Friedman Industries Inc 8-K/A, filed Nov 10, 2025
Friedman Industries Inc (FRD)
About this 8-K/A
Friedman Industries Inc filed this 8-K/A on November 10, 2025, reporting on events of August 29, 2025.
Items reported
- Item 9.01: Financial statements and exhibits
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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23.1
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99.1
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99.2
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99.3
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document)
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FRIEDMAN INDUSTRIES, INCORPORATED
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By:
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/s/ Alex LaRue
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Alex LaRue
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Chief Financial Officer - Secretary and Treasurer
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Exhibit 23.1
ACKNOWLEDGMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement (No. 333-290754) on Form S-8 of Friedman Industries, Inc. of our report dated April 28, 2025, on our audit of the financial statements of Century Metals & Supplies, Inc. as of and for the years ended December 31, 2024 and 2023, respectively and of our report dated November 5, 2025 on our review of the financial statements of Century Metals & Supplies, Inc. as of and for the six months ended June 30, 2025 and 2024, respectively, appearing in this Current Report on Form 8-K/A dated November 10, 2025.
We also agree to the use of our name as it appears under the caption "Independent Certified Public Accountants."
/s/ Rehmann Robson LLC
Orlando, Florida
November 10, 2025
Exhibit 99.1
CENTURY METALS & SUPPLIES, INC.
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Table of Contents |
| Page | |
| Independent Auditors' Report | 1 |
| Financial Statements for the Years Ended December 31, 2024 and 2023 | |
| Balance Sheets | 3 |
| Statements of Income | 4 |
| Statements of Stockholders' Equity | 5 |
| Statements of Cash Flows | 6 |
| Notes to Financial Statements | 7 |
| Supplementary Information for the Years Ended December 31, 2024 and 2023 | 15 |
| Schedules of General and Administrative Expenses | 16 |
INDEPENDENT AUDITORS' REPORT
April 28, 2025
Stockholders
Century Metals & Supplies, Inc.
Miami, Florida
Opinion
We have audited the financial statements of Century Metals & Supplies, Inc. (the "Company"), which comprise the balance sheets as of December 31, 2024 and 2023, and the related statements of income, stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements (the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Century Metals & Supplies, Inc. as of December 31, 2024 and 2023, and the results of its operations and cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America ("GAAS"). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditors' Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
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Exercise professional judgment and maintain professional skepticism throughout the audit. |
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Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
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Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed. |
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Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
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Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Supplementary Information
The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information, which is the responsibility of management, was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The supplementary information has not been subjected to the auditing procedures applied in our audits of the basic financial statements and, accordingly, we do not express an opinion nor provide any assurance on it.
CENTURY METALS & SUPPLIES, INC.
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Balance Sheets |
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December 31 |
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2024 |
2023 |
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| ASSETS | ||||||||
| Current assets | ||||||||
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Cash |
$ | 1,786,815 | $ | 1,802,827 | ||||
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Restricted cash |
2,811,200 | 1,351,200 | ||||||
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Accounts receivable |
14,976,808 | 7,623,471 | ||||||
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Inventory |
33,978,764 | 29,202,593 | ||||||
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Prepaid expenses and other |
5,205,244 | 5,896,075 | ||||||
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Total current assets |
58,758,831 | 45,876,166 | ||||||
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Net property and equipment |
1,688,046 | 1,769,108 | ||||||
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Net operating lease right-of-use assets |
7,878,019 | 6,554,291 | ||||||
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Deposits |
259,482 | 409,482 | ||||||
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Total assets |
$ | 68,584,378 | $ | 54,609,047 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
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Accounts payable |
$ | 14,665,131 | $ | 7,606,485 | ||||
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Short-term bank borrowings |
15,349,523 | 12,125,882 | ||||||
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Current portion of long-term debt |
244,093 | 296,864 | ||||||
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Current portion of operating lease obligations |
1,290,027 | 672,791 | ||||||
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Accrued expenses |
2,565,152 | 2,521,485 | ||||||
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Note payable to related party |
500,000 | 500,000 | ||||||
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Due to affiliate |
400,000 | 400,000 | ||||||
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Total current liabilities |
35,013,926 | 24,123,507 | ||||||
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Long-term debt, net of current portion |
486,193 | 569,155 | ||||||
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Operating lease obligations, net of current portion |
6,649,425 | 5,931,825 | ||||||
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Total liabilities |
42,149,544 | 30,624,487 | ||||||
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Stockholders' equity |
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| Class A voting common stock $.10 par value; 500 shares authorized, 80 shares issued and outstanding | 8 | 8 | ||||||
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Class B non-voting common stock $.10 par value; 4,500 shares authorized, 20 shares issued and outstanding |
2 | 2 | ||||||
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Additional paid-in capital |
990 | 990 | ||||||
| Retained earnings | 26,433,834 | 23,983,560 | ||||||
| Total stockholders' equity | 26,434,834 | 23,984,560 | ||||||
| Total liabilities and stockholders' equity | $ | 68,584,378 | $ | 54,609,047 | ||||
The accompanying notes are an integral part of these financial statements.
CENTURY METALS & SUPPLIES, INC.
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Statements of Income |
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Year Ended December 31 |
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2024 |
2023 |
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Net sales |
$ | 98,846,478 | $ | 103,757,562 | ||||
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Cost of sales |
80,493,604 | 85,721,835 | ||||||
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Gross profit |
18,352,874 | 18,035,727 | ||||||
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General and administrative expenses |
13,134,741 | 12,869,517 | ||||||
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Operating income |
5,218,133 | 5,166,210 | ||||||
| Other (expense) income | ||||||||
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Interest expense |
(1,200,268 | ) | (1,033,501 | ) | ||||
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Interest income |
30,911 | 5,427 | ||||||
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Other |
19,015 | 18,814 | ||||||
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Other expense, net |
(1,150,342 | ) | (1,009,260 | ) | ||||
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Net income |
$ | 4,067,791 | $ | 4,156,950 | ||||
The accompanying notes are an integral part of these financial statements.
CENTURY METALS & SUPPLIES, INC.
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Statements of Stockholders' Equity |
| Common Stock |
Additional Paid-In |
Retained |
Total Stockholders' |
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| Class A | Class B | Capital | Earnings | Equity | ||||||||||||||||
| Balances, January 1, 2023 | $ | 8 | $ | 2 | $ | 990 | $ | 25,655,052 | $ | 25,656,052 | ||||||||||
| Net income | - | - | - | 4,156,950 | 4,156,950 | |||||||||||||||
| Distributions | - | - | - | (5,828,442 | ) | (5,828,442 | ) | |||||||||||||
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Balances, December 31, 2023 |
8 | 2 | 990 | 23,983,560 | 23,984,560 | |||||||||||||||
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Net income |
- | - | - | 4,067,791 | 4,067,791 | |||||||||||||||
| Distributions | - | - | - | (1,617,517 | ) | (1,617,517 | ) | |||||||||||||
| Balances, December 31, 2024 | $ | 8 | $ | 2 | $ | 990 | $ | 26,433,834 | $ | 26,434,834 | ||||||||||
The accompanying notes are an integral part of these financial statements.
CENTURY METALS & SUPPLIES, INC.
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Statements of Cash Flows |
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Year Ended December 31 |
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2024 |
2023 |
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Cash flows from operating activities |
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Net income |
$ | 4,067,791 | $ | 4,156,950 | ||||
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Adjustments to reconcile net income to net cash from operating activities |
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Credit losses |
86,367 | 391,017 | ||||||
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Depreciation and amortization |
292,346 | 283,271 | ||||||
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Non-cash lease expense |
1,092,912 | 713,261 | ||||||
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Changes in operating assets and liabilities which (used) provided cash |
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Accounts receivable |
(7,439,704 | ) | 4,121,755 | |||||
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Related party receivables |
- | (313,979 | ) | |||||
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Inventory |
(4,776,171 | ) | 10,371,947 | |||||
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Prepaid expenses and other assets |
690,831 | (5,698,369 | ) | |||||
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Accounts payable |
7,058,646 | (1,972,941 | ) | |||||
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Operating lease obligations |
(1,081,804 | ) | (700,706 | ) | ||||
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Accrued expenses |
43,667 | (313,734 | ) | |||||
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Net change in cash from operating activities |
34,881 | 11,038,472 | ||||||
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Cash flows from investing activities |
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Purchases of property and equipment |
(211,284 | ) | (284,362 | ) | ||||
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Change in deposits |
150,000 | (170,000 | ) | |||||
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Net change in cash from investing activities |
(61,284 | ) | (454,362 | ) | ||||
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Cash flows from financing activities |
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Net short-term bank borrowings (repayments) |
3,223,641 | (2,331,309 | ) | |||||
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Repayments of long-term debt |
(135,733 | ) | (1,585,479 | ) | ||||
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Distributions |
(1,617,517 | ) | (5,828,442 | ) | ||||
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Net change in cash from financing activities |
1,470,391 | (9,745,230 | ) | |||||
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Net change in cash and restricted cash |
1,443,988 | 838,880 | ||||||
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Cash and restricted cash, beginning of year |
3,154,027 | 2,315,147 | ||||||
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Cash and restricted cash, end of year |
$ | 4,598,015 | $ | 3,154,027 | ||||
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Reconciliation to Balance Sheets |
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Cash |
$ | 1,786,815 | $ | 1,802,827 | ||||
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Restricted cash |
2,811,200 | 1,351,200 | ||||||
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Cash and restricted cash, end of year |
$ | 4,598,015 | $ | 3,154,027 | ||||
| Supplemental disclosures of cash flows information | ||||||||
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Interest paid during the year |
$ | 1,200,300 | $ | 1,033,500 | ||||
The accompanying notes are an integral part of these financial statements.
