<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1999
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 93-0557988
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12005 N. BURGARD
PORTLAND, OREGON 97203
(Address of principal executive offices and zip code)
503-285-1400
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [X]
The aggregate market value of the common equity held by non-affiliates of the
Registrant was $49,913,656 as of March 6, 2000 based upon the last sales price
as reported by Nasdaq.
The number of shares outstanding of the Registrant's Common Stock as of March 6,
2000 was 6,459,930 shares.
--------------------
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated into Part III of Form 10-K by reference portions
of its Proxy Statement for its Annual Meeting of Shareholders to be held on May
2, 2000.
<PAGE>
NORTHWEST PIPE COMPANY
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
PAGE
----
<S> <C>
Item 1 - Business 1
Item 2 - Properties 5
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote
of Security Holders 6
PART II
Item 5 - Market for the Registrant's Common
Equity and Related Stockholder Matters 7
Item 6 - Selected Financial Data 7
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Item 7A - Quantitative and Qualitative Disclosures About
Market Risk 13
Item 8 - Financial Statements and Supplementary
Data 13
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 13
PART III
Item 10 - Directors and Executive Officers of the
Registrant 13
Item 11 - Executive Compensation 13
Item 12 - Security Ownership of Certain Beneficial
Owners and Management 13
Item 13 - Certain Relationships and Related
Transactions 13
PART IV
Item 14 - Exhibits, Financial Statement Schedule
and Reports on Form 8-K 14
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Northwest Pipe Company (the "Company") manufactures welded steel pipe in two
groups. In its Water Transmission business (the "Water Transmission" business),
the Company is a leading supplier in the United States and Canada of large
diameter, high-pressure steel pipe used primarily for water transmission. In its
Tubular Products business (the "Tubular Products" business), the Company
manufactures smaller diameter, electric resistance welded ("ERW") steel pipe for
use in a wide range of construction, agricultural, energy and industrial
applications. In addition, the Company produces propane tanks from its
manufacturing facility in Monterrey, Mexico. In 1999, Water Transmission and
Tubular Products revenues represented approximately 57% and 43% of the Company's
net sales, respectively. The Company is headquartered in Portland, Oregon. Water
Transmission products are manufactured in the Company's Portland, Oregon;
Denver, Colorado; Adelanto and Riverside, California; Parkersburg, West
Virginia; and Saginaw, Texas facilities. Tubular Products are manufactured in
the Company's Portland, Oregon; Atchison, Kansas; Houston, Texas; Bossier City,
Louisiana; and Monterrey, Mexico facilities.
In June 1999, the Company acquired all of the outstanding common stock of North
American Pipe, Inc. ("North American") of Saginaw, Texas. North American
operates two facilities which produce custom fabricated piping assemblies. The
Company continues to operate the acquired facilities for the same purpose.
In June 1998, the Company acquired from L.B. Foster Company, the plant,
equipment, leasehold and contract rights and miscellaneous assets of its
Fosterweld Division manufacturing facility located in Parkersburg, West Virginia
(the "Parkersburg Facility"). The Company also acquired the Parkersburg
Facility's inventory net of assumed accounts payable. The Parkersburg Facility
was used in the manufacture of large diameter, high pressure steel pipe
products. The Company continues to operate the Parkersburg Facility for the same
purpose.
In March 1998, the Company acquired all of the outstanding capital stock of
Southwestern Pipe, Inc. ("Southwestern") and P&H Tube Corporation ("P&H"), both
Texas corporations. The principal business of both Southwestern and P&H was the
manufacture and sale of structural and mechanical tubing products. Southwestern
owned and operated a manufacturing facility in Houston, Texas. P&H owned and
operated a manufacturing facility in Bossier City, Louisiana. The Company
continues to operate the acquired plants, equipment and other property for the
same purpose.
PRODUCTS
WATER TRANSMISSION PRODUCTS. Water transmission pipe is used for (i)
high-pressure applications, typically requiring pipe able to withstand pressures
in excess of 150 pounds per square inch, and (ii) other industrial and
structural applications. Most of the Company's Water Transmission products are
made to custom specifications. Most of these products are for fully engineered,
large diameter, high-pressure water transmission lines. Other uses include pipe
for piling and hydroelectric projects, wastewater transmission and treatment
plant piping. The Company has the capability to manufacture water transmission
pipe in diameters ranging from 4.5" to 156" with wall thicknesses of 0.135" to
3.00". The Company has the capability to coat and line these products with
cement mortar, polyethylene tapes, paints, epoxies and coal tar enamel according
to the customers' specifications. The Company maintains fabrication facilities
that provide installation contractors with custom fabricated sections as well as
straight pipe sections.
TUBULAR PRODUCTS. The Company's Tubular Products range in size from 0.50" to 16"
in diameter with wall thicknesses from 0.035" to 0.315", square tubing from
0.75" to 3", and rectangular tubing from 0.50" x 1" to 3" x 4". These products
are typically sold to distributors or original equipment manufacturers and are
used for a wide variety of applications.
1
<PAGE>
In 1998, the Company installed a tubular products mill in its Portland, Oregon
facility. This mill gives the Company the ability to manufacture products with
smaller diameters and heavier wall thicknesses for uses in industrial piping,
oil and gas transmission, fire protection systems and other applications. The
Company intends to continue to pursue future opportunities to broaden its
product lines by adding products that will take advantage of the Company's
available manufacturing capacity, existing marketing channels and manufacturing
expertise.
