Financial Data and Key Metrics Changes - In Q1 2019, net income was $2.2 million or $0.22 per diluted share, compared to an adjusted net loss of $1.7 million or $0.18 per diluted share in Q1 2018 [3] - Sales increased to $62.6 million in Q1 2019 from $33.4 million in Q1 2018, reflecting a 68% increase in tons produced [3][4] - Gross profit as a percentage of sales improved to 10.5% in Q1 2019 from 4% in Q1 2018 [3] - Selling, general and administrative costs rose to $4.2 million in Q1 2019 from $3.4 million in Q1 2018 due to higher incentive compensation [4] - Income tax expense rate was 8.1% in Q1 2019 compared to a benefit rate of 12.2% in Q1 2018 [5] - Cash provided from continuing operations was $10.4 million in Q1 2019 [5] Business Line Data and Key Metrics Changes - The Ameron acquisition contributed approximately $11.8 million in sales [4] - Backlog, including confirmed orders, was $242 million as of March 31, 2019, down from $252 million in the previous quarter but up from $87 million in Q1 2018 [11] Market Data and Key Metrics Changes - The Texas SWIFT program has funded over $8 billion in projects over the last six years, with ongoing projects expected to continue funding [14] - In California, Proposition 1's $7.1 billion bond for water infrastructure has appropriated 86% of funds for various projects as of the 2017-2018 fiscal year [19] Company Strategy and Development Direction - The company is focused on integrating the Ameron Water Transmission Group, repairing the Saginaw coating facility, improving business performance by prioritizing margin over volume, and driving cost reductions [22] - The company expects strong revenues and margin trends throughout 2019, supported by a stable bidding environment and a solid backlog [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the first quarter showed stronger performance than in recent years, reversing a trend of slow first quarters [12] - The company anticipates that the next couple of quarters may experience anomalies related to expenses and insurance coverage from the fire at the Saginaw coatings plant [13] - Management expressed confidence in the stability of backlog and bidding activity for 2020, indicating a stronger outlook compared to 2019 [28][29] Other Important Information - The Saginaw fire occurred at a small part of the facility, and the rest of the plant continued to operate normally [32] - The company plans to manage the impact of the fire on financial performance, with expected volatility in the second quarter due to expenses and insurance coverage [36] Q&A Session Summary Question: Can you talk about the backlog and its relation to the Ameron acquisition? - Management acknowledged that there is still considerable work from the Ameron transaction and expects to continue working through it at least until the third quarter [24] Question: How do you view the bidding environment for 2020 compared to this quarter? - Management indicated that 2020 looks stronger than 2019, with multi-year programs contributing to a stable bidding environment [28] Question: Can you quantify the impact of the Saginaw fire on financial performance? - Management stated that the fire's impact is manageable, as it occurred in a small part of the facility, and the rest of the operations are running normally [32][34]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section details the company's unaudited financial performance, management's operational analysis, market risk, and internal controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, showing a significant turnaround from a net loss to net income [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, costs, and net income for the period, showing a significant profit turnaround Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net sales | $62,643 | $33,365 | 87.8% | | Cost of sales | $56,072 | $32,017 | 75.1% | | Gross profit | $6,571 | $1,348 | 387.5% | | Operating income (loss) | $2,324 | $(2,342) | N/A | | Net income (loss) | $2,165 | $(1,951) | N/A | | Basic EPS | $0.22 | $(0.20) | N/A | | Diluted EPS | $0.22 | $(0.20) | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the net income or loss and other comprehensive income components, leading to total comprehensive income Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,165 | $(1,951) | | Other comprehensive income, net of tax | $11 | $49 | | Comprehensive income (loss) | $2,176 | $(1,902) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2019 | December 31, 2018 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $3,843 | $6,677 | $(2,834) | | Trade and other receivables | $27,791 | $34,394 | $(6,603) | | Contract assets | $70,267 | $74,271 | $(4,004) | | Inventories | $41,116 | $39,376 | $1,740 | | Total current assets | $147,522 | $159,513 | $(11,991) | | Total assets | $266,525 | $271,350 | $(4,825) | | Total current liabilities | $28,970 | $31,492 | $(2,522) | | Borrowings on line of credit | $- | $11,464 | $(11,464) | | Total liabilities | $45,737 | $52,760 | $(7,023) | | Total stockholders' equity | $220,788 | $218,590 | $2,198 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details changes in the company's equity components, including retained earnings and accumulated other comprehensive loss Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Equity Component (in thousands) | Balance, Dec 31, 2018 | Cumulative-effect adjustment for ASU 2018-02 | Net income | Other comprehensive income (loss) | Share-based compensation expense | Balance, Mar 31, 2019 | | :------------------------------ | :-------------------- | :------------------------------------------- | :--------- | :-------------------------------- | :------------------------------- | :-------------------- | | Common Stock Amount | $97 | $- | $- | $- | $- | $97 | | Additional Paid In Capital | $118,835 | $- | $- | $- | $22 | $118,857 | | Retained Earnings | $101,194 | $235 | $2,165 | $- | $- | $103,594 | | Accumulated Other Comprehensive Loss | $(1,536) | $(235) | $- | $11 | $- | $(1,760) | | Total Stockholders' Equity | $218,590 | $- | $2,165 | $11 | $22 | $220,788 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $10,357 | $(2,266) | | Net cash provided by (used in) investing activities | $(1,620) | $6 | | Net cash used in financing activities | $(11,571) | $(1,395) | | Change in cash and cash equivalents | $(2,834) | $(3,655) | | Cash and cash equivalents, end of period | $3,843 | $39,991 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential additional information and explanations for the financial statements [1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) This note describes the company's business segment and the basis for preparing the financial statements - The Company operates in a single business segment, Water Transmission, focusing on steel pipeline systems, reinforced concrete pipe, and protective linings for drinking water infrastructure, hydroelectric power, wastewater, and industrial applications[20](index=20&type=chunk) - An immaterial out-of-period adjustment of **$1.2 million in revenue**, originally recorded in FY2018, should have been recognized in Q1 2019 due to an error in cost measurement at a recently acquired Ameron facility[23](index=23&type=chunk) [2. Business Combination](index=9&type=section&id=2.%20Business%20Combination) This note details the acquisition of Ameron Water Transmission Group, LLC and its financial impact - On July 27, 2018, the Company acquired 100% of Ameron Water Transmission Group, LLC for **$38.1 million in cash**, expanding its product portfolio to include bar-wrapped concrete cylinder pipe, reinforced concrete pipe, and T-Lock PVC lining[24](index=24&type=chunk) - The acquisition resulted in a **bargain purchase gain of $20.08 million**, recorded due to the seller's motivation to complete the transaction as part of a business repositioning[25](index=25&type=chunk)[26](index=26&type=chunk) Pro Forma Metric (in thousands) | Pro Forma Metric (in thousands) | Three Months Ended March 31, 2018 | | :------------------------------ | :-------------------------------- | | Net sales | $43,567 | | Net loss | $(22,614) | [3. Discontinued Operations](index=11&type=section&id=3.%20Discontinued%20Operations) This note outlines the sale of the Atchison, Kansas manufacturing facility - On December 26, 2017, the Company completed the sale of substantially all assets of its Atchison, Kansas manufacturing facility for **$37.2 million in cash**, recognizing a nominal gain[30](index=30&type=chunk) [4. Inventories](index=11&type=section&id=4.%20Inventories) This note provides a breakdown of the company's inventory components Inventory Type (in thousands) | Inventory Type (in thousands) | March 31, 2019 | December 31, 2018 | | :---------------------------- | :------------- | :---------------- | | Raw materials | $37,381 | $34,426 | | Work-in-process | $1,409 | $2,368 | | Finished goods | $824 | $1,075 | | Supplies | $1,502 | $1,507 | | Total current inventories | $41,116 | $39,376 | [5. Leases](index=11&type=section&id=5.%20Leases) This note explains the adoption of new lease accounting standards and related financial impacts - The Company adopted ASC Topic 842, 'Leases,' on January 1, 2019, using the modified retrospective transition method, recognizing approximately **$8.0 million in right-of-use assets and lease liabilities** for operating leases[70](index=70&type=chunk) Lease Cost (in thousands) | Lease Cost (in thousands) | Three Months Ended March 31, 2019 | | :------------------------ | :-------------------------------- | | Finance lease cost | $124 | | Operating lease cost | $425 | | Short-term lease cost | $262 | | Variable lease cost | $40 | | Total lease cost | $851 | Future Lease Maturities (in thousands) | Future Lease Maturities (in thousands) | Finance Leases | Operating Leases | | :------------------------------------- | :------------- | :--------------- | | 2019 | $348 | $1,334 | | 2020 | $375 | $1,664 | | 2021 | $258 | $1,134 | | 2022 | $237 | $903 | | 2023 | $34 | $752 | | Thereafter | $- | $4,338 | | Present value of lease liabilities | $1,149 | $8,286 | [6. Fair Value Measurements](index=13&type=section&id=6.%20Fair%20Value%20Measurements) This note describes the valuation methods and categories for financial assets Financial Assets (in thousands) | Financial Assets (in thousands) | March 31, 2019 (Total) | December 31, 2018 (Total) | | :------------------------------ | :--------------------- | :------------------------ | | Deferred compensation plan | $5,125 | $4,719 | | Foreign currency forward contracts | $- | $101 | - Deferred compensation plan assets include publicly traded stock and bond mutual funds (Level 1) and guaranteed investment contracts (Level 2)[38](index=38&type=chunk) - Foreign currency forward contracts are valued using observable market parameters (Level 2)[38](index=38&type=chunk)[39](index=39&type=chunk) [7. Share-based Compensation](index=13&type=section&id=7.