8-K/A: Friedman Industries Amends 8-K, Details Century Metals Acquisition

Friedman Industries, Inc. files an amended 8-K to include financial statements and pro forma information for its August 2025 acquisition of Century Metals & Supplies, Inc.

Summary

• Friedman Industries, Inc. (FRD) filed an Amendment No. 1 on Form 8-K/A to supplement its original report from September 3, 2025.
• The amendment provides required financial statements and pro forma financial information for the acquisition of Century Metals & Supplies, Inc. (Century) and related entities.
• The acquisition, completed on August 29, 2025, included Century's real estate, operations, equipment, inventory, and certain other assets in Miami, Tampa, and Orlando, Florida.
• The purchase price was approximately $45.6 million in cash at closing, along with a $3.5 million note issued by Friedman with a five-year maturity.
• An earn-out provision allows the sellers to receive up to $10 million in additional consideration over a four-year period, contingent on achieving specific annual EBITDA targets ranging from $2.5 million to $10.0 million.
• Century Metals & Supplies, Inc. reported net sales of $98.8 million in 2024, a decrease from $103.8 million in 2023, and net income of $4.1 million in 2024, down from $4.2 million in 2023.
• For the six months ended June 30, 2025, Century's net sales were $51.3 million, a slight decrease from $52.7 million in the same period of 2024, while net income increased to $2.2 million from $2.1 million.
• Pro forma combined net sales for Friedman and Century were $543.7 million for the year ended March 31, 2025 (Friedman) and December 31, 2024 (Century), with pro forma net earnings of $7.1 million.
• For the three months ended June 30, 2025, pro forma combined net sales were $159.8 million, with pro forma net earnings of $5.7 million.
• Friedman also completed an August 2025 Refinancing, amending its credit agreement to reduce aggregate commitments from $150 million to $125 million and extend the maturity date to August 29, 2030.

Sentiment

Score: 7

Explanation: The filing details a strategic acquisition and related financing, which are generally positive for growth. While Century's historical sales showed a slight decline, its gross profit and recent interim net income improved. The earn-out structure aligns incentives, and the refinancing extends debt maturity, providing stability. Risks related to customer/vendor concentration are noted but are typical for many businesses.

Positives

• Century Metals & Supplies, Inc. demonstrated consistent gross profit, increasing from $18.0 million in 2023 to $18.4 million in 2024, and from $9.4 million in H1 2024 to $9.7 million in H1 2025.
• Century's net income for the six months ended June 30, 2025, increased to $2.24 million from $2.07 million in the prior year period, indicating improved profitability in the short term.
• The acquisition includes an earn-out provision of up to $10 million, aligning seller incentives with future performance and suggesting confidence in the acquired business's growth potential.
• Friedman's refinancing extended the maturity date of its ABL facility to August 29, 2030, providing longer-term financial flexibility.

Negatives

• Century Metals & Supplies, Inc. experienced a decline in net sales from $103.8 million in 2023 to $98.8 million in 2024, representing a 4.7% decrease.
• Operating income for Century decreased significantly by 21.1% for the six months ended June 30, 2025, falling to $2.05 million from $2.60 million in the same period of 2024.
• Century's net income slightly decreased from $4.16 million in 2023 to $4.07 million in 2024.
• The refinancing reduced Friedman's aggregate commitments under its ABL Credit Agreement from $150 million to $125 million, potentially limiting future borrowing capacity.

Risks

• Century Metals & Supplies, Inc. faces concentration risk with a major customer accounting for 11-12% of net sales, the loss of whom could adversely affect short-term operating results.
• Concentration risk also exists with two major vendors, accounting for 21-28% of cost of sales, whose loss could negatively impact short-term operating results.
• The maximum exposure to losses from related party relationships cannot be quantified, as Century does not explicitly guarantee their debts or working capital shortfalls.
• The final allocation of the purchase price for the acquisition is preliminary and may differ from the current estimates, potentially leading to changes in depreciation/amortization expense and lower earnings from operations if more consideration is allocated to assets with finite lives.

Future Outlook

The acquisition includes a contingent consideration arrangement where the sellers of Century Metals & Supplies, Inc. can receive up to an additional $10 million over a four-year period, based on the acquired business achieving annual EBITDA targets ranging from $2.5 million to $10.0 million. This indicates an expectation of future profitability and growth from the acquired assets.

Industry Context

Friedman Industries, a steel processing and distribution company, has expanded its footprint and capabilities by acquiring Century Metals & Supplies, Inc., a metal processor and supplier to major original equipment manufacturers (OEMs) in the Southeastern United States and Puerto Rico. This acquisition allows Friedman to diversify its customer base and geographic reach within the metal supply chain, serving industries such as appliances, computers, electronics, and construction. The strategic move aims to integrate Century's established operations and customer relationships into Friedman's existing business, potentially enhancing market share and operational synergies.

Related Party Transactions

• Century Metals & Supplies, Inc. is related to AKR Industries, Inc. through common ownership. AKR guarantees Century's $16.5 million revolving line of credit. Sales to AKR were approximately $34,000 in 2024 and $25,000 in H1 2025.
• Century Metals & Supplies, Inc. is related to Century Metals & Supplies, P.R. through common ownership and management control. Sales to PR were approximately $5.18 million in 2024 and $2.9 million in H1 2025.
• GJB Fund I, an affiliated corporation, advanced approximately $400,000 to Century, which is unsecured, non-interest bearing, and has no fixed maturity date.
• A note payable to a related party individual for $500,000, bearing 7.00% interest, requires monthly interest-only payments of $2,917, is unsecured, and has no fixed maturity date.

Stakeholder Impact

• Shareholders of Friedman Industries, Inc. will see the financial impact of the acquisition, including changes to assets, liabilities, and pro forma earnings, potentially influencing future share price and dividend policy.
• Employees of Century Metals & Supplies, Inc. are now part of Friedman Industries, Inc., which may lead to changes in corporate culture, benefits, or operational procedures.
• Customers of Century Metals & Supplies, Inc. may experience changes in service, product offerings, or pricing as the business integrates with Friedman Industries, Inc.
• Suppliers to Century Metals & Supplies, Inc. will now be dealing with Friedman Industries, Inc., potentially affecting existing contracts or future business relationships.
• Creditors of Friedman Industries, Inc. are impacted by the refinancing of the ABL facility, including changes in commitment size, interest rates, and maturity dates.

Next Steps

• Friedman Industries will work towards achieving the performance metrics (EBITDA targets) for the acquired Century Metals & Supplies business to enable the sellers to receive the contingent consideration of up to $10 million over the next four years.
• Integration of Century's operations, equipment, inventory, and real estate into Friedman's existing business will continue.

Key Dates

Recommendation

The acquisition of Century Metals & Supplies, Inc. by Friedman Industries, Inc. is a strategic move that expands Friedman's market presence and capabilities. While the pro forma financials indicate an increase in scale, Century's historical performance shows mixed results with declining sales but stable gross profit and recent interim net income growth. The contingent consideration structure aligns seller incentives, and the refinancing provides extended debt maturity. However, the reduction in ABL commitments and the inherent integration risks of an acquisition warrant a 'hold' recommendation. Investors should monitor the integration process, realization of synergies, and the achievement of earn-out targets before making further investment decisions.

Keywords

Friedman Industries, Century Metals, Acquisition, 8-K/A, SEC Filing, Financial Statements, Pro Forma, Metal Processing, Steel Industry, Corporate Acquisition, Refinancing, Earn-out