MARKETING
WATER TRANSMISSION. The primary customers for Water Transmission products are
installation contractors for projects funded by public water agencies, including
states, municipalities and water districts. The Company's plant locations in
Oregon, Colorado, California, West Virginia and Texas allow it to efficiently
serve customers throughout the United States, Canada and Mexico. The Company's
Water Transmission marketing strategy emphasizes early identification of
potential water projects, promotion of specifications consistent with the
Company's capabilities and close contact with the project designers and owners
throughout the design phase. The Company's in-house sales force is composed of
sales representatives, engineers and support personnel who work with public
water agencies, contractors and engineering firms, often more than a year in
advance of the project being bid, in order to identify and evaluate planned
projects. As a public water agency develops a pipeline project, the Company's
professional engineers provide information to the agency or its design engineers
promoting the advantages of coated and lined steel pipe. After an agency
completes a design, they publicize the upcoming bidding for a water transmission
project. The Company then obtains detailed plans and develops its estimate for
the pipe portion of the project. The Company typically bids to installation
contractors who include the Company's bid in their proposal to the public water
agency. A public water agency generally awards the entire project to the
contractor with the lowest responsible bid.
Because a substantial portion of the Company's Water Transmission revenue is
derived from sales related to public water transmission projects, the Company's
sales could be adversely impacted by a change in the number of projects planned
by public water agencies or by delays in their obtaining of environmental
approvals and right-of-way permits. Additionally adjustments in governmental
spending, general budgetary constraints or the inability of governmental
entities to issue debt could adversely affect the Company's Water Transmission
sales.
TUBULAR PRODUCTS. The Company's Tubular Products are marketed through a network
of direct sales force personnel and independent distributors in the United
States and Canada. The Company's Tubular Products are produced in its plants in
Oregon, Kansas, Texas, Louisiana, and Mexico. The Company's marketing strategy
focuses on customer service and customer relationships. For example, the Company
is willing to sell in small lot sizes and is able to provide mixed truckloads of
finished products to its customers. In 1999, approximately 75% of the Company's
Tubular Products sales were to distributors, and approximately 25% were to
original equipment manufacturers. The Company's sales effort emphasizes regular
personal contact with current and potential customers. The Company supplements
this effort with targeted advertising, participation in trade shows and
brochures.
MANUFACTURING
WATER TRANSMISSION. Water Transmission manufacturing begins with the preparation
of engineered drawings of each unique piece of pipe in a project. These drawings
are prepared on the Company's proprietary computer-aided design system and are
used as blueprints for the manufacture of the pipe. After the drawings are
completed and approved, manufacturing begins by feeding steel coil continuously
at a specified angle into a spiral weld mill which cold forms the band into a
tubular configuration with a spiral seam. Automated arc welders, positioned on
both the inside and the outside of the tube, are used to weld the seam. The
welded tube is then cut at the specified length. After completion of the forming
and welding phases, the finished cylinder is tested and inspected in accordance
with project specifications, which may include 100% radiographic analysis of the
weld seam. The cylinders are then coated and lined as specified. Possible
coatings include coal tar enamel,
2
<PAGE>
polyethylene tape, paint, epoxies and cement mortar. Linings may be coal tar
enamel, cement mortar, polyurethane, or epoxies. Following coating and lining,
certain pieces may be custom fabricated as required for the project. This
process is performed in the Company's fabrication facilities. The pipe is final
inspected and prepared for shipment. The Company ships its products to project
sites principally by truck and rail.
TUBULAR PRODUCTS. Tubular products are manufactured by the ERW process in
diameters ranging from 0.50" to 16". This process begins by unrolling and
slitting steel coils into narrower bands sized to the circumference of the
finished product. Each band is re-coiled and fed into the material handling
equipment at the front end of the ERW mill and fed through a series of rolls
that cold-form it into a tubular configuration. The resultant tube is welded by
high-frequency electric resistance welders and cut into the appropriate lengths.
After exiting the mill, the products are straightened, inspected, tested and
end-finished. Certain products are coated.
TECHNOLOGY. Advances in technology help the Company produce high quality
products at competitive prices. Recent investments in technological improvements
include in-house impact testing capabilities with state of the art metallurgical
optics and electromagnetic imaging testing. To stay abreast of technological
developments in the United States and abroad, the Company participates in trade
shows, industry associations, research projects and vendor trials of new
products.
QUALITY ASSURANCE. The Company has implemented quality assurance policies and
procedures, which govern every aspect of its operations to ensure specification
compliance. Prior to, during and after the manufacturing process, the Company
performs many tests, including tensile, impact, hydrostatic, ultrasonic and
radiographic tests. The Quality Assurance department reports directly to the
chief executive officer. As a reflection of its commitment to quality, the
Company has been certified for specific products or operations by Factory
Mutual, Underwriters Laboratory, Steel Plate Fabricators Association, American
Society for Mechanical Engineers, National Sanitary Foundation and American
Petroleum Institute. The Company's Oregon facility is ISO 9002 certified and the
Company is in the process of registering all of its facilities to meet the
requirements of the ISO 9002 standard.
PRODUCT LIABILITY. The manufacturing and use of steel pipe involves a variety of
risks. Certain losses may result or be alleged to result from defects in the
Company's products, thereby subjecting the Company to claims for damages,
including consequential damages. The Company warrants its products to be free of
certain defects. The Company maintains insurance coverage against potential
product liability claims in the amount of $52 million, which it believes to be
adequate. However, there can be no assurance that product liability claims
exceeding the Company's insurance coverage will not be experienced in the future
or that the Company will be able to maintain such insurance with adequate
coverage.