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Business
Century Metals & Supplies, Inc. (the "Company"), which is incorporated in the state of Florida, operates from its headquarters in Miami with a second location in Orlando. The Company services major original equipment manufacturers, operating in industries such as appliances, computers, electronics, construction, and others, located in the Southeastern United States and Puerto Rico.
Entities Under Common Control
Accounting principles generally accepted in the United States of America permit the Company to elect, when certain conditions exist, not to apply variable interest entity guidance to an entity operating under common control with the Company. Management has determined that these conditions were met by the Company and, as a result, the Company has elected not to apply the VIE guidance to entities affiliated through common control.
Concentration Risks
Sales to a major customer accounted for $10,872,112 of net sales (11%) for 2024, and $12,520,206 of net sales (12%) for 2023. Accounts receivable due from this customer amounted to $659,489 and $598,127 at December 31, 2024 and 2023, respectively. The loss of this customer could adversely affect short-term operating results.
Purchases from two major vendors accounted for $26,680,395 of cost of sales (28%) for 2024, and $20,422,109 of cost of sales (21%) for 2023. Accounts payable due to these vendors amounted to $1,050,905 and $1,303,575 at December 31, 2024 and 2023, respectively. The loss of these vendors could adversely affect short-term operating results.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. Actual results could differ from those estimates.
Cash
Cash consists of demand deposits in banks. The Company maintains its deposits in amounts which, at times, may exceed federally insured limits, in several local financial institutions. Management does not believe the Company is exposed to any significant interest rate or other financial risk as a result of these deposits.
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
Restricted Cash
Restricted cash is maintained in accordance with a letter of credit guaranty with a financial institution.
Revenue from Contracts with Customers
The Company purchases coils of different metals from various domestic and international suppliers, processes them into finished sheets, and resells to customers. Revenue is measured based on the amount of consideration that the Company expects to receive. Management has determined that each order of product placed by an individual customer represents a separate performance obligation. Risk of loss and title typically pass at time of shipment to the customer; as such, revenue is recognized at the point in time when the products are shipped. The Company does not include sales and other taxes in the transaction price and thus does not report these amounts as revenue. In addition, the Company has certain programs which under specified conditions, enable customers to return defective products.
The Company is required to assess whether it acts as a principal in the transaction or as an agent acting on behalf of the customer. Revenue for transactions where the Company is considered to be the agent is recorded net in the statements of income.
Accounts Receivable
Accounts receivable are customer obligations due under normal trade terms generally requiring payment within 30 to 60 days from the invoice date. No collateral or other security is required to support accounts receivable, which are stated at the amounts billed and due from customers less an allowance for expected credit losses. None of the Company's contracts have a significant financing component. Management estimates an allowance for expected credit losses based on the amount it expects to collect from customers, based on the length of time the receivables have been outstanding, historical collection experience, current market conditions and forecasted economic and business environments. Balances that are still outstanding after management has used reasonable collection efforts are written off against the allowance for credit losses. The expense associated with the allowance for credit losses of $86,367 and $391,017 for the years ended December 31, 2024 and 2023, respectively, is recognized in general and administrative expenses. At December 31, 2024 and 2023, the allowance related to these receivables was not material.
Accounts receivable were as follows for the years ended December 31:
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2024 |
2023 |
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Accounts receivable, beginning of year |
$ | 7,623,471 | $ | 12,136,243 | ||||
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Accounts receivable, end of year |
$ | 14,976,808 | $ | 7,623,471 | ||||
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
Inventory
Inventory, which consists of finished goods, is stated at the lower of cost, principally determined using the first-in, first out method ("FIFO"), or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.
Property and Equipment
Property and equipment is stated at cost. Major improvements and renewals are capitalized while ordinary maintenance and repairs are expensed. Management reviews these assets for impairment whenever events or changes in circumstances indicate the related carrying amount may not be recoverable. Depreciation, which includes amortization of leasehold improvements, is computed using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 20 years.
Leases
The Company determines if an arrangement is a lease at inception and considers classification of leases as operating or finance.
Operating lease right-of-use ("ROU") assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses (the risk-free rate) based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable rent payments are expensed as incurred. The Company's variable lease payments primarily consist of real estate, maintenance and usage charges.
The Company has elected to exclude short-term leases from the recognition requirements of Accounting Standards Codification ("ASC") 842, Leases. A lease is short-term if, at the commencement date, it has a term of less than or equal to one year. Lease expense related to short-term leases is recognized on a straight- line basis over the lease term.
The Company has also elected to combine lease and non-lease components when measuring lease liabilities for vehicle and equipment leases.
The Company has elected the practical expedient for private companies in the lease standard to use the written terms and conditions of related party arrangements between entities under common control to determine whether an arrangement contains a lease and how the lease is classified.
Management reviews these ROU assets for impairment whenever events or circumstances indicate that their carrying values may not be fully recoverable.
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
Income Taxes
The stockholders have elected for the Company to be taxed as an "S" Corporation under the provisions of Internal Revenue Code Section 1362, whereby federal taxable income and certain tax credits are passed directly to the stockholders for inclusion in their personal income tax returns. Some states and localities assess income taxes at the entity level for "S" Corporations. Though federal income taxes are not provided for in these financial statements, applicable state and local income taxes are provided as a component of general and administrative expenses.
Management has analyzed the Company's income tax filing positions in the federal and state jurisdictions where it is required to file income tax returns, for all open tax years in these jurisdictions, to identify potential uncertain tax positions. The Company reports interest and penalties attributable to income taxes, to the extent they arise, as a component of operating expenses. As of December 31, 2024, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or disclosure in these financial statements. While the Company is subject to routine audits by taxing jurisdictions, there are currently no audits for any tax periods in progress.
Subsequent Events
In preparing these financial statements, management has evaluated, for potential recognition or disclosure, significant events or transactions that occurred during the period subsequent to the most recent balance sheet presented herein, through the date these financial statements were available to be issued.
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PROPERTY AND EQUIPMENT |
Net property and equipment consists of the following amounts at December 31:
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2024 |
2023 |
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Property and equipment |
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Warehouse equipment |
$ | 2,272,099 | $ | 2,272,099 | ||||
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Leasehold improvements |
929,388 | 929,388 | ||||||
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Transportation equipment |
907,485 | 732,503 | ||||||
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Furniture and fixtures |
133,685 | 133,685 | ||||||
| Information technology | 40,495 | 40,495 | ||||||
| Total | 4,283,152 | 4,108,170 | ||||||
| Less accumulated depreciation and amortization | 2,595,106 | 2,339,062 | ||||||
| Net property and equipment | $ | 1,688,046 | $ | 1,769,108 | ||||
Depreciation and amortization expense was $292,346 and $283,271 in 2024 and 2023, respectively.
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
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DEBT |
Short-term Bank Borrowings
Short-term bank borrowings consist of outstanding draws on a $16,500,000 revolving line of credit (the "line") available to support working capital needs. Interest is charged at the one-month Secured Overnight Financing Rate ("SOFR") plus 2.50% (effective rate of 6.99% and 7.86% at December 31, 2024 and 2023, respectively). Borrowings are subject to a borrowing base calculation of the percentage of insured and uninsured accounts receivable as well as inventory, as defined. Borrowings are collateralized by all Company assets and the assets of an affiliate related by common control (see Note 5). The Company must maintain certain financial and other covenants including but not limited to a minimum debt service coverage ratio and leverage ratio, as defined in the agreement. The line matures in November 2025.
Long-term Debt
Long-term debt consists of the following obligations at December 31:
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2024 |
2023 |
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Note payable to investor; fixed interest of 6.00%; monthly principal and interest payments of $20,833; unsecured; maturing September 2025. |
$ | 93,750 | $ | 207,084 | ||||
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Note payable to bank; variable interest rate at the one-month SOFR plus 2.50% (effective rate of 6.99% and 7.86% at December 31, 2024 and 2023, respectively) adjusted monthly; principal monthly payments of $7,143; collateralized by Company assets; maturing February 2029. |
361,405 | 450,000 | ||||||
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Notes payable to a finance company; interest ranging from 2.50% to 8.79% per annum; payable in 48 to 72 monthly payments ranging from $2,531 to $3,375; collateralized by equipment; maturity dates ranging from March 2026 to July 2030. |
275,131 | 208,935 | ||||||
| Total long-term debt | 730,286 | 866,019 | ||||||
| Less current portion | 244,093 | 296,864 | ||||||
| Long-term debt, less current portion | $ | 486,193 | $ | 569,155 | ||||
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
Scheduled annual principal maturities of long-term debt for each of the five years succeeding December 31, 2024 and thereafter, are summarized as follows:
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Year |
Amount |
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2025 |
$ | 244,093 | ||
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2026 |
148,396 | |||
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2027 |
88,588 | |||
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2028 |
96,110 | |||
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2029 |
135,916 | |||
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Thereafter |
17,183 | |||
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Total |
$ | 730,286 | ||
The borrowing agreements contain certain customary affirmative and restrictive covenants which require the Company to, among other stipulations, maintain certain insurance coverage and furnish a calculation of leverage ratio and actual debt service coverage for the prior 12-month period.
