Northwest Pipe Says Lower Oil Prices Will Impact Q1 Results
03/16/2015 - Northwest Pipe Company announced its financial results for the quarter and year ended 31 December 2014.
Full Year 2014 Results
Net sales from continuing operations for the year ended 31 December 2014 increased 12.2% to US$403.3 million compared to US$359.4 million for the year ended 31 December 2013. Gross profit was US$40.6 million (10.1% of net sales) in 2014, a decrease from US$60.2 million (16.8% of net sales) in 2013. A non-cash goodwill impairment charge of US$16.1 million was recorded in 2014. Including the impairment charge, the 2014 loss from continuing operations was US$6.2 million or US$0.65 per diluted share, compared to income from continuing operations of US$21.7 million or US$2.27 per diluted share for 2013. Excluding the impairment charge, adjusted income from continuing operations for full year 2014 was US$9.9 million or US$1.03 per diluted share.
Water Transmission sales increased 5.4% to US$238.5 million in 2014 from US$226.4 million in 2013. The increase in net sales was due to growth from the acquisition of Permalok partially offset by a decrease in organic revenues due to the continued weakness in municipal markets. Water Transmission gross profit decreased to US$39.6 million (16.6% of segment net sales) in 2014 from US$47.0 million (20.7% of segment net sales) in 2013. Water Transmission gross profit decreased in total and as a percent of sales due to the mix of projects coupled with increased competition, which compressed margins compared to 2013.
Tubular Products sales from continuing operations increased 23.9% to US$164.8 million in 2014 from US$133.0 million in 2013, driven by a 24% increase in tons sold from 132,800 tons in 2013 to 164,600 tons in 2014. Tubular Products gross profit decreased to US$1.0 million (0.6% of segment net sales) in 2014 from US$13.3 million (10.0% of segment net sales) in 2013. Gross profit was negatively impacted by a 7% increase in steel costs while selling prices remained flat with 2013. Margins continue to be negatively impacted by competition from imports in the line pipe markets, the segment's primary product.
On 30 March 2014 the company completed the sale of substantially all of the assets and liabilities associated with the oil country tubular goods (OCTG) business conducted by the company at its manufacturing facilities in Bossier City, La., and Houston, Texas, excluding the real property located in Houston, Texas. These facilities were previously included within the company's Tubular Products Group. The company's results of operations for its disposed OCTG business have been presented as discontinued operations for all periods presented within the consolidated statements of operations.
Goodwill is tested for impairment annually, or whenever events or circumstances change that indicate goodwill may be impaired. The company recorded a non-cash impairment charge ofUS$16.1 million, which was associated with the goodwill for its Tubular Products Group. The impairment was driven by worldwide turmoil in crude oil markets, which became significant late in the fourth quarter of 2014. The impairment charge has no impact on the company's liquidity.
As of 31 December 2014, the backlog of orders in the Water Transmission segment was approximately US$121 million. This compared to a backlog of orders of US$103 million as of 31 December 2013. The backlog includes confirmed orders, including the balance of projects in process, and projects for which the company has been notified that it is the successful bidder even though a binding agreement has not been executed.
Fourth Quarter 2014 Results
Net sales from continuing operations for the quarter ended 31 December 2014 increased 19.3% to US$102.2 million compared to US$85.6 million for the quarter ended 31 December 2013. Gross profit was US$9.1 million (8.9% of net sales) in the fourth quarter of 2014, a decrease from US$10.9 million (12.7% of net sales) in the fourth quarter of 2013. The non-cash goodwill impairment charge described above was recorded in the fourth quarter of 2014. Including the impairment charge, loss from continuing operations for the fourth quarter of 2014 was US$14.0 million or US$1.47 per diluted share compared to income from continuing operations of US$2.4 million or US$0.25 per diluted share for the fourth quarter of 2013. Excluding the impairment charge, adjusted income from continuing operations for the fourth quarter of 2014 was US$2.1 million or US$0.21 per diluted share.
