FRIEDMAN INDUSTRIES INC 10-Q

Item 1. Financial Statements FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED (In thousands, except for share data) DECEMBER 31, 2025 MARCH 31, 2025 ASSETS CURRENT ASSETS: Cash $ 3,005 $ 3,686 Accounts receivable, net of allowances for credit losses of $ 147 at December 31, and March 31, 2025 55,802 47,476 Inventories 169,173 113,689 Current portion of derivative assets 1,604 636 Other current assets 1,893 980 TOTAL CURRENT ASSETS 231,477 166,467 PROPERTY, PLANT AND EQUIPMENT: Land 11,642 1,572 Buildings and yard improvements 33,344 30,393 Machinery and equipment 62,003 57,970 Construction in process 2,989 135 Less accumulated depreciation ( 36,152 ) ( 33,819 ) 73,826 56,251 OTHER ASSETS: Operating lease right-of-use asset 4,906 2,841 Other assets 1,650 1,263 TOTAL ASSETS $ 311,859 $ 226,822 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 59,868 $ 35,304 Income taxes payable — 647 Dividends payable 284 279 Employee compensation and related expenses 3,981 1,807 Current portion of contingent consideration 252 Current portion of derivative liability 29 287 TOTAL CURRENT LIABILITIES 64,414 38,324 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 119 115 DEFERRED INCOME TAX LIABILITY 5,407 5,478 NON-CURRENT LEASE LIABILITIES 4,283 2,752 SELLER NOTE PAYABLE, NET 3,489 — NON-CURRENT CONTINGENT CONSIDERATION LIABILITY 3,328 — ASSET BASED LENDING FACILITY 88,605 47,728 TOTAL LIABILITIES 169,645 94,397 COMMITMENTS AND CONTINGENCIES (SEE NOTE 2) STOCKHOLDERS’ EQUITY: Common stock, par value $ 1 : Authorized shares — 10,000,000 ; Issued shares — 9,019,505 and 8,877,229 shares at December 31, and March 31, 2025 9,020 8,877 Additional paid-in capital 35,592 35,394 Treasury stock at cost (shares 1,907,323 and 1,906,693 shares at December 31, and March 31, 2025, respectively) ( 13,110 ) ( 13,100 ) Retained earnings 110,712 101,254 TOTAL STOCKHOLDERS’ EQUITY 142,214 132,425 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 311,859 $ 226,822 The accompanying notes are an integral part of these financial statements. 3 Table of Contents FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED (In thousands, except per share data) THREE MONTHS ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, 2025 2024 2025 2024 Net Sales $ 167,974 $ 94,074 $ 455,134 $ 315,384 Costs and expenses: Costs of materials sold (excludes items shown separately below) 137,472 78,509 369,258 263,165 Processing and warehousing expense 11,199 7,472 29,591 24,030 Delivery expense 7,247 4,941 20,781 16,373 Selling, general and administrative 7,150 3,887 18,892 12,333 Depreciation and amortization 1,007 827 2,791 2,445 164,075 95,636 441,313 318,346 Gain on disposal of property, plant and equipment — 375 — 153 EARNINGS (LOSS) FROM OPERATIONS 3,899 ( 1,187 ) 13,821 ( 2,809 ) Gain on economic hedges of risk 1,381 264 2,508 5,833 Interest expense ( 1,278 ) ( 632 ) ( 2,710 ) ( 2,182 ) Other income 2 3 7 3 EARNINGS (LOSS) BEFORE INCOME TAXES 4,004 ( 1,552 ) 13,626 845 Provision for (benefit from) income taxes: Current 999 ( 393 ) 3,386 130 Deferred ( 38 ) ( 7 ) ( 71 ) ( 25 ) 961 ( 400 ) 3,315 105 NET EARNINGS (LOSS) $ 3,043 $ ( 1,152 ) $ 10,311 $ 740 Net earnings (loss) per share: Basic $ 0.43 $ ( 0.17 ) $ 1.46 $ 0.11 Diluted $ 0.43 $ ( 0.17 ) $ 1.46 $ 0.11 Cash dividends declared per common share $ 0.04 $ 0.04 $ 0.12 $ 0.12 The accompanying notes are an integral part of these financial statements. 4 Table of Contents FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED (In thousands) NINE MONTHS ENDED DECEMBER 31, 2025 2024 OPERATING ACTIVITIES Net earnings $ 10,311 $ 740 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 2,791 2,445 Deferred taxes ( 71 ) ( 25 ) Compensation expense for restricted stock 341 121 Change in postretirement benefits 4 11 Gain recognized on open derivatives not designated for hedge accounting ( 1,227 ) ( 1,640 ) Gain on disposal of property, plant and equipment — ( 153 ) Amortization of right-of-use asset 58 11 Decrease (increase) in operating assets, net of amounts acquired in business combination: Accounts receivable 4,346 15,602 Inventories ( 20,861 ) 410 Other current assets ( 958 ) 58 Increase (decrease) in operating liabilities, net of amounts assumed in business combination:: Accounts payable and accrued expenses 14,914 ( 2,861 ) Income taxes payable ( 647 ) ( 2,213 ) Employee compensation and related expenses 2,174 ( 5,083 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 11,175 7,423 INVESTING ACTIVITIES Cash paid for