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<SEC-DOCUMENT>/in/edgar/work/20000629/0000950129-00-003495/0000950129-00-003495.txt : 20000920
<SEC-HEADER>0000950129-00-003495.hdr.sgml : 20000920
ACCESSION NUMBER:		0000950129-00-003495
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20000331
FILED AS OF DATE:		20000629

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FRIEDMAN INDUSTRIES INC
		CENTRAL INDEX KEY:			0000039092
		STANDARD INDUSTRIAL CLASSIFICATION:	 [3310
]		IRS NUMBER:				741504405
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			0331
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-K
			SEC ACT:		
			SEC FILE NUMBER:	001-07521
			FILM NUMBER:		664501
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		4001 HOMESTEAD RD
				CITY:			HOUSTON
				STATE:			TX
				ZIP:			77028
				BUSINESS PHONE:		7136729433
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 2:		PO BOX 21147
					CITY:			HOUSTON
					STATE:			TX
					ZIP:			77226
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>e10-k.txt
<DESCRIPTION>FORM 10-K DATED 3-31-2000
<TEXT>

<PAGE>   1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the fiscal year ended March 31, 2000

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the transition period from  _______ to  _______

                           Commission File No. 1-7521

                       FRIEDMAN INDUSTRIES, INCORPORATED
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                    TEXAS                                        74-1504405
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)

     4001 HOMESTEAD ROAD, HOUSTON, TEXAS                           77028
   (Address of principal executive offices)                      (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (713) 672-9433

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                           NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                            ON WHICH REGISTERED
             -------------------                           ---------------------
<S>                                            <C>
          Common Stock, $1 Par Value                      American Stock Exchange
</TABLE>

          Securities registered pursuant to Section 12(g) of the Act:

                                      None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to the filing
requirements for the past 90 days.

                            Yes   X       No  _____

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

                                ____

     The aggregate market value of the Common Stock held by non-affiliates of
the registrant as of June 19, 2000 (computed by reference to the closing price
on the American Stock Exchange on such date), was approximately $16,500,000.

     The number of shares of the registrant's Common Stock outstanding at June
19, 2000 was 7,547,292 shares.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Annual Report to Shareholders of Friedman Industries,
Incorporated for the fiscal year ended March 31, 2000 -- Part II.

     Proxy Statement for the 2000 Annual Meeting of Shareholders -- Part III.

                                     PART I

ITEM 1. BUSINESS

     Friedman Industries, Incorporated (the "Company"), a Texas corporation
incorporated in 1965, is in the steel processing and distribution business. The
Company has two product groups: coil processing and tubular products.

     Significant financial information relating to the Company's product and
service groups for the last three years is contained in Note 6 of the
Consolidated Financial Statements of the Company's Annual Report to Shareholders
for the fiscal year ended March 31, 2000, which is incorporated herein by
reference.

  Coil Processing

     The Company purchases domestic and foreign hot-rolled steel coils,
processes the coils into steel sheet and plate and sells these products on a
wholesale, rapid-delivery basis in competition with steel mills, importers and
steel service centers. The Company also processes customer-owned coils on a fee
basis. The Company has coil processing plants located at Lone Star, Texas,
Houston, Texas and Hickman, Arkansas. At each plant, the steel coils are
processed through a cut-to-length line which levels the steel and cuts it to
prescribed lengths. The Company's processing machinery is heavy, mill-type
equipment capable of processing steel coils weighing up to 25 tons. Coils are
processed to the specifications required for a particular order. Shipments are
made via unaffiliated truckers or by rail and, in times of normal supply and
market conditions, can generally be made within 48 hours of receipt of the
customer's order.

     At its Lone Star facility, the Company purchases hot-rolled steel coils
primarily from Lone Star Steel Company ("LSS"), which is located approximately
four miles from the Company's plant. The Lone Star plant purchases its supply of
steel from LSS and other suppliers at competitive prices determined at the time
of purchase. Loss of LSS as a source of coil supply could have a material
adverse effect on the Company's business.

     At its Houston facility, the Company warehouses and processes hot-rolled
steel coils, which are generally purchased on the open market at competitive
prices from importers, trading companies and domestic steel mills.

     At the Company's Hickman facility, the Company warehouses and processes
steel coils which are purchased primarily from Nucor Steel Company ("NSC"). NSC
is located approximately one-half mile from the Hickman facility. Loss of NSC as
a source of coil supply could have a material adverse effect on the Company's
business.

     At the Lone Star facility, the Company maintains three cut-to-length lines
and a coil-to-coil 2-Hi temper pass mill. This equipment is capable of
processing steel up to 84 inches wide and up to one-half inch thick. At the
Houston facility, the Company has a cut-to-length line and a rolling mill that
are capable of processing steel up to 90 inches wide and up to one-half inch
thick. The Hickman facility operates a cut-to-length line which has 84 inch wide
and one-half inch thick capability. The Company also operates a 2-Hi temper pass
mill at the Hickman facility that is capable of processing steel up to 74 inches
wide and one-half inch thick in a coil-to-coil mode or directly from coil to
cut-to-length processing.

  Tubular Products

     Through its Texas Tubular Products ("TTP") operation in Lone Star, Texas,
the Company purchases, markets, processes (e.g., sorting, end-beveling,
threading, etc.) and manufactures tubular products.

                                        2
<PAGE>   3

     TTP employs various pipe processing equipment including threading and
beveling machines, pipe handling equipment and other related machinery. This
machinery can process pipe up to 13 3/8 inches in outside diameter.

     The TTP operation includes a pipe mill that is capable of producing pipe
from 2 3/8 inches to 8 5/8 inches in outside diameter. The pipe mill is
API-licensed to manufacture line and oil country pipe and also manufactures pipe
for structural and piling purposes that meets recognized industry standards. The
Company currently manufactures and sells substantially all of its line and oil
country pipe to LSS pursuant to orders received from LSS. In addition, LSS sells
pipe to the Company for structural applications for some sizes of pipe that are
beyond the capability of the pipe mill.

     The Company purchases a substantial portion of its annual supply of pipe
and coil material used in pipe production from LSS. The Company can make no
assurances as to the amounts of pipe and coil material that will be available
from LSS in the future. Loss of LSS as a source of supply or as a customer could
have a material adverse effect on the Company's business.

  Marketing

     The following table sets forth the approximate percentage of total sales
contributed by each group of steel products during each of the Company's last
three fiscal years:

<TABLE>
<CAPTION>
                       PRODUCT GROUPS                         2000    1999    1998
                       --------------                         ----    ----    ----
<S>                                                           <C>     <C>     <C>
Coil Processing.............................................   65%     69%     59%
Tubular Products............................................   35%     31%     41%
</TABLE>

     Coil Processing. The Company's coil processing products and services are
sold to approximately 350 customers located primarily in the midwestern,
southwestern and southeastern sections of the United States. The Company's
principal customers for these products and services are steel distributors and
customers fabricating steel products such as storage tanks, steel buildings,
farm machinery and equipment, construction equipment, transportation equipment,
conveyors and other similar products. During each of the fiscal years ended
March 31, 2000, 1999 and 1998, six, six and nine customers, respectively,
accounted for approximately 25% of the Company's sales of coil processing
products. No coil processing customer accounted for as much as 10% of the
Company's total sales during those years.

     The Company sells substantially all of its coil processing products through
its own sales force. At March 31, 2000, the sales force was comprised of a
manager and five professional sales personnel under the direction of the senior
vice president of sales and marketing. Salesmen are paid on a salary and
commission basis.

     Shipments of particular products are made from the facility offering the
product desired. If the product is available at more than one facility, other
factors such as location of the customer, productive capacity of the facility
and activity of the facility enter into the decision regarding shipments. The
Company regularly contracts on a quarterly basis with many of its larger
customers to supply minimum quantities of steel.

     Tubular Products. Tubular products are sold nationally to approximately 330
customers. The Company's principal customers of these products are steel and
pipe distributors, piling contractors and LSS. Sales of pipe to LSS accounted
for approximately 9% of the Company's total sales in fiscal 2000.

     The Company sells its tubular products through its own sales force
comprised of a manager and four professional sales personnel under the direction
of the senior vice president of sales and marketing. Salesmen are paid on a
salary and commission basis.

  Competition

     The Company is engaged in a non-seasonal, highly competitive business. The
Company competes with steel mills, importers and steel service centers. The
steel industry, in general, is characterized by a small number of extremely
large companies dominating the bulk of the market and a large number of
relatively small companies, such as the Company, competing for a limited share
of such market.

                                        3
<PAGE>   4

     The Company believes that in times of normal supply and market conditions
its ability to compete is dependent upon its ability to offer steel products at
prices competitive with or below those of other steel suppliers, as well as its
ability to provide products meeting customer specifications on a rapid delivery
basis.

  Employees

     At March 31, 2000, the Company had approximately 155 full-time employees.