%20Share-based%20Compensation) This note details the expenses and unrecognized compensation related to share-based awards Share-based Compensation Expense (in thousands) | Share-based Compensation Expense (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of sales | $6 | $17 | | Selling, general, and administrative expense | $16 | $64 | | Total | $22 | $81 | - As of March 31, 2019, unrecognized compensation expense for RSUs and PSAs was **$2.2 million**, expected to be recognized over a weighted-average period of **2.2 years**[47](index=47&type=chunk) - Performance Share Awards (PSAs) vested on March 29, 2019, with a **0% payout percentage** as performance-based conditions were not achieved[47](index=47&type=chunk) [8. Commitments and Contingencies](index=15&type=section&id=8.%20Commitments%20and%20Contingencies) This note discusses potential liabilities from legal proceedings and other commitments - The Company is a potentially responsible party for the Portland Harbor Superfund Site cleanup, estimated at **$1 billion over 13 years**, but is currently unable to estimate its specific obligation due to the large number of parties and variable remediation alternatives[48](index=48&type=chunk) - The Company participates in the Natural Resource Damage Assessment (NRDA) for the Portland Harbor Superfund Site, contributing **$0.4 million** for assessment, but has not assumed additional payment obligations[50](index=50&type=chunk) - As of March 31, 2019, the Company has **$1.6 million in letters of credit** related to workers' compensation insurance[55](index=55&type=chunk) [9. Revenue](index=16&type=section&id=9.%20Revenue) This note explains the company's revenue recognition policies and backlog information - Revenue for most contracts is recognized over time using the cost-to-cost method, as products are custom-specified and have no alternative use[57](index=57&type=chunk) - Revisions in contract estimates resulted in a **decrease in revenue of $(1.5) million** for Q1 2019, compared to an increase of $0.8 million for Q1 2018[59](index=59&type=chunk) - Backlog as of March 31, 2019, was approximately **$167.3 million**, with **71% expected to be recognized in 2019** and **25% in 2020**[62](index=62&type=chunk) [10. Income Taxes](index=17&type=section&id=10.%20Income%20Taxes) This note provides details on income tax expense, effective rates, and unrecognized tax benefits Income Tax Metrics | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :----- | :-------------------------------- | :-------------------------------- | | Income tax expense (benefit) | $191 (expense) | $(272) (benefit) | | Estimated effective income tax rate | 8.1% | 12.2% | - The effective income tax rates for both periods were impacted by estimated changes in the Company's valuation allowance[64](index=64&type=chunk) - The Company had **$4.4 million of unrecognized income tax benefits** as of March 31, 2019, and December 31, 2018, with no expected material change in the next twelve months[65](index=65&type=chunk) [11. Accumulated Other Comprehensive Loss](index=17&type=section&id=11.%20Accumulated%20Other%20Comprehensive%20Loss) This note details changes in components of accumulated other comprehensive loss Accumulated Other Comprehensive Loss Components (in thousands) | Component (in thousands) | Balance, Dec 31, 2018 | Cumulative-effect adjustment for ASU 2018-02 | Net current period adjustments | Balance, Mar 31, 2019 | | :----------------------- | :-------------------- | :------------------------------------------- | :----------------------------- | :-------------------- | | Pension Liability Adjustment | $(1,551) | $(235) | $26 | $(1,760) | | Unrealized Gain (Loss) on Cash Flow Hedges | $15 | $- | $(15) | $- | | Total | $(1,536) | $(235) | $11 | $(1,760) | Reclassified to Statements of Operations (in thousands) | Reclassified to Statements of Operations (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Pension liability adjustment (net periodic pension cost) | $(3) | $- | | Unrealized gain (loss) on cash flow hedges (net sales) | $5 | $(2) | [12. Net Income (Loss) per Share](index=18&type=section&id=12.%20Net%20Income%20(Loss)%20per%20Share) This note presents the calculation of basic and diluted earnings per share Net Income (Loss) per Share (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,165 | $(1,951) | | Basic weighted-average common shares outstanding | 9,735 | 9,707 | | Diluted weighted-average common shares outstanding | 9,735 | 9,707 | | Net income (loss) per common share: Basic | $0.22 | $(0.20) | | Net income (loss) per common share: Diluted | $0.22 | $(0.20) | - In Q1 2019, **24,000 antidilutive shares** were excluded from diluted EPS calculation[69](index=69&type=chunk) - In Q1 2018, approximately **87,000 antidilutive shares**, including 34,000 performance-based share awards, were excluded due to net loss or unfulfilled performance conditions[69](index=69&type=chunk) [13. Recent Accounting and Reporting Developments](index=19&type=section&id=13.%20Recent%20Accounting%20and%20Reporting%20Developments) This note outlines the adoption of new accounting standards and their financial impact - The Company adopted ASU No. 2016-02, 'Leases,' on January 1, 2019, recognizing approximately **$8.0 million in right-of-use assets and lease liabilities** for operating leases[70](index=70&type=chunk) - ASU No. 2017-12, 'Derivatives and Hedging,' was adopted on January 1, 2019, with no material impact on financial position, results of operations, or cash flows[71](index=71&type=chunk) - ASU No. 2018-02, 'Income Statement—Reporting Comprehensive Income,' adopted on January 1, 2019, resulted in a **$0.2 million reclassification** between Accumulated other comprehensive loss and Retained earnings, with no impact on results of operations or cash flows[72](index=72&type=chunk) [14. Restructuring](index=19&type=section&id=14.%20Restructuring) This note describes the expenses incurred due to facility closures - In March 2018, the Company announced plans to close its Permalok manufacturing facility in Salt Lake City, Utah, and its Monterrey, Mexico facility, incurring **$0.3 million in restructuring expense** in Q1 2018[74](index=74&type=chunk) [15. Subsequent Event](index=20&type=section&id=15.%20Subsequent%20Event) This note reports on a significant event that occurred after the reporting period - On April 21, 2019, an accidental fire occurred at the Saginaw, Texas facility, damaging the coatings building[76](index=76&type=chunk) - The Company has insurance coverage for property damage and business interruption and can deploy other production locations to absorb lost production[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, operational highlights, and future outlook [Forward-Looking Statements](index=20&type=section&id=Forward-Looking%20Statements) This section cautions readers about inherent risks and uncertainties in forward-looking statements - The report contains forward-looking statements based on current expectations, estimates, and projections, which involve risks and uncertainties that could cause actual results to differ materially[77](index=77&type=chunk) - Key factors influencing actual results include changes in demand, market prices, product mix, bidding activity, raw material prices, international trade policy, tariffs, and the ability to integrate acquisitions[77](index=77&type=chunk) [Overview](index=20&type=section&id=Overview) This section provides a general description of the company's business and recent strategic developments - Northwest Pipe Company is North America's largest manufacturer of engineered welded steel pipe water systems, serving water transmission, plant piping, tunnels, and river crossings[78](index=78&type=chunk) - The July 2018 acquisition of Ameron Water Transmission Group, LLC for **$38.1 million** strengthened the Company's market position and expanded its product portfolio[79](index=79&type=chunk) - An accidental fire at the Saginaw, Texas facility on April 21, 2019, damaged the coatings building, but other production locations can absorb lost production, and insurance coverage is in place[80](index=80&type=chunk) [Our Current Economic Environment](index=21&type=section&id=Our%20Current%20Economic%20Environment) This section discusses market conditions, demand drivers, and the impact of tariffs on the company's operations - Long-term demand for water infrastructure projects in the U.S. is strong, but near-term challenges include strained governmental budgets, increased competition, and fluctuating steel costs[82](index=82&type=chunk) - Tariffs imposed by the U.S. (**25% on imported steel**), Mexico (**25% on U.S. steel**), and Canada (**25% surtax on U.S. steel**) impact raw material costs and finished steel pipe products, potentially leading to project delays or cancellations[83](index=83&type=chunk) [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights key accounting policies requiring significant management judgment - The Company's financial statements rely on estimates and judgments for revenue recognition, business combinations, inventories, property and equipment, share-based compensation, income taxes, and contingencies[84](index=84&type=chunk) - There have been no significant changes in critical accounting policies and estimates during Q1 2019 compared to the 2018 Form 10-K[85](index=85&type=chunk) [Recent Accounting Pronouncements](index=21&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to detailed disclosures on newly adopted accounting standards - For details on recent accounting pronouncements and their impact, refer to Note 13 of the Notes to Condensed Consolidated Financial Statements[86](index=86&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including sales, costs, and profitability Results of Operations (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2019 | % of Net Sales (2019) | Three Months Ended March 31, 2018 | % of Net Sales (2018) | | :-------------------- | :-------------------------------- | :-------------------- | :-------------------------------- | :-------------------- | | Net sales | $62,643 | 100.0% | $33,365 | 100.0% | | Cost of sales | $56,072 | 89.5% | $32,017 | 96.0% | | Gross profit | $6,571 | 10.5% | $1,348 | 4.0% | | Selling, general, and administrative expense | $4,247 | 6.8% | $3,385 | 10.1% | | Restructuring