Northwest Pipe (NWPX) 10-Q 2000 Q3 Quarterly report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2000

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to               

Commission File Number: 0-27140

NORTHWEST PIPE COMPANY
(Exact name of registrant as specified in its charter)

OREGON
(State or other jurisdiction
of incorporation or organization) 93-0557988
(I.R.S. Employer
Identification No.)

200 S.W. Market Street
Suite 1800
Portland, Oregon 97201
(Address of principal executive offices and zip code)

503-946-1200
(Registrant's telephone number including area code)

    Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes /x/  No / /

Common Stock, par value $.01 per share	6,498,114
(Class)	(Shares outstanding at November 7, 2000)

NORTHWEST PIPE COMPANY
FORM 10-Q
INDEX

		Page
PART I—FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements:
	Consolidated Balance Sheets—September 30, 2000 and December 31, 1999	2
	Consolidated Statements of Income—Three Months and Nine Months Ended September 30, 2000 and 1999	3
	Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2000 and 1999	4
	Notes to Consolidated Financial Statements	5
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of   Operations		8
Item 3.  Quantitative and Qualitative Disclosure About Market Risk		12
PART II—OTHER INFORMATION
Item 2.  Changes in Securities		13
Item 6.  Exhibits and Reports on Form 8-K		13

NORTHWEST PIPE COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share amounts)

				September 30, 2000		December 31, 1999
				(Unaudited)
Assets
	Current assets:
		Cash and cash equivalents		$	4,371	$	969
		Trade receivables, less allowance for doubtful accounts of $550 and $1,896			57,858		47,934
		Costs and estimated earnings in excess of billings on uncompleted contracts			45,432		22,389
		Inventories			62,974		44,362
		Refundable income taxes			1,459		2,244
		Deferred income taxes			1,502		1,502
		Prepaid expenses and other			1,510		2,222
			Total current assets		175,106		121,622
		Property and equipment, less accumulated depreciation and amortization of $34,223 and $30,389			89,337		101,240
		Goodwill, net			22,174		22,637
		Restricted assets			2,300		2,300
		Other assets			399		472
				$	289,316	$	248,271
Liabilities and Stockholders' Equity
	Current liabilities:
		Note payable to financial institution		$	48,500	$	40,000
		Current portion of long-term debt			2,124		2,124
		Current portion of capital lease obligations			829		484
		Accounts payable			36,899		17,558
		Accrued liabilities			10,627		4,978
			Total current liabilities		98,979		65,144
		Long-term debt, less current portion			72,964		75,088
		Capital lease obligations, less current portion			3,058		1,896
		Deferred income taxes			8,974		8,974
			Total liabilities		183,975		151,102
		Stockholders' equity:
		Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued or outstanding			—		—
		Common stock, $.01 par value, 15,000,000 shares authorized, 6,487,386 and 6,459,930 shares issued and outstanding			65		64
		Additional paid-in-capital			39,066		38,962
		Retained earnings			66,210		58,143
			Total stockholders' equity		105,341		97,169
				$	289,316	$	248,271

The accompanying notes are an integral part of these consolidated financial statements.

2

NORTHWEST PIPE COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
(In thousands, except per share amounts)

		Three months ended September 30,				Nine months ended September 30,
		2000		1999		2000		1999
Net sales		$	75,986	$	63,322	$	209,467	$	181,864
Cost of sales			63,479		50,048		172,676		145,778
	Gross profit		12,507		13,274		36,791		36,086
Selling, general and administrative expenses			5,245		5,129		15,828		14,360
	Income from operations		7,262		8,145		20,963		21,726
Interest expense, net			2,860		1,647		7,518		5,585
	Income before income taxes		4,402		6,498		13,445		16,141
Provision for income taxes			1,761		2,634		5,378		6,539
	Net income	$	2,641	$	3,864	$	8,067	$	9,602
Basic earnings per share		$	0.41	$	0.60	$	1.25	$	1.49
Diluted earnings per share		$	0.40	$	0.58	$	1.22	$	1.45
Shares used in per share calculations:
	Basic		6,468		6,451		6,464		6,450
	Diluted		6,607		6,631		6,609		6,618

The accompanying notes are an integral part of these consolidated financial statements.

