FRIEDMAN INDUSTRIES INC

Previous wording

Six Months Ended September 30, 2025 Compared to Six Months Ended September 30, 2024

Current wording

Nine Months Ended December 31, 2025 Compared to Nine Months Ended December 31, 2024

Previous wording

During the six months ended September 30, 2025 (the “2025 period”), sales, cost of materials sold and adjusted gross profit increased approximately $65.9 million, $47.1 million and $18.7 million, respectively, compared to the amounts recorded during the six months ended September 30, 2024 (the “2024 period”). 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 sales volume. Sales volume for the 2025 period consisted of approximately 296,500 tons from inventory and another 43,500 tons of toll processing customer owned material compared to the 2024 period volume consisting of approximately 240,000 tons from inventory and 42,000 tons of toll processing. The increase in sales volume for the 2025 period was primarily related to a combination of stronger demand among some customers and successful commercial efforts to increase capacity utilization. Adjusted gross profit was approximately $55.4 million for the 2025 period compared to approximately $36.7 million for the 2024 period. Adjusted gross profit as a percentage of sales was approximately 19.3% for the 2025 period compared to approximately 16.6% for the 2024 period.

Current wording

During the nine months ended December 31, 2025 (the “2025 period”), sales, cost of materials sold and adjusted gross profit increased approximately $139.8 million, $106.1 million and $33.7 million, respectively, compared to the amounts recorded during the nine months ended December 31, 2024 (the “2024 period”). 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 sales volume. Sales volume for the 2025 period consisted of approximately 458,000 tons from inventory and another 59,000 tons of toll processing customer owned material compared to the 2024 period volume consisting of approximately 353,000 tons from inventory and 60,000 tons of toll processing. Same facility year-over-year growth accounted for approximately 89,500 tons of the sales volume increase and the acquisition of Century Metals & Supplies contributed approximately 14,500 tons. Adjusted gross profit was approximately $85.9 million for the 2025 period compared to approximately $52.2 million for the 2024 period. Adjusted gross profit as a percentage of sales was approximately 18.9% for the 2025 period compared to approximately 16.6% for the 2024 period.

Previous wording

Our operating results are significantly impacted by the market prices of the metals we purchase. Most of the Company's revenue is generated from the processing of hot-rolled steel coil ("HRC") or derivative products from HRC. Entering the 2025 period, HRC price had reached the top of a price cycle. Prices remained fairly stable for the first half of the 2025 period and then declined approximately 10% during the second half of the 2025 period. As a result, the Company experienced stronger margins at the start of the 2025 period which then tapered off during the remainder of the 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. As a result, the Company experienced compressed physical margins throughout the 2024 period. The Company utilizes HRC futures, options and swaps to partially manage exposure to commodity price risk. The Company recognized hedging related gains of approximately $1.1 million in the 2025 period compared to hedging related gains of approximately $5.6 million in the 2024 period.

Current wording

Our operating results are significantly impacted by the market prices of the metals we purchase. Most of the Company's revenue is generated from the processing of hot-rolled steel coil ("HRC") or derivative products from HRC. Entering the 2025 period, HRC price had reached the top of a price cycle. Prices declined approximately 15% from April 2025 until October 2025 when prices increased approximately 14% by the end of the 2025 period. As a result, the Company experienced stronger margins at the start of the 2025 period which then tapered off until slight margin improvement to conclude the 2025 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. The Company utilizes HRC futures, options and swaps to partially manage exposure to commodity price risk. The Company recognized hedging related gains of approximately $2.5 million in the 2025 period compared to hedging related gains of approximately $5.8 million in the 2024 period.

Previous wording

Flat-roll product segment sales for the 2025 period totaled approximately $267.4 million compared to approximately $200.8 million for the 2024 period. 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 $2.9 million for the 2025 period and approximately $2.7 million for the 2024 period. Sales generated from flat-roll segment inventory totaled approximately $264.5 million for the 2025 period compared to approximately $198.1 million for the 2024 period. The average per ton selling price related to these shipments increased from approximately $895 per ton in the 2024 period to approximately $946 per ton in the 2025 period. Sales volume for the 2025 period consisted of approximately 280,000 tons from inventory and another 43,500 tons of toll processing customer owned material compared to the 2024 period volume consisting of approximately 221,500 tons from inventory and 42,000 tons of toll processing. The increase in sales volume for the 2025 period was related to a combination of stronger demand among some customers and successful commercial efforts to increase capacity utilization. Flat-roll segment operations recorded earnings from operations of approximately $14.5 million and $5.3 million for the 2025 period and 2024 period, respectively.

