FRD 10-K & 10-Q changes, risk factors and insider trading

NineThree Months Ended DecemberJune 31,30, 20252026 Compared to NineThree Months Ended DecemberJune 31,30, 20242025

During the ninethree months ended DecemberJune 31,30, 20252026 (the “20252026 periodquarter”), sales, cost of materials sold and adjusted gross profit increased approximately $139.8$105.2 million, $106.1$78.5 million and $33.7$26.7 million, respectively, compared to the amounts recorded during the ninethree months ended DecemberJune 31,30, 20242025 (the “20242025 periodquarter”). Adjusted gross profit is a non-GAAP measure calculated as sales minus cost of materials sold. The increase in sales was primarily due to an increase in the average selling price per ton and an increase in sales volume. Sales volume for the 20252026 periodquarter consisted of approximately 458,000188,500 tons from inventory and another 59,00017,500 tons of toll processing customer owned material compared to the 20242025 periodquarter volume consisting of approximately 353,000141,500 tons from inventory and 60,00019,000 tons of toll processing. Same facility year-over-year growth accounted for approximately 89,50033,500 tons of the sales volume increase and the acquisition of Century Metals & Supplies contributed approximately 14,50012,000 tons. Adjusted gross profit was approximately $85.9$55.8 million for the 2026 quarter compared to approximately $29.1 million for the 2025 period compared to approximately $52.2 million for the 2024 period.quarter. Adjusted gross profit as a percentage of sales was approximately 18.9%23.2% for the 2026 quarter compared to approximately 21.6% for the 2025 period compared to approximately 16.6% for the 2024 period.quarter.

Our operating results are significantly impactedinfluenced by changes in the market prices of the metals we purchase. MostThe majority of the Company's revenue is generated from the processing of hot-rolled steel coil ("HRC") or derivativeand products derived from HRC. Entering the 20252026 period,quarter, HRC priceprices were in a sustained upward trend, increasing approximately 28% during the preceding quarter and an additional 10% throughout the 2026 quarter. This favorable pricing environment contributed to margin expansion during the quarter. By comparison, entering the 2025 quarter, HRC prices had reached the toppeak of a pricepricing cycle.cycle Pricesand declinedremained approximatelyrelatively 15%stable frombefore Aprildeclining 2025modestly until October 2025 when prices increased approximately 14% bytoward the end of the 2025 period.quarter. As a result, the Company also experienced strongerfavorable margins at the start ofduring the 2025 periodquarter, whichalthough then tapered off until slightthe margin improvementexpansion towas concludeless pronounced than in the 20252026 period. Entering the 2024 period, HRC price was on a predominately declining trend dropping approximately 40% from January 2024 through the middle of August 2024. From August 2024 to the end of the 2024 period, HRC price remained relatively stable. As a result, the Company experienced compressed physical margins throughout the 2024 period.quarter. The Company utilizes HRC futures, options and swaps to partially manage exposure to commodity price risk. The Company recognized hedging related gainslosses of approximately $2.5$2.8 million in the 20252026 periodquarter compared to hedging related gains of approximately $5.8$0.3 million in the 20242025 period.quarter.

Flat-roll product segment sales for the 20252026 periodquarter totaled approximately $420.4$221.8 million compared to approximately $286.9$124.1 million for the 20242025 period.quarter. For a more complete understanding of the average selling prices of goods sold, it is helpful to exclude any sales generated from processing or storage of customer owned material. Sales generated from processing or storage of customer owned material totaled approximately $3.9$1.2 million for both the 2026 quarter and the 2025 period and approximately $3.7 million for the 2024 period.quarter. Sales generated from flat-roll segment inventory totaled approximately $416.5$220.6 million for the 2026 quarter compared to approximately $122.9 million for the 2025 period compared to approximately $283.2 million for the 2024 period.quarter. The average per ton selling price related to these shipments increased from approximately $868 per ton in the 2024 period to approximately $970$926 per ton in the 2025 period.quarter to approximately $1,262 per ton in the 2026 quarter. Sales volume for the 20252026 periodquarter consisted of approximately 429,000175,000 tons from inventory and another 59,00017,500 tons of toll processing customer owned material compared to the 20242025 periodquarter volume consisting of approximately 326,000132,500 tons from inventory and 60,00019,000 tons of toll processing. The increase in sales volume for the 20252026 periodquarter was related to a combination of stronger demand among some customers, successful commercial efforts to increase capacity utilization and the acquisition of Century. Flat-roll segment operations recorded earnings from operations of approximately $21.8$24.7 million and $6.6$8.8 million for the 20252026 periodquarter and 20242025 period,quarter, respectively.

Tubular product segment sales for the 20252026 periodquarter totaled approximately $34.7$18.2 million compared to approximately $28.5$10.7 million for the 20242025 period.quarter. Sales increased due to a combination of sales volume growth and an increase in the average selling price per ton. Tons sold increased from approximately 26,500 tons in the 2024 period to approximately 29,0009,000 tons in the 2025 period.quarter to approximately 13,500 tons in the 2026 quarter. The average per ton selling price increased from approximately $1,065 per ton for the 2024 period to approximately $1,198$1,206 per ton for the 2025 period.quarter to approximately $1,341 per ton for the 2026 quarter. The tubular segment recorded earnings from operations of approximately $3.6$2.1 million and $1.3 million for the 2026 quarter and 2025 periodquarter, compared to a loss from operations of approximately $2.0 million for the 2024 period.respectively.