expense | $- | - | $305 | 0.9% | | Operating income (loss) | $2,324 | 3.7% | $(2,342) | (7.0)% | | Net income (loss) | $2,165 | 3.5% | $(1,951) | (5.8)% | - Net sales increased **87.8% to $62.6 million** in Q1 2019, with Ameron operations contributing **$11.8 million**[90](index=90&type=chunk) - The increase was driven by a **68% rise in tons produced** and a **12% increase in selling price per ton**[90](index=90&type=chunk) - Gross profit surged by **387.5% to $6.6 million** (**10.5% of net sales**) in Q1 2019, primarily due to increased production volume[91](index=91&type=chunk) - Selling, general, and administrative expense increased **25.5% to $4.2 million** in Q1 2019, mainly due to **$0.8 million in higher wages** and incentive compensation[92](index=92&type=chunk) - Restructuring expense was **$0.3 million** in Q1 2018, related to facility closures in Salt Lake City, Utah, and Monterrey, Mexico, with no such expense in Q1 2019[93](index=93&type=chunk) - Income tax expense was **$0.2 million** (**8.1% effective rate**) in Q1 2019, a shift from a **$0.3 million benefit** (**12.2% effective rate**) in Q1 2018, primarily influenced by changes in the valuation allowance[94](index=94&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows, working capital, and available financing - Working capital decreased to **$118.6 million** as of March 31, 2019, from **$128.0 million** at December 31, 2018[96](index=96&type=chunk) - Net cash provided by operating activities was **$10.4 million** in Q1 2019, a significant improvement from net cash used of **$(2.3) million** in Q1 2018[99](index=99&type=chunk) - Net cash used in investing activities was **$1.6 million** in Q1 2019, primarily for capital expenditures[100](index=100&type=chunk) - Expected total capital expenditures for 2019 are **$9.0 million to $12.5 million**, excluding fire damage replacement[100](index=100&type=chunk) - Net cash used in financing activities was **$11.6 million** in Q1 2019, mainly due to **$11.5 million in net repayments** on the line of credit[101](index=101&type=chunk) - As of March 31, 2019, the Company had no outstanding borrowings and **$49.5 million in additional borrowing capacity** under its **$60 million Credit Agreement**, which expires in October 2023[104](index=104&type=chunk)[105](index=105&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to comprehensive disclosures on market risks, particularly foreign currency and interest rate exposures - For detailed disclosures on market risk related to foreign currencies and interest rates, refer to Part II – Item 7A. 'Quantitative and Qualitative Disclosures About Market Risk' in the Company's 2018 Form 10-K[110](index=110&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2019 - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2019[112](index=112&type=chunk) - Internal control over financial reporting for Ameron Water Transmission Group, LLC was excluded from the evaluation due to its recent acquisition (July 2018) and ongoing integration, representing **17.7% of total assets** and **18.8% of consolidated revenues** for Q1 2019[113](index=113&type=chunk) - No significant changes in internal control over financial reporting occurred during Q1 2019, except for those related to the integration of Ameron[114](index=114&type=chunk) [PART II - OTHER INFORMATION](index=25&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, exhibits, and official signatures [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) This section discusses the company's involvement in legal actions and their potential financial impact - The Company is party to various legal actions in the normal course of business, but does not believe such litigation will have a material impact on its consolidated financial results[115](index=115&type=chunk) - For additional details on commitments and contingencies, refer to Note 8 of the Notes to Condensed Consolidated Financial Statements[115](index=115&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to a comprehensive discussion of potential risks affecting the business - Readers should refer to Part I – Item 1A. 'Risk Factors' in the Company's 2018 Form 10-K for a comprehensive discussion of factors that could materially affect the business, financial condition, or operating results[116](index=116&type=chunk) - The Company acknowledges that there may be additional unknown or currently immaterial risks that could adversely affect its business[116](index=116&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all supplementary documents filed with the report - Exhibits include Form of Performance Share Unit Agreement, Form of Restricted Stock Unit Agreement, Certifications pursuant to Sarbanes-Oxley Act (Sections 302 and 906), and XBRL Instance and Taxonomy Documents[118](index=118&type=chunk) [Signatures](index=27&type=section&id=Signatures) This section contains the official certifications by the company's authorized officers - The report is duly signed by Scott Montross, Director, President, and Chief Executive Officer, and Robin Gantt, Senior Vice President, Chief Financial Officer, and Corporate Secretary, on May 9, 2019[121](index=121&type=chunk)

[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements based on current expectations, estimates, and projections, which are subject to risks and uncertainties that could cause actual results to differ materially[16](index=16&type=chunk) - Key factors that could impact actual results include changes in demand and market prices for products, product mix, bidding activity, timing of orders, raw material prices, production capacity, international trade policy, tariffs, ability to complete and integrate acquisitions, and impacts of the Tax Cuts and Jobs Act of 2017 (TCJA)[16](index=16&type=chunk) - The company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the report date[16](index=16&type=chunk) [Part I](index=5&type=section&id=Part%20I) [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Northwest Pipe Company is North America's largest manufacturer of engineered welded steel pipe water systems, serving water transmission, wastewater, and industrial markets, strategically expanding through acquisitions and optimizing its manufacturing footprint - Northwest Pipe Company is the largest manufacturer of engineered welded steel pipe water systems in North America, serving water transmission, plant piping, tunnels, and river crossings[20](index=20&type=chunk) - In July 2018, the company acquired Ameron Water Transmission Group, LLC for **$38.1 million**, strengthening its market position, expanding bar-wrapped concrete cylinder pipe capabilities, and adding reinforced concrete pipe and T-Lock lining to its product portfolio[23](index=23&type=chunk) - The U.S. water infrastructure is aging and requires substantial investment; the EPA estimates **$473 billion** needed by 2034 for safe drinking water, and ASCE estimates **$150 billion** by 2025 for water and wastewater infrastructure[26](index=26&type=chunk) - The company's core market is large-diameter, high-pressure water transmission pipelines, with an estimated total addressable market of approximately **$2.1 billion** over the next three years[27](index=27&type=chunk) - Backlog, including confirmed orders, increased significantly from **$88 million** as of December 31, 2017, to **$252 million** as of December 31, 2018[42](index=42&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including market overcapacity, intense price competition, and potential adverse effects from downturns in government spending on public water projects - The business faces overcapacity and vigorous price competition, which can negatively affect sales, gross margins, and profitability, especially with new competitors entering the market[57](index=57&type=chunk) - Dependence on public water transmission projects means a downturn in government funding or project delays could adversely affect the business[59](index=59&type=chunk)[63](index=63&type=chunk) - Tariffs on imported steel (**25%** by the U.S.) and retaliatory tariffs (**25%** by Mexico and Canada) could increase raw material costs, impact finished product pricing, and potentially lead to project delays or facility shutdowns, particularly affecting the newly acquired San Luis Río Colorado, Mexico facility[62](index=62&type=chunk) - Steel prices are highly cyclical and volatile, with costs per ton fluctuating significantly (e.g., **$818 in 2018 vs. $474 in 2016**), impacting gross profit if price increases cannot be passed to customers[66](index=66&type=chunk)[68](index=68&type=chunk) - The company's backlog of **$81 million** as of December 31, 2018, is subject to reduction and cancellation, which could materially reduce future revenues[70](index=70&type=chunk) - Failure to successfully integrate acquired businesses, such as Ameron, or to implement effective internal controls at these entities, could lead to operational inefficiencies or material weaknesses in financial reporting[60](index=60&type=chunk)[61](index=61&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [Item 1B. Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - The company has no unresolved staff comments[103](index=103&type=chunk) [Item 2. Properties](index=22&type=section&id=Item%202.%20Properties) The company operates multiple manufacturing facilities across North America, strategically located in Oregon, Mexico, California, Texas, West Virginia, and Missouri, with sufficient capacity Operating Facilities as of December 31, 2018 | Location | Manufacturing Space (approx. sq. ft.) | Property Size (approx. acres) | Number and Type of Mills | | :----------------------- | :------------------------------------ | :---------------------------- | :------------------------------------ | | Portland, Oregon | 300,000 | 25 | 3 Spiral mills | | San Luis Río Colorado, Mexico | 273,000 | 105 | 2 Spiral mills, 1 Plate roll | | Adelanto, California | 200,000 | 100 | 3 Spiral mills, 1 Plate roll | | Saginaw, Texas (2 facilities) | 170,000 | 50 | 2 Spiral mills | | Tracy, California | 165,000 | 87 | 2 Spiral mills | | Parkersburg, West Virginia | 145,000 | 90 | 2 Spiral mills | | St. Louis, Missouri | 100,000 | 20 | 2 Plate rolls | | Brea, California | 73,000 | 5 | 2 Extruders | - The company owns most of its facilities, with some in Saginaw, St. Louis, and Brea being leased, along with adjacent land for parking/storage in Portland and Saginaw[106](index=106&type=chunk) [Item 3. Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal actions arising from normal business operations, including potential claims for punitive damages, and is a potentially responsible party at the Portland Harbor Superfund Site - The company is party to various legal actions in the normal course of business, with plaintiffs occasionally seeking punitive damages[107](index=107&type=chunk) - The company does not believe normal and routine litigation will have a material impact on its consolidated financial results[107](index=107&type=chunk) - The company is identified as a potentially responsible party at the Portland Harbor Superfund Site, facing potential environmental investigation and cleanup liabilities[49](index=49&type=chunk)[107](index=107&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to Northwest Pipe Company[108](index=108&type=chunk) [Part II](index=23&type=section&id=Part%20II) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Northwest Pipe Company's common stock is listed on Nasdaq under 'NWPX', with 24 shareholders of record as of March 4, 2019, and no intention to pay cash dividends in the foreseeable future - Common stock is quoted on Nasdaq under the symbol **'NWPX'**[111](index=111&type=chunk) - As of March 4, 2019, there were **24 shareholders of record** and **9,735,055 shares** of common stock outstanding[6](index=6&type=chunk)[111](index=111&type=chunk) - The company does not intend to pay cash dividends in the foreseeable future[111](index=111&type=chunk) - A Form S-3 registration statement for up to **$120 million** in equity and/or debt securities was declared effective on September 15, 2017, providing a potential source of capital, though no securities have been sold under it yet[112](index=112&type=chunk)[173](index=173&type=chunk) Stock Performance Graph (Indexed Return) | | Northwest Pipe Company | Russell 2000 Index | Peer Group | | :---------------- | :----------------------- | :----------------- | :--------- | | December 31, 2013 | 100.00 | 100.00 | 100.00 | | December 31, 2014 | 79.77 | 104.89 | 102.29 | | December 31, 2015 | 29.63 | 100.26 | 90.96 | | December 31, 2016 | 45.60 | 121.63 | 121.71 | | December 31, 2017 | 50.69 | 139.44 | 125.52 | | December 31, 2018 | 61.68 | 124.09 | 101.65 | [Item 6. Selected Financial Data](index=25&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of selected consolidated financial data, highlighting trends in net sales, gross profit, net income (loss), EPS, total assets, long-term debt, and stockholders' equity Consolidated Statement of Operations Data (In thousands, except per share amounts) | | 2018 | 2017 | 2016 | 2015 | 2014 | | :------------------------------------ | :----- | :----- | :----- | :----- | :----- | | Net sales | $172,149 | $132,780 | $149,387 | $173,160 | $238,545 | | Gross profit | 12,096 | 5,815 | 64 | 945 | 39,770 | | Income (loss) from continuing operations | 20,312 | (8,392) | (6,741) | (17,812) | 10,439 | | Loss on discontinued operations | - | (1,771) | (2,522) | (11,576) | (28,326) | | Net income (loss) | 20,312 | (10,163) | (9,263) | (29,388) | (17,887) | | Basic - Income (loss) from continuing operations | $2.09 | $(0.88) | $(0.71) | $(1.86) | $1.10 | | Basic - Net income (loss) per share | $2.09 | $(1.06) | $(0.97) | $(3.07) | $(1.88) | | Diluted - Net income (loss) per share assuming dilution | $2.09 | $(1.06) | $(0.97) | $(3.07) | $(1.86) | Consolidated Balance Sheet Data (In thousands) | | 2018 | 2017 | 2016 | 2015 | 2014 | | :------------------------------------ | :----- | :----- | :----- | :----- | :----- | | Total assets | $271,350 | $230,324 | $241,555 | $259,380 | $351,882 | | Long-term debt and capital lease obligations, less current portion | 12,303 | 737 | 602 | 676 | 45,701 | | Stockholders' equity | 218,590 | 200,264 | 209,213 | 217,560 | 245,635 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights the impact of strategic acquisitions, economic factors like steel tariffs, and critical accounting policies on financial performance, detailing results for 2018 vs. 2017 and 2017 vs. 2016, and liquidity [Overview](index=26&type=section&id=Overview_MD%26A) Northwest Pipe Company is North America's largest manufacturer of engineered welded steel pipe water systems, strategically expanding its product portfolio through the Ameron acquisition - Northwest Pipe Company is the largest manufacturer of engineered welded steel pipe water systems in North America, with facilities strategically located across the U.S. and Mexico[122](index=122&type=chunk) - The company completed the acquisition of Ameron in July 2018 for **$38.1 million**, expanding its product portfolio to include reinforced concrete pipe and T-Lock PVC lining[123](index=123&type=chunk) - Sales are primarily driven by new water infrastructure spending and a growing trend towards replacement, repair, and upgrade of existing infrastructure, focusing on large-diameter, higher-pressure applications[124](index=124&type=chunk) [Our Current Economic Environment](index=26&type=section&id=Our%20Current%20Economic%20Environment) Long-term demand for U.S. water infrastructure projects is strong, but near-term challenges include strained governmental budgets, increased competition, and fluctuating steel costs - Long-term demand for U.S. water infrastructure projects is strong, but near-term challenges include strained governmental budgets, increased competition, and fluctuating steel costs[125](index=125&type=chunk) - Tariffs imposed by the U.S., Mexico, and Canada on steel products in 2018 cover primary raw materials and finished steel pipe, potentially leading to project delays or cancellations and impacting the newly acquired SLRC facility[126](index=126&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines critical accounting policies for revenue recognition, business combinations, inventory valuation, property and equipment, and income taxes, which require significant management judgment and estimates - Revenue for most contracts is recognized over time using the cost-to-cost method, requiring significant judgment in estimating total costs and project completion progress[129](index=129&type=chunk) - Business combinations are accounted for using the acquisition method, requiring management to make significant estimates and assumptions in determining the fair value of acquired assets and assumed liabilities[132](index=132&type=chunk)[133](index=133&type=chunk) - Inventories are valued at the lower of cost and net realizable value, with cost for steel raw materials on a specific identification or average cost basis, and other inventories on an average cost basis[134](index=134&type=chunk)[135](index=135&type=chunk) - Property and equipment are depreciated using the units of production or straight-line method, with impairment assessed when circumstances indicate carrying values may not be recoverable[136](index=136&type=chunk)[137](index=137&type=chunk) - Income taxes are recorded using an asset and liability approach, requiring significant judgment in determining the provision for income taxes, including valuation allowances and unrecognized income tax benefits[140](index=140&type=chunk)[141](index=141&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) The company saw a significant increase in net sales and gross profit in 2018, partly due to the Ameron acquisition and improved pricing, leading to a bargain purchase gain and a turnaround in net income Consolidated Statement of Operations Data (In thousands, except per share amounts) | | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | | Net sales | $172,149 | $132,780 | $149,387 | | Cost of sales | 160,053 | 126,965 | 149,323 | | Gross profit | 12,096 | 5,815 | 64 | | Selling, general, and administrative expense | 16,663 | 14,143 | 16,921 | | Gain on sale of facilities | (2,960) | - | (7,860) | | Restructuring expense | 1,364 | 881 | 990 | | Operating loss | (2,971) | (9,209) | (9,987) | | Bargain purchase gain | 20,080 | - | - | | Income (loss) from continuing operations before income taxes | 17,060 | (9,492) | (10,839) | | Income tax benefit | (3,252) | (1,100) | (4,098) | | Income (loss) from continuing operations | 20,312 | (8,392) | (6,741) | | Net income (loss) | $20,312 | $(10,163) | $(9,263) | - Net sales from continuing operations increased **29.6% to $172.1 million** in 2018 from **$132.8 million** in 2017, with **$30.2 million** attributed to the Ameron acquisition[146](index=146&type=chunk) - Gross profit increased to **$12.1 million (7.0% of Net sales)** in 2018 from **$5.8 million (4.4% of Net sales)** in 2017, driven by improved pricing and the Ameron acquisition[148](index=148&type=chunk) - A bargain purchase gain of **$20.1 million** was recorded in 2018 due to the Ameron acquisition, where the fair value of acquired assets exceeded the purchase price[152](index=152&type=chunk) - Net sales from continuing operations decreased **11.1% to $132.8 million** in 2017 from **$149.4 million** in 2016, primarily due to a **45% decrease in tons produced**, offset by a **62% increase in selling price per ton**[154](index=154&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased in 2018, but cash and cash equivalents decreased due to the Ameron acquisition and operating activities, with the company relying on operating cash flows and its Credit Agreement for liquidity - Working capital increased to **$128.0 million** as of December 31, 2018, from **$123.8 million** as of December 31, 2017, while cash and cash equivalents decreased from **$43.6 million to $6.7 million**, primarily due to the Ameron acquisition[161](index=161&type=chunk) - Net cash used in operating activities from continuing operations was **$18.4 million** in 2018, primarily due to increases in contract assets and inventories, and decreases in accrued liabilities[164](index=164&type=chunk) - Net cash used in investing activities from continuing operations was **$32.4 million** in 2018, mainly due to the **$37.2 million Ameron acquisition** and **$3.8 million in capital expenditures**, partially offset by **$8.5 million from facility sales**[167](index=167&type=chunk) - Net cash provided by financing activities from continuing operations was **$9.3 million** in 2018, primarily from **$11.5 million** in net borrowings on the line of credit[170](index=170&type=chunk) - As of December 31, 2018, the company had **$11.5 million** in outstanding borrowings and **$38.0 million** in additional borrowing capacity under its **$60 million Credit Agreement**, which expires in October 2023[174](index=174&type=chunk)[175](index=175&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to commodity risk from steel price volatility, interest rate risk from variable-rate debt, and foreign currency exchange rate risk, which it manages through forward contracts - Steel is the most