Century business combination ( 45,597 ) — Purchase of property, plant and equipment ( 5,839 ) ( 3,045 ) Proceeds from sale of assets — 800 Deposit on steel processing equipment — ( 1,000 ) Increase in cash surrender value of officers’ life insurance ( 6 ) ( 5 ) NET CASH USED IN INVESTING ACTIVITIES ( 51,442 ) ( 3,250 ) FINANCING ACTIVITIES Debt issuance cost ( 395 ) — Cash dividends paid ( 846 ) ( 836 ) Cash paid for principal portion of finance lease — ( 54 ) Cash paid for share repurchases ( 10 ) ( 171 ) Borrowings on asset based lending facility 603,055 470,404 Repayments on asset based lending facility ( 562,178 ) ( 478,188 ) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 39,626 ( 8,845 ) DECREASE IN CASH AND RESTRICTED CASH ( 641 ) ( 4,672 ) CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD 4,148 5,897 CASH AND RESTRICTED CASH AT END OF PERIOD $ 3,507 $ 1,225 Cash and restricted cash at both December 31, 2025 and March 31, 2025 included approximately $0.5 million 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, 2025 and March 31, 2025. The Company had approximately $0.1 million in restricted cash as of December 31, 2024. The accompanying notes are an integral part of these financial statements. 5 Table of Contents FRIEDMAN INDUSTRIES, INCORPORATED CONDENSED NOTES TO QUARTERLY REPORT — UNAUDITED NOTE 1 — 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, 2025 . NOTE 2 — BUSINESS COMBINATIONS On August 29, 2025, ( the “Acquisition Date”), the Company acquired certain assets and liabilities of Century Metals & Supplies Inc. (“Century”) based in Miami, Florida. The Company acquired the working capital, buildings, processing and other equipment, and the related real estate of Century (the “Transaction”). In addition to the owned facilities in Miami, the Transaction also includes leased distribution and warehouse facilities in Orlando, Florida and Tampa, Florida. The operations will continue as Century Metals and Supplies LLC, a wholly owned subsidiary of the Company. Century is a metals processing company with cut-to-length and coil slitting capabilities which will operate as part of the Company's flat-roll business segment. As a result of the Transaction, the Company expanded its presence in the southeastern U.S. and Latin American markets and broadened the Company's product offerings to include cold-rolled, coated, and stainless steels, as well as non-ferrous materials such as aluminum, copper, and brass. The Transaction resulted in the Company acquiring all the ownership interests in the assets noted above, for a total consideration of approximately $ 52.7 million, subject to final net working capital adjustments. The total consideration consists of (i) approximately $ 45.6 million of cash at close, (ii) a five -year seller's note with a fair value of approximately $ 3.5 million and (iii) contingent consideration possible through earn-out provisions with a fair value of approximately $ 3.6 million. The contingent consideration allows for up to $ 10 million in additional consideration over a four -year period based on certain performance metrics and is not contingent on the sellers employment with Century at the time of the payout and, as such, the fair value of such contingent consideration was recognized as consideration transferred. The seller’s note was fair valued using a discounted cash flow analysis of the expected future payments, for which the significant inputs included the rate of return based on a reference rate plus a spread and the expected cash flows associated with the seller’s note over the remaining time to maturity. The contingent consideration was fair valued using a Monte Carlo simulation of the potential cash payments to the sellers utilizing an estimate of the average future EBITDA, which was discounted to present value. The significant inputs to the Monte Carlo simulation included projected future EBITDA, a discount rate, EBITDA targets, maximum payout and EBITDA volatility. Such contingent consideration is required to be measured at fair value at inception and at each reporting period. The Company performed a fair value analysis at December 31, 2025 and concluded the fair value was unchanged from the preceding reporting period. There were no changes to the valuation methodology during the interim period. As of December 31, 2025, the value of the contingent consideration was approximately $ 3.6 million and is included within current and long-term contingent consideration liabilities on the consolidated balance sheet. 