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Friedman Industries Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 12, 2010 11:33AM

Friedman Industries Inc (FRD) filed Quarterly Report for the period ended 2010-09-30. Friedman Industries Inc has a market cap of $46 million; its shares were traded at around $6.7701 with a P/E ratio of 20.5 and P/S ratio of 0.7. The dividend yield of Friedman Industries Inc stocks is 4.7%. Friedman Industries Inc had an annual average earning growth of 9.9% over the past 10 years.

FRD is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

During the six months ended September 30, 2010, sales, costs of goods sold and gross profit increased $30,242,945, $24,130,832 and $6,112,113, respectively, from the comparable amounts recorded during the six months ended September 30, 2009. The increase in sales was related primarily to a substantial increase in tons sold which increased from approximately 50,000 tons in the 2009 period to approximately 79,000 tons in the 2010 period. Also, the average per ton selling price increased from approximately $571 per ton in the 2009 period to $740 per ton in the 2010 period. The increase in costs of goods sold was related primarily to the increase in tons sold and an increase in average per ton cost which rose from approximately $547 per ton in the 2009 period to $647 in the 2010 period. Gross profit benefited from the sales increase as well as a significant increase in gross margins. Gross profit as a percentage of sales increased from approximately 4.3% in the 2009 period to approximately 12.5% in the 2010 period. During the 2009 period, the Company experienced a significant economic downturn in the U.S. economy and the Company’s operations were adversely affected by extremely soft market conditions for durable goods and energy-related products. In the 2010 period, the Company experienced improved market conditions for its tubular products but market demand for coil products remained soft. Accordingly, the improvement in results of operations during the 2010 period was related primarily to the tubular product segment of the Company.

Coil product segment sales increased approximately $7,916,000 during the 2010 period. This increase resulted primarily from an increase in tons sold and a significant increase in the average selling price. Coil tons shipped increased from approximately 32,000 tons in the 2009 period to approximately 35,000 tons in the 2010 period and the average per ton selling price increased from approximately $542 per ton in the 2009 period to $723 per ton in the 2010 period. Margins earned on sales of coil products were adversely impacted in both the 2009 and 2010 periods by soft demand. Also, the Company incurred significant increases in cost of coil material in the 2010 period that could not be readily passed on to its customers. Management believes that market conditions for coil products will not improve until the U.S. economy improves and generates significant improvement in demand for durable goods.

Tubular product segment sales increased approximately $22,326,000 during the 2010 period. This increase primarily resulted from an increase in tons sold which increased from approximately 17,000 tons in the 2009 period to approximately 44,000 tons in the 2010 period. The average per ton selling price of tubular products increased from approximately $625 per ton in the 2009 period to $754 per ton in the 2010 period. Tubular product segment operating profits as a percentage of segment sales were approximately 5.3% and 19.0% in the 2009 and 2010 periods, respectively. Extremely soft market conditions were experienced in the 2009 period as compared to stronger market conditions in the 2010 period. Also, since February 2010, the Company has received an increase in orders for finished tubular products from U. S. Steel Tubular Products, Inc. (“USS”), an affiliate of United States Steel Corporation.

During the three months ended September 30, 2010, sales, costs of goods sold and gross profit increased $13,266,932, $10,005,177 and $3,261,755, respectively, from the comparable amounts recorded during the three months ended September 30, 2009. The increase in sales was related primarily to a substantial increase in tons sold which increased from approximately 28,000 tons in the 2009 quarter to approximately 40,000 tons in the 2010 quarter. Also, the average per ton selling price increased from approximately $577 per ton in the 2009 quarter to $730 per ton in the 2010 quarter. The increase in costs of goods sold was related primarily to the increase in tons sold and an increase in average per ton cost which rose from approximately $554 per ton in the 2009 quarter to $633 per ton in the 2010 quarter. Gross profit benefited from the sales increase as well as a significant increase in gross margins. Gross profit as a percentage of sales increased from approximately 3.9% in the 2009 quarter to approximately 13.2% in the 2010 quarter. During the 2009 quarter, the Company experienced a significant economic downturn in the U.S. economy and the Company’s operations were adversely affected by extremely soft market conditions for durable goods and energy-related products. In the 2010 quarter, the Company experienced improved market conditions for its tubular products but market demand for coil products remained soft. Accordingly, the improvement in results of operations during the 2010 quarter was related primarily to the tubular product segment of the Company.

Coil product segment sales increased approximately $2,830,000 during the 2010 quarter. This increase resulted primarily from a significant increase in the average selling price per ton which increased from approximately $554 per ton in the 2009 quarter to $710 in the 2010 quarter. The Company sold approximately 19,000 tons of coil product in both the 2009 and 2010 quarters. Even though the coil segment experienced a small operating profit in the 2010 quarter, margins earned on sales of coil products were adversely impacted in both the 2009 quarter and the 2010 quarter by soft demand. Management believes that market conditions for coil products will not improve until the U.S. economy improves and generates significant improvement in demand for durable goods.

Tubular product segment sales increased approximately $10,437,000 during the 2010 quarter. This increase primarily resulted from an increase in tons sold which increased from approximately 9,000 tons in the 2009 quarter to approximately 22,000 tons in the 2010 quarter. The average per ton selling price of tubular products increased from approximately $624 per ton in the 2009 quarter to $748 in the 2010 quarter. Tubular product segment operating profits as a percentage of segment sales were approximately 8.6% and 19.0% in the 2009 and 2010 quarters, respectively. Extremely soft market conditions were experienced in the 2009 quarter as compared to stronger market conditions in the 2010 quarter. Also, since February 2010, the Company has received an increase in orders for finished tubular products from USS.

Read the The complete Report



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