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LEASES |
The Company leases office and warehouse space in Miami, Orlando and Tampa, as well as certain equipment. The office and warehouse in Miami is leased from an affiliated business entity related under common ownership and management control. The agreement commenced June 11, 2018 and expires May 31, 2038.
The Company leases office and warehouse space in Orlando from an unaffiliated party which began on November 1, 2022 and expires July 1, 2029. The Company also leases warehouse space in Tampa from an unaffiliated party which began on December 1, 2024 and expires November 30, 2029.
The following table summarizes the composition of net lease cost during the years ended December 31:
| Related | Unrelated | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating lease cost | $ | 707,745 | $ | 707,745 | $ | 516,033 | $ | 492,977 | ||||||||
| Short-term lease cost | 18,000 | 18,000 | 627,586 | 370,732 | ||||||||||||
| Total lease cost | $ | 725,745 | $ | 725,745 | $ | 1,143,619 | $ | 863,709 | ||||||||
As of December 31, 2024, leasehold improvements with an unamortized balance in relation to related party lease arrangements are immaterial.
CENTURY METALS & SUPPLIES, INC.
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Notes to Financial Statements |
The following table summarizes other information related to the Company's leases during the years ended December 31:
| 2024 | 2023 | |||||||
| Cash paid for amounts included in the measurement of lease obligations Operating cash flows | $ | 1,212,369 | $ | 817,820 | ||||
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Right-of-use assets obtained in exchange for new operating lease obligations |
$ | 2,416,640 | $ | - | ||||
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Weighted-average remaining lease term (in years) |
9.07 | 11.44 | ||||||
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Weighted-average discount rate |
2.08 | % | 1.72 | % | ||||
The following table presents a maturity analysis summary of the Company's operating lease obligations recorded on the balance sheet as of December 31, 2024:
| Year | Related | Unrelated | ||||||
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2025 |
$ | 712,457 | $ | 728,190 | ||||
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2026 |
654,347 | 731,759 | ||||||
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2027 |
363,799 | 661,339 | ||||||
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2028 |
361,963 | 652,711 | ||||||
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2029 |
358,292 | 464,148 | ||||||
| Thereafter | 2,984,250 | - | ||||||
| Total lease payments | 5,435,108 | 3,238,147 | ||||||
| Less discount to present value | 544,937 | 188,866 | ||||||
| Total lease obligations | 4,890,171 | 3,049,281 | ||||||
| Less current portion | 632,058 | 657,969 | ||||||
| Long-term lease obligations | $ | 4,258,113 | $ | 2,391,312 | ||||
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
|
5. |
RELATED PARTY TRANSACTIONS |
The Company is related to other business entities under common ownership and control. There are no explicit or contractual guarantees from the Company to any of these related parties to guarantee their debts or to fund working capital short-falls. The Company's maximum exposure to losses from these relationships cannot be quantified.
AKR Industries, Inc.
AKR Industries, Inc. ("AKR") is a corporation affiliated through common ownership. AKR guarantees the Company's revolving line of credit in the amount of $16,500,000. The Company does not guarantee any liabilities of AKR and as such, is not directly responsible to satisfy any liabilities of AKR. The Company's maximum exposure to losses from this relationship cannot be quantified. The assets of AKR consist primarily of cash, receivables, amounts due from affiliates and inventory. In 2024 and 2023, the Company recognized sales to AKR of approximately $34,000 and $114,000, respectively.
Century Metals & Supplies, P.R.
Century Metals & Supplies, P. R. ("PR") is a corporation affiliated through common ownership and ultimate management control formed to conduct similar operations in Puerto Rico. The Company does not guarantee any liabilities of PR and as such, is not directly responsible to satisfy any liabilities of PR. The Company's maximum exposure to losses from this relationship cannot be quantified. The assets of PR consist primarily of cash, receivables, amounts due from affiliates and inventory. In 2024 and 2023, the Company recognized sales to PR of approximately $5,180,000 and $5,200,000, respectively.
GJB Fund I
GJB Fund I ("GJBF") is a corporation affiliated through common ownership and ultimate management control formed to hold land and buildings for rental purposes. GJBF advanced funds in the amount of $400,000 to the Company, which is reported on the balance sheets as due to affiliate. At December 31, 2024 and 2023, the advanced funds amount is unsecured, non-interest bearing, and has no fixed maturity date or formal plan of settlement.
Note Payable to Related Party
Note payable to related party consists of an advance during 2022 bearing interest at 7.00%. The note requires monthly interest-only payments of $2,917, is unsecured, and has no fixed maturity date or formal plan of settlement.
|
6. |
PROFIT SHARING PLAN |
The Company sponsors a 401(k) plan covering all employees with at least three months of continuous service and contributes 3% of eligible participants' compensation. The Company contributed to the plan approximately $156,000 and $138,000, respectively, for 2024 and 2023.
■ ■ ■ ■ ■
SUPPLEMENTARY INFORMATION
FOR THE YEARS ENDED
DECEMBER 31, 2024 AND 2023
CENTURY METALS & SUPPLIES, INC.
|
■ |
Schedules of General and Administrative Expenses |
|
Year Ended December 31 |
||||||||
|
2024 |
2023 |
|||||||
|
Wages |
$ | 5,185,699 | $ | 5,022,292 | ||||
|
Office rent |
1,593,807 | 1,300,090 | ||||||
|
Insurance |
1,096,107 | 1,125,950 | ||||||
|
Commissions and fees |
1,048,950 | 544,638 | ||||||
|
Professional fees |
781,221 | 533,365 | ||||||
|
Repairs and maintenance |
553,379 | 603,753 | ||||||
|
Office expense and supplies |
399,835 | 950,920 | ||||||
|
Payroll taxes |
399,434 | 379,909 | ||||||
|
Licenses and other taxes |
306,099 | 331,984 | ||||||
|
Depreciation and amortization |
292,346 | 283,271 | ||||||
|
Other rentals |
275,557 | 289,364 | ||||||
|
Credit losses |
86,367 | 391,017 | ||||||
|
Travel |
207,091 | 153,735 | ||||||
|
Bank service charges |
197,977 | 224,709 | ||||||
|
401(k) contribution |
155,561 | 138,449 | ||||||
|
Utilities |
151,340 | 137,325 | ||||||
|
Auto |
124,156 | 166,031 | ||||||
|
Representation costs |
112,800 | 112,800 | ||||||
|
Advertising |
44,018 | 70,515 | ||||||
|
Dues and subscriptions |
36,435 | 16,340 | ||||||
|
Telephone |
33,322 | 39,524 | ||||||
|
Other |
19,427 | 23,625 | ||||||
|
Alarm and security |
19,058 | 14,511 | ||||||
|
Delivery costs |
10,030 | 5,980 | ||||||
|
Contributions and donations |
3,000 | 4,210 | ||||||
|
Postage |
975 | 908 | ||||||
|
Training and seminars |
750 | 4,302 | ||||||
|
Total |
$ | 13,134,741 | $ | 12,869,517 | ||||
See independent auditors' report.
Exhibit 99.2
CENTURY METALS & SUPPLIES, INC.
|
■ |
Table of Contents |
| Page | |
| Independent Auditors' Review Report | 1 |
| Financial Statements for the Six Months Ended June 30, 2025 and 2024 | |
| Balance Sheets | 2 |
| Statements of Income | 3 |
| Statements of Stockholders' Equity | 4 |
| Statements of Cash Flows | 5 |
| Notes to Financial Statements | 6 |
INDEPENDENT AUDITORS' REVIEW REPORT
November 5, 2025
Stockholders
Century Metals & Supplies, Inc.
Miami, Florida
Results of Review of Interim Financial Information
We have reviewed the accompanying financial statements of Century Metals & Supplies, Inc. (the "Company"), which comprise the balance sheets as of June 30, 2025 and 2024, and the related statements of income, stockholders' equity, and cash flows for the six months then ended, and the related notes to the financial statements (the "interim financial information").
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.
Basis for Review Results of Interim Financial Information
We conducted our review in accordance with auditing standards generally accepted in the United States of America ("GAAS") applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is an expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our review. We believe that the results of the review procedures provide a reasonable basis for our conclusion.