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. The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to finalize its fair value estimates as soon as practicable but no later than one year from the Acquisition Date. Fair value of assets acquired and liabilities assumed Accounts receivable $ 12,672 Inventory 34,623 Property, plant and equipment 14,428 Operating lease right-of-use asset 2,422 Other assets 26 Accounts payable ( 9,083 ) Operating lease liability ( 2,422 ) Total $ 52,666 The following unaudited pro forma consolidated operating results give effect to the Transaction as if it had been completed as of April 1, 2024 ( in thousands). These pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Transaction had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable. Three Months Ended December 31, Nine Months Ended December 31, 2025 2024 2025 2024 Net sales $ 167,974 $ 116,172 $ 501,221 $ 386,955 Earnings (loss) from operations $ 3,899 $ ( 402 ) $ 15,734 $ 569 The Company recorded acquisition specific costs of approximately $ 0.2 million and $ 1.3 million in the three and nine month periods ended December 31, 2025 as a component of "Selling, general and administrative" expenses on the Condensed Consolidated Statement of Operation. 6 Table of Contents NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023 - 09, Improvements to Income Tax Disclosures ("ASU 2023 - 09" ). ASU 2023 - 09 requires that an entity disclose specific categories in the rate reconciliation, provide additional information for reconciling items that are greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate, and provide income taxes paid by jurisdiction that are greater than 5 percent of total income taxes paid. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign operations. ASU 2023 - 09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023 - 09 is to be applied on a prospective basis, but retrospective application is permitted. The Company is evaluating the impact that adoption of the provisions of ASU 2023 - 09 will have on its consolidated financial statements. In November 2024, the FASB issued Accounting Standards Update No. 2024 - 03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses (“ASU 2024 - 03” ). ASU 2024 - 03 will require more detailed information about the types of expenses in commonly presented income statement captions such as “Cost of sales” and “Selling, general and administrative expenses”. The new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027 with early adoption permitted. The Company is evaluating the impact that adoption of the provisions of ASU 2024 - 03 will have on its consolidated financial statements. NOTE 4 — INVENTORIES The Company operates in two segments: the flat-roll segment and the tubular segment. Both the flat-roll segment and tubular segment inventories consist of raw material and finished goods. Cost for all of the Company's flat-roll segment inventory, except for inventory of the Century Metals & Supplies subsidiary, is determined using the weighted average cost method. The cost of Century Metals & Supplies is determined using the specific identification method. Cost for all of the Company's tubular segment inventory is determined using the weighted average cost method. All inventories are valued at the lower of cost or net realizable value. Flat-roll raw material inventory consists primarily of carbon steel, stainless steel and aluminum flat-roll products the Company will process into sheet, plate or slit coil. Flat-roll finished goods consists of processed sheet, plate or slit coil 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. Inventory costs include the costs of the purchased metals, inbound freight, transfer freight, certain external processing, internal processing, direct labor and applicable overhead costs. A summary of inventory values by product group follows (in thousands): December 31, 2025 March 31, 2025 Flat-roll raw material $ 120,293 $ 85,865 Flat-roll finished goods 30,637 15,737 Tubular raw material 8,083 7,055 Tubular finished goods 10,160 5,032 $ 169,173 $ 113,689 NOTE 5 — DEBT On December 9, 2025, the Company executed the sixth amendment to its asset-based lending facility ("ABL Facility") increasing the facility size from $ 125 million to $ 140 million. The ABL Facility is led by JPMorgan Chase Bank, N.A with Wells Fargo Bank, N.A. as a 40% syndicated participant. The ABL Facility matures on August 29, 2030 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. Floating rate borrowings accrue