Table of Contents

2

5

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

    Six Months Ended September 30, 2008 Compared to Six Months Ended September 30, 2007

    During the six months ended September 30, 2008, sales, costs of goods sold and gross profit increased $38,987,755, $26,978,645 and $12,009,110, respectively, from the comparable amounts recorded during the six months ended September 30, 2007. The increase in sales was related primarily to an increase in average selling prices. The average per ton selling price increased from approximately $632 per ton in the 2007 period to approximately $909 per ton in the 2008 period. Total tons shipped remained approximately even, period to period. The Company sold approximately 144,000 tons and 145,000 tons in the 2008 and 2007 periods, respectively. The increase in costs of goods sold was primarily related to an increase in the average per ton cost of goods which increased from approximately $589 per ton in the 2007 period to $782 per ton in the 2008 period. The increase in gross profit in the 2008 period was related to substantially improved margins earned on pipe sales. Gross profit as a percentage of sales increased from approximately 6.8% in the 2007 period to 13.9% in the 2008 period. The Company experienced strong demand for its pipe products in the 2008 period and margins improved significantly. In addition, the Company benefited from lower cost inventory sold at substantially improved selling prices.

    Coil product segment sales increased approximately $8,237,000 during the 2008 period. This increase resulted primarily from an increase in the average per ton selling price which increased from approximately $662 per ton in the 2007 period to $949 per ton in the 2008 period. In the 2008 period, the Company experienced an operating loss of approximately $1,747,000 related to the coil operations compared to a profit of $1,480,000 in the 2007 period. Coil products are used primarily in durable goods and demand for such products was depressed in the 2008 period. As a result, tons sold declined from approximately 61,000 tons during the 2007 period to approximately 51,000 tons in the 2008 period. Also, the Company incurred a significant increase in cost of coil products during the 2008 period. Average per ton cost increased from approximately $627 per ton in the 2007 period to $968 per ton in the 2008 period. The Company was unable to pass all of this increased cost to its customers in the 2008 period. The Company believes that market conditions for coil products will remain somewhat soft until the U. S. economy improves and generates improved demand for durable goods.

    In the 2008 period, LIFO inventory of coil products was reduced. Since the Company maintains inventory levels based on sales requirements which decreased in the 2008 period, this reduction of LIFO inventory is not expected to be replaced by March 31, 2009. The Company expects that the replacement cost and the liquidated cost of material will be approximately equal at March 31, 2009 and that no significant gain or loss will be experienced in the year ended March 31, 2009 as a result of this liquidation. Accordingly, no gain or loss from this liquidation was recognized in the quarter ended September 30, 2008.

    In August 2008, the Company began operations at its new coil facility located at Decatur, Alabama. This operation produced an operating loss of approximately $90,000 during the 2008 period. The Company expects that this facility will continue to produce a loss during this ramp up period and until demand for coil products improves.

    The Company is primarily dependent on Nucor Steel Company (“NSC”) for its supply of coil inventory. NSC continues to supply the Company with steel coils in amounts that are adequate for the Company’s purposes. Loss of NSC as a supplier could have an adverse effect on the Company’s business.

    Tubular product segment sales increased approximately $30,751,000 during the 2008 period. This increase resulted from both an increase in average selling prices and an increase in tons sold. The average selling price per ton increased from approximately $609 per ton in the 2007 period to $887 per ton in the 2008 period. The Company sold approximately 84,000 tons of pipe in the 2007 period compared to approximately 92,000 tons in the 2008 period. Tubular product segment operating profits as a percentage of segment sales improved from 6.9% in the 2007 period to 22.7% in the 2008 period. The Company experienced strong market conditions for its pipe products in the 2008 period and margins improved significantly. In addition, the Company benefited from lower cost inventory sold at substantially improved selling prices.

     U. S. Steel Tubular Products, Inc. (“USS”), an affiliate of United States Steel Corporation that succeeded to the operations of Lone Star Steel Company, is the Company’s primary supplier of tubular products and coil material used in pipe manufacturing and is a major customer of manufactured pipe. In the 2008 period, USS continued to supply the Company with inventory in amounts that were adequate for the Company’s purposes. Loss of USS as a supplier or customer could have an adverse effect on the Company’s business.