Responsibilities of Management for the Interim Financial Information
Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Balance Sheets |
(Unaudited)
| June 30 | ||||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
|
Cash |
$ | 1,823,313 | $ | 1,775,807 | ||||
|
Restricted cash |
3,045,263 | 2,811,200 | ||||||
|
Accounts receivable, less allowance for credit losses of $196,598 ($262,706 in 2024) |
11,619,913 | 10,243,621 | ||||||
|
Current portion of note receivable |
240,000 | - | ||||||
|
Inventory |
35,881,780 | 33,066,371 | ||||||
|
Prepaid expenses and other current assets |
863,967 | 2,261,932 | ||||||
|
Total current assets |
53,474,236 | 50,158,931 | ||||||
|
Net property and equipment |
1,636,345 | 1,643,414 | ||||||
|
Net operating lease right-of-use assets |
7,238,141 | 7,307,225 | ||||||
|
Note receivable, net of current portion |
2,160,000 | - | ||||||
|
Deposits |
259,482 | 259,482 | ||||||
|
Total assets |
$ | 64,768,204 | $ | 59,369,052 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
|
Accounts payable |
$ | 9,579,934 | $ | 9,122,952 | ||||
|
Short-term bank borrowings |
15,437,431 | 13,375,254 | ||||||
|
Current portion of long-term debt |
206,922 | 263,605 | ||||||
|
Current portion of operating lease obligations |
1,308,266 | 1,069,022 | ||||||
|
Accrued expenses |
3,293,811 | 2,896,399 | ||||||
|
Note payable to related party |
500,000 | 500,000 | ||||||
|
Due to affiliate |
400,000 | 409,000 | ||||||
|
Total current liabilities |
30,726,364 | 27,636,232 | ||||||
|
Long-term debt, net of current portion |
324,086 | 472,314 | ||||||
|
Operating lease obligations, net of current portion |
5,991,653 | 6,298,365 | ||||||
|
Total liabilities |
37,042,103 | 34,406,911 | ||||||
|
Stockholders' equity |
||||||||
| Class A voting common stock $.10 par value; 500 shares authorized, 80 shares issued and outstanding | 8 | 8 | ||||||
|
Class B non-voting common stock $.10 par value; 4,500 shares authorized, 20 shares issued and outstanding |
2 | 2 | ||||||
|
Additional paid-in capital |
990 | 990 | ||||||
| Retained earnings | 27,725,101 | 24,961,141 | ||||||
| Total stockholders' equity | 27,726,101 | 24,962,141 | ||||||
| Total liabilities and stockholders' equity | $ | 64,768,204 | $ | 59,369,052 | ||||
See accompanying notes, which are an integral part of these financial statements, and independent auditors' review report.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Statements of Income |
(Unaudited)
|
Six Months Ended June 30 |
||||||||
|
2025 |
2024 |
|||||||
|
Net sales |
$ | 51,302,857 | $ | 52,746,759 | ||||
|
Cost of sales |
41,622,832 | 43,387,432 | ||||||
|
Gross profit |
9,680,025 | 9,359,327 | ||||||
|
General and administrative expenses |
7,625,765 | 6,756,340 | ||||||
|
Operating income |
2,054,260 | 2,602,987 | ||||||
| Other (expense) income | ||||||||
|
Interest expense |
(602,250 | ) | (548,985 | ) | ||||
|
Interest income |
248,136 | 15,689 | ||||||
|
Other |
541,121 | 4,520 | ||||||
|
Other income (expense), net |
187,007 | (528,776 | ) | |||||
|
Net income |
$ | 2,241,267 | $ | 2,074,211 | ||||
See accompanying notes, which are an integral part of these financial statements, and independent auditors' review report.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Statements of Stockholders' Equity |
| Common Stock |
Additional Paid-In |
Retained |
Total Stockholders' |
|||||||||||||||||
| Class A | Class B | Capital | Earnings | Equity | ||||||||||||||||
|
Balances, January 1, 2024 |
$ | 8 | $ | 2 | $ | 990 | $ | 23,983,560 | $ | 23,984,560 | ||||||||||
|
Net income |
- | - | - | 2,074,211 | 2,074,211 | |||||||||||||||
| Distributions | - | - | - | (1,096,630 | ) | (1,096,630 | ) | |||||||||||||
| Balances, June 30, 2024 (unaudited) | $ | 8 | $ | 2 | $ | 990 | $ | 24,961,141 | $ | 24,962,141 | ||||||||||
|
Balances, January 1, 2025 |
$ | 8 | $ | 2 | $ | 990 | $ | 26,433,834 | $ | 26,434,834 | ||||||||||
|
Net income |
- | - | - | 2,241,267 | 2,241,267 | |||||||||||||||
| Distributions | - | - | - | (950,000 | ) | (950,000 | ) | |||||||||||||
| Balances, June 30, 2025 (unaudited) | $ | 8 | $ | 2 | $ | 990 | $ | 27,725,101 | $ | 27,726,101 | ||||||||||
See accompanying notes, which are an integral part of these financial statements, and independent auditors' review report.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Statements of Cash Flows |
| Six Months Ended | ||||||||
| June 30 | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
|
Net income |
$ | 2,241,267 | $ | 2,074,211 | ||||
| Adjustments to reconcile net income to net cash from operating activities | ||||||||
|
Credit losses |
349,342 | 263,957 | ||||||
|
Depreciation and amortization |
144,701 | 142,922 | ||||||
|
Non-cash lease expense |
639,878 | 542,744 | ||||||
|
Changes in operating assets and liabilities which provided (used) cash |
||||||||
|
Accounts receivable |
3,007,553 | (2,884,107 | ) | |||||
|
Related party receivables |
- | 9,000 | ||||||
|
Inventory |
(1,903,016 | ) | (3,863,778 | ) | ||||
|
Prepaid expenses and other assets |
4,341,277 | 3,634,143 | ||||||
|
Accounts payable |
(5,085,197 | ) | 1,516,467 | |||||
|
Operating lease obligations |
(639,533 | ) | (532,907 | ) | ||||
|
Accrued expenses |
728,659 | 374,914 | ||||||
|
Net change in cash from operating activities |
3,824,931 | 1,277,566 | ||||||
|
Cash flows from investing activities |
||||||||
|
Purchases of property and equipment |
(93,000 | ) | (17,228 | ) | ||||
|
Issuance of note receivable |
(2,400,000 | ) | - | |||||
|
Change in deposits |
- | 150,000 | ||||||
|
Net change in cash from investing activities |
(2,493,000 | ) | 132,772 | |||||
|
Cash flows from financing activities |
||||||||
|
Short-term bank borrowings |
14,874,286 | 22,019,832 | ||||||
|
Short-term bank repayments |
(14,786,378 | ) | (20,770,460 | ) | ||||
|
Repayments of long-term debt |
(199,278 | ) | (130,100 | ) | ||||
|
Distributions |
(950,000 | ) | (1,096,630 | ) | ||||
|
Net change in cash from financing activities |
(1,061,370 | ) | 22,642 | |||||
|
Net change in cash and restricted cash |
270,561 | 1,432,980 | ||||||
|
Cash and restricted cash, beginning of period |
4,598,015 | 3,154,027 | ||||||
|
Cash and restricted cash, end of period |
$ | 4,868,576 | $ | 4,587,007 | ||||
|
Cash and restricted cash is presented as follows on the accompanying balance sheets |
||||||||
|
Cash |
$ | 1,823,313 | $ | 1,775,807 | ||||
|
Restricted cash |
3,045,263 | 2,811,200 | ||||||
|
Total |
$ | 4,868,576 | $ | 4,587,007 | ||||
| Supplemental disclosures of cash flows information | ||||||||
|
Interest paid during the period |
$ | 602,300 | $ | 549,000 | ||||
See accompanying notes, which are an integral part of these financial statements, and independent auditors' review report.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
|
1. |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Business
Century Metals & Supplies, Inc. (the "Company"), which is incorporated in the state of Florida, operates from its headquarters in Miami with a second location in Orlando. The Company services major original equipment manufacturers, operating in industries such as appliances, computers, electronics, construction, and others, located in the Southeastern United States and Puerto Rico.
Entities Under Common Control
Accounting principles generally accepted in the United States of America permit the Company to elect, when certain conditions exist, not to apply variable interest entity guidance to an entity operating under common control with the Company. Management has determined that these conditions were met by the Company and, as a result, the Company has elected not to apply the VIE guidance to entities affiliated through common control.
Concentration Risks
Sales to a major customer accounted for $5,832,190 of net sales (12%) for 2025, and $6,099,838 of net sales (11%) for 2024. Accounts receivable due from this customer amounted to $826,895 and $830,661 at June 30, 2025 and 2024, respectively. The loss of this customer could adversely affect short-term operating results.
Purchases from two major vendors accounted for $12,904,888 of cost of sales (31%) for 2025, and $17,292,899 of cost of sales (40%) for 2024. Accounts payable due to these vendors amounted to $1,723,515 and $1,803,388 at June 30, 2025 and 2024, respectively. The loss of these vendors could adversely affect short-term operating results.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash consists of demand deposits in banks. The Company maintains its deposits in amounts which, at times, may exceed federally insured limits, in several local financial institutions. Management does not believe the Company is exposed to any significant interest rate or other financial risk as a result of these deposits.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
Restricted Cash
Restricted cash is maintained in accordance with a letter of credit guaranty with a financial institution.
Revenue from Contracts with Customers
The Company purchases coils of different metals from various domestic and international suppliers, processes them into finished sheets, and resells to customers. Revenue is measured based on the amount of consideration that the Company expects to receive. Management has determined that each order of product placed by an individual customer represents a separate performance obligation. Risk of loss and title typically pass at time of shipment to the customer; as such, revenue is recognized at the point in time when the products are shipped. The Company does not include sales and other taxes in the transaction price and thus does not report these amounts as revenue. In addition, the Company has certain programs which under specified conditions, enable customers to return defective products. Returns and allowance are not expected to be material.