  Executive Officers of the Company

     The following table sets forth the name, age, officer positions and family
relationships, if any, of each executive officer of the Company and period
during which each officer has served in such capacity:

<TABLE>
<CAPTION>
                                    POSITION, OFFICES WITH THE COMPANY
        NAME          AGE            AND FAMILY RELATIONSHIPS, IF ANY
        ----          ---           ----------------------------------
  <S>                 <C>   <C>
  Jack Friedman...... 79    Chairman of the Board of Directors and Chief
                              Executive Officer since 1970, Director since
                              1965, brother of Harold Friedman
  Harold Friedman.... 70    Vice Chairman since 1995, formerly President and
                              Chief Operating Officer since 1975, Executive
                              Vice President from 1973 to 1975, Director since
                              1965, brother of Jack Friedman
  William E. Crow.... 53    President and Chief Operating Officer since 1995,
                              formerly Vice President since 1981 and formerly
                              President of Texas Tubular Products Division
                              since August 1990
  Benny Harper....... 54    Senior Vice President -- Finance since 1995
                            (formerly Vice President since 1990), Treasurer
                              since 1980 and Secretary since May 1992
  Thomas Thompson.... 49    Senior Vice President -- Sales and Marketing since
                              1995, formerly Vice President -- Sales since 1990
  Ronald Burgerson... 61    Vice President since 1974

  Dale Ray........... 54    Vice President since 1994
</TABLE>

                                        4
<PAGE>   5

ITEM 2. PROPERTIES

     The principal properties of the Company are described in the following
table:

<TABLE>
<CAPTION>
                                    APPROXIMATE                        TYPE OF
            LOCATION                   SIZE          OWNERSHIP       CONSTRUCTION
            --------                -----------      ---------       ------------
<S>                               <C>                <C>          <C>
Lone Star, Texas
  Plant -- Coil Processing......  42,260 sq. feet    Owned(1)     Steel frame/siding
  Plant -- Texas Tubular
     Products...................  76,000 sq. feet    Owned(1)     Steel frame/siding
  Offices -- Coil Processing....  1,200 sq. feet     Owned(1)     Steel building
  Offices -- Texas Tubular
     Products...................  5,000 sq. feet     Owned(1)     Cinder block
  Land -- Coil Processing.......    13.93 acres      Owned(1)             --
  Land -- Texas Tubular
     Products...................    67.77 acres      Leased(2)            --
Longview, Texas Offices.........  2,600 sq. feet     Leased(3)    Office Building
Houston, Texas
  Plant and Warehouse -- Coil
     Processing.................  70,000 sq. feet    Owned(1)     Rigid steel frame
                                                                  and steel siding
  Offices -- Coil Processing....  4,000 sq. feet     Owned(1)     Brick veneer;
                                                                  steel
                                                                  building
  Land -- Coil Processing.......     12 acres        Owned(1)             --
Hickman, Arkansas
  Plant and Warehouse -- Coil
     Processing.................  42,600 sq. feet    Owned(1)     Steelframe/siding
  Offices -- Coil Processing....  1,800 sq. feet     Owned(1)     Cinder block
  Land -- Coil Processing.......    26.19 acres      Owned(1)             --
</TABLE>

- ---------------

(1) All of the Company's owned real estate, plants and offices are held in fee
    and are not subject to any mortgage or deed of trust.

(2) The real estate lease is with LSS and its affiliate, Texas & Northern
    Railway, Inc., and expires August 31, 2010. The lease provides for monthly
    payments of $1,667 adjusted each January 1 for changes in the Consumer Price
    Index. The Company has an exclusive option to purchase this property during
    a period beginning December 29, 1998 and ending December 31, 2002.

(3) The office lease is with a nonaffiliated party, expires April 30, 2001, and
    provides for an annual rental of $24,672.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not a party to, nor is its property the subject of, any
material pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                        5
<PAGE>   6

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

     The Company's Common Stock is traded principally on the American Stock
Exchange (Symbol: FRD).

     Reference is hereby made to the sections of the Company's Annual Report to
Shareholders for the fiscal year ended March 31, 2000, entitled "Description of
Business -- Range of High and Low Sales Prices of Common Stock" and "Description
of Business -- Dividends Declared Per Share of Common Stock", which sections are
hereby incorporated herein by reference.

     The approximate number of shareholders of record of Common Stock of the
Company as of May 28, 2000 was 620.

ITEM 6. SELECTED FINANCIAL DATA

     Information with respect to Item 6 is hereby incorporated herein by
reference from the section of the Company's Annual Report to Shareholders for
the fiscal year ended March 31, 2000, entitled "Selected Financial Data".

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     Information with respect to Item 7 is hereby incorporated herein by
reference from the section of the Company's Annual Report to Shareholders for
the fiscal year ended March 31, 2000, entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not material

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The following financial statements and notes thereto of the Company
included in the Company's Annual Report to Shareholders for the fiscal year
ended March 31, 2000, are hereby incorporated herein by reference:

        Consolidated Balance Sheets -- March 31, 2000 and 1999

        Consolidated Statements of Earnings -- Years ended March 31, 2000, 1999
        and 1998

        Consolidated Statements of Stockholders' Equity -- Years ended March 31,
        2000, 1999 and 1998

        Consolidated Statements of Cash Flows -- Years ended March 31, 2000,
        1999 and 1998

        Notes to Consolidated Financial Statements -- March 31, 2000

        Report of Independent Auditors

     Information with respect to supplementary financial information relating to
the Company appears in Note 7 -- Summary of Quarterly Results of Operations
(Unaudited) of the Notes to Consolidated Financial Statements incorporated
herein by reference above in this Item 8 from the Company's Annual Report to
Shareholders for the fiscal year ended March 31, 2000.

     The following supplementary schedule for the Company for the year ended
March 31, 2000, is included elsewhere in this report.

     Schedule II -- Valuation and Qualifying Accounts

     All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore, have been
omitted.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None

                                        6
<PAGE>   7

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information with respect to Item 10 is hereby incorporated herein by
reference from the Company's proxy statement in respect of the 2000 Annual
Meeting of Shareholders, definitive copies of which are expected to be filed
with the Securities and Exchange Commission on or before 120 days after the end
of the Company's 2000 fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

     Information with respect to Item 11 is hereby incorporated herein by
reference from the Company's proxy statement in respect of the 2000 Annual
Meeting of Shareholders, definitive copies of which are expected to be filed
with the Securities and Exchange Commission on or before 120 days after the end
of the Company's 2000 fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information with respect to Item 12 is hereby incorporated herein by
reference from the Company's proxy statement in respect of the 2000 Annual
Meeting of Shareholders, definitive copies of which are expected to be filed
with the Securities and Exchange Commission on or before 120 days after the end
of the Company's 2000 fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information with respect to Item 13 is hereby incorporated herein by
reference from the Company's proxy statement in respect of the 2000 Annual
Meeting of Shareholders, definitive copies of which are expected to be filed
with the Securities and Exchange Commission on or before 120 days after the end
of the Company's 2000 fiscal year.

                                        7
<PAGE>   8

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) Documents included in this report

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                    DESCRIPTION
        -------                                  -----------
<C>                      <S>
       1 and 2           -- The responses to this section of Item 14 appears in this
                            report as a separate section of this report.
             3           -- Exhibits
             3.1         -- Articles of Incorporation of the Company, as amended,
                            filed as an exhibit to the Company's Annual Report on
                            Form 10-K for the year ended March 31, 1982, and
                            incorporated herein by reference.
             3.2         -- Articles of Amendment to the Articles of Incorporation of
                            the Company, as filed with the Texas Secretary of State
                            on September 22, 1987, filed as an exhibit to the
                            Company's Annual Report on Form 10-K for the year ended
                            March 31, 1988, and incorporated herein by reference.
             3.3         -- Bylaws of the Company, amended as of March 27, 1992,
                            filed as an exhibit to the Company's Annual Report on
                            Form 10-K for the year ended March 31, 1992, and
                            incorporated herein by reference.
             4.1         -- Promissory Note of the Company to Texas Commerce Bank
                            National Association, dated December 1, 1993, in the
                            amount of $4,000,000, filed as an exhibit to the
                            Company's Quarterly Report on Form 10-Q for the quarterly
                            period ended December 31, 1993, and incorporated herein
                            by reference.
             4.2         -- Letter Agreement dated March 22, 1993, as amended by the
                            First Amendment dated December 31, 1993, by and between
                            the Company and Texas Commerce Bank National Association
                            regarding a $5,000,000 revolving credit line, filed as an
                            exhibit to the Company's Quarterly Report on Form 10-Q
                            for the quarterly period ended December 31, 1993, and
                            incorporated herein by reference.
             4.3         -- Amended and Restated Letter Agreement dated April 1,
                            1995, between the Company and Texas Commerce Bank
                            National Association regarding an $8,000,000 revolving
                            line of credit, filed as an exhibit to the Company's
                            Annual Report on Form 10-K for the year ended March 31,
                            1995, and incorporated herein by reference.
            10.1         -- Lease Agreement between NCNB Texas National Bank, as
                            Trustee, and the Company dated September 10, 1990, and
                            Addendum No. 1 thereto dated November 11, 1991, filed as
                            an exhibit to the Company's Annual Report on Form 10-K
                            for the year ended March 31, 1992, and incorporated
                            herein by reference.
            10.2         -- Lease, effective September 1, 1990, by and between Lone
                            Star Steel Company, Texas & Northern Railway, Inc., a
                            Texas corporation, and the Company, filed as an exhibit
                            to the Company's Current Report on Form 8-K dated August
                            1, 1990, and incorporated herein by reference.
           *10.3         -- Friedman Industries, Incorporated 1989 Incentive Stock
                            Option Plan, filed as an exhibit to the Company's Annual
                            Report on Form 10-K for the fiscal year ended March 31,
                            1991, and incorporated herein by reference.
            10.4         -- Promissory Note of the Company to Texas Commerce Bank
                            National Association, dated December 1, 1993, in the
                            amount of $4,000,000 (included as Exhibit 4.1 hereto).
            10.5         -- Letter Agreement dated March 22, 1993, as amended by the
                            First Amendment dated December 31, 1993, by and between
                            the Company and Texas Commerce Bank National Association
                            regarding a $5,000,000 revolving credit line (included as
                            Exhibit 4.2 hereto).
            10.6         -- Amended and Restated Letter Agreement dated April 1,
                            1995, between the Company and Texas Commerce Bank
                            National Association regarding an $8,000,000 revolving
                            line of credit (included as Exhibit 4.3 hereto).
</TABLE>