Current wording

Flat-roll product segment sales for the 2025 period totaled approximately $420.4 million compared to approximately $286.9 million for the 2024 period. 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 million for the 2025 period and approximately $3.7 million for the 2024 period. Sales generated from flat-roll segment inventory totaled approximately $416.5 million for the 2025 period compared to approximately $283.2 million for the 2024 period. The average per ton selling price related to these shipments increased from approximately $868 per ton in the 2024 period to approximately $970 per ton in the 2025 period. Sales volume for the 2025 period consisted of approximately 429,000 tons from inventory and another 59,000 tons of toll processing customer owned material compared to the 2024 period volume consisting of approximately 326,000 tons from inventory and 60,000 tons of toll processing. The increase in sales volume for the 2025 period 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 million and $6.6 million for the 2025 period and 2024 period, respectively.

Previous wording

Tubular product segment sales for the 2025 period totaled approximately $19.8 million compared to approximately $20.5 million for the 2024 period. Sales decreased primarily due to a decline in tons sold, offset by an increase in the average selling price per ton. Tons sold decreased from approximately 19,000 tons in the 2024 period to approximately 16,500 tons in 2025 period. The average per ton selling price increased from approximately $1,087 per ton for the 2024 period to approximately $1,196 per ton for the 2025 period. The tubular segment recorded earnings from operations of approximately $2.2 million for the 2025 period compared to a loss from operations of approximately $1.8 million for the 2024 period.

Current wording

Tubular product segment sales for the 2025 period totaled approximately $34.7 million compared to approximately $28.5 million for the 2024 period. 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 29,000 tons in the 2025 period. The average per ton selling price increased from approximately $1,065 per ton for the 2024 period to approximately $1,198 per ton for the 2025 period. The tubular segment recorded earnings from operations of approximately $3.6 million for the 2025 period compared to a loss from operations of approximately $2.0 million for the 2024 period.

Previous wording

During the 2025 period, selling, general and administrative costs increased approximately $3.3 million compared to the 2024 period. This increase is primarily related to increased incentive compensation expense due to the higher earnings in the 2025 period compared to the 2024 period and approximately $1.1 million of non-recurring transaction related expenses associated with the acquisition of Century Metals & Supplies.

Current wording

During the 2025 period, selling, general and administrative costs increased approximately $6.6 million compared to the 2024 period. This increase was driven by $1.3 million of one-time, non-recurring transaction costs associated with the acquisition of Century, as well as $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.

Previous wording

Income taxes increased from a provision for the 2024 period of approximately $0.5 million to a provision for the 2025 period of approximately$2.4 million. This increase was primarily related to increased earnings before taxes for the 2025 period. The income tax provision as a percentage of earnings before tax was approximately 24.5% and 21.1% for thesix months ended September 30, 2025 and 2024, respectively. For the 2025 period, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision. For the 2024 period, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision with this impact partially reduced by the tax effect of restricted stock vesting during the periods.

Current wording

Income taxes increased from a provision for the 2024 period of approximately $0.1 million to a provision for the 2025 period of approximately$3.3 million. This increase was primarily related to increased earnings before taxes for the 2025 period. The income tax provision as a percentage of earnings before tax was approximately 24.3% and 12.4% for thenine months ended December 31, 2025 and 2024, respectively. For the 2025 period, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision. For the 2024 period, the effective tax rate differed from the federal statutory rate due primarily to the tax effect of restricted stock vesting during the period with this impact partially reduced by the inclusion of state tax expenses in the provision.

Previous wording

During the three months ended September 30, 2025 (the “2025 quarter”), sales, cost of materials sold and adjusted gross profit increased approximately $45.6 million, $37.3 million and $8.3 million, respectively, compared to the amounts recorded during the three months ended September 30, 2024 (the “2024 quarter”). 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 sales volume. Sales volume for the 2025 quarter consisted of approximately 154,500 tons from inventory and another 24,500 tons of toll processing customer owned material compared to the 2024 quarter volume consisting of approximately 121,500 tons from inventory and 18,000 tons of toll processing. The increase in sales volume for the 2025 quarter was primarily related to a combination of stronger demand among some customers and successful commercial efforts to increase capacity utilization. Adjusted gross profit was approximately $26.3 million for the 2025 quarter compared to approximately $18.0 million for the 2024 quarter. Adjusted gross profit as a percentage of sales was approximately 17.3% for the 2025 quarter compared to approximately 16.9% for the 2024 quarter.