3

NORTHWEST PIPE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(In thousands)

				Nine months ended September 30,
				2000			1999
Cash Flows From Operating Activities:
	Net income			$	8,067		$	9,602
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization			5,699			3,614
		Allowance for doubtful accounts			(1,346	)		533
		Gain on sale of property and equipment			(493	)		(562	)
	Changes in current assets and liabilities, net of acquisitions:
		Trade receivables			(8,578	)		(13,005	)
		Costs and estimated earnings in excess of billings on uncompleted contracts			(23,042	)		1,851
		Inventories			(18,612	)		4,745
		Refundable income taxes			785			—
		Prepaid expenses and other			712			217
		Accounts payable			19,342			(33	)
		Accrued liabilities			5,649			2,864
			Net cash provided by (used in) operating activities		(11,817	)		9,826
Cash Flows From Investing Activities:
	Additions to property and equipment				(7,852	)		(9,670	)
	Proceeds from the sale of property and equipment				600			691
	Acquisitions, net of cash acquired				—			(4,413	)
	Other assets				38			74
		Net cash used in investing activities			(7,214	)		(13,318	)
Cash Flows From Financing Activities:
	Proceeds from sale of common stock				105			14
	Net payments under long-term debt				(2,124	)		(1,679	)
	Net borrowings under notes payable to financial institution				8,500			7,881
	Net proceeds from sale-leaseback				14,446			—
	Borrowings from capital lease obligations				1,989			—
	Payments under capital lease obligations				(483	)		(2,025	)
		Net cash provided by financing activities			22,433			4,191
		Net increase in cash and cash equivalents			3,402			699
	Cash and cash equivalents, beginning of period				969			524
	Cash and cash equivalents, end of period			$	4,371		$	1,223
Supplemental Disclosure of Cash Flow Information:
	Cash paid during the period for:
		Interest, net of amounts capitalized		$	6,083		$	3,575
		Income taxes			2,360			5,101
Supplemental Disclosure of Noncash Information:
	Acquisitions:
		Fair value of assets acquired		$	—		$	8,692
		Fair value of liabilities assumed			—			4,279

The accompanying notes are an integral part of these consolidated financial statements.

4

NORTHWEST PIPE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

1.  Basis of Presentation

    The accompanying unaudited financial statements as of and for the three month and nine month periods ended September 30, 2000 and 1999 have been prepared in conformity with generally accepted accounting principles. The financial information as of December 31, 1999 is derived from the audited financial statements presented in the Northwest Pipe Company (the "Company") Annual Report on Form 10-K for the year ended December 31, 1999. Certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. The accompanying financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 1999, as presented in the Company's Annual Report on Form 10-K.

    Operating results for the three months and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2000 or any portion thereof.

2.  Earnings per Share

    Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares of common stock and dilutive common equivalent shares outstanding during the period. Incremental shares of 138,994 and 180,121 for the three months ended September 30, 2000 and 1999, respectively, and incremental shares of 144,450 and 167,566 for the nine months ended September 30, 2000 and 1999, respectively were used in the calculations of diluted earnings per share. Options to purchase 685,372 shares of common stock at prices of $13.563 to $22.875 per share were outstanding at September 30, 2000, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the underlying common stock.

3.  Inventories

    Inventories are stated at the lower of cost or market. Finished goods are stated at standard cost which approximates the first-in, first-out method of accounting. Inventories of steel coil are stated at cost on a specific identification basis. Inventories of coating and lining materials, as well as materials and supplies, are stated on an average cost basis. Inventories consist of the following:

	September 30, 2000		December 31, 1999
Finished goods	$	25,921	$	18,107
Raw materials		35,066		24,156
Materials and supplies		1,987		2,099
	$	62,974	$	44,362

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4.  Segment Information

    The Company has adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information" which requires disclosure of financial and descriptive information about the Company's reportable operating segments. The operating segments reported below are based on the nature of the products sold by the Company and are the segments of the Company for which separate financial information is available and for which operating results are regularly evaluated by executive management to make decisions about resources to be allocated to the segment and assess its performance. Management evaluates segment performance based on segment gross profit. There were no material transfers between segments in the periods presented.