                                        8
<PAGE>   9

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                    DESCRIPTION
        -------                                  -----------
<C>                      <S>
            10.7         -- Lease Agreement between Judson Plaza, Inc. and the
                            Company dated March 16, 1996, regarding the lease of
                            office space (incorporated by reference to the Company's
                            Annual Report on Form 10-K for the year ended March 31,
                            1996).
           *10.8         -- Friedman Industries, Incorporated 1996 Stock Option Plan
                            (incorporated by reference to the Company's Annual Report
                            on Form 10-K for the year ended March 31, 1997).
            10.9         -- $8,000,000 Revolving Promissory Note dated April 1, 1997
                            (incorporated by reference to the Company's Annual Report
                            on Form 10-K for the year ended March 31, 1997).
            10.10        -- First Amendment to Amended and Restated Letter Agreement
                            between the Company and Texas Commerce Bank National
                            Association dated April 1, 1997 (incorporated by
                            reference to the Company's Annual Report on Form 10-K for
                            the year ended March 31, 1997).
            10.11        -- ISDA Master Agreement between the Company and Texas
                            Commerce Bank National Association ("TCB") dated July 21,
                            1997 (incorporated by reference to the Company's Report
                            on Form 10-Q for the three months ended June 30, 1997).
            10.12        -- Advancing Promissory Note of the Company to TCB dated
                            July 21, 1997 (incorporated by reference to the Company's
                            Report on Form 10-Q for the three months ended June 30,
                            1997).
            10.13        -- Second Amendment to Amended and Restated Letter Agreement
                            between the Company and TCB dated July 21, 1997
                            (incorporated by reference to the Company's Report on
                            Form 10-Q for the three months ended June 30, 1997).
           *10.14        -- First Amendment to the Friedman Industries, Incorporated
                            1989 Incentive Stock Option Plan (incorporated by
                            reference to the Company's Report on Form 10-Q for the
                            three months ended September 30, 1997).
           *10.15        -- Friedman Industries, Incorporated 1995 Non-Employee
                            Director Stock Plan and First Amendment thereto dated
                            effective August 22, 1997, (incorporated by reference to
                            the Company's Annual Report on Form 10K for the year
                            ended March 31, 1998).
            10.16        -- Third amendment to the Amended and Restated Letter
                            Agreement dated April 1, 1999 between the Company and
                            Chase Bank of Texas ("Chase") (incorporated by reference
                            to the Company's report on Form 10-Q for the three months
                            ended June 30, 1999).
            10.17        -- Revolving Promissory Note dated April 1, 1999 between the
                            Company and Chase (incorporated by reference to the
                            Company's report on Form 10-Q for the three months ended
                            June 30, 1999).
            13.1         -- The Company's Annual Report to Shareholders for the
                            fiscal year ended March 31, 2000.
            21.1         -- List of Subsidiaries.
            23.1         -- Consent of Independent Auditors.
            27.1         -- Financial Data Schedule.
</TABLE>

- ---------------

* Management contract or compensation plan.

     Copies of exhibits filed as a part of this Annual Report on Form 10-K may
be obtained by shareholders of record at a charge of $.10 per page. Direct
inquiries to: Benny Harper, Senior Vice President -- Finance, Friedman
Industries, Incorporated, P. O. Box 21147, Houston, Texas 77226.

     (b) Reports on Form 8-K filed in the fourth quarter of fiscal 2000:

          None

                                        9
<PAGE>   10

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Friedman Industries, Incorporated has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Houston, and State of Texas, this 28th day of June, 2000.

                                            FRIEDMAN INDUSTRIES, INCORPORATED

                                            By:     /s/ JACK FRIEDMAN
                                              ----------------------------------
                                                        Jack Friedman
                                                    Chairman of the Board
                                                 and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated on behalf of Friedman Industries, Incorporated in the City
of Houston, and State of Texas.

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                   DATE
                      ---------                                     -----                   ----
<C>                                                    <S>                              <C>

                  /s/ JACK FRIEDMAN                    Chairman of the Board, Chief     June 28, 2000
- -----------------------------------------------------    Executive Officer and
                    Jack Friedman                        Director (Principal Executive
                                                         Officer)

                 /s/ HAROLD FRIEDMAN                   Vice Chairman of the Board and   June 28, 2000
- -----------------------------------------------------    Director
                   Harold Friedman

                 /s/ WILLIAM E. CROW                   President, Chief Operating       June 28, 2000
- -----------------------------------------------------    Officer and Director
                   William E. Crow

                 /s/ BENNY B. HARPER                   Senior Vice                      June 28, 2000
- -----------------------------------------------------    President -- Finance and
                   Benny B. Harper                       Treasurer (Principal
                                                         Financial and Accounting
                                                         Officer)

                   /s/ HENRY SPIRA                     Director                         June 28, 2000
- -----------------------------------------------------
                     Henry Spira

                 /s/ CHARLES W. HALL                   Director                         June 28, 2000
- -----------------------------------------------------
                   Charles W. Hall

                 /s/ KIRK K. WEAVER                    Director                         June 28, 2000
- -----------------------------------------------------
                   Kirk K. Weaver

                  /s/ ALAN M. RAUCH                    Director                         June 28, 2000
- -----------------------------------------------------
                    Alan M. Rauch

                 /s/ HERSHEL M. RICH                   Director                         June 28, 2000
- -----------------------------------------------------
                   Hershel M. Rich
</TABLE>

                                       10
<PAGE>   11

                       FRIEDMAN INDUSTRIES, INCORPORATED
                                 HOUSTON, TEXAS

                           ANNUAL REPORT ON FORM 10-K
                           YEAR ENDED MARCH 31, 2000

                               ITEM 14(A)1 AND 2

                        LIST OF FINANCIAL STATEMENTS AND
                         FINANCIAL STATEMENT SCHEDULES

                                       11
<PAGE>   12

                                   FORM 10-K

                               ITEM 14(A)1 AND 2

                       FRIEDMAN INDUSTRIES, INCORPORATED
         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

     The following financial statements of the Company are set forth herewith in
response to Item 14(a)1 and 2 of this report.

        Consolidated Balance Sheets -- March 31, 2000 and 1999

        Consolidated Statements of Earnings -- Years ended March 31, 2000, 1999
        and 1998

        Consolidated Statements of Stockholders' Equity -- Years end March 31,
        2000, 1999 and 1998

        Consolidated Statements of Cash Flows -- Years ended March 31, 2000,
        1999 and 1998

        Notes to Consolidated Financial Statements -- March 31, 2000

        Report of Independent Auditors

        The following financial statement schedule of the Company is included in
        this report.

        S-1-Schedule II -- Valuation and Qualifying Accounts

     All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore, have
been omitted.

                                       12
<PAGE>   13

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                       FRIEDMAN INDUSTRIES, INCORPORATED

<TABLE>
<CAPTION>
          COLUMN A             COLUMN B               COLUMN C                 COLUMN D        COLUMN E
          --------            ----------   -------------------------------   -------------   -------------
                                                      ADDITIONS
                                           -------------------------------
                              BALANCE AT   CHARGED TO       CHARGED TO
                              BEGINNING     COSTS AND    OTHER ACCOUNTS --   DEDUCTIONS --    BALANCE AT
        DESCRIPTION           OF PERIOD    EXPENSES(1)       DESCRIBE         DESCRIBE(A)    END OF PERIOD
        -----------           ----------   -----------   -----------------   -------------   -------------
<S>                           <C>          <C>           <C>                 <C>             <C>
Year ended March 31, 2000
  Allowance for doubtful
     accounts receivable
     (deducted from related
     asset account).........    $7,276                                                          $7,276
                                ======      ========          ======           ========         ======
Year ended March 31, 1999
  Allowance for doubtful
     accounts receivable
     (deducted from related
     asset account).........    $7,276      $ 15,365                           $ 15,365         $7,276
                                ======      ========          ======           ========         ======
Year ended March 31, 1998
  Allowance for doubtful
     accounts receivable
     (deducted from related
     asset account).........    $7,276      $200,000                           $200,000         $7,276
                                ======      ========          ======           ========         ======
</TABLE>

- ---------------

(A) Accounts and notes receivable written off.

                                       S-1
<PAGE>   14

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                    DESCRIPTION
        -------                                  -----------
<C>                      <S>
    1 and 2              -- The responses to this section of Item 14 appears in this
                            report as a separate section of this report.
          3              -- Exhibits
          3.1            -- Articles of Incorporation of the Company, as amended,
                            filed as an exhibit to the Company's Annual Report on
                            Form 10-K for the year ended March 31, 1982, and
                            incorporated herein by reference.
          3.2            -- Articles of Amendment to the Articles of Incorporation of
                            the Company, as filed with the Texas Secretary of State
                            on September 22, 1987, filed as an exhibit to the
                            Company's Annual Report on Form 10-K for the year ended
                            March 31, 1988, and incorporated herein by reference.
          3.3            -- Bylaws of the Company, amended as of March 27, 1992,
                            filed as an exhibit to the Company's Annual Report on
                            Form 10-K for the year ended March 31, 1992, and
                            incorporated herein by reference.
          4.1            -- Promissory Note of the Company to Texas Commerce Bank
                            National Association, dated December 1, 1993, in the
                            amount of $4,000,000, filed as an exhibit to the
                            Company's Quarterly Report on Form 10-Q for the quarterly
                            period ended December 31, 1993, and incorporated herein
                            by reference.
          4.2            -- Letter Agreement dated March 22, 1993, as amended by the
                            First Amendment dated December 31, 1993, by and between
                            the Company and Texas Commerce Bank National Association
                            regarding a $5,000,000 revolving credit line, filed as an
                            exhibit to the Company's Quarterly Report on Form 10-Q
                            for the quarterly period ended December 31, 1993, and
                            incorporated herein by reference.
          4.3            -- Amended and Restated Letter Agreement dated April 1,
                            1995, between the Company and Texas Commerce Bank
                            National Association regarding an $8,000,000 revolving
                            line of credit, filed as an exhibit to the Company's
                            Annual Report on Form 10-K for the year ended March 31,
                            1995, and incorporated herein by reference.
         10.1            -- Lease Agreement between NCNB Texas National Bank, as
                            Trustee, and the Company dated September 10, 1990, and
                            Addendum No. 1 thereto dated November 11, 1991, filed as
                            an exhibit to the Company's Annual Report on Form 10-K
                            for the year ended March 31, 1992, and incorporated
                            herein by reference.
         10.2            -- Lease, effective September 1, 1990, by and between Lone
                            Star Steel Company, Texas & Northern Railway, Inc., a
                            Texas corporation, and the Company, filed as an exhibit
                            to the Company's Current Report on Form 8-K dated August
                            1, 1990, and incorporated herein by reference.
        *10.3            -- Friedman Industries, Incorporated 1989 Incentive Stock
                            Option Plan, filed as an exhibit to the Company's Annual
                            Report on Form 10-K for the fiscal year ended March 31,
                            1991, and incorporated herein by reference.
         10.4            -- Promissory Note of the Company to Texas Commerce Bank
                            National Association, dated December 1, 1993, in the
                            amount of $4,000,000 (included as Exhibit 4.1 hereto).
         10.5            -- Letter Agreement dated March 22, 1993, as amended by the
                            First Amendment dated December 31, 1993, by and between
                            the Company and Texas Commerce Bank National Association
                            regarding a $5,000,000 revolving credit line (included as
                            Exhibit 4.2 hereto).
         10.6            -- Amended and Restated Letter Agreement dated April 1,
                            1995, between the Company and Texas Commerce Bank
                            National Association regarding an $8,000,000 revolving
                            line of credit (included as Exhibit 4.3 hereto).
</TABLE>
<PAGE>   15