significant commodity risk, comprising **25% to 30% of project costs**, and its price volatility can significantly affect gross profit[183](index=183&type=chunk)[184](index=184&type=chunk) - As of December 31, 2018, **$11.5 million** of outstanding debt accrues interest at a variable rate, but a hypothetical **1.0% change** in interest rates would not materially impact interest expense in 2018 or 2017[185](index=185&type=chunk) - The company uses foreign currency forward contracts to offset risks from Canadian currency sales contracts, with a total notional amount of **$1.7 million (CAD$2.3 million)** as of December 31, 2018[187](index=187&type=chunk) - A hypothetical **10% change** in Canadian Dollar or Mexican Peso exchange rates would not materially impact reported Net income (loss) from continuing operations in 2018 or 2017[188](index=188&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the consolidated financial statements, including the statements of operations, comprehensive income (loss), balance sheets, stockholders' equity, and cash flows, along with their accompanying notes and supplementary schedules - The Consolidated Financial Statements and supplementary data are included on pages F-1 to F-31 and Schedule S-1[189](index=189&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=38&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure matters - There are no changes in or disagreements with accountants on accounting and financial disclosure[190](index=190&type=chunk) [Item 9A. Controls and Procedures](index=38&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2018, excluding Ameron's internal controls, which represented 18.5% of total assets and 17.5% of consolidated revenues - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2018[192](index=192&type=chunk) - Management excluded the internal control over financial reporting of Ameron (acquired July 27, 2018) from its assessment, as permitted by SEC guidance. Ameron represented approximately **18.5% of total assets** and **17.5% of consolidated revenues** as of and for the year ended December 31, 2018[193](index=193&type=chunk)[197](index=197&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018, based on COSO criteria[196](index=196&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2018, except for those related to the integration of Ameron[199](index=199&type=chunk) [Item 9B. Other Information](index=39&type=section&id=Item%209B.%20Other%20Information) There is no other information required to be disclosed in this section - There is no other information to report in this section[200](index=200&type=chunk) [Part III](index=40&type=section&id=Part%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=40&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides information on the company's directors and executive officers, their positions, and references the Code of Business Conduct and Ethics and Code of Ethics for Senior Financial Officers Executive Officers of Northwest Pipe Company (as of December 31, 2018) | Name | Age | Current Position with Northwest Pipe Company | | :------------ | :-- | :--------------------------------------------------------- | | Scott Montross | 54 | Director, President and Chief Executive Officer | | Robin Gantt | 47 | Senior Vice President, Chief Financial Officer and Corporate Secretary | | William Smith | 63 | Executive Vice President of Water Transmission Engineered Systems | | Aaron Wilkins | 44 | Vice President of Finance and Corporate Controller | | Miles Brittain | 55 | Vice President of Operations for Water Transmission Engineered Systems | - The company has adopted a Code of Business Conduct and Ethics for all employees and a Code of Ethics for Senior Financial Officers, available on its website[209](index=209&type=chunk) [Item 11. Executive Compensation](index=41&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for the 2019 Annual Meeting of Shareholders - Executive compensation information is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[211](index=211&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=41&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details securities authorized for issuance under equity compensation plans as of December 31, 2018, and incorporates security ownership information by reference from the proxy statement Securities Authorized for Issuance under Equity Compensation Plans (as of December 31, 2018) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) (1) | Weighted-average exercise price of outstanding options, warrants and rights (b) (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :---------------------------------------------- | :-------------------------------------------------------------------------------- | :---------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 63,992 | $24.15 | 537,978 | | Equity compensation plans not approved by security holders (3) | - | - | - | | Total | 63,992 | $24.15 | 537,978 | - Security ownership information for beneficial owners and management is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[214](index=214&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=41&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for the 2019 Annual Meeting of Shareholders - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[215](index=215&type=chunk) [Item 14. Principal Accounting Fees and Services](index=41&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for the 2019 Annual Meeting of Shareholders - Information on principal accounting fees and services is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[216](index=216&type=chunk) [Part IV](index=42&type=section&id=Part%20IV) [Item 15. Exhibits, Financial Statement Schedules](index=42&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements, including the report of independent registered public accounting firm, and a schedule of valuation and qualifying accounts, along with a comprehensive list of exhibits - Includes Consolidated Financial Statements (Statements of Operations, Comprehensive Income (Loss), Balance Sheets, Stockholders' Equity, Cash Flows, and Notes) and Schedule II Valuation and Qualifying Accounts[218](index=218&type=chunk)[219](index=219&type=chunk) - A detailed list of exhibits is provided, including the Membership Interest Purchase Agreement for Ameron, corporate charter documents, and various compensation plans[220](index=220&type=chunk)[222](index=222&type=chunk) [Item 16. Form 10-K Summary](index=46&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section indicates that no Form 10-K Summary is provided - No Form 10-K Summary is included[225](index=225&type=chunk) [Report of Independent Registered Public Accounting Firm](index=47&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Moss Adams LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting, excluding Ameron - Moss Adams LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements as of December 31, 2018 and 2017, and for the three years ended December 31, 2018[228](index=228&type=chunk)[229](index=229&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2018, based on COSO criteria[229](index=229&type=chunk) - The company changed its method of accounting for revenue recognition in 2018 due to the adoption of ASC Topic No. 606[230](index=230&type=chunk) - The audit of internal control over financial reporting excluded Ameron, whose financial statements constituted **18.5% of total assets** and **17.5% of consolidated net revenues** as of and for the year ended December 31, 2018[234](index=234&type=chunk) [Consolidated Financial Statements](index=49&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=49&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show a significant turnaround in 2018, with net income of **$20.3 million**, driven by increased net sales, higher gross profit, and a substantial bargain purchase gain Consolidated Statements of Operations (In thousands, except per share amounts) | | 2018 | 2017 | 2016 | | :------------------------------------------------ | :----- | :----- | :----- | | Net sales | $172,149 | $132,780 | $149,387 | | Gross profit | 12,096 | 5,815 | 64 | | Operating loss | (2,971) | (9,209) | (9,987) | | Bargain purchase gain | 20,080 | - | - | | Income (loss) from continuing operations | 20,312 | (8,392) | (6,741) | | Net income (loss) | $20,312 | $(10,163) | $(9,263) | | Basic Net income (loss) per share | $2.09 | $(1.06) | $(0.97) | | Diluted Net income (loss) per share | $2.09 | $(1.06) | $(0.97) | - Net sales increased by **29.6% from $132.8 million in 2017 to $172.1 million in 2018**[240](index=240&type=chunk) - Gross profit significantly improved from **$5.8 million in 2017 to $12.1 million in 2018**[240](index=240&type=chunk) - A bargain purchase gain of **$20.1 million** was recognized in 2018[240](index=240&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=50&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The Consolidated Statements of Comprehensive Income (Loss) reflect a comprehensive income of **$20.2 million** in 2018, a significant improvement from prior years' losses, adjusted for pension liability and cash flow hedge items Consolidated Statements of Comprehensive Income (Loss) (In thousands) | | 2018 | 2017 | 2016 | | :------------------------------------ | :----- | :----- | :----- | | Net income (loss) | $20,312 | $(10,163) | $(9,263) | | Other comprehensive income (loss), net of tax: | | | | | Pension liability adjustment | (115) | 57 | 131 | | Unrealized gain (loss) on cash flow hedges | 24 | (19) | (76) | | Other comprehensive income (loss), net of tax | (91) | 38 | 55 | | Comprehensive income (loss) | $20,221 | $(10,125) | $(9,208) | - Comprehensive income for 2018 was **$20.2 million**, a substantial increase from comprehensive losses in prior years[242](index=242&type=chunk) - Other comprehensive income (loss) in 2018 was a net loss of **$91 thousand**, primarily due to pension liability adjustments[242](index=242&type=chunk) [Consolidated Balance Sheets](index=51&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$271.4 million** in 2018, largely due to the Ameron acquisition, while cash decreased, and total liabilities and stockholders' equity also increased Consolidated Balance Sheets (Dollar amounts in thousands) | | December 31, 2018 | December 31, 2017 | | :-------------------------------------------------------------------------------- | :------------------ | :------------------ | | **Assets** | | | | Cash and cash equivalents | $6,677 | $43,646 | | Trade and other receivables, net | 34,394 | 28,990 | | Contract assets | 74,271 | 44,502 | | Inventories | 39,376 | 