			Three months ended September 30,				Nine months ended September 30,
			2000		1999		2000		1999
Net Sales:
	Water Transmission		$	42,311	$	36,086	$	109,993	$	104,806
	Tubular Products			33,675		27,236		99,474		77,058
		Total	$	75,986	$	63,322	$	209,467	$	181,864
Gross Profit:
	Water Transmission		$	8,942	$	7,980	$	22,986	$	23,513
	Tubular Products			3,565		5,294		13,805		12,573
		Total	$	12,507	$	13,274	$	36,791	$	36,086

5.  Acquisitions

    On June 18, 1999, the Company acquired all of the outstanding common stock of North American Pipe, Inc. of Saginaw, Texas ("Saginaw"). Saginaw operates two facilities, which produce custom fabricated piping assemblies. The purchase price of $4.5 million has been allocated to the underlying assets and liabilities, including certain debt, of Saginaw.

6.  Operating Lease

    On September 26, 2000, the Company completed a sale-leaseback of certain manufacturing equipment for $14.4 million. The length of the lease is eighty-four months and includes options beginning after the third year to terminate, purchase or continue to rent through the term length.

7.  Recent Accounting Pronouncements

    In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," (SAB 101), and further amended it to defer the effective date. This pronouncement summarizes certain of the SEC Staff's views on applying generally accepted accounting principles to revenue recognition. The Company is required to adopt the provisions of SAB 101 no later than December 31, 2000. The Company is currently reviewing the requirements of SAB 101 and assessing the impact on its consolidated financial statements.

6

    In March 2000, the FASB issued FASB Interpretation No. 44, (FIN 44) "Accounting for Certain Transactions Involving Stock Compensation—an Interpretation of APB Opinion No. 25" which provides interpretive guidance on several implementation issues related to Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees." FIN 44 is effective July 1, 2000, but certain conclusions must be applied earlier. The adoption of FIN 44 did not have a material impact on the Company's consolidated financial statements.

    The FASB has issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133." This statement amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" to be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 requires that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized in earnings unless specific hedge accounting criteria are met. The Company believes that the effect of adoption of SFAS No. 133 will not have a material effect on the Company's financial statements.

    The FASB has issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an Amendment of FASB Statement No. 133." This statement amends SFAS No. 133 for specified transactions. SFAS No. 138 is effective concurrently with SFAS No. 133 if SFAS No. 133 is not adopted prior to June 15, 2000. If SFAS No. 133 is adopted prior to June 15, 2000, SFAS No. 138 is effective for quarters beginning after June 15, 2000. The Company believes that the effect of adoption of SFAS No. 138 will not have a material effect on the Company's financial statements.

7

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

    This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Report contain forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 that are based on current expectations, estimates and projections about the Company's business, management's beliefs, and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors including changes in demand for the Company's products, product mix, bidding activity, the timing of customer orders and deliveries, excess or shortage of production capacity, and other risks discussed from time to time in the Company's Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.

    The Company's net sales and net income may fluctuate significantly from quarter to quarter due to the size and schedule for deliveries of certain Water Transmission orders and due to the seasonality of the Company's Tubular Products business. The Company has experienced such fluctuations in the past and may experience such fluctuations in the future. Results of operations in any period should not be considered indicative of the results to be expected for any future period, and fluctuations in operating results may also result in fluctuations in the price of the Company's common stock. The Company's business is subject to cyclical fluctuations based on general economic conditions and the economic conditions of the specific industries served. Future economic downturns could have a material adverse effect on the Company's business, financial condition and results of operations.

Overview

    The Company is headquartered in Portland, Oregon. Water Transmission products are manufactured in its Portland, Oregon; Denver, Colorado; Adelanto and Riverside, California; Parkersburg, West Virginia; and Saginaw, Texas facilities. Tubular Products are manufactured in its Portland, Oregon; Atchison, Kansas; Houston, Texas; Bossier City, Louisiana; and Monterrey, Mexico facilities.