BACKLOG
The Company's backlog includes confirmed orders, including the balance of
projects in process, and projects for which the Company has been notified it is
the successful bidder even though a binding agreement has not been executed.
Projects for which a binding contract has not been executed could be canceled.
Binding orders received by the Company may also be subject to cancellation or
postponement, however, cancellation would generally obligate the customer to pay
the costs incurred by the Company. As of December 31, 1999 and 1998, the
Company's backlog of orders was approximately $93.0 million and $82.0 million,
respectively. Backlog as of December 31, 1999 includes projects having a value
of approximately $10.5 million for which binding contracts had not yet been
executed. Backlog as of any particular date may not be indicative of actual
operating results for any fiscal period. There can be no assurance that any
amount of backlog ultimately will be realized.
3
<PAGE>
COMPETITION
WATER TRANSMISSION. The Company has several competitors in the Water
Transmission business. Most Water Transmission projects are competitively bid
and price competition is vigorous. Price competition may reduce the gross margin
on sales, which may adversely affect overall profitability. Other competitive
factors include timely delivery, ability to meet customized specifications and
high freight costs which may limit the ability of manufacturers located in other
market areas to compete with the Company. With Water Transmission manufacturing
facilities in Oregon, Colorado, California, West Virginia and Texas, the Company
believes it can more effectively compete throughout the U.S. and Canada. The
Company's primary competitors in the water transmission business in the western
United States and southwestern Canada are Ameron International, Inc. and
Continental Pipe. East of the Rocky Mountains, the Company's primary competition
includes American Cast Iron Pipe Company, McWane Cast Iron Pipe Company and US
Pipe & Foundry Company, all of which manufacture ductile iron pipe; Price Bros.
and Hanson Concrete Products, Inc., which manufacture concrete cylinder pipe.
In July 1999, American Cast Iron Pipe Company (ACIPCO) announced the formation
of a new subsidiary, American SpiralWeld Pipe Company (ASWP), and began
construction of a new facility in Columbia, South Carolina in August 1999. ASWP
plans to manufacture spiral welded steel pipe in diameters up to 12 feet for the
water, wastewater, hydro, and industrial markets. The plant is expected to be
operational in the latter half of 2000. The Company expects that ASWP will
compete with it primarily in the Southeast region of the U.S. No assurance can
be given that other new or existing competitors will not establish new
facilities or expand capacity within the Company's market areas. New or expanded
facilities or new competitors could have a material adverse effect on the
Company's ability to capture market share and maintain product pricing.
TUBULAR PRODUCTS. The market for tubular products is highly fragmented and
diversified with over 100 manufacturers in the United States and a number of
foreign-based manufacturers that export such pipe into the United States. During
the first half of 1999, the Company experienced pricing pressures primarily in
its West Coast Tubular Products market, which it believes was the result of
increased foreign price competition. SEE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Manufacturers compete with one another primarily on the basis of price,
established business relationships, customer service and delivery. In a number
of sectors within the tubular products industry, competition may be less
vigorous due to the existence of a relatively small number of companies with the
capabilities to manufacture certain products. In particular, the Company
operates in a variety of different markets that require pipe with lighter wall
thicknesses in relation to diameters than many of the Company's competitors can
manufacture. However, the Company is increasingly introducing products into
higher volume markets with more competition than it experiences with its niche
products.
RAW MATERIALS AND SUPPLIES
The Company purchases hot rolled steel coil from a number of primary domestic
and import steel producers including National Steel Corporation, California
Steel Industries, Inc., Tuscaloosa Steel Corporation, Geneva Steel Company and
Nucor Corporation. The Company orders steel according to its business forecasts
for its Tubular Products business. Steel for the Water Transmission business is
normally purchased only after a project has been awarded to the Company,
however, the steel price is generally negotiated in advance of the bidding
process. From time to time, the Company may purchase additional steel when it is
available at favorable prices. Purchased steel represents a substantial portion
of the Company's cost of sales. The steel industry is highly cyclical in nature
and steel prices are influenced by numerous factors beyond the control of the
Company, including general economic conditions, import duties, other trade
restrictions and currency exchange rates. Steel prices are increasing and the
Company has recently raised prices in some product lines to recover the steel
price increases. There can be no assurance that the Company will be successful
in implementing further price increases on its products to offset additional
steel price increases, if any.
4
<PAGE>
The Company also relies on certain suppliers of coating materials, lining
materials and certain custom fabricated items. The Company has at least two
suppliers for most of its raw materials. The Company believes its relationships
with its suppliers are positive and has no indication that it will experience
shortages of raw materials or components essential to its production processes
or that it will be forced to seek alternative sources of supply. Any shortages
of raw materials may result in production delays and costs, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPLOYEES
As of December 31, 1999, the Company had 1,249 full-time employees.
Approximately 24% were salaried and approximately 76% were employed on an hourly
basis. Unions represent all of the hourly employees at the Company's Denver,
Colorado and Monterrey, Mexico facilities. The Company considers its relations
with its employees to be good.
ITEM 2. PROPERTIES
PORTLAND, OREGON The Portland, Oregon facility consists of 300,000 square feet
of covered manufacturing space located on approximately 25 acres. The Company
operates six pipe mills at its Portland, Oregon facility.
ATCHISON, KANSAS The Atchison, Kansas facility consists of 60,000 square feet of
covered manufacturing space located on 40 acres. The Company operates two pipe
mills at its Atchison, Kansas facility.