17,055 | | Total current assets | 159,513 | 140,755 | | Property and equipment, net | 103,447 | 78,756 | | Total assets | $271,350 | $230,324 | | **Liabilities and Stockholders' Equity** | | | | Accounts payable | $19,784 | $7,521 | | Accrued liabilities | 7,547 | 6,563 | | Contract liabilities | 3,745 | 2,599 | | Total current liabilities | 31,492 | 17,001 | | Borrowings on line of credit | 11,464 | - | | Total liabilities | 52,760 | 30,060 | | Total stockholders' equity | 218,590 | 200,264 | - Total assets increased by **$41.0 million (17.8%) from $230.3 million in 2017 to $271.4 million in 2018**[245](index=245&type=chunk) - Cash and cash equivalents decreased significantly from **$43.6 million in 2017 to $6.7 million in 2018**[245](index=245&type=chunk) - Borrowings on the line of credit increased to **$11.5 million** in 2018 from zero in 2017[245](index=245&type=chunk) - Stockholders' equity increased by **$18.3 million (9.1%) from $200.3 million in 2017 to $218.6 million in 2018**[245](index=245&type=chunk) [Consolidated Statements of Stockholdings' Equity](index=52&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Retained earnings increased significantly in 2018 due to net income, despite a cumulative-effect adjustment for revenue recognition, contributing to an overall increase in total stockholders' equity Consolidated Statements of Stockholders' Equity (Dollar amounts in thousands) | | Shares | Common Stock Amount | Additional Paid-In-Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | | :-------------------------- | :------- | :------------------ | :------------------------- | :---------------- | :----------------------------------- | :------------------------- | | Balances, December 31, 2015 | 9,564,752 | $96 | $117,819 | $101,183 | $(1,538) | $217,560 | | Balances, December 31, 2016 | 9,601,011 | 96 | 118,680 | 91,920 | (1,483) | 209,213 | | Balances, December 31, 2017 | 9,619,755 | 96 | 119,856 | 81,757 | (1,445) | 200,264 | | Cumulative-effect adjustment (Note 2) | - | - | - | (875) | - | (875) | | Balances, January 1, 2018 | 9,619,755 | 96 | 119,856 | 80,882 | (1,445) | 199,389 | | Net income | - | - | - | 20,312 | - | 20,312 | | Balances, December 31, 2018 | 9,735,055 | $97 | $118,835 | $101,194 | $(1,536) | $218,590 | - Retained earnings increased from **$81.8 million** at December 31, 2017, to **$101.2 million** at December 31, 2018, after a cumulative-effect adjustment of **$(0.9) million** for revenue recognition[248](index=248&type=chunk) - Total stockholders' equity increased by **$18.3 million** in 2018, reaching **$218.6 million**[248](index=248&type=chunk) [Consolidated Statements of Cash Flows](index=53&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased by **$37.0 million** in 2018, primarily due to significant cash used in investing activities for the Ameron acquisition and operating activities, partially offset by financing activities Consolidated Statements of Cash Flows (In thousands) | | 2018 | 2017 | 2016 | | :------------------------------------------------ | :----- | :----- | :----- | | Net cash used in operating activities from continuing operations | $(18,400) | $(5,793) | $(1,793) | | Net cash provided by (used in) operating activities from discontinued operations | - | (1,727) | 3,312 | | Net cash provided by (used in) operating activities | $(18,400) | $(7,520) | $1,519 | | Net cash provided by (used in) investing activities from continuing operations | $(32,364) | $(2,705) | $11,655 | | Net cash provided by investing activities from discontinued operations | 4,465 | 32,505 | - | | Net cash provided by (used in) investing activities | $(27,899) | $29,800 | $11,655 | | Net cash provided by (used in) financing activities from continuing operations | $9,330 | $(463) | $(1,543) | | Net cash provided by (used in) financing activities | $9,330 | $(463) | $(1,654) | | Change in cash and cash equivalents | $(36,969) | $21,817 | $11,520 | | Cash and cash equivalents, end of period | $6,677 | $43,646 | $21,829 | - Net cash used in operating activities from continuing operations increased to **$18.4 million** in 2018 from **$5.8 million** in 2017[250](index=250&type=chunk) - Net cash used in investing activities from continuing operations was **$32.4 million** in 2018, primarily due to the **$37.2 million Ameron acquisition**[250](index=250&type=chunk) - Net cash provided by financing activities from continuing operations was **$9.3 million** in 2018, driven by **$11.5 million** in net borrowings on the line of credit[252](index=252&type=chunk) [Notes to Consolidated Financial Statements](index=55&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of accounting policies, significant transactions, and financial statement line items, including revenue recognition, the Ameron acquisition, and commitments [1. ORGANIZATION](index=55&type=section&id=1.%20ORGANIZATION) Northwest Pipe Company operates in one business segment, Water Transmission, producing steel pipeline systems, reinforced concrete pipe, and protective linings for water infrastructure across multiple North American facilities - Northwest Pipe Company operates in one business segment, Water Transmission, producing steel pipeline systems, reinforced concrete pipe, and protective linings for water infrastructure[255](index=255&type=chunk) - Manufacturing facilities are located in Oregon, Mexico, California, Texas, West Virginia, and Missouri[255](index=255&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=55&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the company's significant accounting policies, including the adoption of new revenue recognition standards, accounting for business combinations, inventory valuation, and the upcoming adoption of new lease accounting standards - The company adopted ASC Topic 606, 'Revenue from Contracts with Customers,' on January 1, 2018, using the modified retrospective method, resulting in a **$0.9 million decrease to retained earnings**[290](index=290&type=chunk)[291](index=291&type=chunk) - Revenue for most contracts is recognized over time using the cost-to-cost method due to the right to payment for work performed and lack of alternative use for unique products[275](index=275&type=chunk) - Business combinations are accounted for under the acquisition method, recognizing acquired assets and assumed liabilities at fair value, with any excess of fair value over consideration recorded as a bargain purchase gain[258](index=258&type=chunk) - Inventories are stated at the lower of cost and net realizable value, with steel raw materials on a specific identification or average cost basis[263](index=263&type=chunk) - The company will adopt ASC Topic 842, 'Leases,' on January 1, 2019, using the modified retrospective method, expecting to recognize approximately **$8.0 million** in right-of-use assets and lease liabilities for operating leases[297](index=297&type=chunk) [3. BUSINESS COMBINATION](index=66&type=section&id=3.%20BUSINESS%20COMBINATION) On July 27, 2018, the company acquired Ameron Water Transmission Group, LLC for **$38.1 million**, resulting in a preliminary bargain purchase gain of **$20.1 million** and contributing **$30.2 million** in net sales - On July 27, 2018, the company acquired 100% of Ameron Water Transmission Group, LLC for **$38.1 million in cash**[304](index=304&type=chunk) - The acquisition resulted in a preliminary bargain purchase gain of **$20.1 million**, as the net fair value of acquired assets and assumed liabilities exceeded the purchase price[305](index=305&type=chunk)[306](index=306&type=chunk) - Ameron contributed **$30.2 million** in net sales to the company's continuing operations from July 27, 2018, to December 31, 2018[308](index=308&type=chunk) - Acquisition-related costs of **$2.6 million** were incurred and expensed in 2018[307](index=307&type=chunk) [4. DISCONTINUED OPERATIONS](index=67&type=section&id=4.%20DISCONTINUED%20OPERATIONS) On December 26, 2017, the company sold its Atchison, Kansas manufacturing facility for **$37.2 million**, and its financial results are presented as discontinued operations, with the company now operating solely in the Water Transmission segment - On December 26, 2017, the company sold substantially all assets of its Atchison, Kansas manufacturing facility for **$37.2 million in cash**, resulting in a nominal gain[310](index=310&type=chunk) - The financial results of the Atchison facility are presented as discontinued operations, and the company now operates solely in the Water Transmission segment[311](index=311&type=chunk) Operating Results for Discontinued Operations (In thousands) | | Year Ended December 31, 2017 | Year Ended December 31, 2016 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net sales | $12 | $6,869 | | Gross loss | (1,780) | (2,908) | | Operating loss | (1,773) | (3,165) | | Net loss | $(1,771) | $(2,522) | [5. INVENTORIES](index=68&type=section&id=5.%20INVENTORIES) Total current inventories significantly increased from **$17.1 million** in 2017 to **$39.4 million** in 2018, primarily in raw materials Inventories (In thousands) | | December 31, 2018 | December 31, 2017 | | :-------------------- | :---------------- | :---------------- | | Raw materials | $34,426 | $13,700 | | Work-in-process | 2,368 | 1,268 | | Finished goods | 1,075 | 464 | | Supplies | 1,507 | 1,623 | | Total current inventories | $39,376 | $17,055 | | Noncurrent inventories: | | | | Finished goods | 65 | 820 | | Total inventories | $39,441 | $17,875 | - Total current inventories increased significantly from **$17.1 million in 2017 to $39.4 million in 2018**[313](index=313&type=chunk) [6. PROPERTY AND EQUIPMENT](index=68&type=section&id=6.%20PROPERTY%20AND%20EQUIPMENT) Net property and equipment increased by **$24.7 million** to **$103.4 million** in 2018, with a portion located in Mexico, and the company sold two facilities during the year Property and Equipment, Net (In thousands) | | December 31, 2018 | December 31, 2017 | | :-------------------------- | :---------------- | :---------------- | | Land and improvements | $22,940 | $20,185 | | Buildings | 40,477 | 30,301 | | Machinery and equipment | 112,884 | 100,438 | | Equipment under capital lease | 1,683 | 1,171 | | Less accumulated depreciation and amortization | (76,861) | (74,311) | | Construction in progress | 2,324 | 972 | | Property and equipment, net | $103,447 | $78,756 | - Net property and equipment increased by **$24.7 million (31.4%) from $78.8 million in 2017 to $103.4 million in 2018**[314](index=314&type=chunk) - All property and equipment is located in the United States, except for **$21.6 million** in Mexico as of December 31, 2018[315](index=315&type=chunk) - In 2018, the company sold its Monterrey, Mexico facility for **$2.7 million** (gain of **$0.2 million**) and property in Houston, Texas for **$5.8 million** (gain of **$2.8 million**)[315](index=315&type=chunk) [7. INTANGIBLE ASSETS](index=69&type=section&id=7.