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                    DESCRIPTION
        -------                                  -----------
<C>                      <S>
         10.7            -- Lease Agreement between Judson Plaza, Inc. and the
                            Company dated March 16, 1996, regarding the lease of
                            office space (incorporated by reference to the Company's
                            Annual Report on Form 10-K for the year ended March 31,
                            1996).
        *10.8            -- Friedman Industries, Incorporated 1996 Stock Option Plan
                            (incorporated by reference to the Company's Annual Report
                            on Form 10-K for the year ended March 31, 1997).
         10.9            -- $8,000,000 Revolving Promissory Note dated April 1, 1997
                            (incorporated by reference to the Company's Annual Report
                            on Form 10-K for the year ended March 31, 1997).
         10.10           -- First Amendment to Amended and Restated Letter Agreement
                            between the Company and Texas Commerce Bank National
                            Association dated April 1, 1997 (incorporated by
                            reference to the Company's Annual Report on Form 10-K for
                            the year ended March 31, 1997).
         10.11           -- ISDA Master Agreement between the Company and Texas
                            Commerce Bank National Association ("TCB") dated July 21,
                            1997 (incorporated by reference to the Company's Report
                            on Form 10-Q for the three months ended June 30, 1997).
         10.12           -- Advancing Promissory Note of the Company to TCB dated
                            July 21, 1997 (incorporated by reference to the Company's
                            Report on Form 10-Q for the three months ended June 30,
                            1997).
         10.13           -- Second Amendment to Amended and Restated Letter Agreement
                            between the Company and TCB dated July 21, 1997
                            (incorporated by reference to the Company's Report on
                            Form 10-Q for the three months ended June 30, 1997).
        *10.14           -- First Amendment to the Friedman Industries, Incorporated
                            1989 Incentive Stock Option Plan (incorporated by
                            reference to the Company's Report on Form 10-Q for the
                            three months ended September 30, 1997).
        *10.15           -- Friedman Industries, Incorporated 1995 Non-Employee
                            Director Stock Plan and First Amendment thereto dated
                            effective August 22, 1997, (incorporated by reference to
                            the Company's Annual Report on Form 10K for the year
                            ended March 31, 1998).
         10.16           -- Third amendment to the Amended and Restated Letter
                            Agreement dated April 1, 1999 between the Company and
                            Chase Bank of Texas ("Chase") (incorporated by reference
                            to the Company's report on Form 10-Q for the three months
                            ended June 30, 1999).
         10.17           -- Revolving Promissory Note dated April 1, 1999 between the
                            Company and Chase (incorporated by reference to the
                            Company's report on Form 10-Q for the three months ended
                            June 30, 1999).
         13.1            -- The Company's Annual Report to Shareholders for the
                            fiscal year ended March 31, 2000.
         21.1            -- List of Subsidiaries.
         23.1            -- Consent of Independent Auditors.
         27.1            -- Financial Data Schedule.
</TABLE>

- ---------------

* Management contract or compensation plan.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>2
<FILENAME>ex13-1.txt
<DESCRIPTION>ANNUAL REPORT TO SHAREHOLDERS
<TEXT>

<PAGE>   1




                                                                      FRIEDMAN
                                                                    INDUSTRIES,
                                                                    INCORPORATED






                                                                        2000
                                                                   ANNUAL REPORT
<PAGE>   2
                                               FRIEDMAN INDUSTRIES, INCORPORATED

- --------------------------------------------------------------------------------

U                                                                              W

                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                                        2000             1999
                                                    ------------     ------------
         <S>                                        <C>              <C>
         Net sales................................  $120,267,809     $124,719,640
         Net earnings.............................    $2,506,801       $3,540,811
         Net earnings per share (Basic)*..........         $0.33            $0.47
         Cash dividends per share*................         $0.18            $0.25
         Stock dividend...........................             5%               5%
         Stockholders' equity.....................   $28,622,951      $27,422,779
         Stockholders' equity per share
           (Basic)*...............................         $3.79            $3.64
         Working capital..........................   $28,568,099      $25,776,002
         * Adjusted for stock dividends.
</TABLE>

V                                                                              X
- --------------------------------------------------------------------------------

TO OUR SHAREHOLDERS:

     Is there much difference in the "new economy" and the "old economy"? The
workaday world is primarily about managing change. Management's attitude has
always been and continues to be to embrace and adapt to any "economy" that
evolves while remaining grounded in sound, basic business philosophies. The
Company continually pursues and employs appropriate technologies and techniques
to assure the continued progress and success of your Company.

     You are cordially invited to attend the Annual Meeting of Shareholders to
be held on August 25, 2000. The meeting will be held at 11:00 a.m. in the
offices of Fulbright & Jaworski L.L.P., 1301 McKinney, Houston, Texas.

                                          Sincerely,

                                          LOGO

                                          Jack Friedman
                                          Chairman of the Board
                                          and Chief Executive Officer

                                        1
<PAGE>   3
FRIEDMAN INDUSTRIES, INCORPORATED

OFFICERS

Jack Friedman
Chairman of the Board and
Chief Executive Officer

Harold Friedman
Vice Chairman of the Board

William E. Crow
President and Chief Operating Officer

Benny B. Harper
Senior Vice President -- Finance
and Secretary/Treasurer

Thomas N. Thompson
Senior Vice President -- Sales and Marketing

Ronald L. Burgerson
Vice President

Dale Ray
Vice President

Charles W. Hall
Assistant Secretary

COMPANY OFFICES AND WEB SITE
  MAIN OFFICE
  4001 Homestead Road
  Houston, Texas 77028
  713-672-9433

  SALES OFFICE -- COIL PRODUCTS
  1121 Judson Road
  Longview, Texas 75606
  903-758-3431

  SALES OFFICE -- TUBULAR PRODUCTS
  P.O. Box 0388
  Lone Star, Texas 75668
  903-639-2511
  WEB SITE ADDRESS
  www.friedmanindustries.com

COUNSEL
Fulbright & Jaworski L.L.P.
1301 McKinney, 51st Floor
Houston, Texas 77010

AUDITORS
Ernst & Young LLP
1221 McKinney, Suite 2400
Houston, Texas 77010

TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
DIRECTORS

Jack Friedman
Chairman of the Board and
Chief Executive Officer

Harold Friedman
Vice Chairman of the Board

William E. Crow
President and Chief Operating Officer

Charles W. Hall
Partner, Fulbright & Jaworski L.L.P. (law firm)
Houston, Texas

Alan M. Rauch
President, Ener-Tex
International, Inc.
(oilfield equipment sales)
Houston, Texas

Hershel M. Rich
Private investor and
business consultant
Houston, Texas

Henry Spira
Retired; Former Vice President,
Friedman Industries, Incorporated
Houston, Texas

Kirk K. Weaver
President,
Parkans International, L.L.C.
(recycling services),
Houston, Texas;
Chairman of the Board and
Chief Executive Officer,
LTI Technologies, Inc.
(technical services)
Houston, Texas

STOCK EXCHANGE LISTING
American Stock Exchange
(Trading symbol: FRD)

APPROXIMATE NUMBER OF
  SHAREHOLDERS OF RECORD
620 at May 26, 2000

ANNUAL REPORT ON FORM 10-K

Shareholders may obtain without charge a copy of the Company's Annual Report on
Form 10-K for the year ended March 31, 2000 as filed with the Securities and
Exchange Commission. Written requests should be addressed to: Benny B. Harper,
Senior Vice President, Friedman Industries, Incorporated, P.O. Box 21147,
Houston, Texas 77226.

                                        2
<PAGE>   4
                                               FRIEDMAN INDUSTRIES, INCORPORATED

DESCRIPTION OF BUSINESS

     Friedman Industries, Incorporated is in the steel processing and
distribution business. The Company has two product groups: coil processing and
tubular products.

     At its facilities in Lone Star, Texas, Houston, Texas and Hickman,
Arkansas, the Company processes semi-finished, hot-rolled steel coils into flat,
finished sheet and plate, and sells these products on a wholesale,
rapid-delivery basis in competition with steel mills, importers and steel
service centers. The Company also processes customer-owned coils on a fee basis.
The Company purchases a substantial amount of its annual coil tonnage from Lone
Star Steel Company ("LSS") and Nucor Steel Company ("NSC"). Loss of LSS or NSC
as a source of coil supply could have a material adverse effect on the Company's
business.

     Steel sheet and plate and coil processing services are sold directly
through the Company's own sales force to approximately 350 customers located
primarily in the midwestern, southwestern and southeastern sections of the
United States. These products and services are sold principally to steel
distributors and to customers fabricating steel products such as storage tanks,
steel buildings, farm machinery and equipment, construction equipment,
transportation equipment, conveyors and other similar products.

     The Company, through its Texas Tubular Products operation located in Lone
Star, Texas, purchases, processes, manufactures and markets tubular products
("pipe"). The Company sells pipe nationally to approximately 330 customers and
sells a substantial amount of manufactured pipe to LSS. The Company purchases a
substantial portion of its annual supply of pipe and coil material used in pipe
production from LSS. Loss of LSS as a source of pipe and coil material supply or
as a customer of manufactured pipe could have a material adverse effect on the
Company's business.