    The Company believes that the Tubular Products business, in conjunction with the Water Transmission business, provides a degree of market diversification, because the principal factors affecting demand for Water Transmission products are different from those affecting demand for tubular products. Demand for Water Transmission products is generally based on population growth and movement, changing water sources and replacement of aging infrastructure. Demand can vary dramatically within the Company's market area since each population center determines its own waterworks requirements. Construction, the energy market and general economic conditions influence demand for tubular products.

8

Results of Operations

    The following table sets forth, for the periods indicated, certain financial information regarding costs and expenses expressed as a percentage of total net sales and net sales of the Company's business segments.

			Three months ended September 30,				Nine months ended September 30,
			2000		1999		2000		1999
Net sales
	Water Transmission		55.7	%	57.0	%	52.5	%	57.6	%
	Tubular Products		44.3		43.0		47.5		42.4
Total net sales			100.0		100.0		100.0		100.0
Cost of sales			83.5		79.0		82.4		80.2
		Gross profit	16.5		21.0		17.6		19.8
Selling, general and administrative expenses			6.9		8.1		7.6		7.9
Income from operations			9.6		12.9		10.0		11.9
Interest expense, net			3.8		2.6		3.6		3.0
Income before income taxes			5.8		10.3		6.4		8.9
Provision for income taxes			2.3		4.2		2.5		3.6
Net income			3.5	%	6.1	%	3.9	%	5.3	%
Gross profit as a percentage of segment net sales:
	Water Transmission		21.1	%	22.1	%	20.9	%	22.4	%
	Tubular Products		10.6		19.4		13.9		16.3

Third Quarter and Nine Months Ended September 30, 2000 Compared to Third Quarter and Nine Months Ended September 30, 1999

    Net Sales.  Net sales increased 20.0% to $76.0 million in the third quarter of 2000, from $63.3 million in the third quarter of 1999, and increased 15.2% to $209.5 million in the first nine months of 2000, from $181.9 million in the first nine months of 1999.

    Water Transmission sales increased 17.3% to $42.3 million in the third quarter of 2000 from $36.1 million in the third quarter of 1999, and increased 4.9% to $110.0 million in the first nine months of 2000 from $104.8 million in the first nine months of 1999. Water Transmission sales in the third quarter of 2000 improved as a result of higher production resulting from improved market conditions. The increase in Water Transmission sales in the first nine months of 2000 was primarily a result of sales attributable to the Saginaw facility, which was acquired in June 1999.

    Tubular Products sales increased 23.6% to $33.7 million in the third quarter of 2000 from $27.2 million in the third quarter of 1999 and increased 29.1% to $99.5 million in the first nine months of 2000 from $77.1 million in the first nine months of 1999. The increases were primarily the result of improved volume in certain product lines and price increases implemented in the first half of 2000 to partially offset increases in the price of steel purchased by the Company. In the fourth quarter of 2000 and the first quarter of 2001 the Company expects competitive pressures from imported products and seasonal slowdown will negatively impact pricing and volume.

    No single customer accounted for 10% or more of total net sales in the third quarter or first nine months of 1999 or 2000.

9

    Gross Profit.  Gross profit decreased 5.8% to $12.5 million (16.5% of total net sales) in the third quarter of 2000 from $13.3 million (21.0% of total net sales) in the third quarter of 1999 and increased 2.0% to $36.8 million (17.6% of total net sales) in the first nine months of 2000 from $36.1 million (19.8% of total net sales) in the first nine months of 1999.

    Water Transmission gross profit increased 12.1% to $8.9 million (21.1% of segment net sales) in the third quarter of 2000 from $8.0 million (22.1% of segment net sales) in the third quarter of 1999 and decreased 2.2% to $23.0 million (20.9% of segment net sales) in the first nine months of 2000 from $23.5 million (22.4% of segment net sales) in the first nine months of 1999. Water transmission gross profit increased in the third quarter of 2000 primarily due to higher production, while the decrease in gross profit as a percent of segment net sales resulted from the unfavorable mix of projects being produced. In the first nine months of 2000, gross profit decreased as a result of lower margin projects being produced and the inability to effectively utilize available manufacturing capacity in the first half of 2000. The unfavorable mix of projects being produced in the third quarter is expected to continue to impact the fourth quarter of 2000.