ADELANTO AND RIVERSIDE, CALIFORNIA The Adelanto, California facility consists of
85,000 square feet of covered manufacturing space located on 70 acres. The
Company operates two pipe mills at its Adelanto, California facility. The
Riverside, California facility consists of 65 acres with approximately 46,100
square feet of covered manufacturing space, and the Company operates two spiral
mills and one ERW mill at this facility.
DENVER, COLORADO The Denver, Colorado facility consists of approximately 157,000
square feet of covered manufacturing space located on approximately 40 acres,
and the Company operates two pipe mills from this facility.
BOSSIER CITY, LOUISIANA The Bossier City facility has two pipe mills with
approximately 111,000 square feet of covered manufacturing space, located on 24
acres.
HOUSTON, TEXAS The Houston, Texas facility has three mills with approximately
185,000 square feet of covered manufacturing space, located on 15 acres.
PARKERSBURG, WEST VIRGINIA The Parkersburg, West Virginia facility has two
mills, with approximately 110,000 square feet of covered manufacturing space,
located on 92 acres.
SAGINAW, TEXAS The Saginaw, Texas facility has two mills, with approximately
170,000 square feet of covered manufacturing space, located on 26 acres at two
facilities.
MONTERREY, MEXICO The Monterrey, Mexico facility consists of approximately
25,000 square feet of covered manufacturing space located on approximately five
acres, and the Company produces propane tanks from this facility.
As of December 31, 1999, the Company owned all of its facilities, except for
Saginaw, Texas facilities, which are under long-term leases through 2008.
The Company currently has available manufacturing capacity at each of its
facilities. To take advantage of market opportunities, the Company has
identified capital projects that will allow it to expand its manufacturing
facilities to meet the expected growth opportunities. SEE MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
5
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of its business. The Company
maintains insurance coverage against potential claims in amounts that it
believes to be adequate. Management believes that it is not presently a party to
any litigation, the outcome of which would have a material adverse effect on the
Company's business, financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
quarter ended December 31, 1999.
6
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is quoted on the Nasdaq National Market System under
the symbol "NWPX." The high and low sales prices as reported on the Nasdaq
National Market System for each quarter in the years ended December 31, 1998 and
1999 were as follows.
<TABLE>
<CAPTION>
LOW HIGH
<S> <C> <C>
1998
First Quarter $17 3/4 $24 1/2
Second Quarter 20 3/8 24 1/8
Third Quarter 16 23 3/4
Fourth Quarter 14 7/8 18 1/2
1999
First Quarter $ 12 3/4 $17 1/2
Second Quarter 13 1/2 18 3/8
Third Quarter 15 1/8 18 1/2
Fourth Quarter 11 1/8 15 1/4
</TABLE>
There were 79 shareholders of record and approximately 2,300 beneficial
shareholders at March 6, 2000. There were no cash dividends declared or paid in
fiscal years 1998 or 1999. The Company does not anticipate paying cash dividends
in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA: In thousands, except per share amounts
Net sales $ 240,307 $ 209,516 $ 150,833 $ 135,182 $ 97,715
Gross profit 48,904 41,664 31,117 30,942 19,576
Net income 13,285 12,581 11,100 10,404 5,107
Basic earnings per share 2.06 1.96 1.73 1.92 6.11
Diluted earnings per share 2.01 1.90 1.68 1.85 1.44
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 56,478 $ 54,237 $ 51,051 $ 35,737 $ 22,438
Total assets 248,271 234,151 132,051 101,424 64,454
Long-term debt, less current portion 76,984 76,321 39,944 14,356 12,040
Stockholders' equity 97,169 83,715 70,779 59,694 33,729
</TABLE>
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
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 and management's beliefs and assumptions. 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 certain risks, uncertainties and assumptions 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, but not limited to those
discussed in this discussion and analysis of financial condition and results of
operations, as well as those discussed elsewhere in this Report and from time to
time in the Company's other 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 of certain Water Transmission orders, the schedule
for deliveries of those orders, the delays in Water Transmission projects the
Company has been awarded or postponements in bidding activity and awarding of
new Water Transmission projects and the inventory management policies of certain
of the Company's Tubular Products customers. 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's 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
the Company's 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 significant 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. Demand
for tubular products is influenced by construction, the energy market, the
agricultural economy and general economic conditions.
8
<PAGE>
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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Net sales:
Water transmission 57.2 % 59.5 % 65.8 %
Tubular products 42.8 40.5 34.2
---------- --------- ---------
Total net sales 100.0 100.0 100.0
Cost of sales 79.7 80.1 79.4
---------- --------- ---------
Gross profit 20.3 19.9 20.6
Selling, general and administrative
expenses 7.8 7.6 7.5
---------- --------- ---------
Operating income 12.5 12.3 13.1
Interest expense, net 3.3 2.3 1.2
---------- --------- ---------
Income before income taxes 9.2 10.0 11.9
Provision for income taxes 3.7 4.0 4.5
========== ========= =========
Net income 5.5 % 6.0 % 7.4 %
========== ========= =========
Gross profit as a percentage
of segment net sales:
Water transmission 23.5 % 23.0 % 22.9 %
Tubular products 16.1 15.3 16.3
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
NET SALES. Net sales increased 14.7% to $240.3 million in 1999 from $209.5
million in 1998. No single customer accounted for 10% or more of total net sales
in 1999 or 1998.
Water Transmission sales increased 10.3% to $137.4 million in 1999 from $124.6
million in 1998. The increase was primarily a result of sales attributable to
the Parkersburg facility, which was acquired in June 1998 and North American,
which was acquired in June 1999. Water Transmission sales in the second half of
1999 were negatively impacted by delays in projects the Company had already been
awarded, and postponements in bidding activity and awarding of new projects. The
Company expects that these delays and postponements will continue to negatively
affect Water Transmission sales in the first quarter of 2000.