     Significant financial information relating to the Company's product groups
is contained in Note 6 of Notes to the Company's Consolidated Financial
Statements appearing herein.

                               ------------------
               RANGE OF HIGH AND LOW SALES PRICES OF COMMON STOCK

<TABLE>
<CAPTION>
                                                                 FISCAL 2000              FISCAL 1999
                                                              -----------------        -----------------
                                                              HIGH         LOW         HIGH         LOW
                                                              ----        -----        ----        -----
<S>                                                           <C>         <C>          <C>         <C>
First Quarter...............................................  4 5/8       3 13/16      8 3/8       6 3/8
Second Quarter..............................................  4 7/16      3 5/16       7 3/8       4 3/8
Third Quarter...............................................  3 7/8       3 1/4        5 11/16     4 1/2
Fourth Quarter..............................................  4 1/8       3 5/16       5 3/8       3 3/4
</TABLE>

                               ------------------

                  DIVIDENDS DECLARED PER SHARE OF COMMON STOCK

<TABLE>
<CAPTION>
                                                                 FISCAL 2000               FISCAL 1999
                                                              ------------------        ------------------
                                                              CASH         STOCK        CASH         STOCK
                                                              -----        -----        -----        -----
<S>                                                           <C>          <C>          <C>          <C>
First Quarter...............................................  $ .05                     $ .075
Second Quarter..............................................  $ .05                     $ .07
Third Quarter...............................................  $ .05                     $ .07
Fourth Quarter..............................................  $ .04          5%         $ .06          5%
(Per share amounts above have not been adjusted to reflect stock dividends.)
</TABLE>

                                        3
<PAGE>   5
FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
                                                                        MARCH 31
                                                              ----------------------------
                                                                  2000            1999
                                                              ------------    ------------
<S>                                                           <C>             <C>
CURRENT ASSETS:
     Cash and cash equivalents..............................  $    443,818    $  3,798,935
     Accounts receivable, less allowance for doubtful
       accounts of $7,276 in 2000 and 1999..................    13,533,550       8,709,728
     Inventories............................................    22,910,509      19,906,170
     Other..................................................        57,501         119,207
                                                              ------------    ------------
          TOTAL CURRENT ASSETS..............................    36,945,378      32,534,040
PROPERTY, PLANT AND EQUIPMENT:
     Land...................................................       221,543         221,543
     Buildings and yard improvements........................     3,346,912       3,317,088
     Machinery and equipment................................    16,075,816      15,879,803
     Less accumulated depreciation..........................   (12,170,191)    (11,127,089)
                                                              ------------    ------------
                                                                 7,474,080       8,291,345
OTHER ASSET:
     Cash value of officers' life insurance.................       687,332         197,992
                                                              ------------    ------------
          TOTAL ASSETS......................................  $ 45,106,790    $ 41,023,377
                                                              ============    ============
</TABLE>

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                        MARCH 31
                                                              ----------------------------
                                                                  2000            1999
                                                              ------------    ------------
<S>                                                           <C>             <C>
CURRENT LIABILITIES:
     Accounts payable and accrued expenses..................  $  6,447,538    $  4,839,560
     Current portion of long-term debt......................       800,000         800,000
     Dividends payable......................................       287,522         410,563
     Income taxes payable...................................       256,906          68,522
     Contribution to profit sharing plan....................       274,000         252,000
     Employee compensation and related expenses.............       311,313         387,393
                                                              ------------    ------------
          TOTAL CURRENT LIABILITIES.........................     8,377,279       6,758,038
LONG-TERM DEBT, less current portion........................     7,600,000       6,400,000
DEFERRED INCOME TAXES.......................................       393,560         329,560
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.................       113,000         113,000
STOCKHOLDERS' EQUITY:
     Common stock, par value $1:
       Authorized shares -- 10,000,000
       Issued and outstanding shares -- 7,188,213 in 2000
          and 6,828,387 in 1999.............................     7,188,213       6,828,387
     Additional paid-in capital.............................    26,878,477      25,725,195
     Retained deficit.......................................    (5,443,739)     (5,130,803)
                                                              ------------    ------------
          TOTAL STOCKHOLDERS' EQUITY........................    28,622,951      27,422,779
                                                              ------------    ------------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........  $ 45,106,790    $ 41,023,377
                                                              ============    ============
</TABLE>

See accompanying notes.

                                        4
<PAGE>   6
                                               FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                            YEAR ENDED MARCH 31
                                                 ------------------------------------------
                                                     2000           1999           1998
                                                 ------------   ------------   ------------
<S>                                              <C>            <C>            <C>
Sales..........................................  $120,267,809   $124,719,640   $148,840,724
Costs and expenses:
     Cost of products sold.....................   111,602,851    114,363,659    135,981,231
     Selling, general, and administrative......     4,479,215      4,694,933      5,193,206
     Interest expense..........................       546,160        443,686        431,498
                                                 ------------   ------------   ------------
                                                  116,628,226    119,502,278    141,605,935
                                                 ------------   ------------   ------------
                                                    3,639,583      5,217,362      7,234,789
Interest and other income......................       158,602        147,506         53,080
                                                 ------------   ------------   ------------
          EARNINGS BEFORE FEDERAL INCOME
            TAXES..............................     3,798,185      5,364,868      7,287,869
Federal income taxes:
     Current...................................     1,227,384      1,884,057      2,537,877
     Deferred..................................        64,000        (60,000)       (60,000)
                                                 ------------   ------------   ------------
                                                    1,291,384      1,824,057      2,477,877
                                                 ------------   ------------   ------------
          NET EARNINGS.........................  $  2,506,801      3,540,811   $  4,809,992
                                                 ============   ============   ============
Average number of common shares outstanding:
  Basic........................................     7,547,624      7,528,702      7,512,901
  Diluted......................................     7,547,624      7,575,409      7,653,530
Net earnings per share:
  Basic........................................  $        .33   $        .47   $        .64
  Diluted......................................  $        .33   $        .47   $        .63
</TABLE>

CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                 ADDITIONAL     RETAINED
                                                      COMMON       PAID-IN      EARNINGS
                                                      STOCK        CAPITAL      (DEFICIT)
                                                    ----------   -----------   -----------
<S>                                                 <C>          <C>           <C>
Balance at March 31, 1997.........................  $6,161,994   $22,377,246   $(5,757,281)
Net earnings......................................          --            --     4,809,992
Exercise of stock options.........................      20,077        17,467            --
Issuance of Directors' shares.....................       2,000        16,500            --
Stock dividend (5%)...............................     307,737     1,269,415    (1,579,431)
Cash dividends ($.25 per share)...................          --            --    (1,912,759)
                                                    ----------   -----------   -----------
          BALANCE AT MARCH 31, 1998...............   6,491,808    23,680,628    (4,439,479)
Net earnings......................................          --            --     3,540,811
Exercise of stock options.........................      10,202         8,211            --
Issuance of Directors' shares.....................       2,000         9,000            --
Stock dividend (5%)...............................     324,377     2,027,356    (2,355,039)
Cash dividends ($0.25 per share)..................          --            --    (1,877,096)
                                                    ----------   -----------   -----------
          BALANCE AT MARCH 31, 1999...............   6,828,387    25,725,195    (5,130,803)
Net earnings......................................          --            --     2,506,801
Exercise of stock options.........................      16,021        36,666            --
Issuance of Directors' shares.....................       2,000         5,750            --
Stock dividend (5%)...............................     341,805     1,110,866    (1,454,108)
Cash dividends ($0.18 per share)..................          --            --    (1,365,629)
                                                    ----------   -----------   -----------
          BALANCE AT MARCH 31, 2000...............  $7,188,213   $26,878,477   $(5,443,739)
                                                    ==========   ===========   ===========
</TABLE>

See accompanying notes.

                                        5
<PAGE>   7
FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                    YEAR ENDED MARCH 31
                                          ---------------------------------------
                                             2000          1999          1998
                                          -----------   -----------   -----------
<S>                                       <C>           <C>           <C>
OPERATING ACTIVITIES
     Net earnings.......................  $ 2,506,801   $ 3,540,811   $ 4,809,992
     Adjustments to reconcile net
       earnings to net cash provided by
       (used in) operating activities:
          Depreciation..................    1,043,103       671,735       665,908
          Loss on disposal of property,
            plant, and equipment........           --            --        26,008
          Directors' shares issued......        7,750        11,000        18,500
          Provision from deferred
            taxes.......................       64,000       (60,000)      (60,000)
     Decrease (increase) in operating
       assets:
          Accounts receivable...........   (4,823,822)    4,495,385    (1,302,188)
          Inventories...................   (3,004,339)    4,680,693    (3,383,198)
          Other.........................       61,706        74,672       (72,517)
     (Decrease) increase in operating
       liabilities:
          Accounts payable and accrued
            expenses....................    1,607,978    (6,085,463)    2,812,809
          Contribution to profit sharing
            plan........................       22,000       (28,000)       38,000
          Employee compensation and
            related expenses............      (76,080)     (213,411)      208,377
          Federal income taxes
            payable.....................      188,384      (275,943)       48,994
                                          -----------   -----------   -----------
          Net cash (used in) provided by
            operating activities........   (2,402,519)    6,811,479     3,810,685
INVESTING ACTIVITIES
     Purchase of property, plant, and
       equipment........................     (225,838)   (2,352,122)   (2,593,410)
     Cash value of officers' life
       insurance........................      (62,710)     (117,138)      (30,287)
                                          -----------   -----------   -----------
          Net cash used in investing
            activities..................     (288,548)   (2,469,260)   (2,623,697)
FINANCING ACTIVITIES
     Cash dividends paid................   (1,488,670)   (1,954,156)   (1,795,890)
     Proceeds from borrowings of
       long-term debt...................    5,000,000       833,334     2,566,666
     Principal payments on long-term
       debt.............................   (3,800,000)     (800,000)     (800,000)
     Payments on loans against life
       insurance........................     (426,630)           --            --
     Cash paid on fractional shares from
       stock dividend...................       (1,437)       (2,568)       (1,859)
     Cash received from exercised stock
       options..........................       52,687        18,413        37,543
                                          -----------   -----------   -----------
          Net cash (used in) provided by
            financing activities........     (664,050)   (1,904,977)        6,460
                                          -----------   -----------   -----------
          Increase (decrease) in cash
            and cash equivalents........   (3,355,117)    2,437,242     1,193,448
     Cash and cash equivalents at
       beginning of year................    3,798,935     1,361,693       168,245
                                          -----------   -----------   -----------
          Cash and cash equivalents at
            end of year.................  $   443,818   $ 3,798,935   $ 1,361,693
                                          ===========   ===========   ===========
</TABLE>

See accompanying notes.