    Tubular Products gross profit decreased 32.7% to $3.6 million (10.6% of segment net sales) in the third quarter of 2000 from $5.3 million (19.4% of segment net sales) in the third quarter of 1999 and increased 9.8% to $13.8 million (13.9% of segment net sales) in the first nine months of 2000 from $12.6 million (16.3% of segment net sales) in the first nine months of 1999. Tubular Products gross profit decreased in the third quarter of 2000 as a result of an unfavorable product mix, the inability to fully pass on steel price increases and increased competitive pressures from imported products. The improvement in Tubular Products gross profit in the first nine months of 2000 was largely a result of increased volume, while the decrease in gross profit as a percent of segment sales resulted from the inability of the Company to increase prices enough to offset the increase in steel costs and increased pricing pressure from imported products. Tubular Products gross profit is expected to decrease further in the fourth quarter of 2000 as a result of the expected price decreases due to the decrease in recent months in steel costs and competitive pressures from imported products and as the higher priced steel in inventory is consumed through the production process and sold.

    Selling, General and Administrative Expenses.  Selling, general and administrative expenses increased 2.3% to $5.2 million (6.9% of total net sales) in the third quarter of 2000 from $5.1 million (8.1% of total net sales) in the third quarter of 1999 and increased 10.2% to $15.8 million (7.6% of total net sales) in the first nine months of 2000 from $14.4 million (7.9% of total net sales) in the first nine months of 1999. The increases were primarily the result of increased operating expenses related to the acquisition of Saginaw in June 1999 and increased expenses to support the growth in the Company's business.

    Interest Expense, Net.  Interest expense, net increased 73.6% to $2.9 million in the third quarter of 2000 from $1.6 million in the third quarter of 1999 and increased 34.6% to $7.5 million in the first nine months of 2000 from $5.6 million in the first nine months of 1999. The increase in interest expense resulted from higher interest rates, increased borrowings used to finance the acquisition of Saginaw and capital expenditures and higher working capital requirements to support higher production and sales volumes.

    Income Taxes.  The provision for income taxes was $5.4 million in the first nine months of 2000, based on an expected tax rate of approximately 40% for 2000.

Liquidity and Capital Resources

    The company finances operations with internally generated funds and available borrowings. At September 30, 2000, the Company had cash and cash equivalents of $4.4 million.

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    Net cash used for operating activities in the first nine months of 2000 was $11.8 million. This was primarily a net result of $8.1 million of net income, non-cash adjustments for depreciation and amortization of $5.7 million, an increase in accounts payable of $19.3 million, offset by increases in costs and estimated earnings in excess of billings on uncompleted contracts, inventories and net trade receivables of $23.0 million, $18.6 million and $9.9 million, respectively. The increase in accounts payable, inventories, costs and estimated earnings in excess of billings on uncompleted contracts and net trade receivables primarily resulted from increased production and shipments in the Water Transmission segment.

    Net cash used in investing activities in the first nine months of 2000 was $7.2 million, which primarily resulted from expenditures related to additions of property and equipment.

    Net cash provided by financing activities was $22.4 million in the first nine months of 2000, which primarily resulted from the sale-leaseback of certain manufacturing equipment for $14.4 million (See Note 6 of Notes to Consolidated Financial Statements), $8.5 million in net borrowings under the Company's line of credit agreement and net capital lease proceeds of $1.5 million, partially offset by payments on long-term debt of $2.1 million.

    The Company had the following significant components of debt at September 30, 2000: a $55 million credit agreement under which $45.3 million was outstanding; a $10.0 million bridge loan commitment under which $3.2 million was outstanding; $7.1 million of Series A Senior Notes, without collateral, which bear interest at 6.63%; $30.0 million of Series B Senior Notes, without collateral, which bear interest at 6.91%; $35.0 million of Senior Notes, without collateral, which bear interest at 6.87%; an Industrial Development Bond of $2.5 million with variable interest rate of 4.43%; and capital lease obligations of $3.9 millions which bear interest at 8.27%.

