Friedman Industries(US:FRD)2021-08-23 20:32Financial Performance - For the three months ended June 30, 2021, sales increased by $42,391,839 to a total of $63,000,000 compared to the same period in 2020, driven by a rise in average selling prices and tons sold, which increased from approximately 38,000 tons to 54,000 tons [63]. - Gross profit for the 2021 quarter was $17,329,935, up from $256,754 in the 2020 quarter, with gross profit as a percentage of sales increasing from approximately 1.1% to 26.3% [63]. - The coil product segment's sales for the 2021 quarter totaled $52,694,730, compared to $15,432,784 in the 2020 quarter, with the average selling price per ton rising from approximately $566 to $1,462 [64]. - The tubular product segment's sales for the 2021 quarter were $13,221,709, up from $8,091,816 in the 2020 quarter, with tons sold increasing from approximately 11,000 to 14,500 [66]. - The company recorded operating profits of approximately $13,256,000 for the coil segment and $2,600,000 for the tubular segment in the 2021 quarter, compared to operating losses in the previous year [64][67]. Operational Developments - The company expects to complete the construction of a new facility in Sinton, Texas, with an estimated total cost of $21 million, expected to commence operations in April 2022 [60]. - The Company expects strong margins for Q2 ending September 30, 2021, with an anticipated improvement in operating results compared to Q1 [79]. - Hot-rolled steel prices have increased approximately 10% since June 30, 2021, and the Company expects prices to continue rising through September 30, 2021 [79]. Financial Position - The company's current ratio was 1.6 at June 30, 2021, down from 2.7 at March 31, 2021, with working capital increasing to $50,869,746 [73]. - The company had borrowings of $23,381,289 outstanding under the ABL Facility as of the filing date, with full access to the facility [76]. Costs and Expenses - General, selling, and administrative costs increased by $1,958,400 in the 2021 quarter, primarily due to incentive compensation and professional fees [70]. - The company reported other income of $312,062, primarily from a $1,706,614 gain associated with the forgiveness of the Paycheck Protection Program loan [71]. Internal Controls and Compliance - The Company identified a material weakness in internal control over financial reporting related to the review of the annual income tax provision [88]. - The Chief Executive Officer and Chief Financial Officer concluded that the Company's internal control over financial reporting was not effective as of the end of the period covered by the report [84]. - The Company has not completed its remediation of the material weakness previously identified and disclosed in the Annual Report for the fiscal year ended March 31, 2021 [84]. - The Company plans to remediate the identified material weakness by investing in human capital, having hired an additional degreed accountant on May 24, 2021 [89]. - As of the filing date, the Company had 104 employees, with a finance team consisting of two degreed accountants [89]. - The Company believes that the additional investment in human capital will provide sufficient remediation in future periods [90]. - The Company will continue to monitor and evaluate the effectiveness of its disclosure controls and procedures [90]. Forward-Looking Statements - Actual results may differ materially from forward-looking statements due to various risks and uncertainties, including changes in demand and prices of products [82].