                                        6
<PAGE>   8
                                               FRIEDMAN INDUSTRIES, INCORPORATED

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2000

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF CONSOLIDATION:  The consolidated financial statements include the
accounts of Friedman Industries, Incorporated, and its subsidiary (collectively,
the "Company"). All material intercompany amounts and transactions have been
eliminated.

     REVENUE RECOGNITION:  Revenues are recognized upon shipment of products.

     CASH AND CASH EQUIVALENTS:  The Company considers all highly liquid debt
instruments purchased with maturities of three months or less to be cash
equivalents.

     INVENTORIES:  The following is a summary of inventory by product group:

<TABLE>
<CAPTION>
                                                            YEAR ENDED MARCH 31
                                                         --------------------------
                                                            2000           1999
                                                         -----------    -----------
<S>                                                      <C>            <C>
Coil...................................................  $11,705,839    $10,652,830
Tubular................................................   11,204,670      9,253,340
                                                         -----------    -----------
                                                         $22,910,509    $19,906,170
                                                         ===========    ===========
</TABLE>

     Coil inventory consists primarily of raw materials. Tubular inventory
consists of both raw materials and finished goods. Inventories are valued at the
lower of cost or replacement market. Cost for the Company's coil inventory is
determined under the last-in, first-out ("LIFO") method. Cost for tubular
inventories is determined using the first-in, first-out method. At March 31,
2000, the replacement cost of LIFO inventories exceeded their LIFO value by
approximately $2,741,000 while, at March 31, 1999, replacement cost was
approximately the same as the LIFO value.

     PROPERTY, PLANT, AND EQUIPMENT:  Property, plant, and equipment are stated
on the basis of cost. Depreciation is calculated primarily by the straight-line
method over the estimated useful lives of the various classes of assets.
Interest costs incurred during construction projects are capitalized as part of
the cost of such assets.

     PER SHARE INFORMATION:  All applicable per share amounts herein have been
retroactively adjusted to give effect to a 5% stock dividend distributed May 26,
2000.

     SUPPLEMENTAL CASH FLOW INFORMATION:  The Company paid interest of
approximately $560,000 in 2000, $777,000 in 1999, and $513,000 in 1998. The
Company paid income taxes, net of refunds, of $1,039,000 in 2000, $2,180,000 in
1999, and $2,455,000 in 1998.

     USE OF ESTIMATES:  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.

     FINANCIAL INSTRUMENTS:  The carrying value of the Company's financial
instruments approximates fair value.

     ECONOMIC RELATIONSHIP:  Lone Star Steel Company ("LSS") and Nucor Steel
Company supply a significant amount of steel products to the Company. Loss of
either of these mills as a source of supply could have a material adverse effect
on the Company. Additionally, the Company derives revenue by selling a
substantial amount of its manufactured pipe to LSS. Total sales to LSS were
approximately $11.0 million, $8.0 million, and $21.7 million in 2000, 1999, and
1998, respectively. Loss of the LSS mill as a customer could have a material
adverse effect on the Company's business.

                                        7
<PAGE>   9
FRIEDMAN INDUSTRIES, INCORPORATED

2. CAPITAL STOCK AND STOCK OPTIONS

     Under the Company's 1989 and 1996 Incentive Stock Option Plans, incentive
options were granted to certain officers and key employees to purchase common
stock of the Company. Pursuant to the terms of the plans, 27,959 additional
options may be granted. All options have ten-year terms and become fully
exercisable at the end of six months of continued employment. The following is a
summary of activity relative to options outstanding during the years ended March
31 (adjusted for stock dividends):

<TABLE>
<CAPTION>
                                                     2000                   1999                   1998
                                              -------------------    -------------------    -------------------
                                                         WEIGHTED               Weighted               Weighted
                                                         AVERAGE                Average                Average
                                                         EXERCISE               Exercise               Exercise
                                              SHARES      PRICE      SHARES      PRICE      SHARES      PRICE
                                              -------    --------    -------    --------    -------    --------
<S>                                           <C>        <C>         <C>        <C>         <C>        <C>
Outstanding at beginning of year..........    437,174     $3.98      416,053     $3.85      440,923     $3.73
Granted...................................         --        --       32,524     $4.73           --        --
Exercised.................................    (17,581)    $2.99      (11,403)    $1.62      (24,870)    $1.62
                                              -------                -------                -------
Outstanding at end of year................    419,593     $4.02*     437,174     $3.98*     416,053     $3.85
                                              =======                =======                =======
Exercisable at end of year................    419,593     $4.02      404,650     $3.92      416,053     $3.85
Weighted average fair value of options
  granted during the year.................                  N/A                  $1.65                    N/A
</TABLE>

* Range of $1.62 to $4.73 per share and a weighted average remaining life of 7.2
years.

     The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB 25"), for its employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Had the Company followed the alternative
fair value accounting provided for under FASB Statement No. 123, Accounting for
Stock-Based Compensation, net earnings and earnings per share would have been
reduced by .7%, .5% and 1.3% in 2000, 1999 and 1998, respectively. The fair
value of options was estimated using a Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest rates of 6.5%, a
dividend yield of 3.8%, volatility factor of the expected market price of the
Company's common stock of .28, and a weighted average expected life of the
option of four years.

     The Company has 1,000,000 authorized shares of Cumulative Preferred Stock
with a par value of $1 per share. The stock may be issued in one or more series,
and the Board of Directors is authorized to fix the designations, preferences,
rights, qualifications, limitations, and restrictions of each series, except
that any series must provide for cumulative dividends and must be convertible
into common stock.

3. LONG-TERM DEBT

     The Company has a credit arrangement with a bank which provides for a
revolving line of credit facility (the "revolving facility") and a term credit
facility (the "term credit facility"). Pursuant to the revolving facility which
expires April 1, 2002, the Company may borrow up to $8 million at an interest
rate no greater than the bank's prime rate. At March 31, 2000, the Company had
borrowings outstanding under the revolving facility of $6 million. The amount
outstanding under the term credit facility bears interest at a stated rate of
LIBOR plus 1.25% and requires quarterly principal payments of $200,000 plus
accrued interest through March 1, 2003. In July 1997, the Company entered into a
swap transaction with the bank pursuant to which it exchanged the term credit
facility's LIBOR-based interest rate obligation for a fixed interest rate
obligation of 8% to remain in effect for the entire term of the term credit
facility. As of March 31, 2000, the principal amount of indebtedness outstanding
under the term credit facility was $2.4 million. The annual principal payments
required on long-term debt during the next five years are as follows:

                                        8
<PAGE>   10
                                               FRIEDMAN INDUSTRIES, INCORPORATED

3. LONG-TERM DEBT (CONTINUED)

<TABLE>
<S>                                                           <C>
2001........................................................  $  800,000
2002........................................................     800,000
2003........................................................   6,800,000
2004........................................................          --
2005........................................................          --
                                                              ----------
     Total..................................................  $8,400,000
                                                              ==========
</TABLE>

     In July 1995, the Company borrowed $708,168 against the cash surrender
value of officers' life insurance policies (the "borrowings"). During the year
ended March 31, 2000, the Company repaid $426,630 of the borrowings, leaving a
balance owing of $281,538 at an average interest rate of approximately 6%. The
borrowings do not require specific repayment terms except that in the case of
death, the borrowings related to the life insurance policy will be deducted from
the proceeds of such policy.

4. INCOME TAXES

     Deferred income taxes are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amount used for tax purposes. Significant components of the Company's
consolidated deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                           MARCH 31
                                                     ---------------------
                                                       2000        1999
                                                     ---------   ---------
<S>                                                  <C>         <C>
DEFERRED TAX LIABILITIES:
  Depreciation.....................................  $(513,757)  $(470,625)
  Other............................................    (16,536)         --
                                                     ---------   ---------
Total deferred tax liabilities.....................   (530,293)   (470,625)
DEFERRED TAX ASSETS:
  Inventory capitalization.........................     74,155      85,908
  Postretirement benefits other than pensions......     38,420      38,420
  Other............................................     24,158      16,737
                                                     ---------   ---------
Total deferred tax assets..........................    136,733     141,065
                                                     ---------   ---------
Net deferred tax liabilities.......................  $(393,560)  $(329,560)
                                                     =========   =========
</TABLE>

5. PROFIT SHARING PLAN AND OTHER POSTRETIREMENT BENEFITS

     The Company has a defined contribution plan (the "Plan") covering
substantially all employees, including officers. Company contributions, which
are made at the discretion of the Board of Directors in an amount not to exceed
15% of the total compensation paid during the year to all eligible employees,
were $274,000 for the year ended March 31, 2000, $252,000 for the year ended
March 31, 1999, and $280,000 for the year ended March 31, 1998. Contributions,
Plan earnings, and forfeitures of terminated participants' nonvested accounts
are allocated to the individual accounts of participating employees based on
compensation received during the Plan year and years of active service with the
Company.

     In addition, certain health care benefits are provided for retired
employees. Employees with a minimum of 20 years of employment with the Company
who retire at age 65 or older are eligible. The Company has not funded the cost
of the postretirement health care plan.