interest at a rate equal to the prime rate minus 1.45 % per annum. Term rate borrowings accrue interest at a rate equal to the SOFR rate applicable to the selected term plus 1.65 % per annum. Availability of funds under the ABL Facility is subject to a borrowing base calculation determined as the sum of (a) 90 % of eligible accounts receivable, plus (b) the product of 85 % multiplied by the net orderly liquidating value percentage identified in the most recent inventory appraisal multiplied by eligible inventory. The ABL Facility contains a springing financial covenant whereby the financial covenant is only tested when availability falls below the greater of 10 % of the revolving commitment or $ 14.0 million. The financial covenant restricts the Company from allowing its fixed charge coverage ratio to be, as of the end of any calendar month, less than 1.00 to 1.00 for the trailing twelve -month period then ending. The fixed charge coverage ratio is calculated as the ratio of (a) EBITDA, as defined in the ABL Facility, minus unfinanced capital expenditures to (b) cash interest expense plus scheduled principal payments on indebtedness plus taxes paid in cash plus restricted payments paid in cash plus capital lease obligation payments plus cash contributions to any employee pension benefit plans. The ABL Facility contains other representations and warranties and affirmative and negative covenants that are usual and customary. If certain conditions precedent are satisfied, the ABL facility may be increased up to an aggregate of $ 60 million, in minimum increments of $ 5 million. At December 31, 2025 , the Company had a balance of approximately $ 88.6 million under the ABL Facility with an applicable interest rate of 5.3 %. At December 31, 2025 , the Company's borrowing base supported full access to the ABL Facility. The Company incurred debt issuance costs of approximately $ 0.4 million related to the renewal of the ABL Facility during the nine months ended December 31, 2025 with these costs recorded as a non-current other asset which will be amortized on an equal monthly basis over the term of the ABL facility. The Company issued a seller's note of $ 3.5 million related to the acquisition of Century described in Note 2. The promissory note has a maturity date of August 29, 2030 and accrues interest at a rate of 6.5 % per annum, payable quarterly in arrears on the last date of each quarter, commencing September 30, 2025. 7 Table of Contents NOTE 6 — LEASES In August 2025, the Company was assigned operating leases for distribution and warehouse facilities in Orlando, FL and Tampa, FL and certain transportation equipment related to the acquisition of Century. The Orlando lease expires July 31, 2029 and calls for monthly rental payments of approximately $ 25,000 . The Tampa lease expires November 30, 2029 but contains a 6 month extension option and calls for monthly rental payments of approximately $ 21,000 . The Company recognized initial right-of-use ("ROU") assets and lease liabilities of approximately $ 2.4 million related to the assumed Century leases. The Company's other ROU assets and lease liabilities consist primarily of operating leases for the Granite City, IL operating facility and administrative office spaces in The Woodlands, TX and Longview, TX. The Company’s other operating leases for items such as operations equipment, IT equipment and storage space are either short-term in nature or immaterial. The Company does not have any finance leases in place. The Company determines if an arrangement contains a lease at inception based on if the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration and allows the Company to obtain substantially all of the economic benefit from the use of the identified asset. Certain lease agreements contain rent escalation clauses and one or more options to extend the lease. The Company considers these provisions when calculating operating lease obligations. The Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The components of expense related to leases for the three and nine months ended December 31, 2025 and 2024 are as follows (in thousands): Three Months Ended Nine Months Ended December 31, December 31, 2025 2024 2025 2024 Operating lease expense $ 287 $ 108 $ 563 $ 276 $ 287 $ 108 $ 563 $ 276 The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of December 31, 2025 and March 31, 2025 (in thousands): December 31, 2025 March 31, 2025 Balance Sheet Classification Assets Operating lease right-of-use asset $ 4,906 $ 2,841 