Current wording

During the three months ended December 31, 2025 (the “2025 quarter”), sales, cost of materials sold and adjusted gross profit increased approximately $73.9 million, $59.0 million and $14.9 million, respectively, compared to the amounts recorded during the three months ended December 31, 2024 (the “2024 quarter”). 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 sales volume. Sales volume for the 2025 quarter consisted of approximately 162,000 tons from inventory and another 15,500 tons of toll processing customer owned material compared to the 2024 quarter volume consisting of approximately 112,500 tons from inventory and 18,000 tons of toll processing. Same facility year-over-year growth accounted for approximately 36,000 tons of the sales volume increase and the acquisition of Century Metals & Supplies contributed approximately 11,000 tons. Adjusted gross profit was approximately $30.5 million for the 2025 quarter compared to approximately $15.6 million for the 2024 quarter. Adjusted gross profit as a percentage of sales was approximately 18.2% for the 2025 quarter compared to approximately 16.5% for the 2024 quarter.

Previous wording

Our operating results are significantly impacted by the market prices of the metals we purchase. Most of the Company's revenue is generated from the processing of hot-rolled steel coil ("HRC") or derivative products from HRC. Both the 2025 quarter and the 2024 quarter experienced compressed physical margins associated with declining HRC prices. The Company utilizes HRC futures, options and swaps to partially manage exposure to commodity price risk. The Company recognized hedging related gains of approximately $0.9 million and $0.2 million in the 2025 and 2024 quarters, respectively.

Current wording

Our operating results are significantly impacted by the market prices of the metals we purchase. Most of the Company's revenue is generated from the processing of hot-rolled steel coil ("HRC") or derivative products from HRC. HRC price was on a declining trend entering the 2025 quarter but stabilized during October 2025 and increased approximately 11% to end the 2025 quarter. As a result, the Company experienced slight margin improvement at the conclusion of the 2025 quarter. Entering the 2024 quarter, HRC price had reached the bottom of a price cycle after a prolonged decline and remained relatively stable near the bottom during the 2024 quarter. As a result, the Company experienced compressed margins throughout the 2024 quarter. The Company utilizes HRC futures, options and swaps to partially manage exposure to commodity price risk. The Company recognized hedging related gains of approximately $1.4 million and $0.3 million in the 2025 and 2024 quarters, respectively.

Previous wording

Flat-roll product segment sales for the 2025 quarter totaled approximately $143.3 million compared to approximately $97.4 million for the 2024 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 $1.6 million for the 2025 quarter and approximately $1.1 million for the 2024 quarter. Sales generated from flat-roll segment inventory totaled approximately $141.7 million for the 2025 quarter compared to approximately $96.2 million for the 2024 quarter. The average per ton selling price related to these shipments increased from approximately $858 per ton in the 2024 quarter to approximately $963 per ton in the 2025 quarter. Sales volume for the 2025 quarter consisted of approxi mately 147,000 tons from inventory and another 24,500 tons of toll processing customer owned material compared to the 2024 quarter volume consisting of approximately 112,000 tons from inventory and 18,000 tons of toll processing. The increase in sales volume for the 2025 quarter was related to a combination of stronger demand among some customers and successful commercial efforts to increase capacity utilization. Flat-roll segment operations recorded earnings from operations of approximately $5.7 million and $2.7 million for the 2025 quarter and 2024 quarter, respectively.

Current wording

Flat-roll product segment sales for the 2025 quarter totaled approximately $153.0 million compared to approximately $86.1 million for the 2024 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 $1.1 million for the 2025 quarter and approximately $1.0 million for the 2024 quarter. Sales generated from flat-roll segment inventory totaled approximately $151.9 million for the 2025 quarter compared to approximately $85.1 million for the 2024 quarter. The average per ton selling price related to these shipments increased from approximately $813 per ton in the 2024 quarter to approximately $1,016 per ton in the 2025 quarter. Sales volume for the 2025 quarter consisted of approxi mately 149,500 tons from inventory and another 15,500 tons of toll processing customer owned material compared to the 2024 quarter volume consisting of approximately 105,000 tons from inventory and 18,000 tons of toll processing. The increase in sales volume for the 2025 quarter 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 $7.3 million and $1.3 million for the 2025 quarter and 2024 quarter, respectively.