Tubular Products sales increased 21.2% to $102.9 million in 1999 from $84.9
million in 1998. The increases were primarily the result of increased sales in
certain product lines and a lessening in pricing pressures from imported
products in the second half of 1999. The Company also raised prices in certain
product lines beginning in the fourth quarter of 1999 to offset increases in the
price of steel purchased by the Company.
GROSS PROFIT. Gross profit increased 17.4% to $48.9 million (20.3% of total net
sales) in 1999 from $41.7 million (19.9% of total net sales) in 1998.
Water Transmission gross profit increased 12.6% to $32.3 million (23.5% of
segment net sales) in 1999 from $28.7 million (23.0% of segment net sales) in
1998. Water Transmission gross profit increased as a result of improved market
conditions and stronger bidding activity in the first half of 1999, and the
acquisition of the Parkersburg facility in June 1998 and North American in June
1999. Water Transmission gross profit in the second half of 1999 was negatively
impacted by lower production volume, which resulted from delays in projects the
Company had already been awarded, and postponements in bidding activity and
awarding of
9
<PAGE>
new projects. The Company expects that these delays and postponements will
continue to negatively affect Water Transmission gross profit in the first
quarter of 2000.
Gross profit from Tubular Products increased 27.9% to $16.6 million (16.1% of
segment net sales) in 1999 from $12.9 million (15.3% of segment net sales) in
1998. Tubular Products gross profit increased in 1999 as a result of a lessening
in pricing pressure from imported products in certain product lines, a favorable
product mix and generally improved market conditions in the second half of 1999.
The Company also raised prices in certain product lines beginning in the fourth
quarter of 1999 to offset increases in the price of steel purchased by the
Company. There can be no assurance that the Company will be successful in
implementing further price increases on its products to offset additional steel
price increases, if any.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 18.5% to $18.8 million (7.8% of total net
sales) in 1999 from $15.9 million (7.6% of total net sales) in 1998. The
increase was primarily the result of increased operating expenses related to the
acquisitions completed in March and June 1998 and June 1999 and the general
growth of the Company's business.
INTEREST EXPENSE. Interest expense increased to $8.1 million in 1999 from $4.8
million in 1998. The increase in interest expense resulted from increased
borrowings used to finance acquisitions and capital expenditures and to support
higher production and sales levels.
INCOME TAXES. The Company's effective tax rate was approximately 39.8% in 1999,
compared to approximately 40% in 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
NET SALES. Net sales increased 38.9% to $209.5 million in 1998 from $150.8
million in 1997. No single customer accounted for 10% or more of total net sales
in 1998 or 1997.
Water Transmission sales increased 25.5% to $124.6 million in 1998 from $99.3
million in 1997. The increase resulted primarily from higher production brought
about by improved market conditions in 1998 and increased sales attributable to
the Parkersburg Facility, which was acquired in June 1998.
Tubular Products sales increased 64.8% to $84.9 million in 1998 from $51.5
million in 1997. The increase was primarily the result of sales attributable to
P&H Tube Corporation ("P&H") and Southwestern Pipe, Inc. ("Southwestern"), which
were acquired in March 1998, and increased demand in certain product lines.
GROSS PROFIT. Gross profit increased 33.9% to $41.7 million (19.9% of total net
sales) in 1998 from $31.1 million (20.6% of total net sales) in 1997.
Water Transmission gross profit increased 26.3% to $28.7 million (23.0% of
segment net sales) in 1998 from $22.7 million (22.9% of segment net sales) in
1997. Water Transmission gross profit as a percentage of segment net sales
increased slightly in 1998 compared to 1997. In the first six months of 1998,
the Company experienced lower bidding activity, unfavorable pricing pressures
and shipping delays. In the latter half of 1998, demand and production increased
as market conditions and bidding activity improved.
Gross profit from Tubular Products increased 54.4% to $12.9 million (15.3% of
segment net sales) in 1998 from $8.4 million (16.3% of segment net sales) in
1997. During 1998, the Company experienced pricing pressures in its Tubular
Products markets, which it believes was the result of increased foreign price
competition. This increased foreign price competition and to a lesser degree, an
unfavorable product mix, partially offset by a decrease in raw material prices
in the fourth quarter of 1998, resulted in a decrease in Tubular Products gross
profit as a percentage of net sales in 1998.
10
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 39.3% to $15.9 million (7.6% of total net
sales) in 1998 from $11.4 million (7.5% of total net sales) in 1997. The
increase was primarily the result of additional operating costs related to the
acquisitions completed in March and June 1998.
INTEREST EXPENSE. Interest expense increased to $4.8 million in 1998 from $1.8
million in 1997. The increase in interest expense resulted from increased
borrowings used to finance the acquisitions made in March and June 1998, and to
support higher production and sales levels.
INCOME TAXES. The Company's effective tax rate was approximately 40% in 1998,
compared to approximately 38.1% in 1997. The increase in the effective tax rate
was due primarily to acquisitions which resulted in non-deductible goodwill.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances operations with internally generated funds and available
borrowings. At December 31, 1999, the Company had cash and cash equivalents of
$969,000.
Net cash provided by operating activities in 1999 was $15.2 million. This was
primarily the result of $13.3 million of net income, non-cash adjustments for
depreciation and amortization of $5.1 million, decreases in inventories and
accounts payable of $6.2, and $6.9 million, respectively; offset by an increase
in net trade receivables of $3.8 million. The decrease in accounts payable was
primarily attributable to the timing and amount of purchases and utilization of
steel. The increase in trade receivables and decrease in inventories primarily
resulted from increased product shipments in 1999.