%20INTANGIBLE%20ASSETS) Total intangible assets, net, decreased to **$1.6 million** in 2018, with backlog acquired from Ameron having a weighted-average amortization period of eleven months Intangible Assets, Net (In thousands) | | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | | :---------------------- | :-------------------- | :----------------------- | :--------------------- | | **As of December 31, 2018** | | | | | Customer relationships | $1,378 | $(689) | $689 | | Trade names and trademarks | 1,132 | (377) | 755 | | Backlog | 200 | (91) | 109 | | Total | $2,710 | $(1,157) | $1,553 | | **As of December 31, 2017** | | | | | Customer relationships | $1,378 | $(551) | $827 | | Patents | 1,162 | (929) | 233 | | Trade names and trademarks | 1,132 | (302) | 830 | | Other | 176 | (163) | 13 | | Total | $3,848 | $(1,945) | $1,903 | - Total intangible assets, net, decreased from **$1.9 million in 2017 to $1.6 million in 2018**[317](index=317&type=chunk) - Backlog, acquired with Ameron in July 2018, has a weighted-average amortization period of **eleven months**[317](index=317&type=chunk) [8. LINE OF CREDIT](index=69&type=section&id=8.%20LINE%20OF%20CREDIT) The company entered a new **$60 million** Credit Agreement in October 2018, with **$11.5 million** outstanding and **$38.0 million** additional borrowing capacity as of December 31, 2018 - The company entered into a new Credit Agreement with Wells Fargo Bank, N.A. on October 25, 2018, providing for revolving loans and letters of credit up to **$60 million**, expiring October 25, 2023[319](index=319&type=chunk) - As of December 31, 2018, outstanding borrowings were **$11.5 million**, with an additional borrowing capacity of **$38.0 million**[320](index=320&type=chunk) - Borrowings bear interest at rates related to daily three-month LIBOR plus **1.5% to 2.0%**, with a weighted-average interest rate of **4.56%** as of December 31, 2018[320](index=320&type=chunk) - The Credit Agreement is secured by substantially all of the company's and its subsidiaries' assets[322](index=322&type=chunk) [9. LEASES](index=70&type=section&id=9.%20LEASES) Total capital lease obligations were **$1.3 million** as of December 31, 2018, and total operating lease rental expense was **$2.7 million** in 2018 - Total capital lease obligations outstanding were **$1.3 million** as of December 31, 2018, with a weighted-average interest rate of **5.01%**[325](index=325&type=chunk) Future Minimum Capital Lease Payments (In thousands) | Year | Amount | | :--- | :----- | | 2019 | $470 | | 2020 | 375 | | 2021 | 258 | | 2022 | 237 | | 2023 | 33 | | Total | $1,373 | - Total rental expense from continuing operations for operating leases was **$2.7 million** in 2018, down from **$3.0 million** in 2017 and 2016[326](index=326&type=chunk) Future Minimum Operating Lease Payments (In thousands) | Year | Amount | | :--------- | :----- | | 2019 | $1,582 | | 2020 | 1,456 | | 2021 | 1,145 | | 2022 | 959 | | 2023 | 762 | | Thereafter | 4,347 | | Total | $10,251 | [10. FAIR VALUE MEASUREMENTS](index=70&type=section&id=10.%20FAIR%20VALUE%20MEASUREMENTS) The company measures financial assets and liabilities at fair value using a three-level hierarchy, with deferred compensation plan assets and foreign currency forward contracts being key items - The company measures financial assets and liabilities at fair value using a three-level hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs)[328](index=328&type=chunk) Financial Assets and Liabilities Measured at Fair Value (In thousands) | | Total | Level 1 | Level 2 | Level 3 | | :-------------------------- | :---- | :------ | :------ | :------ | | **As of December 31, 2018** | | | | | | Financial assets: | | | | | | Deferred compensation plan | $4,719 | $3,925 | $794 | $- | | Foreign currency forward contracts | 101 | - | 101 | - | | Total financial assets | $4,820 | $3,925 | $895 | $- | | **As of December 31, 2017** | | | | | | Financial assets: | | | | | | Deferred compensation plan | $6,244 | $5,251 | $993 | $- | | Financial liabilities: | | | | | | Foreign currency forward contracts | $(60) | - | $(60) | - | - Deferred compensation plan assets include publicly traded mutual funds (Level 1) and guaranteed investment contracts (Level 2)[329](index=329&type=chunk) - Foreign currency forward contracts are valued using pricing models or discounted cash flow analyses with observable market parameters (Level 2)[330](index=330&type=chunk) [11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=71&type=section&id=11.%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) The company uses foreign currency forward contracts as cash flow hedges to offset risks from Canadian currency sales contracts, with a total notional amount of **$1.7 million** as of December 31, 2018 - The company uses foreign currency forward contracts as cash flow hedges to offset risks from foreign currency exposures, primarily Canadian currency sales contracts[332](index=332&type=chunk) - As of December 31, 2018, the total notional amount of designated cash flow hedges was **$1.7 million (CAD$2.3 million)**, with all contracts having maturities less than twelve months[333](index=333&type=chunk)[334](index=334&type=chunk) - Gains recognized in Net sales from continuing operations from non-designated foreign currency forward contracts were approximately **$0.2 million** in 2018[335](index=335&type=chunk) [12. RETIREMENT PLANS](index=72&type=section&id=12.%20RETREMENT%20PLANS) The company maintains a defined contribution plan and two frozen defined benefit plans, with an accrued pension liability of **$1.7 million** and a frozen non-qualified deferred compensation plan of **$4.7 million** as of December 31, 2018 - The company has a defined contribution retirement plan with a company match and two frozen noncontributory defined benefit plans[336](index=336&type=chunk)[337](index=337&type=chunk) - As of December 31, 2018, an accrued pension liability of **$1.7 million** was recorded, with an unrecognized actuarial loss of **$1.6 million**[338](index=338&type=chunk) - The company also has a frozen non-qualified deferred compensation plan for officers and highly compensated employees, with balances of **$4.7 million** recorded in Other assets and Other long-term liabilities as of December 31, 2018[341](index=341&type=chunk) - Total expense for all retirement plans was **$0.9 million** in 2018 and 2017, and **$1.4 million** in 2016[342](index=342&type=chunk) [13. SHARE-BASED COMPENSATION](index=72&type=section&id=13.%20SHARE-BASED%20COMPENSATION) Share-based compensation expense decreased significantly to **$0.3 million** in 2018, with **24,000** stock options outstanding and unvested PSAs deemed unlikely to achieve performance conditions - The company's 2007 Stock Incentive Plan allows for awards of stock options, RSUs, and PSAs to employees and directors[343](index=343&type=chunk) - Total share-based compensation expense recorded was **$0.3 million** in 2018, significantly down from **$1.2 million** in 2017 and **$1.8 million** in 2016[345](index=345&type=chunk) - As of December 31, 2018, there were **24,000 stock options** outstanding with a weighted-average exercise price of **$24.15**, all exercisable[346](index=346&type=chunk) - The unvested balance of PSAs as of December 31, 2018, was **39,992** at target level, but the likelihood of achieving performance conditions was deemed remote, resulting in **$0** unrecognized compensation expense[348](index=348&type=chunk)[349](index=349&type=chunk) [14. SHAREHOLDER RIGHTS PLAN](index=75&type=section&id=14.%20SHAREHOLDER%20RIGHTS%20PLAN) The company's Shareholder Rights Plan, extended to June 28, 2019, grants one non-detachable preferred stock purchase right per common share, exercisable if a person or group acquires **15%** or more of common stock - The company has a Shareholder Rights Plan, adopted in 1999 and amended in 2009, designed to ensure fair treatment for shareholders in potential acquisitions[352](index=352&type=chunk)[353](index=353&type=chunk) - The plan grants one non-detachable preferred stock purchase right per common share, exercisable if a person or group acquires **15% or more** of common stock[352](index=352&type=chunk) - The Rights Agreement was extended to June 28, 2019[353](index=353&type=chunk) [15. COMMITMENTS AND CONTINGENCIES](index=75&type=section&id=15.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is a potentially responsible party at the Portland Harbor Superfund Site, facing potential environmental liabilities, and maintains insurance coverage for product liability and defense costs - The company is a potentially responsible party at the Portland Harbor Superfund Site, facing potential liability for cleanup costs estimated at **$1 billion** by the EPA[354](index=354&type=chunk) - The company is unable to estimate its specific obligation for the Superfund site cleanup costs, and no further adjustment has been recorded[354](index=354&type=chunk) - The company participates in the Natural Resource Damage Assessment (NRDA) process for Portland Harbor, contributing **$0.4 million** for assessment funding[357](index=357&type=chunk) - The company maintains insurance coverage for potential product liability and defense costs, which it believes to be adequate[41](index=41&type=chunk)[359](index=359&type=chunk) - As of December 31, 2018, the company had **$1.6 million** in letters of credit related to workers' compensation insurance[362](index=362&type=chunk) [16. REVENUE](index=77&type=section&id=16.%20REVENUE) Net sales from continuing operations were **$172.1 million** in 2018, primarily from the United States, with no single customer accounting for **10%** or more of sales, and a backlog of **$81.3 million** expected to be recognized over the next two years Net Sales from Continuing Operations by Geographic Region (In thousands) | | 2018 | 2017 | 2016 | | :------------------------------------------ | :----- | :----- | :----- | | United States | $161,415 | $122,179 | $137,411 | | Canada | 10,734 | 10,601 | 11,976 | | Total | $172,149 | $132,780 | $149,387 | - No single customer accounted for **10% or more** of total Net sales from continuing operations in 2018 or 2017[363](index=363&type=chunk) - Backlog as of December 31, 2018, was approximately **$81.3 million**, with **83%** expected to be recognized in 2019 and **13%** in 2020[367](index=367&type=chunk) [17. INCOME TAXES](index=78&type=section&id=17.