Accounts Receivable
Accounts receivable are customer obligations due under normal trade terms generally requiring payment within 30 to 60 days from the invoice date. No collateral or other security is required to support accounts receivable, which are stated at the amounts billed and due from customers less an allowance for expected credit losses. None of the Company's contracts have a significant financing component. Management estimates an allowance for expected credit losses based on the amount it expects to collect from customers, based on the length of time the receivables have been outstanding, historical collection experience, current market conditions and forecasted economic and business environments. Balances that are still outstanding after management has used reasonable collection efforts are written off against the allowance for credit losses. The expense associated with the allowance for credit losses of $349,342 and $263,957 for the six months ended June 30, 2025 and 2024, respectively, is recognized in general and administrative expenses.
Accounts receivable were as follows at June 30:
| 2025 | 2024 | |||||||
| Accounts receivable, beginning of period | $ | 14,976,808 | $ | 7,623,471 | ||||
| Accounts receivable, end of period | $ | 11,619,913 | $ | 10,243,621 | ||||
Inventory
Inventory, which consists of raw materials and finished goods, is stated at the lower of cost, determined under the specific identification method, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
Property and Equipment
Property and equipment is stated at cost. Major improvements and renewals are capitalized while ordinary maintenance and repairs are expensed. Management reviews these assets for impairment whenever events or changes in circumstances indicate the related carrying amount may not be recoverable. Depreciation, which includes amortization of leasehold improvements, is computed using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 20 years.
Leases
The Company determines if an arrangement is a lease at inception and considers classification of leases as operating or finance.
Operating lease right-of-use ("ROU") assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses the risk-free rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable rent payments are expensed as incurred. The Company's variable lease payments primarily consist of real estate, maintenance and usage charges.
The Company has elected to exclude short-term leases from the recognition requirements of Accounting Standards Codification ("ASC") 842, Leases. A lease is short-term if, at the commencement date, it has a term of less than or equal to one year. Lease expense related to short-term leases is recognized on a straight-line basis over the lease term.
The Company has also elected to combine lease and non-lease components when measuring lease liabilities for vehicle and equipment leases.
The Company has elected the practical expedient for private companies in the lease standard to use the written terms and conditions of related party arrangements between entities under common control to determine whether an arrangement contains a lease and how the lease is classified.
Management reviews these ROU assets for impairment whenever events or circumstances indicate that their carrying values may not be fully recoverable.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
Note Receivable
The Company issued a note receivable in the amount of $2,400,000 to a third party for upgrades to a supplier facility in the Dominican Republic. The note receivable is collateralized by real estate in Florida, matures in January 2030, and requires monthly repayments of $40,000 beginning in January 2026.
Income Taxes
The stockholders have elected for the Company to be taxed as an "S" Corporation under the provisions of Internal Revenue Code Section 1362, whereby federal taxable income and certain tax credits are passed directly to the stockholders for inclusion in their personal income tax returns. Some states and localities assess income taxes at the entity level for "S" Corporations. Though federal income taxes are not provided for in these financial statements, applicable state and local income taxes are provided as a component of general and administrative expenses.
Management has analyzed the Company's income tax filing positions in the federal and state jurisdictions where it is required to file income tax returns, for all open tax years in these jurisdictions, to identify potential uncertain tax positions. The Company reports interest and penalties attributable to income taxes, to the extent they arise, as a component of operating expenses. As of June 30, 2025, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or disclosure in these financial statements. While the Company is subject to routine audits by taxing jurisdictions, there are currently no audits for any tax periods in progress.
Subsequent Events
In preparing these financial statements, management has evaluated, for potential recognition or disclosure, significant events or transactions that occurred during the period subsequent to the most recent balance sheet presented herein, through the date these financial statements were available to be issued.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
|
2. |
PROPERTY AND EQUIPMENT |
Net property and equipment consists of the following amounts at June 30:
|
2025 |
2024 |
|||||||
|
Property and equipment |
||||||||
|
Warehouse equipment |
$ | 2,255,444 | $ | 2,272,099 | ||||
|
Leasehold improvements |
929,388 | 929,388 | ||||||
|
Transportation equipment |
907,485 | 749,730 | ||||||
|
Furniture and fixtures |
133,685 | 133,685 | ||||||
| Information technology | 40,495 | 40,495 | ||||||
| Total | 4,266,497 | 4,125,397 | ||||||
| Less accumulated depreciation and amortization | 2,630,152 | 2,481,983 | ||||||
| Net property and equipment | $ | 1,636,345 | $ | 1,643,414 | ||||
Depreciation and amortization expense was $144,701 and $142,922 for the six months ended June 30, 2025 and 2024, respectively.
|
3. |
DEBT |
Short-term Bank Borrowings
Short-term bank borrowings consist of outstanding draws on a $16,500,000 revolving line of credit (the "line") available to support working capital needs. Interest is charged at the one-month Secured Overnight Financing Rate ("SOFR") plus 2.50% (effective rate of 6.95% and 7.83% at June 30, 2025 and 2024, respectively). Borrowings are subject to a borrowing base calculation of the percentage of insured and uninsured accounts receivable as well as inventory, as defined. Borrowings are collateralized by all Company assets and the assets of an affiliate related by common control (see Note 5). The Company must maintain certain financial and other covenants including but not limited to a minimum debt service coverage ratio and leverage ratio, as defined in the agreement. The line matures in November 2025.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
Long-term Debt
Long-term debt consists of the following obligations at June 30:
|
2025 |
2024 |
|||||||
|
Note payable to investor; fixed interest of 6.00%; monthly principal and interest payments of $10,417; unsecured; maturing September 2025. |
$ | 31,248 | $ | 156,250 | ||||
|
Note payable to bank; variable interest rate at the one-month SOFR plus 2.50% (effective rate of 6.95% and 7.83% at June 30, 2025 and 2024, respectively) adjusted monthly; principal monthly payments of $7,143; collateralized by Company assets; maturing February 2029. |
318,548 | 407,143 | ||||||
|
Notes payable to a finance company; interest ranging from 2.50% to 8.79% per annum; payable in 48 to 72 monthly payments ranging from $2,531 to $3,375; collateralized by equipment; maturity dates ranging from March 2026 to July 2029. |
181,212 | 172,526 | ||||||
| Total long-term debt | 531,008 | 735,919 | ||||||
| Less current portion | 206,922 | 263,605 | ||||||
| Long-term debt, less current portion | $ | 324,086 | $ | 472,314 | ||||
Scheduled annual principal maturities of long-term debt for each of the four years succeeding June 30, 2025, are summarized as follows:
|
Year |
Amount |
|||
|
2026 |
$ | 206,922 | ||
|
2027 |
91,759 | |||
|
2028 |
92,226 | |||
|
2029 |
140,101 | |||
|
Total |
$ | 531,008 | ||
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
The borrowing agreements contain certain customary affirmative and restrictive covenants which require the Company to, among other stipulations, maintain certain insurance coverage and furnish a calculation of leverage ratio and actual debt service coverage for the prior 12-month period.
|
4. |
LEASES |
The Company leases office and warehouse space in Miami, Orlando, and Tampa, as well as certain equipment. The office and warehouse in Miami is leased from an affiliated business entity related under common ownership and management control. The agreement commenced June 11, 2018 and expires May 31, 2038.
The Company leases office and warehouse space in Orlando from an unaffiliated party which began on November 1, 2022 and expires July 1, 2029. The Company also leases warehouse space in Tampa from an unaffiliated party, which began on December 1, 2024 and expires November 30, 2029.
The following table summarizes the composition of net lease cost during the six months ended June 30:
| Related | Unrelated | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease cost | $ | 353,873 | $ | 353,873 | $ | 364,426 | $ | 254,606 | ||||||||
| Short-term lease cost | 9,000 | 9,000 | 186,209 | 326,145 | ||||||||||||
| Total lease cost | $ | 362,873 | $ | 362,873 | $ | 550,635 | $ | 580,751 | ||||||||
As of June 30, 2025, leasehold improvements with an unamortized balance in relation to related party lease arrangements are immaterial.
The following table summarizes other information related to the Company's leases during the six months ended June 30:
|
2025 |
2024 |
|||||||
|
Cash paid for amounts included in the measurement of lease obligations |
||||||||
|
Operating cash flows |
$ | 717,953 | $ | 598,341 | ||||
|
Right-of-use assets obtained in exchange for new operating lease obligations |
$ | - | $ | 1,295,678 | ||||
|
Weighted-average remaining lease term (in years) |
8.58 | 9.58 | ||||||
|
Weighted-average discount rate |
2.08 | % | 1.76 | % | ||||
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
The following table presents a maturity analysis summary of the Company's operating lease obligations recorded on the balance sheet as of June 30, 2025:
| Year | Related | Unrelated | Total | |||||||||
|
2026 |
$ | 712,457 | $ | 733,878 | $ | 1,446,335 | ||||||
|
2027 |
480,018 | 703,020 | 1,183,038 | |||||||||
|
2028 |
363,799 | 646,369 | 1,010,168 | |||||||||
|
2029 |
359,210 | 647,153 | 1,006,363 | |||||||||
|
2030 |
358,292 | 146,002 | 504,294 | |||||||||
| Thereafter | 2,805,102 | - | 2,805,102 | |||||||||
| Total lease payments | 5,078,878 | 2,876,422 | 7,955,300 | |||||||||
| Less discount to present value | 503,589 | 151,792 | 655,381 | |||||||||
| Total lease obligations | 4,575,289 | 2,724,630 | 7,299,919 | |||||||||
| Less current portion | 636,668 | 671,598 | 1,308,266 | |||||||||
| Long-term lease obligations | $ | 3,938,621 | $ | 2,053,032 | $ | 5,991,653 | ||||||
|
5. |
RELATED PARTY TRANSACTIONS |
The Company is related to other business entities under common ownership and control. There are no explicit or contractual guarantees from the Company to any of these related parties to guarantee their debts or to fund working capital short-falls. The Company's maximum exposure to losses from these relationships cannot be quantified.