                                        9
<PAGE>   11
FRIEDMAN INDUSTRIES, INCORPORATED

5. PROFIT-SHARING PLAN AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

     Employees of the Company may participate in a 401(k) retirement plan (the
"401(k) plan"). Employees are eligible to participate in the 401(k) plan when
the employee has completed one year of service. Under the 401(k) plan,
participating employees may defer a portion of their pretax earnings up to
certain limits prescribed by the Internal Revenue Service. The Company provides
matching contributions under the provisions of the plan. Employees fully vest in
the Company's matching contributions upon the completion of 7 years of service.
Contribution expense related to the 401(k) plan was approximately $40,000,
$50,000 and $60,000 for the years ended March 31, 2000, 1999 and 1998,
respectively.

6. INDUSTRY SEGMENT DATA

     The Company is engaged in the steel processing and distribution business.
Within the Company, there are two product groups: coil processing and tubular
products. Coil processing converts steel coils into flat sheet and plate steel
cut to customer specifications. Through its Texas Tubular Products operation,
the Company purchases, processes, manufactures, and markets tubular products.

     The following is a summary of significant financial information relating to
the product groups:

<TABLE>
<CAPTION>
                                                     YEAR ENDED MARCH 31
                                          ------------------------------------------
                                              2000           1999           1998
                                          ------------   ------------   ------------
<S>                                       <C>            <C>            <C>
NET SALES:
  Coil processing.......................  $ 77,842,307   $ 86,409,139   $ 87,619,322
  Tubular...............................    42,425,502     38,310,501     61,221,402
                                          ------------   ------------   ------------
          TOTAL NET SALES...............  $120,267,809   $124,719,640   $148,840,724
                                          ============   ============   ============
OPERATING PROFIT:
  Coil processing.......................  $  1,950,771   $  4,773,761   $  1,876,097
  Tubular...............................     3,414,479      2,210,841      7,593,430
                                          ------------   ------------   ------------
          TOTAL OPERATING PROFIT........     5,365,250      6,984,602      9,469,527
  Corporate expenses....................    (1,179,507)    (1,323,554)    (1,803,240)
  Interest expense......................      (546,160)      (443,686)      (431,498)
  Interest and other income.............       158,602        147,506         53,080
                                          ------------   ------------   ------------
          TOTAL EARNINGS BEFORE TAXES...  $  3,798,185   $  5,364,868   $  7,287,869
                                          ============   ============   ============
IDENTIFIABLE ASSETS:
  Coil processing.......................  $ 25,728,057   $ 24,030,442   $ 25,404,991
  Tubular...............................    18,183,058     12,913,517     19,054,950
                                          ------------   ------------   ------------
                                            43,911,115     36,943,959     44,459,941
  General corporate assets..............     1,195,675      4,079,418      1,579,420
                                          ------------   ------------   ------------
          TOTAL ASSETS..................  $ 45,106,790   $ 41,023,377   $ 46,039,361
                                          ============   ============   ============
</TABLE>

                                       10
<PAGE>   12
                                               FRIEDMAN INDUSTRIES, INCORPORATED

6. INDUSTRY SEGMENT DATA (CONTINUED)

<TABLE>
<CAPTION>
                                                  YEAR ENDED MARCH 31
                                          ------------------------------------
                                             2000         1999         1998
                                          ----------   ----------   ----------
<S>                                       <C>          <C>          <C>
DEPRECIATION:
  Coil processing.......................  $  701,526   $  326,577   $  317,851
  Tubular products......................     327,206      335,794      337,485
  Corporate and other...................      14,371        9,364       10,572
                                          ----------   ----------   ----------
                                          $1,043,103   $  671,735   $  665,908
                                          ==========   ==========   ==========
CAPITAL EXPENDITURES:
  Coil processing.......................  $  116,172   $2,316,306   $2,372,483
  Tubular products......................      49,248       33,216      200,635
  Corporate assets......................      60,418        2,600       20,292
                                          ----------   ----------   ----------
                                          $  225,838   $2,352,122   $2,593,410
                                          ==========   ==========   ==========
</TABLE>

     Operating profit is total revenue less operating expenses, excluding
general corporate expenses, interest expense, and interest and other income.
Corporate assets consist primarily of cash and cash equivalents and the cash
value of officers' life insurance. There are no sales between product groups.

7. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following is a summary of unaudited quarterly results of operations for
the years ended March 31, 2000 and 1999 (per share amounts have been adjusted
for subsequent stock dividends):

<TABLE>
<CAPTION>
                                                              Quarter Ended
                                          ------------------------------------------------------
                                            June 30     September 30   December 31    March 31
                                             1999           1999          1999          2000
                                          -----------   ------------   -----------   -----------
<S>                                       <C>           <C>            <C>           <C>
Net sales...............................  $26,664,262   $29,397,118    $29,894,914   $34,311,515
Gross profit............................    2,153,321     2,279,274     1,884,084      2,348,279
Net earnings............................      600,151       739,308       500,221        667,121
Net earnings per share(1):
  Basic.................................         0.08          0.10          0.07           0.09
  Diluted...............................         0.08          0.10          0.07           0.09
</TABLE>

<TABLE>
<CAPTION>
                                                              Quarter Ended
                                          ------------------------------------------------------
                                            June 30     September 30   December 31    March 31
                                             1998           1998          1998          1999
                                          -----------   ------------   -----------   -----------
<S>                                       <C>           <C>            <C>           <C>
Net sales...............................  $38,923,169   $32,178,289    $26,938,496   $26,679,686
Gross profit............................    2,921,393     2,867,212     2,131,504      2,435,872
Net earnings............................    1,022,748     1,015,084       681,700        821,279
Net earnings per share(1):
  Basic.................................         0.14          0.14          0.09           0.11
  Diluted...............................         0.13          0.13          0.09           0.11
</TABLE>

(1) The sum of the quarterly net income per share amounts does not equal the
    annual amount reported, as per share amounts are computed independently for
    each quarter and for the full year based on the respective weighted average
    common shares outstanding.

8. CONCENTRATION OF RECEIVABLES

     The Company's sales are concentrated primarily in the midwestern,
southwestern, and southeastern sections of the United States, and are primarily
to customers in the steel distributing and fabricating industries. The Company
performs periodic credit evaluations of the financial conditions of its
customers and generally does not require collateral. Generally, receivables are
due within 30 days.

                                       11
<PAGE>   13
FRIEDMAN INDUSTRIES, INCORPORATED

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Friedman Industries, Incorporated

We have audited the accompanying consolidated balance sheets of Friedman
Industries, Incorporated as of March 31, 2000 and 1999, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Friedman
Industries, Incorporated, at March 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 2000, in conformity with auditing standards generally
accepted in the United States.

                                    Ernst & Young LLP

May 26, 2000
Houston, Texas

                   ------------------------------------------

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31
                                    ---------------------------------------------------------------------------------
                                        2000             1999             1998             1997             1996
                                    -------------    -------------    -------------    -------------    -------------
<S>                                 <C>              <C>              <C>              <C>              <C>
Net sales.........................  $ 120,267,809    $ 124,719,640    $ 148,840,724    $ 119,920,966    $ 106,849,181
Net earnings......................      2,506,801        3,540,811        4,809,992        3,630,071        2,836,768
Total assets......................     45,106,790       41,023,377       46,039,361       38,117,191       32,812,986
Long-term debt....................      7,600,000        6,400,000        6,366,666        4,600,000        5,400,000
Stockholders' equity..............     28,622,951       27,422,779       25,732,957       22,781,959       20,428,936
Net earnings per share:
  Basic...........................           0.33             0.47             0.64             0.48             0.38
  Diluted.........................           0.33             0.47             0.63             0.48             0.38
Cash dividends declared per share
  adjusted for stock dividends....           0.18             0.25             0.25             0.18             0.15
</TABLE>

See also Note 1 of Notes to the Company's Consolidated Financial Statements
herein which describes the Company's relationship with its primary suppliers of
steel products.
                                       12
<PAGE>   14
                                               FRIEDMAN INDUSTRIES, INCORPORATED

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS

Year ended March 31, 2000 compared to year ended March 31, 1999

     During the year ended March 31, 2000, sales, cost of products sold and
gross profit decreased $4,451,831, $2,760,808 and $1,691,023, respectively, from
the comparable amounts recorded during the year ended March 31, 1999. During
fiscal 2000, the Company's tubular operations generated an increase in sales
that was more than offset by a decline in sales associated with coil operations.
Tubular operations benefited from stronger demand for tubular products in fiscal
2000 and the Company recorded a 25% increase in tubular tons sold. Conversely,
coil operations were adversely affected by softer demand for these products and
a 6% decline in coil tons sold was recorded. In addition, coil operations
incurred significant increases in the costs of coil products that could not be
immediately passed along to customers. Gross profit as a percentage of sales
decreased from 8.3% in fiscal 1999 to 7.2% in fiscal 2000. Improved margins
earned on tubular sales were more than offset by a significant decline in
margins earned on coil product sales.

     Interest expense increased $102,474 from the amount recorded during fiscal
1999. During fiscal 1999, certain interest costs were related to construction of
fixed assets and were capitalized.

     Federal income taxes declined $532,673 from the amount recorded during
fiscal 1999. This decrease resulted from the decline in earnings before taxes as
the effective tax rates were the same for both years.

Year ended March 31, 1999 compared to year ended March 31, 1998

     During the year ended March 31, 1999, sales, cost of products sold and
gross profit declined $24,121,084, $21,617,572 and $2,503,512, respectively,
from the comparable amounts recorded during the year ended March 31, 1998. These
declines were primarily attributable to the Company's tubular operations which
were adversely affected by a significant downturn in the energy sector of the
U.S. economy in fiscal 1999. This downturn had the effect of reducing demand for
tubular products and generating intense competition for available sales. An
increase in gross profit associated with coil operations was more than offset by
a decrease in gross profit relative to tubular operations. Gross profit as a
percentage of sales decreased from 8.6% in fiscal 1998 to 8.3% in fiscal 1999.
Margins earned on tubular sales declined significantly in fiscal 1999 and offset
improved margins earned on coil sales.

     Selling, general and administrative expenses declined $498,273 from the
amount recorded in fiscal 1998. This decline was primarily related to a decrease
in variable expenses attributable to reduced volume and/or earnings and to a
decline in bad debt expense.