%20INCOME%20TAXES) The effective income tax benefit rate was **19.1%** in 2018, impacted by a non-taxable bargain purchase gain and changes in valuation allowance, with significant federal and state net operating loss carryforwards Income Tax Benefit from Continuing Operations (In thousands) | | 2018 | 2017 | 2016 | | :------------------------------------ | :----- | :----- | :----- | | Total current income tax expense (benefit) | $377 | $(405) | $(842) | | Total deferred income tax benefit | $(3,629) | $(695) | $(3,256) | | Total income tax benefit | $(3,252) | $(1,100) | $(4,098) | - The effective income tax benefit rate was **19.1%** in 2018, impacted by a non-taxable bargain purchase gain and changes in valuation allowance[153](index=153&type=chunk)[369](index=369&type=chunk) - The Tax Cuts and Jobs Act of 2017 (TCJA) resulted in a **$0.9 million** additional income tax expense in 2017, primarily due to deferred income tax asset/liability remeasurement and transition tax[142](index=142&type=chunk)[368](index=368&type=chunk) - As of December 31, 2018, the company had **$45.4 million** in federal net operating loss carryforwards and **$56.7 million** in state net operating loss carryforwards[371](index=371&type=chunk) - Unrecognized income tax benefits totaled **$4.4 million** at December 31, 2018, with no material change expected in the next twelve months[374](index=374&type=chunk) [18. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=81&type=section&id=18.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss increased slightly to **$(1.5) million** in 2018, primarily due to pension liability adjustments, with **$61 thousand** reclassified to the Statements of Operations Accumulated Other Comprehensive Loss (In thousands) | | December 31, 2018 | December 31, 2017 | | :-------------------------------------------------------------------------------- | :---------------- | :---------------- | | Pension liability adjustment, net of income tax benefit | $(1,551) | $(1,436) | | Unrealized gain (loss) on cash flow hedges, net of income tax expense (benefit) | 15 | (9) | | Total | $(1,536) | $(1,445) | - Accumulated other comprehensive loss increased slightly from **$(1.4) million in 2017 to $(1.5) million in 2018**, primarily due to pension liability adjustments[376](index=376&type=chunk) - Amounts reclassified from Accumulated other comprehensive loss to the Consolidated Statements of Operations totaled **$61 thousand** in 2018[378](index=378&type=chunk) [19. RESTRUCTURING](index=83&type=section&id=19.%20RESTRUCTURING) The company incurred **$1.4 million** in restructuring expense in 2018 related to facility closures and production relocation, following similar expenses in prior years for other facility closures - In March 2018, the company announced plans to close its Salt Lake City Permalok facility and move production to St. Louis, and to close and sell its Monterrey, Mexico facility, which was completed in December 2018[379](index=379&type=chunk) - Restructuring expense in 2018 was **$1.4 million**, including **$0.6 million** for employee severance and **$0.8 million** for demobilization activities[379](index=379&type=chunk) - Restructuring expenses of **$0.9 million** in 2017 and **$1.0 million** in 2016 were related to the closure and sale of the Denver, Colorado facility[380](index=380&type=chunk) [20. QUARTERLY DATA (UNAUDITED)](index=84&type=section&id=20.%20QUARTERLY%20DATA%20%28UNAUDITED%29) This section provides summarized unaudited quarterly financial data for 2018 and 2017, highlighting fluctuations in net sales, gross profit, operating income (loss), and net income (loss) per share Summarized Quarterly Financial Data for 2018 (In thousands, except per share amounts) | | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | | :-------------------- | :------------ | :------------- | :------------ | :------------- | :------ | | Net sales | $33,365 | $28,785 | $52,455 | $57,544 | $172,149 | | Gross profit (loss) | 1,348 | (1,238) | 5,203 | 6,783 | 12,096 | | Operating income (loss) | (2,342) | (5,827) | 2,497 | 2,701 | (2,971) | | Net income (loss) | (1,951) | (5,686) | 27,801 | 148 | 20,312 | | Basic income (loss) per share | $(0.20) | $(0.59) | $2.86 | $0.02 | $2.09 | Summarized Quarterly Financial Data for 2017 (In thousands, except per share amounts) | | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | | :-------------------- | :------------ | :------------- | :------------ | :------------- | :------- | | Net sales | $29,657 | $28,692 | $38,804 | $35,627 | $132,780 | | Gross profit | 1,243 | 746 | 1,993 | 1,833 | 5,815 | | Operating loss | (3,478) | (2,826) | (1,430) | (1,475) | (9,209) | | Net loss | (3,868) | (2,068) | (2,069) | (2,158) | (10,163) | | Basic and diluted loss per share | $(0.40) | $(0.22) | $(0.21) | $(0.23) | $(1.06) | - Third quarter 2018 net income includes a preliminary bargain purchase gain of **$21.9 million**, while fourth quarter 2018 net income includes a **$1.8 million** adjustment to decrease this gain[384](index=384&type=chunk) [Schedule II Valuation and Qualifying Accounts](index=85&type=section&id=Schedule%20II%20Valuation%20and%20Qualifying%20Accounts) Schedule II details changes in the Allowance for doubtful accounts and Valuation allowance for deferred income tax assets for 2018, 2017, and 2016 Valuation and Qualifying Accounts (Dollars in thousands) | | Balance at Beginning of Period | Charged to Profit and Loss | Deduction from Reserves | Balance at End of Period | | :------------------------------------ | :----------------------------- | :------------------------- | :---------------------- | :----------------------- | | **Year Ended December 31, 2018:** | | | | | | Allowance for doubtful accounts | $477 | $449 | $(266) | $660 | | Valuation allowance for deferred income tax assets | 10,413 | 1,785 | (2,765) | 9,433 | | **Year Ended December 31, 2017:** | | | | | | Allowance for doubtful accounts | $515 | $637 | $(675) | $477 | | Valuation allowance for deferred income tax assets | 8,217 | 2,196 | - | 10,413 | | **Year Ended December 31, 2016:** | | | | | | Allowance for doubtful accounts | $751 | $295 | $(531) | $515 | | Valuation allowance for deferred income tax assets | 7,057 | 1,160 | - | 8,217 | - The allowance for doubtful accounts increased from **$477 thousand in 2017 to $660 thousand in 2018**[386](index=386&type=chunk) - The valuation allowance for deferred income tax assets decreased from **$10.4 million in 2017 to $9.4 million in 2018**[386](index=386&type=chunk) [SIGNATURES](index=86&type=section&id=SIGNATURES) The report was signed on March 15, 2019, by key executives including the Director, President, Chief Executive Officer, and Chief Financial Officer - The report was signed on March 15, 2019, by Scott Montross (Director, President and Chief Executive Officer) and Robin Gantt (Senior Vice President, Chief Financial Officer and Corporate Sec

Financial Data and Key Metrics Changes - The fourth quarter income from continuing operations was $148,000 or $0.02 per diluted share, with adjusted income from continuing operations at $2.6 million or $0.27 per diluted share compared to an adjusted loss of $1.1 million or $0.11 per diluted share in Q4 2017 [6] - Sales increased to $57.5 million in Q4 2018 from $35.6 million in Q4 2017, with gross profit as a percentage of sales improving to 11.8% from 5.1% [7] - For the full year, income from continuing operations was $20.3 million or $2.09 per diluted share, compared to a loss of $8.4 million or $0.88 per diluted share in 2017 [10] Business Line Data and Key Metrics Changes - The Ameron acquisition contributed approximately $19.1 million in sales for Q4 2018 and $30.2 million for the full year [7][13] - Selling, general and administrative costs rose to $4.1 million in Q4 2018 from $3.3 million in Q4 2017, primarily due to $600,000 in acquisition-related costs [8] Market Data and Key Metrics Changes - The backlog, including confirmed orders, reached a record $252 million at year-end 2018, up from $201 million in Q3 2018 and $88 million in Q4 2017 [18] - The company noted strong bidding opportunities in the Texas market, with significant projects funded by the SWIFT program [20] Company Strategy and Development Direction - The company aims to focus on the successful integration of the Ameron Water Transmission Group, improving business performance by prioritizing margin over volume, and driving cost reductions [28] - The company expects continued improvement in revenues and margins throughout 2019, supported by a strong backlog and stable bidding environment [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the first quarter of 2019, expecting it to be stronger than previous years due to current demand levels and a stable competitive landscape [19] - The company anticipates a positive trend in revenue and margins throughout 2019, with a substantial portion of projects being multi-year programs [27] Other Important Information - The company reported using $18.4 million in cash from operations in 2018, with capital expenditures planned at about $12 million for 2019 [15] - At the end of 2018, the company had no borrowings and approximately $50 million available for working capital needs [16] Q&A Session Summary Question: Did the fourth quarter have any negative price cost impact due to steel price movements? - Management indicated that pipe pricing has kept pace with steel price increases, and they expect margins to improve as they work through the backlog [34][35] Question: How does the bidding outlook for 2019 compare to 2018? - Management noted that while 2018 was a strong bidding year, 2019 is expected to be solid with around 200,000 tons of bidding opportunities, not a significant drop from the previous year [36][38] Question: Has weather impacted volumes? - Management acknowledged that weather issues in Texas and California have affected shipments and revenues [40][41] Question: What is the historical gross profit margin? - Management stated that historical gross profit margins have averaged between 15% to 17%, with potential to return to levels above 20% if market conditions remain stable [51][52] Question: How does the Ameron acquisition affect gross profit levels? - Management believes the integration of Ameron will enhance operational efficiencies and improve gross margin profiles [53] Question: What is the current headcount compared to the past? - The total headcount is over 700, with about 228 from the Ameron Group, indicating a strategic approach to resource allocation [56]