AKR Industries, Inc.
AKR Industries, Inc. ("AKR") is a corporation affiliated through common ownership. AKR guarantees the Company's revolving line of credit in the amount of $16,500,000. The Company does not guarantee any liabilities of AKR and as such, is not directly responsible to satisfy any liabilities of AKR. The Company's maximum exposure to losses from this relationship cannot be quantified. The assets of AKR consist primarily of cash, receivables, amounts due from affiliates and inventory. For the six months ended June 30, 2025 and 2024, the Company recognized sales to AKR of approximately $25,000 and $6,500, respectively.
CENTURY METALS & SUPPLIES, INC.
|
■ |
Notes to Financial Statements |
Century Metals & Supplies, P.R.
Century Metals & Supplies, P. R. ("PR") is a corporation affiliated through common ownership and ultimate management control formed to conduct similar operations in Puerto Rico. The Company does not guarantee any liabilities of PR and as such, is not directly responsible to satisfy any liabilities of PR. The Company's maximum exposure to losses from this relationship cannot be quantified. The assets of PR consist primarily of cash, receivables, amounts due from affiliates and inventory. For the six months ended June 30, 2025 and 2024, the Company recognized sales to PR of approximately $2,900,000 and $2,500,000, respectively.
GJB Fund I
GJB Fund I ("GJBF") is a corporation affiliated through common ownership and ultimate management control formed to hold land and buildings for rental purposes. GJBF advanced funds in the amount of approximately $400,000 to the Company, which is reported on the balance sheets as due to affiliate. At June 30, 2025 and 2024, the advanced funds amount is unsecured, non-interest bearing, and has no fixed maturity date or formal plan of settlement.
Note Payable to Related Party
Note payable to related party individual consists of an advance during 2022 bearing interest at 7.00%. The note requires monthly interest-only payments of $2,917, is unsecured, and has no fixed maturity date or formal plan of settlement.
|
6. |
PROFIT SHARING PLAN |
The Company sponsors a 401(k) plan covering all employees with at least three months of continuous service and contributes 3% of eligible participants' compensation. The Company contributed to the plan approximately $78,768 and $74,443, respectively, for the six months ended June 30, 2025 and 2024.
|
7. |
SUBSEQUENT EVENT |
On August 29, 2025, Friedman Industries, Incorporated (the "Buyer") entered into a definitive agreement with the Company and related entities, to which the Buyer acquired the real estate, operations, equipment, inventory and certain assets and liabilities of the Company and related entities. Under the terms of the agreement, the Buyer acquired the assets for approximately $45,000,000 in cash at closing, along with a note issued by the Buyer with a principal amount of $3,500,000 with a five-year maturity date. The final purchase price is subject to adjustment based on final net working capital levels and an earn-out that allows the owners of the Company to receive up to $10,000,000 in additional consideration over a four-year period, based on certain performance metrics of the acquired business.
■ ■ ■ ■ ■
Exhibit 99.3
FRIEDMAN INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations based upon the consolidated historical financial statements of Friedman Industries, Incorporated (“Friedman”) and the consolidated historical financial statements of Century Metals & Supplies, Inc. (“Century”), adjusted to present the assets acquired and liabilities assumed of Century, after giving effect to the consummation of the Century Acquisition and the related completion of the August 2025 Refinancing (each as defined and described below).
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma adjustments reflecting the Century Acquisition have been prepared in accordance with Accounting Standards Codification 805, Business Combinations ("ASC 805") and reflect the preliminary allocation of the estimated consideration to the acquired assets and liabilities assumed based upon their estimated fair values, using the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is derived from (i) Friedman’s (a) historical audited consolidated financial statements as included in its Annual Report on Form 10-K for the year ended March 31, 2025, filed with the SEC on June 12, 2025, and (b) historical unaudited condensed consolidated financial statements as included in its Quarterly Report on Form 10-Q for the three months ended June 30, 2025, filed with the SEC on August 7, 2025 and (ii) Century’s (c) historical audited consolidated financial statements for the year ended December 31, 2024 and (d) historical unaudited condensed consolidated financial statements for the three months ended June 30, 2025 (which have been adjusted to reflect only the assets acquired and liabilities assumed by Friedman), which are included within Exhibits 99.1 and 99.2 of this Form 8-K, and has been prepared in accordance with Article 8 and Article 11 of Regulation S-X.
The unaudited pro forma condensed combined financial information includes assumptions which are preliminary and may be revised, such as the valuation of certain assets as a result of the application of acquisition accounting in connection with the Century Acquisition. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the results or financial position that actually would have occurred or that may occur in the future had the Century Acquisition and August 2025 Refinancing been completed on the dates indicated, nor is it necessarily indicative of the future operating results or financial position of Friedman after the Century Acquisition and August 2025 Refinancing. Future results may vary significantly from the results reflected because of various factors, including those discussed in previous filings made by Friedman with the Securities and Exchange Commission. The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Century Acquisition or any integration costs.
Century Acquisition
On August 29, 2025, Friedman entered into a definitive agreement with Century, CEME Holdings LLC (“CEME”), Palm Lakes Investment LLC (“PLI”), Jemi Investments, LLC (“JEMI”, together with Century, CEME and PLI as “Sellers”), the equityholders of the Sellers and Misael Rosario, as Seller Representative, pursuant to which Friedman acquired the real estate, operations, equipment, inventory and certain other assets of the Sellers of Century’s Miami, FL facilities and certain inventory and other assets at Century’s Tampa, FL and Orlando, FL (the “Century Acquisition”). Under the terms of the agreement, Friedman acquired the assets for approximately $45.6 million in cash at closing, along with a note issued by Friedman with a principal amount of $3.5 million with a five-year maturity date. The final purchase price is subject to adjustment based on final net working capital levels and an earn-out that allows the Sellers to receive up to $10 million in additional consideration over a four-year period based on certain performance metrics of the acquired business.
The Century Acquisition will be accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, with Friedman representing the accounting acquirer under this guidance. The pro forma adjustments related to the Century Acquisition are reflected as "Transaction Accounting Adjustments" herein.
August 2025 Financing
On August 29, 2025, Friedman also entered into a Fifth Amendment (the “Fifth Amendment”) to that certain Amended and Restated Credit Agreement and Second Amendment to Security Agreement by and among Friedman, as a borrower, Century Metals & Supplies, LLC, a Texas limited liability company, as a borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Amendment amends that certain Amended and Restated Credit Agreement dated as of May 19, 2021 (as amended to date, “A&R Credit Agreement”) to, among other things, (i) permit the Acquisition, (ii) provide that BMO Harris Bank N.A. is replaced as a lender under the A&R Credit Agreement with Wells Fargo Bank, N.A., (iii) reduce the aggregate commitments under the A&R Credit Agreement from $150 million to $125 million, (iv) provide for revolving borrowings either at prime rate plus a margin of 1.45% or adjusted Term SOFR plus a margin of 1.55%, (v) extend the maturity date to August 29, 2030, and (vi) make certain borrowing base adjustments in contemplation of the Acquisition.
The pro forma adjustments related to the August 2025 Refinancing are reflected as "Refinancing Transaction Accounting Adjustments" herein.