Operating lease right-of-use asset Total right-of-use assets $ 4,906 $ 2,841 Liabilities Operating lease liability, current $ 753 $ 160 Accrued expenses Operating lease liability, non-current 4,283 2,752 Non-current lease liabilities Total lease liabilities $ 5,036 $ 2,912 As of December 31, 2025 , the weighted-average remaining lease term was 12.4 years for operating leases. The weighted average discount rate was 7.0 % for operating leases . Maturities of lease liabilities as of December 31, 2025 were as follows (in thousands): Operating Leases Fiscal 2026 (remainder of fiscal year) $ 266 Fiscal 2027 1,054 Fiscal 2028 990 Fiscal 2029 971 Fiscal 2030 and beyond 5,022 Total undiscounted lease payments $ 8,303 Less: imputed interest ( 3,267 ) Present value of lease liability $ 5,036 8 Table of Contents NOTE 7 — PROPERTY, PLANT AND EQUIPMENT At December 31, 2025 , the Company's construction in process balance of approximately $ 3.0 million consisted of approximately $ 2.5 million associated with additional processing equipment being installed in our Granite City, IL facility. The remaining balance consists of several smaller projects among our facilities. NOTE 8 — STOCK BASED COMPENSATION The Company maintains two stock based compensation plans: the Friedman Industries, Incorporated 2016 Restricted Stock Plan (the “2016 Plan”) and the Friedman Industries, Incorporated 2025 Long-Term Incentive Plan (the "2025 Plan"). The plans are administered by the Compensation Committee of the Board of Directors (the “Board”) and continue indefinitely until terminated by the Board or until all shares allowed by the plans have been awarded and earned. All shares authorized under the 2016 Plan have been awarded with some of those shares still under vesting restrictions at December 31, 2025 . Under the 2025 Plan, the Company may award stock-based compensation to employees, non-employee directors and third -party service providers. The 2025 Plan permits the award of stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards for up to 550,000 shares of the Company's common stock. As of December 31, 2025 , all stock based compensation issued under the 2025 plan was in the form of restricted stock awards and a total of 521,696 shares were still available to be issued under the plan. Restricted awards entitle recipients to vote and receive non-forfeitable dividends during the restriction period. Because dividends are non-forfeitable, they are reflected in retained earnings. Forfeitures are accounted for upon their occurrence. 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 awards for the nine months ended December 31, 2025 : Weighted Average Number of Shares Grant Date Fair Value Per Share Unvested at March 31, 2025 18,026 $ 7.07 Cancelled or forfeited — — Granted 142,276 16.94 Vested ( 14,000 ) 4.32 Unvested at December 31, 2025 146,302 $ 16.93 The Company measures compensation expense for restricted stock awards at the market price of the common stock as of the grant date. Compensation expense for awards with time based restrictions is recognized over the requisite service period applicable to each award. Compensation expense for awards with performance based restrictions is recognized once it is probable the performance conditions will be satisfied with a cumulative effect adjustment and the remaining expense recognized over the remaining service period. The stock awards granted during the nine months ended December 31, 2025 consist of 53,221 time restricted shares with annual ratable vesting over a three year period, 50,000 time restricted shares with annual ratable vesting over a two year period, 2,742 time restricted shares with one year cliff vesting, and 36,313 performance restricted shares with vesting thresholds dependent on the percentage of average earnings before tax to average accounts receivable, inventory and net PP&E over a three year period. The Company recorded compensation expen se of approximately $ 0.3 million and $ 0.1 million in the nine months ended December 31, 2025 and 2024 , respectively, relating to the restricted stock issued under the plans. As of December 31, 2025 , unrecognized compensation expense related to unvested restricted stock was approximately $ 1.7 million which is expected to be recognized over a weighted average period of approximately 2.0 years. NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS From time to time, we expect to utilize hot-rolled coil futures, options or swaps to reduce our exposure to commodity price risk that is inherent in our business. For the nine months ended December 31, 2025 and 2024 , all of the Company's hedging activities were classified as economic hedges of risk with mark-to-market ("MTM") accounting treatment. 