Water Transmission sales increased 31.9% to US$56.5 million in the fourth quarter of 2014 from US$42.8 million in the fourth quarter of 2013. Water Transmission gross profit increased to US$9.9 million (17.5% of segment net sales) in the fourth quarter of 2014 from US$7.0 million (16.4% of segment net sales) in the fourth quarter of 2013. Water Transmission net sales and gross profit increased due to higher production compared to the fourth quarter of 2013, partially offset by increased competition, which compressed margins.
Tubular Products sales from continuing operations increased 6.7% to US$45.7 million in the fourth quarter of 2014 from US$42.8 million in the fourth quarter of 2013. Tubular Products had a gross loss of US$0.8 million in the fourth quarter of 2014 compared to gross profit of US$3.8 million in the fourth quarter of 2013. Gross profit was negatively impacted by the product mix, coupled with a 2% increase in steel costs and a 1% decrease in fourth quarter of 2014 selling prices compared with the fourth quarter of 2013. Margins continue to be negatively impacted by competition from imports in the line pipe markets.
Outlook
"We believe that the first quarter of 2015 will continue to present significant challenges. Water Transmission revenues should be similar to fourth quarter and margins are projected to be in the low to mid-teens," said Scott Montross, president and chief executive officer of the company. "In addition, the sudden and swift decline in crude oil prices is expected to have significant near term impacts on order intake, production and inventory values in the Tubular Products segment. As a result we expect a small gross loss for Tubular Products in the first quarter of 2015."
Northwest Pipe Company is a leading manufacturer of welded steel pipe and tube products. The Water Transmission Group is the largest manufacturer of engineered steel pipe water systems in North America. With eight Water Transmission manufacturing facilities, the Group is positioned to meet North America's growing needs for water and wastewater infrastructure. The Water Transmission Group serves a wide-range of markets and their solution-based products are a perfect fit for applications including: water transmission, plant piping, energy, tunnels, river crossings, structural, industrial and construction. The Tubular Products Group operates a state of the art electric resistance weld mill facility. The Tubular Products portfolio serves a wide-range of markets and its quality certified pipe and tube products are good for applications including: oil and gas, structural industrial, fire protection, low pressure and agricultural. The company is headquartered in Vancouver, Wash., and has manufacturing facilities in the United States and Mexico.
Net sales from continuing operations for the year ended 31 December 2014 increased 12.2% to US$403.3 million compared to US$359.4 million for the year ended 31 December 2013. Gross profit was US$40.6 million (10.1% of net sales) in 2014, a decrease from US$60.2 million (16.8% of net sales) in 2013. A non-cash goodwill impairment charge of US$16.1 million was recorded in 2014. Including the impairment charge, the 2014 loss from continuing operations was US$6.2 million or US$0.65 per diluted share, compared to income from continuing operations of US$21.7 million or US$2.27 per diluted share for 2013. Excluding the impairment charge, adjusted income from continuing operations for full year 2014 was US$9.9 million or US$1.03 per diluted share.
Water Transmission sales increased 5.4% to US$238.5 million in 2014 from US$226.4 million in 2013. The increase in net sales was due to growth from the acquisition of Permalok partially offset by a decrease in organic revenues due to the continued weakness in municipal markets. Water Transmission gross profit decreased to US$39.6 million (16.6% of segment net sales) in 2014 from US$47.0 million (20.7% of segment net sales) in 2013. Water Transmission gross profit decreased in total and as a percent of sales due to the mix of projects coupled with increased competition, which compressed margins compared to 2013.
Tubular Products sales from continuing operations increased 23.9% to US$164.8 million in 2014 from US$133.0 million in 2013, driven by a 24% increase in tons sold from 132,800 tons in 2013 to 164,600 tons in 2014. Tubular Products gross profit decreased to US$1.0 million (0.6% of segment net sales) in 2014 from US$13.3 million (10.0% of segment net sales) in 2013. Gross profit was negatively impacted by a 7% increase in steel costs while selling prices remained flat with 2013. Margins continue to be negatively impacted by competition from imports in the line pipe markets, the segment's primary product.
