Friedman Industries(FRD) - 2020 Q3 - Quarterly Report

Sales Performance - Sales for the nine months ended December 31, 2019, decreased by $35,829,710 or approximately 10% in tons sold, from 175,500 tons in 2018 to 157,500 tons in 2019[49]. - Coil product segment sales decreased by $17,085,201 or approximately 18%, totaling $77,603,435 in the 2019 period compared to $94,688,636 in the 2018 period[52]. - Tubular product segment sales decreased by $18,744,509 or approximately 37%, totaling $31,518,282 in the 2019 period compared to $50,262,791 in the 2018 period[55]. Profitability - Gross profit as a percentage of sales dropped from approximately 8.3% in the 2018 period to approximately 0.7% in the 2019 period[49]. - Average selling price per ton for coil segment inventory decreased from approximately $890 in the 2018 period to approximately $667 in the 2019 period[52]. - Average selling price per ton for tubular segment inventory increased from approximately $704 in the 2018 period to approximately $750 in the 2019 period[55]. - Operating loss for the tubular segment was approximately $1,670,000 in the 2019 period, compared to an operating profit of approximately $4,348,000 in the 2018 period[55]. Costs and Expenses - General, selling, and administrative costs decreased by $173,649 in the 2019 period compared to the 2018 period[58]. Financial Position - The current ratio was 5.4 at December 31, 2019, down from 6.0 at March 31, 2019[71]. - Working capital was $56,420,996 at December 31, 2019, compared to $62,091,305 at March 31, 2019[71]. Capital Expenditures - The Company commenced two capital expenditure projects with a total estimated cost of $6,900,000, including a $1,100,000 building expansion in Arkansas and a $5,800,000 new processing line in Alabama[73]. - The new processing line in Alabama will increase the coil processing capability from up to 72" wide to up to 96" wide, allowing for higher strength grades[73]. - The Company expects the building expansion project to be completed by April 2020[73]. - Installation of the new processing equipment in Alabama is expected to begin in October 2020, with commercial use starting in February 2021[73]. Cash Flow and Credit - The Company believes its current cash position and cash flows from operations are adequate to fund expected cash requirements for the next 24 months[75]. - The Company's $5,000,000 revolving line of credit facility expired on December 12, 2019, with no borrowings outstanding at expiration[74]. Internal Controls and Reporting - There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2019[80]. - The Company’s management evaluated the effectiveness of its disclosure controls and procedures as of December 31, 2019, concluding they were effective[79]. Risks and Estimates - The Company’s financial statements require significant estimates, including useful lives for fixed assets and allowance for doubtful accounts, which could differ from actual results[76]. - Forward-looking statements made by the Company involve risks and uncertainties that could cause actual results to differ materially[77].