    During the 2008 period, general, selling and administrative costs increased $1,341,645 from the amount recorded during the 2007 period. This increase was related primarily to increases in commissions and bonuses associated with the increase in earnings.

    Income taxes increased $3,752,014 from the comparable amount recorded during the 2007 period. This increase was primarily related to the increase in earnings before taxes. Effective tax rates were 34.8% and 34.0% in the 2008 and 2007 periods, respectively. The Company incurred an increase in state income taxes in the 2008 period.

    Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

    During the three months ended September 30, 2008, sales, costs of goods sold and gross profit increased $29,919,569, $22,205,584 and $7,713,985, respectively, from the comparable amounts recorded during the three months ended September 30, 2007. The sales increase was primarily related to an increase in the average selling price which increased from approximately $619 per ton in the 2007 quarter to approximately $1,055 per ton in the 2008 quarter. The Company sold approximately 67,000 tons in both the 2008 quarter and the 2007 quarter. The increase in costs of goods sold was primarily related to an increase in the average per ton cost of goods which increased from approximately $582 per ton in the 2007 quarter to $904 per ton in the 2008 quarter. The increase in gross profit in the 2008 quarter was related to substantially improved margins earned on pipe sales. Gross profit as a percentage of sales increased from approximately 5.9% in the 2007 quarter to 14.3% in the 2008 quarter. The Company experienced strong demand for its pipe products in the 2008 quarter and margins improved significantly. In addition, the Company benefited from lower cost inventory sold at substantially improved selling prices.

    Coil product segment sales increased approximately $3,305,000 during the 2008 quarter. This increase resulted from an increase in the average per ton selling price that was partially offset by a decrease in tons sold. The average selling price per ton increased from approximately $648 per ton in the 2007 quarter to $1,112 per ton in the 2008 quarter. In the 2008 quarter, the Company experienced an operating loss of approximately $2,332,000 related to the coil operations compared to a profit of $544,000 in the 2007 quarter. Coil products are used primarily in durable goods and demand for such products was depressed in the 2008 quarter. As a result, tons sold declined from approximately 30,000 tons during the 2007 quarter to approximately 21,000 tons in the 2008 quarter. Also, the Company incurred a significant increase in cost of coil products during the 2008 quarter. Average per ton cost increased from approximately $618 per ton in the 2007 quarter to $1,202 per ton in the 2008 quarter. The Company was unable to pass all of this increased cost to its customers in the 2008 quarter. The Company believes that market conditions for coil products will remain somewhat soft until the U. S. economy improves and generates improved demand for durable goods.

    In the 2008 quarter, LIFO inventory of coil products was reduced. Since the Company maintains inventory levels based on sales requirements which decreased in the 2008 quarter, this reduction of LIFO inventory is not expected to be replaced by March 31, 2009. The Company expects that the replacement cost and the liquidated cost of material will be approximately equal at March 31, 2009 and that no significant gain or loss will be experienced in the year ended March 31, 2009 as a result of this liquidation. Accordingly, no gain or loss from this liquidation was recognized in the quarter ended September 30, 2008.

    In August 2008, the Company began operations at the new coil facility located at Decatur, Alabama. This operation produced a loss of approximately $90,000 during the 2008 quarter. The Company expects that this facility will continue to produce a loss during this ramp up period and until demand for coil products improves.

    The Company is primarily dependent on Nucor Steel Company (“NSC”) for its supply of coil inventory. NSC continues to supply the Company with steel coils in amounts that are adequate for the Company’s purposes. Loss of NSC as a supplier could have an adverse effect on the Company’s business.

