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Northwest Pipe Reports Record Results for 2007

03/06/2008 - Northwest Pipe reports net income of $5.6 million on sales of $98.2 million for the fourth quarter, and net income of $20.8 million on sales of $382.8 million for the year ended December 31, 2007—the highest annual sales and earnings in the company’s history.

Northwest Pipe Co. reported net income of $5.6 million on sales of $98.2 million for the fourth quarter. The company also reported net income of $20.8 million on sales of $382.8 million for the year ended December 31, 2007—the highest annual sales and earnings in the company’s history.
 
Fourth quarter net income of $5.6 million ($0.60 per diluted share) is slightly lower than the net income of $6.0 million recorded for the same quarter last year. Sales of $98.2 million compare sales of to $97.5 million for the fourth quarter of 2006.
 
Net income of $20.8 million compares to net income of $20.0 million in 2006. The 2006 results included a non-recurring gain on sale of approximately $7.7 million. Sales of $382.8 million compare to sales of $346.6 million in 2006.
 
Water Transmission Results—For the fourth quarter, sales were $76.8 million, and gross profit was $17.4 million, or 22.7% of sales. Sales for 2007 were $274.8 million compared to $244.8 million for 2006, and gross profit was $60.6 million, or 22.0% of sales, compared to $46.6 million, or 19.0% of sales in 2006. Results represent the highest volume ever recorded for this group and the highest gross profit margin reported for a quarter since 2003.
 
"The Water Transmission Group's performance was outstanding during the quarter," said Northwest Pipe President and CEO Brian W. Dunham. "The higher margin reflects that performance, some incremental improvements in the market, and a positive product mix. While this margin performance won't necessarily repeat every quarter, we do believe it is indicative of real improvements in our markets and our facilities."
 
Tubular Products Results—Fourth quarter sales were $17.9 million and gross profit was $1.0 million. Sales for the year were $95.0 million, which compare to $84.8 million in 2006. Gross profit was $10.0 million, or 10.5% of sales, compared to $8.9 million, or 10.5% of sales for 2006.
 
"Although we met our objectives for the year, the fourth quarter for this Group was disappointing," said Dunham. "Volume was down as we changed our direction in the energy market and we were significantly impacted by adverse weather in the Midwest. We do expect to see rapid improvement and margin should be back in the low double digit range in the first quarter of 2008."
 
Fabricated Products Results—The Group lost $400,000 on sales of $3.5 million in the fourth quarter and ended the year with a loss of $350,000 on full-year sales of $13.0 million.
 
The company said that it plans to include results for this business in the Water Transmission Group beginning in the first quarter of 2008. This change reflects the internal management structure and strategic direction for this Group.
 
Outlook—The company said that its backlog is at an all-time-high of $212 million, and that the market continues to look very active in 2008. As a result, the company said that it expects to improve on 2007's results in both sales and earnings over the course of the year. At this time, given the timing of projected market activity, the company expects that the second half of the year should be significantly better than the first half, and the second quarter should be stronger than the first quarter. "While we expect solid performance in the first quarter, we do not expect to match the earnings we are reporting today in the Water Transmission Group, which were based on historically high volume and a strong product mix," said Dunham.
 
"We expect a quick return to better margins and volume in the Tubular Products Group in the first quarter," continued Dunham. "In spite of concerns about a slower overall economy, we see growth opportunities in non-residential construction products, energy products, and traffic signpost products in 2008."
 
The company also noted the rapid increase in the cost of steel over the past few months. "Steel price increases cause different challenges in our two main groups," said Dunham. "In Tubular Products, the challenge is to pass on these increases to customers. At this time, prices for our products are going up and we believe the market dynamics are strong enough to absorb expected increases. In the Water Transmission Group, the risk is that we might underestimate the cost of steel in fixed price contracts. While this is possible, we do not see significant exposure at this time."
 
"Steel availability is an issue for both groups. In the first quarter of 2008, our overall revenues in Water Transmission will be somewhat lower because delivery lead times have increased. We believe this is only a near term timing problem. In general, for both groups, we believe we have adequate supply of steel to meet our needs, but we are watching this situation carefully," concluded Dunham.
 
Northwest Pipe manufactures welded steel pipe and other products in three business groups. Its Water Transmission Group is the leading supplier of large diameter, high-pressure steel pipe products that are used primarily for water infrastructure in North America. Its Tubular Products Group manufactures smaller diameter steel pipe for a wide range of construction, agricultural, energy, industrial, and mechanical applications. Its Fabricated Products Group manufactures propane tanks, water transmission fittings, and other fabricated products. The company is headquartered in Portland, Ore., and has nine manufacturing facilities across the United States and Mexico.