FRIEDMAN INDUSTRIES, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2025
The unaudited pro forma condensed consolidated balance sheet combines (i) the historical consolidated balance sheet of Friedman and (ii) the historical consolidated balance sheet of Century, has been prepared assuming the Century Acquisition and related August 2025 Refinancing occurred on June 30, 2025, and includes preliminary adjustments to reflect the events that are directly attributable to the Century Acquisition and related August 2025 Refinancing and are factually supportable.
|
June 30, 2025 |
||||||||||||||||||||
|
Historical Friedman |
Historical Century (1) |
Transaction Accounting Adjustments |
Refinancing Transaction Accounting Adjustments |
Total Pro Forma |
||||||||||||||||
|
|
(amounts in thousands) |
|||||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||||||
|
Cash |
$ | 2,099 | $ | - | $ | (45,598 | ) 3 | $ | 45,677 | 4 | $ | 2,178 | ||||||||
|
Accounts receivable, net of allowances |
50,717 | 10,457 | 61,174 | |||||||||||||||||
|
Inventories |
103,458 | 36,293 | 165 | 3c | 139,916 | |||||||||||||||
|
Current portion of derivative assets |
328 | - | 328 | |||||||||||||||||
|
Other current assets |
1,327 | 864 | 2,191 | |||||||||||||||||
|
TOTAL CURRENT ASSETS |
157,929 | 47,614 | (45,433 | ) | 45,677 | 205,787 | ||||||||||||||
|
PROPERTY, PLANT AND EQUIPMENT: |
||||||||||||||||||||
|
Land |
1,572 | - | 10,070 | 3e | 11,642 | |||||||||||||||
|
Buildings and yard improvements |
30,393 | 929 | 2,902 | 3e | 33,295 | |||||||||||||||
| (929 | ) 3d | |||||||||||||||||||
|
Machinery and equipment |
59,197 | 3,337 | (1,833 | ) 3d | 60,701 | |||||||||||||||
|
Construction in process |
689 | - | 689 | |||||||||||||||||
|
Less accumulated depreciation |
(34,641 | ) | (2,630 | ) | 2,630 | 3d | (34,641 | ) | ||||||||||||
| 57,210 | 1,636 | 12,840 | - | 71,686 | ||||||||||||||||
|
OTHER ASSETS: |
||||||||||||||||||||
|
Operating lease right-of-use asset |
2,788 | 7,238 | (4,601 | ) 3f | 5,425 | |||||||||||||||
|
Goodwill |
- | - | 2,143 | 3 | 2,143 | |||||||||||||||
|
Other assets |
1,151 | 37 | 395 | 2 | 1,583 | |||||||||||||||
|
TOTAL ASSETS |
$ | 219,078 | $ | 56,525 | $ | (35,051 | ) | $ | 46,072 | $ | 286,624 | |||||||||
|
CURRENT LIABILITIES: |
||||||||||||||||||||
|
Accounts payable and accrued expenses |
$ | 35,289 | $ | 11,767 | $ | 937 | 1 | $ | 47,993 | |||||||||||
|
Income taxes payable |
2,272 | - | 2,272 | |||||||||||||||||
|
Lease liability - current |
- | 1,308 | (737 | ) 3f | 571 | |||||||||||||||
|
Short-term bank borrowings |
- | 15,437 | (15,437 | ) 3g | - | |||||||||||||||
|
Dividends payable |
282 | - | 282 | |||||||||||||||||
|
Employee compensation and related expenses |
2,551 | - | 2,551 | |||||||||||||||||
|
Current portion of derivative liability |
82 | - | 82 | |||||||||||||||||
|
TOTAL CURRENT LIABILITIES |
40,476 | 28,512 | (15,237 | ) | - | 53,751 | ||||||||||||||
|
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |
118 | - | 118 | |||||||||||||||||
|
DEFERRED INCOME TAX LIABILITY |
5,452 | - | 5,452 | |||||||||||||||||
|
NON-CURRENT LEASE LIABILITIES |
2,713 | 5,992 | (3,925 | ) 3f | 4,780 | |||||||||||||||
|
SELLER NOTE PAYABLE, NET |
- | - | 3,489 | 3b | 3,489 | |||||||||||||||
|
CONTINGENT CONSIDERATION LIABILITY |
- | - | 3,580 | 3a | 3,580 | |||||||||||||||
|
ASSET BASED LENDING FACILITY |
33,039 | - | - | 46,072 | 79,111 | |||||||||||||||
|
TOTAL LIABILITIES |
81,798 | 34,504 | (12,093 | ) | 46,072 | 150,281 | ||||||||||||||
|
COMMITMENTS AND CONTINGENCIES |
||||||||||||||||||||
|
STOCKHOLDERS’ EQUITY: |
||||||||||||||||||||
|
Common stock |
8,967 | - | - | 3 | 8,967 | |||||||||||||||
|
Additional paid-in capital |
35,427 | (949 | ) | 949 | 3 | 35,427 | ||||||||||||||
|
Treasury stock at cost |
(13,110 | ) | - | (13,110 | ) | |||||||||||||||
|
Retained earnings |
105,996 | 22,970 | (22,970 | ) 3 | 105,059 | |||||||||||||||
| (937 | ) 1 | |||||||||||||||||||
|
TOTAL STOCKHOLDERS’ EQUITY |
137,280 | 22,021 | (22,958 | ) | - | 136,343 | ||||||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 219,078 | $ | 56,525 | $ | (35,051 | ) | $ | 46,072 | $ | 286,624 | |||||||||
(1) Excludes certain assets and liabilities not purchased by Friedman, as specified in the definitive agreement, which primarily relate to certain cash, restricted cash, certain receivables, liabilities associated with the excluded assets, and certain debt not settled in connection with the Century Acquisition.
FRIEDMAN INDUSTRIES, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For Friedman’s Year Ended March 31, 2025 and Century’s Year Ended December 31, 2024
The unaudited pro forma condensed consolidated statement of operations combines (i) the historical consolidated statement of operations of Friedman and (ii) the historical consolidated statement of operations of Century and has also been adjusted to give effect to pro forma events that are directly attributable to the Century Acquisition and related August 2025 Refinancing, factually supportable and expected to have a continuing impact on the consolidated results. The unaudited pro forma condensed consolidated statement of operations has been prepared assuming the Century Acquisition and related August 2025 Refinancing closed on April 1, 2024.
|
Friedman's Year Ended March 31, 2025 and Century's Year Ended December 31, 2024 |
||||||||||||||||||||
|
Historical Friedman |
Historical Century (1) |
Transaction Accounting Adjustments |
Refinancing Transaction Accounting Adjustments |
Total Pro Forma |
||||||||||||||||
|
(amounts in thousands, except per share data) |
||||||||||||||||||||
|
Net sales |
$ | 444,600 | $ | 99,131 | $ | 543,731 | ||||||||||||||
|
Costs and expenses: |
||||||||||||||||||||
|
Cost of products sold |
365,648 | 81,071 | 165 | 3c | 446,884 | |||||||||||||||
|
Processing and warehousing expense |
33,477 | 6,975 | (766 | ) 3f | 39,686 | |||||||||||||||
|
Delivery expense |
23,228 | 155 | 23,383 | |||||||||||||||||
|
Selling, general and administrative |
16,171 | 5,478 | 1,070 | 1 | 22,719 | |||||||||||||||
|
Depreciation and amortization |
3,291 | 292 | 161 | 3d | 3,955 | |||||||||||||||
| 211 | 3e | |||||||||||||||||||
| 441,815 | 93,971 | 841 | — | 536,627 | ||||||||||||||||
|
Gain on disposal of property, plant, and equipment |
258 | 9 | 267 | |||||||||||||||||
|
EARNINGS (LOSS) FROM OPERATIONS |
3,043 | 5,169 | (841 | ) | — | 7,371 | ||||||||||||||
|
Gain on economic hedges of risk |
7,598 | — | 7,598 | |||||||||||||||||
|
Interest expense |
(2,953 | ) | (1,200 | ) | (230 | ) 3b | (2,751 | ) | (6,057 | ) | ||||||||||
| 1,077 | 3g | |||||||||||||||||||
|
Interest income |
— | 31 | 31 | |||||||||||||||||
|
Other income (loss) |
5 | — | 5 | |||||||||||||||||
|
EARNINGS (LOSS) BEFORE INCOME TAXES |
7,693 | 4,000 | 6 | (2,751 | ) | 8,948 | ||||||||||||||
|
Provision for (benefit from) income taxes: |
||||||||||||||||||||
|
Current |
1,387 | — | (34 | ) 6 | (252 | ) | 2,208 | |||||||||||||
| 1,107 | 7 | |||||||||||||||||||
|
Deferred |
221 | — | 36 | 6 | (429 | ) | (346 | ) | ||||||||||||
| (174 | ) 7 | |||||||||||||||||||
| 1,608 | — | 935 | (681 | ) | 1,862 | |||||||||||||||
|
NET EARNINGS (LOSS) |
$ | 6,085 | $ | 4,000 | $ | (929 | ) | $ | (2,070 | ) | $ | 7,086 | ||||||||
|
Weighted average number of common shares outstanding: |
||||||||||||||||||||
|
Basic and diluted |
6,944,602 | - | - | - | 6,944,602 | |||||||||||||||
|
Net earnings (loss) per share: |
||||||||||||||||||||
|
Basic and diluted |
$ | 0.87 | - | - | - | $ | 1.02 | |||||||||||||
(1) Excludes certain revenue and expenses related to the assets and liabilities not purchased by Friedman, as specified in the definitive agreement.
