Northwest Pipe Co. announced net income was $3.4 million on record sales of $86.4 million for the second quarter of 2005.

Net income of $3.4 million ($0.49 per diluted share) compares to $3.0 million ($0.45 per diluted share) in the second quarter of 2004. The $86.4 million in sales compares to $69.6 million in the second quarter of 2004.

"Our second quarter results improved compared to both the same quarter last year and to the first quarter of 2005," said Brian Dunham, President and CEO. "The Water Transmission Group generated record revenues and improved margins leading us to a strong overall quarter."

Sales in the Water Transmission Group were $60.0 million in the second quarter of 2005, compared to $37.6 million for the second quarter last year. The gross profit for this Group was $12.4 million (20.8% of sales) compared to $7.2 million (19.2% of sales) last year. The gross margin improvement is attributed to improved pricing in the market, higher volumes leveraging fixed costs and a favorable mix of projects produced during the quarter. "We recorded the highest margins we have seen since 2003," said Dunham. "We expect similar results in the quarters ahead if we can keep operating at our forecasted production levels."

The Tubular Products Group's sales were $26.4 million in the second quarter of 2005, compared to $32.0 million reported for the second quarter last year. "Sales were lower than we had forecasted. Contrary to original expectations, our markets in 2005 have generally been sluggish. Several of our products are used in non-residential construction activities, for example, and this market has remained soft through the first half of the year," noted Dunham.

Gross profit was $1.3 million for the quarter compared to $4.6 million in the second quarter of 2004. Gross profit as a percent of sales was 4.8% in the second quarter of 2005, compared to 14.5% in 2004. "Gross profit declined significantly from last year due to lower demand and increased import competition in some product lines. In addition, our margins have been adversely affected because of declining steel costs in the first half of the year. Steel is our primary raw material and its cost has declined substantially in 2005. The reduction in steel costs puts pressure on our selling prices and they have fallen faster than our costs have declined. As a result, our margins have been reduced. We expect this situation to improve as steel stabilizes," concluded Dunham.

Outlook—The backlog at June 30, 2005 was $150.0 million, compared to $101.9 million at June 30, 2004. While the backlog was down from the record $162.3 million reported at the end of the first quarter of 2005, it is still the second-highest backlog the company has ever reported. Water transmission project bidding activity during the second quarter was strong, although somewhat lower than in the first quarter. Bidding activity should increase again in the third quarter of 2005 and remain strong through the end of the year, resulting in a higher year-end backlog.

Tubular products demand has been below expectations and, while it is improving, no dramatic changes are expected during the balance of the year. In fact, certain product lines are seasonal in nature and are expected to peak in the third quarter and then show a typical slowing in the fourth quarter. "Margins in the Tubular Products Group are low due to the relatively high cost of steel in inventory and low production levels. While we do not expect to see significant changes in production until next year, we do expect steel costs to level out, leading to at least a partial recovery in margins in the fourth quarter," said Dunham.

Northwest Pipe Co. manufactures welded steel pipe in two business segments. Its Water Transmission Group is the 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 nine manufacturing facilities across the United States and Mexico.