Net cash used in investing activities in 1999 was $17.9 million, which primarily
resulted from additions of property and equipment, including a new company-wide
enterprise resource planning computer software system, and the completion of
construction of the Company's LPG tank manufacturing facility in Monterrey,
Mexico, and the acquisition of North American.
Capital expenditures are expected to approximate $9.0 million in 2000.
Net cash provided by financing activities in 1999 was $3.1 million, which
primarily resulted from $3.6 million in net borrowings under the Company's line
of credit agreement, offset by payments of long-term debt. Additionally, capital
lease obligations of $2.4 million related to the new company-wide enterprise
resource planning computer software system were incurred in 1999.
The Company had the following significant components of debt at December 31,
1999: a $55 million credit agreement under which $40.0 million was outstanding;
$8.6 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 $2.8 million with variable
interest rate of 4.19%; and a capital lease obligation of $2.4 million which
bears interest at 7.9%.
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% (7.4% at
December 31, 1999), or at prime less 0.5% (8.0% at December 31, 1999). At
December 31, 1999, the Company had $33.0 million outstanding under the line of
credit bearing interest at a weighted average IBOR interest rate of 7.55%, $7.0
million bearing interest at 8.0% and additional borrowing capacity under the
line of credit of $15.0 million. The line of credit agreement contains the
following covenants: minimum debt service ratio, maximum funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"), and minimum
tangible net worth. In June 1999, the Company amended its line of credit
agreement to include a $10.0 million bridge loan commitment which expired on
December 31, 1999. Amounts outstanding under the bridge loan commitment were
transferred to the Company's line of credit which was increased to $55.0 million
on December 30, 1999. Additionally on
11
<PAGE>
December 30, 1999, the maturity date of the agreement was extended to September
30, 2002 and the ratio of maximum funded debt to EBITDA was adjusted to 3.75:1.0
until March 31, 2000, 3.50:1.0 until September 30, 2000 and 3.25:1.0 until
December 31, 2000.
At December 31, 1999, the Company was in compliance with all covenants specified
in its debt 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 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 leases if such
resources are available on satisfactory terms. The Company has from time to time
evaluated and continues to evaluate 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.
ACQUISITIONS. On June 18, 1999, the Company acquired all of the outstanding
common stock of North American Pipe, Inc. ("North American") of Saginaw, Texas.
North American 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 North American.
In June 1998, the Company acquired from L.B. Foster Company the plant,
equipment, leasehold and contract rights and miscellaneous assets of its
Fosterweld Division manufacturing facility (the "Parkersburg Facility") for $5.3
million, and acquired the Parkersburg Facility's inventory net of assumed
accounts payable. The Parkersburg Facility is employed in the manufacture of
large diameter, high pressure steel pipe products.
In March 1998, the Company acquired all of the outstanding capital stock of
Southwestern Pipe, Inc. ("Southwestern") and P&H Tube Corporation ("P&H") for
$40.1 million. The excess of the acquisition cost over the fair value of the net
assets acquired of $23.7 million is being amortized over 40 years using the
straight-line method. The principal business of both Southwestern and P&H is the
manufacture and sale of structural and mechanical tubing products.
YEAR 2000 ISSUE. The Company incurred costs of approximately $160,000 related to
its Year 2000 assessment, remediation and testing efforts, including, the
replacement of approximately $100,000 of certain telephone system components as
a result of the Year 2000 issue. The Company did not experience any significant
disruption of operations or services as a result of Year 2000 issues.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 also requires that changes in
the derivative instrument's fair value be recognized currently in results of
operations unless specific hedge accounting criteria are met. SFAS No. 133, as
amended by SFAS No. 137, is effective for fiscal years beginning after June 15,
2000. The Company's management has studied the implications of SFAS 133 and
based on the initial evaluation, expects the adoption to have no impact on the
Company's financial condition or results of operations.
12
<PAGE>
ITEM 7A. 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 risks. The Company is
exposed to cash flow and fair value risk due to changes in interest rates with
respect to its long-term debt. Information required by this item is set forth in
Notes 1, 6, 7 and 8 of the Notes to Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
The information required by this item is included under the caption QUARTERLY
DATA, in Note 15 of Notes to Consolidated Financial Statements as listed in Item
14 of Part IV of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is included under the captions INFORMATION
AS TO NOMINEES AND CONTINUING DIRECTORS, EXECUTIVE OFFICERS and SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE in the Company's Proxy Statement for
its 2000 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included under the caption EXECUTIVE
COMPENSATION in the Company's Proxy Statement for its 2000 Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included under the caption STOCK OWNED
BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS in the Company's Proxy Statement for
its 2000 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No disclosures required.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The Financial Statements, together with the report thereon of
PricewaterhouseCoopers LLP are included on the pages indicated below.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants F-1
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 F-2
Consolidated Balance Sheets as of
December 31, 1999 and 1998 F-3
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
(a) (2) FINANCIAL STATEMENT SCHEDULE
The following schedule and report of independent public accountants are filed
herewith:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II Valuation and Qualifying Accounts S-1
Report of Independent Accountants on Financial Statement Schedule S-2
</TABLE>
Schedules not listed above have been omitted because the information required to
be set forth therein is not applicable or is included in the Consolidated
Financial Statements or notes thereto.