Previous wording

Tubular product segment sales for the 2025 quarter totaled approximately $9.0 million compared to approximately $9.4 million for the 2024 quarter. Sales decreased primarily due to a decline in tons sold, offset by an increase in the average selling price per ton. Tons sold decreased from approximately 9,000 tons in the 2024 quarter to approximately 7,500 tons in 2025 quarter. The average per ton selling price increased from approximately $1,030 per ton for the 2024 quarter to approximately $1,185 per ton for the 2025 quarter. The tubular segment recorded earnings from operations of approxi mately $0.9 million for the 2025 quarter compared to a loss from operations of approximately $0.6 million for the 2024 quarter.

Current wording

Tubular product segment sales for the 2025 quarter totaled approximately $14.9 million compared to approximately $7.9 million for the 2024 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 8,000 tons in the 2024 quarter to approximately 12,500 tons in 2025 quarter. The average per ton selling price increased from approximately $1,013 per ton for the 2024 quarter to approximately $1,201 per ton for the 2025 quarter. The tubular segment recorded earnings from operations of approxi mately $1.4 million for the 2025 quarter compared to a loss from operations of approximately $0.2 million for the 2024 quarter.

Previous wording

During the 2025 quarter, selling, general and administrative costs increased approximately $2.3 million compared to the 2024 quarter. This increase is primarily related to increased incentive compensation expense due to the higher earnings in the 2025 quarter compared to the 2024 quarter and approximately $0.9 million of non-recurring transaction related expenses associated with the acquisition of Century Metals & Supplies..

Current wording

During the 2025 quarter, selling, general and administrative costs increased approximately $3.3 million compared to the 2024 quarter. This increase was driven by $1.4 million of additional ongoing expenses related to the operation of Century, as well as $0.2 million of one-time, non-recurring transaction costs associated with the acquisition. 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 quarter.

Previous wording

Income taxes increased from a benefit for the 2024 quarter of approximately $0.2 million to a provision for the 2025 quarter of approximately $0.7 million. This increase was primarily related to increased earnings before taxes for the 2025 quarter. The income tax provision or benefit as a percentage of earnings before tax was approximately 24.8% and 25.2% for the 2025 quarter and 2024 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.

Current wording

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 million. This increase was primarily related to increased earnings before taxes for the 2025 quarter. The income tax provision or benefit as a percentage of earnings before tax was approximately 24.0% and 25.7% for the 2025 quarter and 2024 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.

Previous wording

The Company’s current ratio was 3.2 at September 30, 2025 and 4.3 at March 31, 2025. Working capital was approx imately $159.9 million at September 30, 2025 and $128.1 million at March 31, 2025.

Current wording

The Company’s current ratio was 3.6 at December 31, 2025 and 4.3 at March 31, 2025. Working capital was approx imately $167.0 million at December 31, 2025 and $128.1 million at March 31, 2025.

Previous wording

During the six months ended September 30, 2025, 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. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

Current wording

During the nine months ended December 31, 2025, 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. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

Previous wording

On August 29, 2025, the Company renewed its asset-based lending facility ("ABL Facility") led by JPMorgan Chase Bank, N.A by executing the fifth amendment to the credit agreement. Wells Fargo Bank, N.A. became the only syndicated participant of the ABL facility with a 40% holding. The $125 million 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 $12.5 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 $75 million, in minimum increments of $5 million. At September 30, 2025, the Company had a balance of approximately $83.5 million under the ABL Facility with an applicable interest rate of 5.8%. As of the filing date of this Form 10-Q, the Company had borrowings of approximately $84.2 million outstanding under the ABL Facility and the Company's most recent borrowing base calculation supported full access to the ABL Facility.

Current wording

On December 9, 2025, the Company executed the sixth amendment to its 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 December 31, 2025, the Company had a balance of approximately $88.6 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.

Previous wording

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 gains of approximately $1.1 million and $5.6 million in the six months ended September 30, 2025 and 2024, respectively, 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.

Current wording

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 gains of approximately $2.5 million and $5.8 million in the nine months ended December 31, 2025 and 2024, respectively, 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.