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 attempts to minimize 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 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. 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. 9 Table of Contents At December 31, 2025 and March 31, 2025 , the Company did not have any derivatives designated as hedging instruments and classified 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, 2025 (in thousands): Asset Derivatives Liability Derivatives Balance Sheet Balance Sheet Derivatives not designated as hedging instruments: Location Fair Value Location Fair Value Hot-rolled coil steel contracts Current portion of derivative assets $ 1,604 Current portion of derivative liability $ 29 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 March 31, 2025 (in thousands): Asset Derivatives Liability Derivatives Balance Sheet Balance Sheet Derivatives not designated as hedging instruments: Location Fair Value Location Fair Value Hot-rolled coil steel contracts Current portion of derivative assets $ 636 Current portion of derivative liability $ 287 All derivatives are presented on a gross basis on the Consolidated Balance Sheets. During the nine months ended December 31, 2025 and 2024 , the Company entered into hot-rolled coil futures and swap 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 nine months ended December 31, 2025 and 2024 , the Company did not designate any transactions as hedging instruments for accounting purposes. The following table summarizes the gain recognized in earnings for derivative instruments not designated as hedging instruments during the three and nine months ended December 31, 2025 (in thousands): Gain Recognized in Earnings Location of Gain for the Three Months Ended Recognized in Earnings December 31, 2025 Hot-rolled coil steel contracts Gain on economic hedges of risk $ 1,381 Gain Recognized in Earnings Location of Gain for the Nine Months Ended Recognized in Earnings December 31, 2025 Hot-rolled coil steel contracts Gain on economic hedges of risk $ 2,508 The following table summarizes the gain recognized in earnings for derivative instruments not designated as hedging instruments during the three and nine months ended December 31, 2024 (in thousands): Gain Recognized in Earnings Location of Gain for the Three Months Ended Recognized in Earnings December 31, 2024 Hot-rolled coil steel contracts Gain on economic hedges of risk $ 264 Gain Recognized in Earnings Location of Gain for the Nine Months Ended Recognized in Earnings December 31, 2024 Hot-rolled coil steel contracts Gain on economic hedges of risk $ 5,833 The following table summarizes the Company's economic (non-designated) derivative instruments outstanding at December 31, 2025 (in thousands): Notional Amount Maturity Date Hot-rolled coil steel contracts $ 32,229 January 2026 - December 2026 The following table summarizes the Company's economic (non-designated) derivative instruments outstanding at March 31, 2025 (in thousands): Notional Amount Maturity Date Hot-rolled coil steel contracts $ ( 9,522 ) April 2025 - December 2025 At both December 31, 2025 and March 31, 2025 , cash of approximately $ 0.5 million 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, 2025 and March 31, 2025 . 10 Table of Contents NOTE 10 — 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. Recurring Fair Value Measurements At December 31, 2025 , our financial assets and liabilities, measured at fair value on a recurring basis were as follows (in thousands): 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, net $ 1,575 $ — $ — $ 1,575 Contingent consideration for business combination – financial liability — — ( 3,580 ) ( 3,580 ) Total $ 1,575 $ — $ ( 3,580 ) $ ( 2,005 ) At March 31, 2025 , our financial assets and liabilities, measured at fair value on a recurring basis were as follows (in thousands): 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, net $ 349 $ — $ — $ 349 Total $ 349 $ — $ — $ 349 At December 31, 2025 and March 31, 2025 , the Company did not have any fair value measurements on a non-recurring basis. 