14
<PAGE>
(a) (3) EXHIBITS INCLUDED HEREIN:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Second Restated Articles of Incorporation, incorporated by reference
to Exhibits to the Company's Registration Statement on Form S-1, as
amended, effective November 30, 1995, Commission Registration No.
33-97308 ("the S-1")
3.2 Second Amended and Restated Bylaws, incorporated by reference to
Exhibits to the S-1
4.1 Form of Rights Agreement dated as of June 28, 1999 between the Company
and ChaseMellon Shareholder Services, L.L.C. as Rights Agent,
incorporated by reference to Exhibits 1.1 to the Company's
Registration Statement on Form 8-A as filed with the Securities and
Exchange Commission on July 1, 1999
10.2 1986 Incentive Stock Option Plan, incorporated by reference to
Exhibits to the S-1*
10.3 1995 Stock Option Plan for Nonemployee Directors, incorporated by
reference to Exhibits to the S-1*
10.4 Registration Rights Agreement, incorporated by reference to Exhibits
to the S-1*
10.5 Loan Agreement dated May 1, 1990 between the Company and California
Statewide Communities Development Authority, incorporated by reference
to Exhibits to the S-1
10.6 Stock Purchase Agreement dated as of May 8, 1996 among Northwest Pipe
Company, Thompson Pipe and Steel Company, CHL Holdings, Inc. and
Inter-City Products Corporation Incorporated by reference to Exhibits
to the Company's Report on Form 8-K as filed with the Securities and
Exchange Commission on June 14, 1996
10.7 Amended 1995 Stock Incentive Plan, incorporated by reference to
Exhibits to the Company's Proxy Statement for the 1997 Annual Meeting
of Shareholders *
10.8 Note Purchase Agreement dated November 1, 1997, incorporated by
reference to Exhibits to the Company's Report on Form 8-K as filed
with the Securities and Exchange Commission on March 20, 1998
10.9 Stock Purchase Agreement dated March 6, 1998 by and among Northwest
Pipe Company, Southwestern Pipe, Inc., P&H Tube Corporation, Lewis
Family Investments Partnership, Ltd., Philip C. Lewis, Hosea E.
Henderson, Don S. Brzowski, William H. Cottle, Barry J. Debroeck,
Horace M. Jordan and William B. Stuessy (the "Stock Purchase
Agreement"), incorporated by reference to Exhibits to the Company's
Report on Form 8-K as filed with the Securities and Exchange
Commission on March 20, 1998
10.10 Note Purchase Agreement dated April 1, 1998 (certain schedules to the
Agreement have been omitted), incorporated by reference to Exhibits to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 as filed with the Securities and Exchange Commission on
May 15, 1998
10.11 Amended and Restated Loan Agreement with Bank of America National
Trust and Savings Association and US National Bank Association, dated
June 30, 1998, incorporated by reference to Exhibits to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 as
filed with the Securities and Exchange Commission on August 14, 1998
15
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.12 First Amendment to Amended and Restated Loan Agreement, dated
December 23, 1998, incorporated by reference to Exhibits to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999 as filed with the Securities and Exchange Commission on March 30,
1999
10.13 Second Amendment to Amended and Restated Loan Agreement, dated June
16, 1999, incorporated by reference to Exhibits to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 as
filed with the Securities and Exchange Commission on August 2, 1999
10.14 Third Amendment to Amended and Restated Loan Agreement, dated
November 30, 1999, filed herewith
10.15 Fourth Amendment to Amended and Restated Loan Agreement, dated
December 30, 1999, filed herewith
10.16 1999 Employee Stock Purchase Plan, incorporated by reference to
Exhibit A to the Company's Proxy Statement for its 1999 Annual Meeting
of Shareholders as filed with the Securities and Exchange Commission
on April 9, 1999 *
10.17 Form of Change in Control Agreement, dated July 28, 1999, between
Northwest Pipe Company and William R. Tagmyer and Brian W. Dunham,
filed herewith *
10.18 Form of Change in Control Agreement, dated July 28, 1999, between
Northwest Pipe Company and Charles L. Koenig, Robert L. Mahoney,
Terrence R. Mitchell, John D. Murakami and Gary A. Stokes, filed
herewith *
21 Subsidiaries of the Registrant, filed herewith
23 Consent of PricewaterhouseCoopers LLP, filed herewith
27 Financial Data Schedule, filed herewith
*This exhibit constitutes a management contract or compensatory plan or
arrangement.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1999.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 16th day of March
2000.
NORTHWEST PIPE COMPANY
By /s/ WILLIAM R. TAGMYER
----------------------------
William R. Tagmyer
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated, on the 16th day of March 2000.
SIGNATURE TITLE
/s/ WILLIAM R. TAGMYER Chairman of the Board
- ---------------------------- and Chief Executive Officer
William R. Tagmyer (Principal Executive Officer)
/s/ BRIAN W. DUNHAM Director, President and Chief Operating Officer
- ----------------------------
Brian W. Dunham
/s/ JOHN D. MURAKAMI Vice President, Chief Financial Officer
- ---------------------------- (Principal Financial Officer)
John D. Murakami
/s/ WAYNE B. KINGSLEY Director
- ----------------------------
Wayne B. Kingsley
/s/ NEIL R. THORNTON Director
- ----------------------------
Neil R. Thornton
/s/ VERN B. RYLES, JR. Director
- ----------------------------
Vern B. Ryles, Jr.