During the 2025 period,2026 quarter, selling, general and administrative costs increased approximately $6.6$5.4 million compared to the 2024 period.2025 quarter. This increase was primarily driven by $1.3profit-based and volume-based incentive compensation being approximately $3.1 million ofhigher one-time,for non-recurringthe transaction2026 costsquarter associatedcombined with the acquisition of Century, as well asapproximately $1.7 million of additional ongoing expenses related to the operation of Century. The remaining increase was primarily attributable to an increase in personnel to support sales growth and execution of our strategic initiatives, along with increased incentive compensation resulting from improved profitability compared to the 2024 period.initiatives.

Income taxes increased from a benefit for the 2024 quarter of approximately $0.4 million to a provision for the 2025 quarter of approximately $1.0$1.6 million to a provision for the 2026 quarter of approximately $4.2 million. This increase was primarily related to increased earnings before taxes for the 20252026 quarter. The income tax provision or benefit as a percentage of earnings before tax was approximately 24.0%24.7% and 25.7%24.3% for the 20252026 quarter and 20242025 quarter, respectively. For both quarters, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision.

The Company’s current ratio was 3.62.9 at DecemberJune 31,30, 20252026 and 4.33.4 at March 31, 2025.2026. Working capital was approximately $167.0$190.8 million at DecemberJune 31,30, 20252026 and $128.1$180.9 million at March 31, 2025.2026.

During the ninethree months ended DecemberJune 31,30, 2025,2026, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Changes in balance sheet amounts occurred in the ordinary course of business and due to the acquisition of Century Metals & Supplies resulting in notable increases to accounts receivable, inventory, fixed assets, accounts payable and ABL facility debt.business. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

On December 9, 2025, theThe Company executedhas thea sixth$140 amendment to itsmillion asset-based lending facility ("ABL Facility") increasing the facility size from $125 million to $140 million. The ABL Facility is led by JPMorgan Chase Bank, N.A. with Wells Fargo Bank, N.A. as a 40% syndicated participant. The ABL Facility matures on August 29, 2030 and is secured by substantially all of the assets of the Company. The Company can elect borrowings on a floating rate basis or a term basis. Floating rate borrowings accrue interest at a rate equal to the prime rate minus 1.45% per annum. Term rate borrowings accrue interest at a rate equal to the SOFR rate applicable to the selected term plus 1.65% per annum. Availability of funds under the ABL Facility is subject to a borrowing base calculation determined as the sum of (a) 90% of eligible accounts receivable, plus (b) the product of 85% multiplied by the net orderly liquidating value percentage identified in the most recent inventory appraisal multiplied by eligible inventory. The ABL Facility contains a springing financial covenant whereby the financial covenant is only tested when availability falls below the greater of 10% of the revolving commitment or $14 million. The financial covenant restricts the Company from allowing its fixed charge coverage ratio to be, as of the end of any calendar month, less than 1.00 to 1.00 for the trailing twelve-month period then ending. The fixed charge coverage ratio is calculated as the ratio of (a) EBITDA, as defined in the ABL Facility, minus unfinanced capital expenditures to (b) cash interest expense plus scheduled principal payments on indebtedness plus taxes paid in cash plus restricted payments paid in cash plus capital lease obligation payments plus cash contributions to any employee pension benefit plans. The ABL Facility contains other representations and warranties and affirmative and negative covenants that are usual and customary. If certain conditions precedent are satisfied, the ABL facility may be increased up to an aggregate of $60 million, in minimum increments of $5 million. At DecemberJune 31,30, 2025,2026, the Company had a balance of approximately $88.6$91.5 million under the ABL Facility with an applicable interest rate of 5.3% and the Company's borrowing base calculation supported full access to the ABL Facility.

The Company utilizes hot-rolled coil futures, options and swaps to manage price risk on unsold inventory and longer-term fixed price sales agreements. The Company has elected hedge accounting for some of its hedging activities previously but most recently the Company has classified its hedging activities as economic hedges of risk with mark-to-market ("MTM") accounting treatment. Hedging decisions are intended to protect the value of the Company's inventory and produce more consistent financial results over price cycles. The Company recognized gainsa loss of approximately $2.5$2.8 million and $5.8 million induring the ninethree months ended DecemberJune 31,30, 20252026 and 2024,a respectively,gain of $0.3 million during the three months ended June 30, 2025 related to hedging activities with all of this being classified as economic hedges of risk. With MTM accounting treatment, it is possible that hedging related gains or losses might be recognized in a different fiscal quarter or fiscal year than the corresponding improvement or contraction in our physical margins. See Note 9 for additional information related to the Company's hedging activities.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The determination of fair values related to the Century Metals & Supplies business combination accounting involves significant estimates and judgementsjudgments in the valuation process. Actual results could differ from any estimates.