11 Table of Contents NOTE 11 — SEGMENT INFORMATION The Company is engaged in the metals processing, pipe manufacturing, and metals and pipe distribution business. Within the Company, there are two product groups: flat-roll and tubular. The Company’s flat-roll operations consist primarily of converting carbon steel, stainless steel and aluminum flat-roll products into sheet, plate or slit coil. Through its tubular operations, the Company purchases, processes, manufactures and markets tubular products. Segment results are reviewed regularly by the Company’s Chief Operating Decision Makers (“CODMs”). The Company’s CODMs are comprised of the Chief Executive Officer and the Chief Financial Officer. The CODMs assess segment performance and allocate resources based on a number of factors with the most emphasis placed on earnings from operations. The following is a summary of significant financial information relating to the product groups (in thousands): Three Months Ended December 31, 2025 Flat-roll Tubular Other Total Net Sales $ 153,032 $ 14,942 — $ 167,974 Cost and expenses: Cost of materials sold 126,816 10,656 — 137,472 Processing and warehousing expense 8,896 2,303 — 11,199 Delivery expense 6,962 285 — 7,247 Commercial expense 2,225 214 — 2,439 Depreciation and amortization 867 61 79 1,007 General corporate expenses — — 4,711 4,711 145,766 13,519 4,790 164,075 EARNINGS (LOSS) FROM OPERATIONS: 7,266 1,423 ( 4,790 ) 3,899 Gain on economic hedges of risk 1,381 Interest expense ( 1,278 ) Other income 2 EARNINGS BEFORE INCOME TAXES $ 4,004 Nine Months Ended December 31, 2025 Flat-roll Tubular Other Total Net Sales $ 420,439 $ 34,695 — $ 455,134 Cost and expenses: Cost of materials sold 345,790 23,468 — 369,258 Processing and warehousing expense 23,309 6,282 — 29,591 Delivery expense 20,231 550 — 20,781 Commercial expense 6,896 614 — 7,510 Depreciation and amortization 2,461 162 168 2,791 General corporate expenses — — 11,382 11,382 398,687 31,076 11,550 441,313 EARNINGS (LOSS) FROM OPERATIONS: 21,752 3,619 ( 11,550 ) 13,821 Gain on economic hedges of risk 2,508 Interest expense ( 2,710 ) Other income 7 EARNINGS BEFORE INCOME TAXES $ 13,626 Three Months Ended December 31, 2024 Flat-roll Tubular Other Total Net Sales $ 86,144 $ 7,930 — $ 94,074 Cost and expenses: Cost of materials sold 72,313 6,196 — 78,509 Processing and warehousing expense 5,544 1,927 — 7,471 Delivery expense 4,759 182 — 4,941 Commercial expense 1,507 162 — 1,669 Depreciation and amortization 726 72 29 827 General corporate expenses — — 2,219 2,219 84,849 8,539 2,248 95,636 Gain on disposal of property, plant and equipment — 375 — 375 EARNINGS (LOSS) FROM OPERATIONS: 1,295 ( 234 ) ( 2,248 ) ( 1,187 ) Gain on economic hedges of risk 264 Interest expense ( 632 ) Other income 3 LOSS BEFORE INCOME TAXES $ ( 1,552 ) Nine Months Ended December 31, 2024 Flat-roll Tubular Other Total Net Sales $ 286,910 $ 28,474 — $ 315,384 Cost and expenses: Cost of materials sold 240,105 23,060 — 263,165 Processing and warehousing expense 17,498 6,532 — 24,030 Delivery expense 15,854 519 — 16,373 Commercial expense 4,486 499 — 4,985 Depreciation and amortization 2,115 240 90 2,445 General corporate expenses — — 7,348 7,348 280,058 30,850 7,438 318,346 Gain (loss) on disposal of property, plant and equipment ( 222 ) 375 — 153 EARNINGS (LOSS) FROM OPERATIONS: 6,630 ( 2,001 ) ( 7,438 ) ( 2,809 ) Gain on economic hedges of risk 5,833 Interest expense ( 2,182 ) Other income 3 EARNINGS BEFORE INCOME TAXES $ 845 December 31, 2025 March 31, 2025 IDENTIFIABLE ASSETS: Flat-Roll $ 282,597 $ 204,890 Tubular 23,290 16,792 305,887 221,682 General corporate assets 5,972 5,140 $ 311,859 $ 226,822 General corporate expenses reflect general and administrative expenses not directly associated with segment operations and consist primarily of payroll expenses related to corporate functions, professional fees and services, retirement plan contribution expense, corporate insurance expenses, restricted stock plan compensation expense and office supplies. At December 31, 2025 and March 31, 2025 , corporate assets consist primarily of cash, restricted cash, leased administrative office right-of-use assets, 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. 12 Table of Contents NOTE 12 — REVENUE Revenue is generated primarily from contracts to manufacture or process metal 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 or storage 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: Flat-Roll and Tubular. Flat-roll primarily generates revenue from cutting to length or slitting flat-roll metals. 