Northwest Pipe Co. reported net income of $3.0 million on sales of $69.6 million for the second quarter of 2004.

Net income of $3.0 million ($0.45 per diluted share) compares to net income of $437,000 ($0.06 per diluted share) in the second quarter of 2003. Sales of $69.6 million compare to $61.5 million in the second quarter of 2003.

"Our second quarter results showed marked improvement from the same period last year, as well as from the first quarter of 2004," said Brian Dunham, CEO. "The improvement in the economy has resulted in improved market conditions for tubular products. Bidding activity in water transmission is also strong. We continue to be optimistic that the second half of 2004 will show improvement over our first half results."

Segment Results—Sales in the Water Transmission Group were $37.6 million in the second quarter of 2004, compared to $36.7 million for the second quarter of last year. The gross profit for this Group was $7.2 million, or 19.2% of sales, compared to $7.4 million, or 20.3% of sales, last year. The decrease is primarily due to the impact of increased steel costs on orders in process during the quarter.

The Tubular Products Group's sales improved significantly to $32.0 million in the second quarter of 2004 compared to $24.8 million reported for the second quarter last year. Gross profit was $4.6 million in the second quarter of 2004 compared to $383,000 in the second quarter of 2003. Gross profit as a percent of sales was 14.5% for the quarter, compared to 1.5% in the same quarter of 2003.

"As anticipated, the improvement in the tubular products market continued through the second quarter of 2004," Dunham reported. "The improvement in revenue and gross profit resulted primarily from higher prices, while overall demand continued to be positive."

Outlook—Water transmission bidding activity continued at a strong level through the second quarter of 2004. As a result, backlog exceeded $100 million for the first time since the third quarter of 2001. Backlog increased from $83.8 million at the beginning of the second quarter of 2004 to $101.9 million at the end of the quarter. "We continue to track a large number of jobs that are scheduled to bid in 2004 and continue to expect the total 2004 market to substantially exceed the 2003 market," said Dunham. "Production began to ramp-up in June to support the improved backlog. The benefits of increased capacity utilization is expected to result in improvement in revenue and gross profit in the second half of 2004 compared to the first half."

Demand in the Tubular Products Group is expected to remain near current levels through the third quarter and then decrease somewhat in the fourth quarter due to normal seasonality. Profitability in this Group is heavily impacted by steel costs. The uncertainty of future steel costs make forecasting gross profit for the remainder of 2004 very difficult. "As steel costs continue to rise," said Dunham, "the key to our earnings is our ability to pass on increases to our customers. At this time, the market appears to be strong enough to absorb these increases and allow us to maintain our profitability."

Northwest Pipe Co. manufactures welded steel pipe in two business segments. Its Water Transmission Group is a leading supplier of large diameter, high-pressure steel pipe products that are used primarily for water transmission in the United States and Canada. Its Tubular Products Group manufactures smaller diameter steel pipe for a wide range of construction, agricultural, energy, industrial and mechanical applications. The company is headquartered in Portland, Ore., and operates eleven manufacturing facilities across the United States and Mexico.