Northwest Pipe Co. reported its highest-ever quarterly sales and earnings: net income of $4.2 million on sales of $80.3 million for the fourth quarter of 2004. The company also reported net income of $12.4 million on record sales of $291.9 million for the year 2004.

Fourth Quarter Results—Net income of $4.2 million ($0.62 per diluted share) compares to $1.4 million ($0.20 per diluted share) for the same quarter in 2003. Sales of $80.3 million compare to $59.1 million in the fourth quarter of 2003.

Water Transmission Group sales were $57.6 million, which compares to $34.6 million for the fourth quarter of 2003. Gross profit for this Group was $11.1 million, which compares to $7.9 million for the same period last year. "Sales in our Water Transmission Group were at a record high during the fourth quarter," said Brian W. Dunham, President and CEO. "This reflects the strong market conditions we experienced during the year as well as favorable timing of specific projects. Margins were also at a favorable level, especially considering the high cost of steel."

Tubular Products Group sales were $22.7 million, slightly less than sales reported in last year’s fourth quarter. Gross profit, however, was $3.8 million compared to only $747,000 for the fourth quarter of 2003. Gross profit as a percent of sales was 17.0%, compared to 3.1% in 2003. "Sales were down in the fourth quarter, as expected, due to seasonal declines," Dunham reported. "We also believe ordering was down as our customers worked to reduce their own inventories and, possibly, delayed purchases as they assessed potential future steel costs."

Full Year Results—Net income of $12.4 million ($1.83 per diluted share) compares to $3.5 million ($0.53 per diluted share) last year. Record sales of $291.9 million compare to $245 million in 2003.

Water Transmission sales of $177.8 million compare to $146.3 million in 2003. Gross margin for the Group was $33.9 million, compared to $32.2 million in 2003. Tubular Products Group sales were $114.1 million in 2004 compared to $98.7 million for 2003. The Group’s gross margin was substantially higher at $15.4 million compared to $1.1 million in 2003. The improved gross margin reflected the impact of increased selling prices that were partially offset by higher steel costs.

Outlook — The 2004 water transmission market was much improved compared to the prior two years and was strongest in the second half of the year. As a result, the company's backlog increased throughout the year, finishing at $129 million as of December 31, 2004, compared to $74 million at the beginning of the year. Water transmission bidding activity in the first quarter of 2005 has continued at a healthy pace and the company expects the 2005 market to be similar to the 2004 market. The company expects Water Transmission revenues to be lower in the first quarter of 2005 due to the timing of individual projects, but to pick up in the second quarter and remain strong through the rest of the year.

Water Transmission margins were generally consistent throughout 2004. The company expects similar margins in 2005, assuming steel costs remain relatively flat through the year.

Demand in the Tubular Products Group began to decelerate in the fourth quarter and has continued to be slow in the first part of 2005. The company, however, has recently noted indications of a gradual strengthening in demand for most of its tubular products. "We expect to see improved sales volume in the second and third quarters of 2005," said Dunham.

Margins in the Tubular Products Group grew significantly as selling prices were increased in reaction to higher steel costs during 2004. Stabilization of steel costs will pressure these margins. "We combined two facilities into one in 2004 and also refined our product mix to focus on more profitable product lines," said Dunham. "These changes should keep us competitive and, as volume grows in 2005, should help us to stabilize margins in the low double-digit range."

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.