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, 2025 and 2024 , respectively (in thousands): Three Months Ended Nine Months Ended December 31, December 31, 2025 2024 2025 2024 Flat-Roll Segment: Company Owned Flat-Roll Products 151,956 85,131 416,496 283,197 Processing or Storage of Customer Owned Coil 1,076 1,013 3,943 3,713 153,032 86,144 420,439 286,910 Tubular Segment: Manufactured Pipe 14,942 7,930 34,695 28,474 14,942 7,930 34,695 28,474 NOTE 13 — STOCKHOLDERS’ EQUITY The following tables reflect the changes in stockholders’ equity for each of the nine months ended December 31, 2025 and December 31, 2024 (in thousands): Additional Common Paid-In Treasury Retained Stock Capital Stock Earnings Total BALANCE AT MARCH 31, 2025 $ 8,877 $ 35,394 $ ( 13,100 ) $ 101,254 $ 132,425 Net earnings — — — 5,028 5,028 Paid in capital – restricted stock units — 123 — — 123 Issuance of restricted stock 90 ( 90 ) — — — Repurchase of shares — — ( 10 ) — ( 10 ) Cash dividends ($ 0.04 per share) — — — ( 286 ) ( 286 ) BALANCE AT JUNE 30, 2025 $ 8,967 $ 35,427 $ ( 13,110 ) $ 105,996 $ 137,280 Net earnings — — — 2,240 2,240 Paid in capital – restricted stock units — 36 — — 36 Cash dividends ($ 0.0 4 per share) — — — ( 283 ) ( 283 ) BALANCE AT SEPTEMBER 30, 2025 $ 8,967 $ 35,463 $ ( 13,110 ) $ 107,953 $ 139,273 Net earnings — — — 3,043 3,043 Issuance of restricted stock 53 ( 53 ) — — — Paid in capital – restricted stock units — 182 — — 182 Cash dividends ($ 0.04 per share) — — — ( 284 ) ( 284 ) BALANCE AT DECEMBER 31, 2025 $ 9,020 $ 35,592 $ ( 13,110 ) $ 110,712 $ 142,214 13 Table of Contents Additional Common Paid-In Treasury Retained Stock Capital Stock Earnings Total BALANCE AT MARCH 31, 2024 $ 8,873 $ 35,247 $ ( 12,929 ) $ 96,284 $ 127,475 Net earnings — — — 2,567 2,567 Paid in capital – restricted stock units — 47 — — 47 Repurchase of shares — — ( 123 ) — ( 123 ) Cash dividends ($ 0.04 per share) — — — ( 279 ) ( 279 ) BALANCE AT JUNE 30, 2024 $ 8,873 $ 35,294 $ ( 13,052 ) $ 98,572 $ 129,687 Net loss — — — ( 675 ) ( 675 ) Paid in capital – restricted stock units — 42 — — 42 Repurchase of shares — — ( 11 ) — ( 11 ) Cash dividends ($ 0.04 per share) — — — ( 279 ) ( 279 ) BALANCE AT SEPTEMBER 30, 2024 $ 8,873 $ 35,336 $ ( 13,063 ) $ 97,618 $ 128,764 Net loss — — — ( 1,152 ) ( 1,152 ) Paid in capital – restricted stock units — 32 — — 32 Repurchase of shares — — ( 37 ) — ( 37 ) Cash dividends ($ 0.04 per share) — — — ( 278 ) ( 278 ) BALANCE AT DECEMBER 31, 2024 $ 8,873 $ 35,368 $ ( 13,100 ) $ 96,188 $ 127,329 NOTE 14 — 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 December 31, December 31, 2025 2024 2025 2024 Numerator (basic and diluted) Net earnings (loss) $ 3,043 $ ( 1,152 ) $ 10,311 $ 740 Less: Allocation to unvested restricted stock awards 55 1 154 3 Net earnings (loss) attributable to common shareholders $ 2,988 $ ( 1,153 ) $ 10,157 $ 737 Denominator (basic and diluted) Weighted average common shares outstanding 6,965,880 6,948,023 6,965,880 6,942,216 For the nine months ended December 31, 2025 and 2024 , the Company allocated dividends and undistributed earnings to the unvested restricted stock awards. As the restricted stock qualifies as participating securities, the following restricted stock awards were not accounted in the computation of weighted average diluted common shares outstanding under the two -class method: Three Months Ended Nine Months Ended December 31, December 31, 2025 2024 2025 2024 Restricted Stock Awards 89,685 16,425 99,613 13,832 NOTE 15 — SUPPLEMENTAL CASH FLOW INFORMATION During the nine months ended December 31, 2025, the Company had non-cash investing and financing activities associated with the Century Metals & Supplies acquisition of approximately $ 3.5 million related to a seller's note and approximately $ 3.6 million related to contingent consideration. The Company paid interest o f approximately $ 2.5 million and $ 2.2 million during the nine months ended December 31, 2025 and 2024 , respectively. Additionally, the Company paid income taxes of approximately $ 4.5 million and $ 2.9 million during the nine months ended December 31, 2025 and 2024 , respectively. NOTE 16 — INCOME TAXES For the nine months ended December 31, 2025 and 2024 , the Company recorded income tax provisio ns of approximately $ 3.3 million and $ 0.1 million, respectively. For the 2025 period , the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision. For the 2024 period , the effective tax rate differed from the federal statutory rate due primarily to the tax effect of restricted stock vesting during the period with this impact partially reduced by the inclusion of state tax expenses in the provision. 14 Table of Contents