Friedman Industries(FRD) - 2025 Q3 - Quarterly Report

Financial Performance - Sales for the nine months ended December 31, 2024, decreased by approximately $68.6 million to $1.1 billion compared to the same period in 2023[60] - Adjusted gross profit for the nine months ended December 31, 2024, was approximately $52.2 million, down from approximately $74.9 million in 2023, representing a decrease of 30.4%[60] - Flat-roll segment sales for the 2024 quarter totaled approximately $86.1 million, down from approximately $106.4 million in the 2023 quarter[70] - Tubular product segment sales for the 2024 period totaled approximately $28.5 million, down from approximately $31.9 million in 2023, primarily due to a decrease in average selling price per ton[64] - The tubular segment recorded operating losses of approximately $0.2 million for the 2024 quarter compared to a loss of approximately $0.1 million in the 2023 quarter[72] Pricing and Cost Analysis - The average selling price per ton for flat-roll products decreased from approximately $995 in the 2023 period to approximately $868 in the 2024 period[62] - Selling, general and administrative costs decreased by approximately $2.6 million during the 2024 period compared to the 2023 period[66] - Income tax provision decreased from approximately $3.8 million in the 2023 period to approximately $0.1 million in the 2024 period, reflecting lower earnings before taxes[67] Liquidity and Financial Position - The current ratio improved to 3.5 at December 31, 2024, compared to 3.1 at March 31, 2024[79] - The Company has a $150 million asset-based lending facility (ABL Facility) maturing on May 19, 2026, with a current balance of approximately $32.5 million and an applicable interest rate of 6.5%[81] - The Company's borrowing base calculation supports access to approximately $100.5 million of the ABL Facility as of the filing date[81] - The Company believes its current cash position and cash flows from operations are adequate to fund expected cash requirements for the next 12 months[82] Hedging and Risk Management - The Company recognized hedging related gains of approximately $5.8 million in the 2024 period, compared to $0.7 million in the 2023 period[61] - The Company recognized gains of approximately $0.3 million and $5.8 million in the three and nine months ended December 31, 2024, respectively, related to hedging activities[84] - The Company utilizes hot-rolled coil futures to manage price risk on unsold inventory and has classified most hedging activities as economic hedges of risk[83] Future Outlook - The Company expects fourth quarter sales volume for fiscal 2025 to be higher than the third quarter due to stronger order activity and holiday impacts[85] - HRC prices were stable at the start of the fourth quarter but began to increase, with industry participants anticipating further price increases in the second half of the quarter[85] Financial Covenants - The ABL Facility includes a financial covenant requiring a fixed charge coverage ratio of at least 1.10 to 1.00 for the trailing twelve months[81] - The Company may increase the ABL Facility by up to an aggregate of $25 million, in minimum increments of $5 million, if certain conditions are met[81] Accounting Estimates - The Company did not identify any significant estimates or judgments related to the consolidated financial statements in the Form 10-Q filing[86]