FRIEDMAN INDUSTRIES, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended June 30, 2025
|
Friedman and Century's Three Months Ended June 30, 2025 |
||||||||||||||||||||
|
Historical Friedman |
Historical Century (1) |
Transaction Accounting Adjustments |
Refinancing Transaction Accounting Adjustments |
Total Pro Forma |
||||||||||||||||
|
(amounts in thousands, except per share data) |
||||||||||||||||||||
|
Net sales |
$ | 134,777 | $ | 24,992 | $ | 159,769 | ||||||||||||||
|
Costs and expenses: |
||||||||||||||||||||
|
Cost of products sold |
105,704 | 20,142 | 125,846 | |||||||||||||||||
|
Processing and warehousing expense |
9,328 | 1,791 | (192 | ) 3f | 10,927 | |||||||||||||||
|
Delivery expense |
6,400 | 61 | 6,461 | |||||||||||||||||
|
Selling, general and administrative |
5,455 | 2,060 | 7,515 | |||||||||||||||||
|
Depreciation and amortization |
847 | 74 | 40 | 3d | — | 1,031 | ||||||||||||||
| 70 | 3e | |||||||||||||||||||
| 127,734 | 24,128 | (82 | ) | — | 151,780 | |||||||||||||||
|
Gain on disposal of property, plant, and equipment |
— | — | — | — | — | |||||||||||||||
|
EARNINGS (LOSS) FROM OPERATIONS |
7,043 | 864 | 82 | — | 7,989 | |||||||||||||||
|
Gain on economic hedges of risk |
276 | — | 276 | |||||||||||||||||
|
Interest expense |
(678 | ) | (307 | ) | (57 | ) 3b | (688 | ) 5 | (1,451 | ) | ||||||||||
| 279 | 3g | |||||||||||||||||||
|
Interest income |
242 | 242 | ||||||||||||||||||
|
Other income (loss) |
4 | 537 | — | — | 541 | |||||||||||||||
|
EARNINGS (LOSS) BEFORE INCOME TAXES |
6,645 | 1,336 | 304 | (688 | ) | 7,597 | ||||||||||||||
|
Provision for (benefit from) income taxes: |
||||||||||||||||||||
|
Current |
1,643 | — | 75 | (170 | ) 6 | 1,876 | ||||||||||||||
| 328 | ||||||||||||||||||||
|
Deferred |
(26 | ) | — | (26 | ) | |||||||||||||||
| 1,617 | — | 403 | (170 | ) | 1,850 | |||||||||||||||
|
NET EARNINGS (LOSS) |
$ | 5,028 | $ | 1,336 | $ | (99 | ) | $ | (518 | ) | $ | 5,747 | ||||||||
|
Weighted average number of common shares outstanding: |
||||||||||||||||||||
|
Basic and diluted |
6,965,880 | - | - | - | 6,965,880 | |||||||||||||||
|
Net earnings (loss) per share: |
||||||||||||||||||||
|
Basic and diluted |
$ | 0.71 | - | - | - | $ | 0.83 | |||||||||||||
(1) Excludes certain revenue and expenses related to the assets and liabilities not purchased by Friedman, as specified in the definitive agreement.
FRIEDMAN INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Pro Forma Adjustments
|
1) |
Represents the accrual of non-recurring transaction costs incurred by Friedman that were not reflected in the historical financial statements (i) as of June 30, 2025 and (ii) for the year ended March 31, 2025. Such costs are not expected to impact Friedman's income statement beyond 12-months after the acquisition date. The remaining transaction costs incurred by Friedman of $0.1 million are included in Friedman's historical income statement for the year ended March 31, 2025. |
|
2) |
Represents the capitalization of deferred financing costs incurred in connection with the Fifth Amendment to the ABL Facility. The deferred financing costs will be amortized over the remaining term of the ABL Facility on a straight-line basis. |
|
3) |
Represents the application of acquisition accounting in connection with the Century Acquisition. For purposes of these unaudited proforma combined financial statements, it has been assumed that, with the exception of the preliminary fair value adjustments reflected in the table below, the historical cost bases of Century’s existing assets and liabilities approximate their fair value. The details of the preliminary acquisition accounting as of the transaction closing date are set forth below: |
|
Initial cash consideration |
$ | 45,598 | ||
|
Fair value of contingent consideration (a) |
3,580 | |||
|
Sellers note (b) |
3,489 | |||
|
Total purchase price |
$ | 52,667 | ||
|
Net book value of net assets acquired (historical implied equity of Century) |
22,021 | |||
|
Preliminary fair value adjustments to existing Century carrying values: |
||||
|
Inventory (c) |
$ | 165 | ||
|
Personal property (d) |
429 | |||
|
Real property (e) |
12,411 | |||
|
Operating lease right-of-use assets (f) |
(4,601 | ) | ||
|
Operating lease liabilities (f) |
4,662 | |||
|
Short-term bank borrowings (g) |
15,437 | |||
|
Total fair value adjustments |
28,503 | |||
|
Estimated incremental increase to goodwill |
$ | 2,143 |
|
a) |
Represents the fair value of contingent consideration payable to the sellers of Century over a four-year period for the achievement of an annual EBITDA target ranging from $2.5 million to $10.0 million, not to exceed a total aggregate payout of $10.0 million. |
|
b) |
Represents the promissory note payable issued by Friedman in connection with the Century Acquisition. The promissory note has a maturity date of August 29, 2030 and accrues interest at a rate of 5.8% per annum, payable quarterly in arrears on the last date of each quarter, commencing September 30, 2025. In the event of a default by Friedman, the note would accrue an additional 2.0% of interest per annum. The pro forma combined statements of operations are also adjusted to reflect the increase in interest expense associated with the promissory note payable, which is included in interest expense within the pro forma combined statement of operations for the periods presented. |
|
c) |
Represents the preliminary estimate of the fair value adjustment to Century's finished goods, work-in-process, and raw material inventory. The fair value of the raw materials was determined based on the replacement value of the Company's raw materials inventory. The fair value of the work-in-process and finished goods inventory was based on the comparative sales method, which utilizes the expected selling price of the inventory, adjusted for remaining manufacturing and selling costs, factoring in any potential obsolescence, and a normal profit margin on those manufacturing and selling efforts. The pro forma combined statements of operations are also adjusted to increase cost of products sold by the value of inventory that is expected to be sold within one year for the year ended March 31, 2025. |
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d) |
Represents the preliminary estimate of the fair value adjustment to Century's personal property, which is primarily comprised of steel processing equipment, warehouse equipment, transportation equipment, furniture & equipment, and computer software. The personal property was valued using primarily the market approach in connection with the cost approach. The pro forma consolidated statements of operations are also adjusted to increase depreciation expense in accordance with the step up in basis of the assets, which is included in depreciation and amortization within the pro forma combined statement of operations for the periods presented. |
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e) |
Represents the preliminary estimate of the fair value adjustment to Century's real property, which is primarily comprised of two properties (comprised of land, buildings, and site improvements) which were historically leased by Century and acquired as part of the Century Acquisition. The real property was valued using primarily using the cost approach in connection with the market approach . The pro forma consolidated statements of operations are also adjusted to increase depreciation expense in accordance with the acquisition of these assets, which is included in depreciation and amortization within the pro forma combined statement of operations for the periods presented. |
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f) |
Represents the preliminary estimate of the fair value adjustment to Century's operating right-of-use asset and lease liabilities, which is comprised of: (i) remeasurement using Friedman's incremental borrowing rate of 5.8%, (ii) the exclusion of the operating right-of-use asset and lease liabilities associated with certain properties that were previously leased by Century and were acquired as part of the Century Acquisition, and (iii) the exclusion of certain leases which were short-term as of the Century Acquisition and as such, were not capitalized. The fair value of the newly acquired properties is included in the fair value adjustment to real property on the condensed combined balance sheet as of June 30, 2025. |
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g) |
Represents the extinguishment of Century's existing debt, which was settled at the date of the Century Acquisition. The pro forma combined statements of operations are also adjusted to remove the related interest expense associated with such debt during the periods presented. |
The final allocation of the purchase price will be based upon appraisals and may differ from the preliminary allocation reflected herein. Finalization of the valuation process may lead to changes in property, plant and equipment, inventories, goodwill, incomes taxes and other valuation-related items such as out-of-market contracts, including contracts that impact Century's operating expenses. To the extent that additional consideration is allocated to assets with finite lives, the final allocation of the purchase price could result in additional depreciation and or amortization expense that in turn would result in lower earnings from operations.
In addition to the foregoing, as a result of the application of acquisition accounting, Century's historical equity was eliminated.
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4) |
Represents proceeds from the borrowing made under the Company's ABL Facility of $46.1 million (and related deferred financing costs of $0.4 million), which were used to effect the Century Acquisition. |
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5) |
Represents the assumed net increase in interest expense resulting from borrowing made under the ABL Facility in connection with the Century Acquisition: |
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Three Months Ended June 30, 2025 |
Year Ended |
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Increase in interest expense (1) |
$ | 668 | $ | 2,672 | ||||
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Increase associated with amortization of deferred financing costs incurred (2) |
20 | 79 | ||||||
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Total adjustment |
$ | 688 | $ | 2,751 | ||||
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(1) |
Interest expense on the borrowing made under the ABL Facility accrues at the greater of the Prime Rate (as defined in the agreement) or 2.50% plus or minus an applicable margin. The pro forma adjustment to reflect interest expense on the additional borrowing made under the ABL Facility in connection with the Century Acquisition is based on an interest rate of 5.8% at the Acquisition Date and assumes there are no changes in interest rate or additional amounts drawn. A 0.125% change to the annual interest rate would change interest expense by approximately $0.1 million for the year ended March 31, 2025 and an immaterial amount for the three months ended June 30, 2025. |
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(2) |
Deferred financing costs are amortized over the term of the related ABL Facility on a straight-line basis, which approximates the effective interest method. |
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6) |
Represents the income tax impacts of pro forma adjustments using the estimated deferred tax rate of the combined entity of 24.8%. |
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7) |
Represents the income tax impacts of the combined profits and losses of Friedman and Century. |