    Tubular product segment sales increased approximately $26,614,000 during the 2008 quarter. This increase resulted from both an increase in average selling prices and an increase in tons sold. The average selling price per ton increased from approximately $594 per ton in the 2007 quarter to $1,030 per ton in the 2008 quarter. The Company sold approximately 36,000 tons of pipe in the 2007 quarter compared to approximately 47,000 tons in the 2008 quarter. Tubular product segment operating profits as a percentage of segment sales improved from 5.9% in the 2007 quarter to 24.2% in the 2008 quarter. The Company experienced strong market conditions for its pipe products in the 2008 quarter and margins improved significantly. In addition, the Company benefited from lower cost inventory sold at substantially improved selling prices.

    USS is the Company’s primary supplier of tubular products and coil material used in pipe manufacturing and is a major customer of manufactured pipe. In the 2008 quarter, USS continued to supply the Company with inventory in amounts that were adequate for the Company’s purposes. Loss of USS as a supplier or customer could have an adverse effect on the Company’s business.

    During the 2008 quarter, general, selling and administrative costs increased $780,115 from the amount recorded during the 2007 quarter. This increase was related primarily to increases in commissions and bonuses associated with the increase in earnings.

    Income taxes increased $2,417,550 from the comparable amount recorded during the 2007 quarter. This increase was primarily related to the increase in earnings before taxes. Effective tax rates were 34.7% and 34.3% in the 2008 and 2007 quarters, respectively. The Company incurred an increase in state income taxes in the 2008 quarter.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

      The Company remained in a strong, liquid position at September 30, 2008. Current ratios were 2.2 and 3.3 at September 30, 2008 and March 31, 2008, respectively. Working capital was $35,200,749 at September 30, 2008 and $34,638,228 at March 31, 2008.

      During the three months ended September 30, 2008, the Company maintained assets and liabilities at levels it believed were commensurate with operations. Changes in current assets and liabilities during the 2008 period were related primarily to the ordinary course of business of the Company. During the 2008 period, cash was used to pay off long-term debt. The increase in receivables was related primarily to an increase in sales. The increase in inventory was primarily related to pipe operations and was funded principally with the increase in accounts payable. The Company expects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

      During the six months ended September 30, 2008, the Company purchased approximately $1,700,000 in fixed assets. These assets were related primarily to equipment associated with the new coil operation located in Decatur, Alabama which began operations in August 2008. At the Decatur facility the Company operates a steel temper mill and a steel cut-to-length line including a leveling line. At September 30, 2008, the Company had invested approximately $10,000,000 at this location.

      The Company has an arrangement with a bank which provides for a revolving line of credit facility (the “revolver”). Pursuant to the revolver, which expires April 1, 2010, the Company may borrow up to $10 million at the bank’s prime rate or 1.5% over LIBOR. The Company uses the revolver to support cash flow and will borrow and repay the note as working capital is required. At September 30, 2008, the Company had no borrowings outstanding under the revolver. At March 31, 2008, the Company owed $6,600,000 pursuant to the revolver at an average interest rate of 4.4%. These loans were paid off in April and May 2008.

      The Company has in the past and may in the future borrow funds on a term basis to build or improve facilities. The Company currently has no plans to borrow any significant amount of funds on a term basis.

      Notwithstanding the current market conditions, the Company believes its cash flows from operations and borrowing capability under its revolver are adequate to fund its expected cash requirements for the next twenty-four months.

CRITICAL ACCOUNTING POLICIES

      The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. One such accounting policy which requires significant estimates and judgments is the valuation of LIFO inventories in the Company’s quarterly reporting. The quarterly valuation of inventory requires estimates of the year end quantities which is inherently difficult. Historically, these estimates have been materially correct. On an ongoing basis, the Company evaluates estimates and judgments. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances.

FORWARD-LOOKING STATEMENTS

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      In the normal course of business the Company is exposed to market risks primarily from changes in the cost of steel in inventory and in interest rates. The Company closely monitors exposure to market risks and develops appropriate strategies to manage risk. With respect to steel purchases, there is no recognized market to purchase derivative financial instruments to reduce the inventory exposure risk on changing commodity prices. The exposure to market risk associated with interest rates relates primarily to debt. Recent debt balances are minimal and, as a result, direct exposure to interest rates changes is not significant.

7

8