     Interest and other income during fiscal 1999 increased $94,426 from the
amount recorded in fiscal 1998. This increase was primarily related to other
income associated with an increase in the cash surrender value of officers' life
insurance.

     Federal income taxes decreased $653,820 from the amount recorded during
fiscal 1998 due to reduced earnings before taxes. The effective tax rate was the
same for fiscal 1999 and 1998.

FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL

     The Company remained in a strong, liquid position at March 31, 2000.
Current ratios were 4.4 and 4.8 at March 31, 2000 and March 31, 1999,
respectively. Working capital was $28,568,099 at March 31, 2000 and $25,776,002
at March 31, 1999.

                                       13
<PAGE>   15
FRIEDMAN INDUSTRIES, INCORPORATED

FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL (CONTINUED)
     The Company has a credit arrangement with a bank which provides for a
revolving line of credit facility (the "revolving facility") and a term credit
facility (the "term facility"). Pursuant to the revolving facility which expires
April 1, 2002, the Company may borrow up to $8 million at an interest rate no
greater than the bank's prime rate. At March 31, 2000, the Company had
borrowings outstanding under the revolving facility of $6 million. The term
facility included borrowings of $1.2 million from the previous term note and
also provided for additional advances up to $3.5 million, all of which converted
to a term loan on December 31, 1998. The amount outstanding under the term
facility bears interest at a stated rate of LIBOR plus 1.25% and requires
quarterly principal payments of $200,000 plus accrued interest through March 1,
2003. In July 1997, the Company entered into a swap transaction with the bank
pursuant to which it exchanged the term facility's LIBOR-based interest rate
obligation for a fixed interest rate obligation of 8% to remain in effect for
the entire term of the term facility. As of March 31, 2000, the principal amount
of indebtedness outstanding under the term facility was $2.4 million.

     The Company believes that its cash flow from operations and borrowing
capability under its line of credit and term debt facilities are adequate to
fund its expected cash requirements for the year ended March 31, 2001.

FORWARD-LOOKING STATEMENTS

     From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1996) and that involve risk and uncertainty. These forward-looking
statements may include, but are not limited to, future results of operations,
future production capacity and product quality. Forward-looking statements may
be made by management orally or in writing including, but not limited to, this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Company's filings with the Securities and
Exchange Commission under the Securities Act of 1933 and the Securities Exchange
Act of 1934. Actual results and trends in the future may differ materially
depending on a variety of factors including but not limited to, the success of
the Company's capital improvements at its Hickman, Arkansas facility, changes in
the demand and prices for the Company's products and changes in the demand for
steel and steel products in general, and the Company's success in executing its
internal operating plans.

EFFECT OF YEAR 2000 ISSUE

     The Year 2000 issue is the result of computer programming being written
using two digits rather than four to define the applicable year. Any of the
Company's systems, as well as those of key vendors, payors and customers, that
have date sensitive logic may interpret a date using "00" as the year 1900
rather than 2000. This may cause inaccurate processing or possible system
failure and may potentially disrupt operations. This disruption may result in,
among other things, a temporary inability to process transactions, send bills
for services or engage in similar normal business activities. To date, the Year
2000 issue has not resulted in significant operational or financial problems for
the Company. The Company is not aware of any significant problems experienced by
its suppliers, third-party payors or customers as a result of the Year 2000
issue, but the Company will continue to communicate with such parties regarding
any possible problems. The foregoing statements are intended to be and hereby
are designated "Year 2000 Readiness Disclosure Statements" within the meaning of
the Year 2000 Information and Readiness Disclosure Act.

                                       14
<PAGE>   16

FRIEDMAN INDUSTRIES, INCORPORATED

TEN YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
                                                                     YEAR ENDED MARCH 31
                                    --------------------------------------------------------------------------------------
                                        2000           1999           1998           1997           1996          1995
                                    ------------   ------------   ------------   ------------   ------------   -----------
<S>                                 <C>            <C>            <C>            <C>            <C>            <C>
Net sales.........................  $120,267,809   $124,719,640   $148,840,724   $119,920,966   $106,849,181   $97,968,805
Earnings..........................  $  2,506,801   $  3,540,811   $  4,809,992   $  3,630,071   $  2,836,768   $ 2,458,132
Current assets....................  $ 36,945,378   $ 32,534,040   $ 39,347,548   $ 33,357,160   $ 27,524,670   $25,956,555
Current liabilities...............  $  8,377,279   $  6,758,038   $ 13,437,178   $ 10,172,672   $  6,410,527   $ 5,816,334
Net working capital...............  $ 28,568,099   $ 25,776,002   $ 25,910,370   $ 23,184,488   $ 21,114,143   $20,140,221
Total assets......................  $ 45,106,790   $ 41,023,377   $ 46,039,361   $ 38,117,191   $ 32,812,986   $32,074,862
Stockholders' equity..............  $ 28,622,951   $ 27,422,779   $ 25,732,957   $ 22,781,959   $ 20,428,936   $18,722,781
Earnings as a percent of
    Net sales.....................           2.1            2.8            3.2            3.0            2.7           2.5
    Stockholders' equity..........           8.8           12.9           18.7           15.9           13.9          13.1
Average number of common shares
  outstanding: Basic(2)...........     7,547,624      7,528,702      7,512,901      7,489,943      7,446,076     7,444,041
Per share
  Net earnings per share:
    Basic(2)......................        $ 0.33         $ 0.47         $ 0.64         $ 0.48         $ 0.38        $ 0.33
  Stockholders' equity(2).........        $ 3.79         $ 3.64         $ 3.43         $ 3.04         $ 2.74        $ 2.52
Cash dividends per common
  share(2)........................        $ 0.18         $ 0.25         $ 0.25         $ 0.18         $ 0.15        $ 0.16
Stock dividend declared...........            5%             5%             5%             5%             5%            5%

<CAPTION>
                                                     YEAR ENDED MARCH 31
                                    ------------------------------------------------------
                                       1994           1993          1992          1991
                                    -----------    -----------   -----------   -----------
<S>                                 <C>            <C>           <C>           <C>
Net sales.........................  $70,908,065    $56,230,967   $42,609,330   $50,264,851
Earnings..........................  $ 1,691,075(1) $   806,272   $   483,720   $   866,259
Current assets....................  $21,014,281    $16,542,769   $15,537,203   $16,826,544
Current liabilities...............  $ 5,534,143    $ 3,549,495   $ 2,849,637   $ 2,501,178
Net working capital...............  $15,480,138    $12,993,274   $12,687,566   $14,325,366
Total assets......................  $27,184,421    $20,491,441   $19,619,875   $20,936,487
Stockholders' equity..............  $17,430,337    $16,528,543   $16,277,792   $16,274,914
Earnings as a percent of
    Net sales.....................          2.4            1.4           1.1           1.7
    Stockholders' equity..........          9.7            4.9           3.0           5.3
Average number of common shares
  outstanding: Basic(2)...........    7,440,888      7,440,328     7,440,328     7,440,328
Per share
  Net earnings per share:
    Basic(2)......................       $ 0.23(1)      $ 0.11        $ 0.07        $ 0.12
  Stockholders' equity(2).........       $ 2.34         $ 2.22        $ 2.19        $ 2.19
Cash dividends per common
  share(2)........................       $ 0.11         $ 0.07        $ 0.07        $ 0.10
Stock dividend declared...........           5%             5%            5%            5%
</TABLE>

- ------------

(1) Includes the cumulative effect of accounting changes which increased net
    earnings $77,000 ($.01 per share).

(2) Adjusted for stock dividends.
<PAGE>   17

























                    [FRIEDMAN INDUSTRIES, INCORPORATED LOGO]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>3
<FILENAME>ex21-1.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 21.1

                                  SUBSIDIARIES

<TABLE>
<S>                                                <C>                 <C>
Royal Fasteners Corporation......................  Texas Corporation   100% owned
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>4
<FILENAME>ex23-1.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 23.1

                        CONSENT OF INDEPENDENT AUDITORS

     We consent to the incorporation by reference in this Annual Report (Form
10-K) of Friedman Industries, Incorporated of our report dated May 26, 2000,
included in the 2000 Annual Report to Shareholders of Friedman Industries,
Incorporated.

     Our audits also included the financial statement schedule of Friedman
Industries, Incorporated listed in the response to Item 14(a). This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.

     We also consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 1996 Stock Option Plan, 1995 Non-Employee
Director Plan, as amended, and the 1989 Incentive Stock Option Plan, as amended,
of our report dated May 26, 2000, with respect to the financial statements and
schedule of Friedman Industries, Incorporated included in the 2000 Annual Report
to Shareholders of Friedman Industries, Incorporated.


/s/ ERNST & YOUNG LLP
- ---------------------


Houston, Texas
May 26, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>5
<FILENAME>ex27-1.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
YEAR ENDED MARCH 31, 2000
</LEGEND>
<MULTIPLIER> 1

<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-2000
<PERIOD-START>                             APR-01-1999
<PERIOD-END>                               MAR-31-2000
<CASH>                                         443,818
<SECURITIES>                                         0
<RECEIVABLES>                               13,533,550
<ALLOWANCES>                                         0
<INVENTORY>                                 22,910,509
<CURRENT-ASSETS>                            36,945,378
<PP&E>                                      19,644,271
<DEPRECIATION>                              12,170,191
<TOTAL-ASSETS>                              45,106,790
<CURRENT-LIABILITIES>                        8,377,279
<BONDS>                                      7,600,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                     7,188,213
<OTHER-SE>                                  21,434,738
<TOTAL-LIABILITY-AND-EQUITY>                45,106,790
<SALES>                                    120,267,809
<TOTAL-REVENUES>                           120,426,411
<CGS>                                      111,602,851
<TOTAL-COSTS>                              116,082,066
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             546,160
<INCOME-PRETAX>                              3,798,185
<INCOME-TAX>                                 1,291,384
<INCOME-CONTINUING>                          2,506,801
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                 2,506,801
<EPS-BASIC>                                       0.33
<EPS-DILUTED>                                     0.33


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