On 30 March 2014 the company completed the sale of substantially all of the assets and liabilities associated with the oil country tubular goods (OCTG) business conducted by the company at its manufacturing facilities in Bossier City, La., and Houston, Texas, excluding the real property located in Houston, Texas. These facilities were previously included within the company's Tubular Products Group. The company's results of operations for its disposed OCTG business have been presented as discontinued operations for all periods presented within the consolidated statements of operations.
Goodwill is tested for impairment annually, or whenever events or circumstances change that indicate goodwill may be impaired. The company recorded a non-cash impairment charge ofUS$16.1 million, which was associated with the goodwill for its Tubular Products Group. The impairment was driven by worldwide turmoil in crude oil markets, which became significant late in the fourth quarter of 2014. The impairment charge has no impact on the company's liquidity.
As of 31 December 2014, the backlog of orders in the Water Transmission segment was approximately US$121 million. This compared to a backlog of orders of US$103 million as of 31 December 2013. The backlog includes confirmed orders, including the balance of projects in process, and projects for which the company has been notified that it is the successful bidder even though a binding agreement has not been executed.
Fourth Quarter 2014 Results
Net sales from continuing operations for the quarter ended 31 December 2014 increased 19.3% to US$102.2 million compared to US$85.6 million for the quarter ended 31 December 2013. Gross profit was US$9.1 million (8.9% of net sales) in the fourth quarter of 2014, a decrease from US$10.9 million (12.7% of net sales) in the fourth quarter of 2013. The non-cash goodwill impairment charge described above was recorded in the fourth quarter of 2014. Including the impairment charge, loss from continuing operations for the fourth quarter of 2014 was US$14.0 million or US$1.47 per diluted share compared to income from continuing operations of US$2.4 million or US$0.25 per diluted share for the fourth quarter of 2013. Excluding the impairment charge, adjusted income from continuing operations for the fourth quarter of 2014 was US$2.1 million or US$0.21 per diluted share.
Water Transmission sales increased 31.9% to US$56.5 million in the fourth quarter of 2014 from US$42.8 million in the fourth quarter of 2013. Water Transmission gross profit increased to US$9.9 million (17.5% of segment net sales) in the fourth quarter of 2014 from US$7.0 million (16.4% of segment net sales) in the fourth quarter of 2013. Water Transmission net sales and gross profit increased due to higher production compared to the fourth quarter of 2013, partially offset by increased competition, which compressed margins.
Tubular Products sales from continuing operations increased 6.7% to US$45.7 million in the fourth quarter of 2014 from US$42.8 million in the fourth quarter of 2013. Tubular Products had a gross loss of US$0.8 million in the fourth quarter of 2014 compared to gross profit of US$3.8 million in the fourth quarter of 2013. Gross profit was negatively impacted by the product mix, coupled with a 2% increase in steel costs and a 1% decrease in fourth quarter of 2014 selling prices compared with the fourth quarter of 2013. Margins continue to be negatively impacted by competition from imports in the line pipe markets.
Outlook
"We believe that the first quarter of 2015 will continue to present significant challenges. Water Transmission revenues should be similar to fourth quarter and margins are projected to be in the low to mid-teens," said Scott Montross, president and chief executive officer of the company. "In addition, the sudden and swift decline in crude oil prices is expected to have significant near term impacts on order intake, production and inventory values in the Tubular Products segment. As a result we expect a small gross loss for Tubular Products in the first quarter of 2015."
Northwest Pipe Company is a leading manufacturer of welded steel pipe and tube products. The Water Transmission Group is the largest manufacturer of engineered steel pipe water systems in North America. With eight Water Transmission manufacturing facilities, the Group is positioned to meet North America's growing needs for water and wastewater infrastructure. The Water Transmission Group serves a wide-range of markets and their solution-based products are a perfect fit for applications including: water transmission, plant piping, energy, tunnels, river crossings, structural, industrial and construction. The Tubular Products Group operates a state of the art electric resistance weld mill facility. The Tubular Products portfolio serves a wide-range of markets and its quality certified pipe and tube products are good for applications including: oil and gas, structural industrial, fire protection, low pressure and agricultural. The company is headquartered in Vancouver, Wash., and has manufacturing facilities in the United States and Mexico.