    The credit agreement expires on September 30, 2002 and is without collateral. It bears interest at rates related to IBOR or LIBOR plus 0.65% to 2.25% (8.91% at September 30, 2000), or at prime less 0.5% (9.0% at September 30, 2000). At September 30, 2000, the Company had $44.0 million outstanding under the line of credit bearing interest at a weighted average IBOR interest rate of 8.94%, $4.5 million bearing interest at 9.0% and additional borrowing capacity under the line of credit of $16.5 million. On October 5, 2000 the Company amended its line of credit agreement to eliminate the $10.0 million bridge loan commitment and increase the total commitment of the line of credit agreement to $65.0 million. The amendment also revised the maximum funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio to 3.65:1.0 on September 30, 2000 and December 31, 2000, to 3.50:1.0 on March 31, 2001, and to 3.25:1.0 until September 30, 2002. The amendment also added a Maximum Funded Debt to Selected Balance Sheet Items ratio of 1.00:1 effective September 30, 2000. The amendment also requires the Company to obtain approval on certain asset sales not made in the ordinary course of business.

    At September 30, 2000, the Company was in compliance with all covenants specified in its borrowing agreements.

    The Company's working capital requirements have increased due to an increase in the Company's Water Transmission business, which is characterized by lengthy production periods, delays and postponements in projects the Company had already been awarded and extended payment cycles and an increase in Tubular Products sales. The Company anticipates that its existing cash and cash equivalents, cash flows expected to be generated by operations and amounts available under its line of credit will be adequate to fund its working capital and capital requirements for at least the next twelve months.

    To the extent necessary, the Company may also satisfy capital requirements through additional bank borrowings, senior notes and capital and operating leases if such resources are available on satisfactory terms. The Company has from time to time evaluated and continues to evaluate

11

opportunities for acquisitions and expansion. Any such transactions, if consummated, may use a portion of the Company's working capital or necessitate additional bank borrowings.

    Acquisition.  In June 1999, the Company acquired all of the outstanding common stock of Saginaw. Saginaw operates two facilities that produce custom fabricated piping assemblies. The purchase price of $4.5 million has been allocated to the underlying assets and liabilities, including certain debt, of the Saginaw.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

    The Company does not currently use derivative financial instruments for speculative purposes which expose the Company to market risk. The Company is exposed to cash flow and fair value risk due to changes in interest rates with respect to its line of credit and long-term debt. Information required by this item is set forth in "Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

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Part II—Other Information

Item 2.  Changes in Securities

    During the third quarter of 2000, the Company sold securities without registration under the Securities Act of 1933, as amended (the "Securities Act") upon the exercise of certain stock options granted under the Company's stock option plans. An aggregate of 19,243 shares of Common Stock was issued at an exercise price of $0.87. This transaction was effected in reliance upon the exemption from registration under the Securities Act provided by Rule 701 promulgated by Securities and Exchange Commission pursuant to authority granted under Section 3(b) of the Securities Act.

Item 6.  Exhibits and Reports on Form 8-K

(a)

The exhibits filed as part of this report are listed below:

Exhibit No.
10.23	Sixth Amendment to Amended and Restated Loan Agreement, dated August 31, 2000
10.24	Seventh Amendment to Amended and Restated Loan Agreement, dated October 5, 2000
10.25	General Electric Capital Corporation Master Lease Agreement, dated September 26, 2000
27	Financial Data Schedule

(b)

Reports on Form 8-K

    No reports on Form 8-K were filed during the quarter ended September 30, 2000

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    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:  November 7, 2000

NORTHWEST PIPE COMPANY
By:	/s/ WILLIAM R. TAGMYER   William R. Tagmyer Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
By:	/s/ JOHN D. MURAKAMI   John D. Murakami Vice President, Chief Financial Officer (Principal Financial Officer)

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