/s/ WARREN K KEARNS Director
- ----------------------------
Warren K. Kearns
17
<PAGE>
SCHEDULE II
NORTHWEST PIPE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO DEDUCTION BALANCE AT
BEGINNING OF PROFIT AND FROM CLOSE OF
PERIOD LOSS RESERVES PERIOD
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful trade receivables $1,046 $1,654 $804 $1,896
Year ended December 31, 1998:
Allowance for doubtful trade receivables $1,825 $416 $1,195 $1,046
Year ended December 31, 1997:
Allowance for doubtful trade receivables $1,680 $266 $121 $1,825
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Northwest Pipe Company
Our audits of the consolidated financial statements referred to in our report
dated February 21, 2000 appearing on page F-1 of this Form 10-K also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Portland, Oregon
February 21, 2000
S-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Northwest Pipe Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
Northwest Pipe Company and its subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Portland, Oregon
February 21, 2000
F-1
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997
-------------- ------------- --------------
<S> <C> <C> <C>
Net sales $ 240,307 $ 209,516 $ 150,833
Cost of sales 191,403 167,852 119,716
---------- ---------- -----------
Gross profit 48,904 41,664 31,117
Selling, general and administrative
expense 18,790 15,859 11,382
---------- ---------- -----------
Operating income 30,114 25,805 19,735
Interest expense, net 8,065 4,835 1,616
Interest expense to related parties -- -- 201
---------- ---------- -----------
Income before income taxes 22,049 20,970 17,918
Provision for income taxes 8,764 8,389 6,818
---------- ---------- -----------
Net income $ 13,285 $ 12,581 $ 11,100
========== ========== ===========
Basic earnings per share $ 2.06 $ 1.96 $ 1.73
========== ========== ===========
Diluted earnings per share $ 2.01 $ 1.90 $ 1.68
========== ========== ===========
Shares used in per share calculations:
Basic 6,452 6,435 6,405
========== ========== ===========
Diluted 6,611 6,628 6,622
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-2
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 969 $ 524
Trade receivables, less allowance for doubtful accounts
of $1,896 and $1,046 47,934 41,719
Costs and estimated earnings in excess of billings on
uncompleted contracts 22,389 23,270
Inventories 44,362 49,269
Refundable income taxes 2,244 2,800
Deferred income taxes 1,502 1,794
Prepaid expenses and other 2,222 1,733
------------- ------------
Total current assets 121,622 121,109
Property and equipment, net 101,240 87,139
Goodwill, net 22,637 23,223
Restricted assets 2,300 2,300
Other assets 472 380
============= ============
$ 248,271 $ 234,151
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to financial institution $ 40,000 $ 34,200
Current portion of long-term debt 2,124 1,679
Current portion of capital lease obligations 484 2,000
Accounts payable 17,558 23,524
Accrued liabilities 4,978 5,469
------------- ------------
Total current liabilities 65,144 66,872
Long-term debt, less current portion 75,088 76,321
Capital lease obligations, less current portion 1,896 --
Minimum pension liability -- 58
Deferred income taxes 8,974 7,185
------------- ------------
Total liabilities 151,102 150,436
Commitments and contingencies (Note 12)
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,
6,459,930 and 6,447,516 shares issued and outstanding 64 64
Additional paid-in-capital 38,962 38,849
Retained earnings 58,143 44,858
Accumulated other comprehensive loss:
Minimum pension liability -- (56)
------------- ------------
Total stockholders' equity 97,169 83,715
============= ============
$ 248,271 $ 234,151
============= ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
--------------------------- Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income (Loss) Equity
--------------- ----------- --------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 6,388,986 $ 64 $ 38,546 $ 21,177 $ (93) $ 59,694
Net income 11,100 11,100
Issuance of common stock
under stock option plans 22,416 49 49
Minimum pension liability
adjustment (194) (194)
Tax benefit of stock options
exercised 130 130
------------ -------- ------------ ----------- ---------- --------------
Balances, December 31, 1997 6,411,402 64 38,725 32,277 (287) 70,779
Net income 12,581 12,581
Issuance of common stock
under stock option plans 36,334 45 45
Repurchase of common stock (220) (4) (4)
Minimum pension liability
adjustment 231 231
Tax benefit of stock options
exercised 83 83
------------ -------- ------------ ----------- ---------- --------------
Balances, December 31, 1998 6,447,516 64 38,849 44,858 (56) 83,715
Net income 13,285 13,285
Issuance of common stock
under stock option plans 4,219 14 14
Issuance of common stock
under employee stock
purchase plan 8,195 94 94
Minimum pension liability
adjustment 56 56
Tax benefit of stock options
exercised 5 5
------------ -------- ----------- ----------- ---------- --------------
Balances, December 31, 1999 6,459,930 $ 64 $ 38,962 $ 58,143 $ -- $ 97,169
============ ======== =========== =========== ========== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1999 1998 1997
-------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,285 $ 12,581 $ 11,100
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,090 3,685 2,242
Deferred income taxes 1,228 2,199 3,010
Gain on sale of property and equipment (632) (342) --
Changes in current assets and liabilities:
Trade receivables, net (3,776) (12,302) (1,940)
Costs and estimated earnings in excess of billings on
uncompleted contracts 882 (3,357) (9,164)
Inventories 6,192 (18,182) (46)
Refundable income taxes 849 507 (3,307)
Prepaid expenses and other (449) (222) (113)
Accounts payable (6,865) 10,978 (1,814)
Accrued and other liabilities (604) 1,315 (4,301)
----------- ------------ -----------
Net cash provided by (used in) operating activities 15,200 (3,140) (4,333)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (14,153) (16,185) (20,351)
Proceeds from sale of property and equipment 687 1,670 --
Acquisitions, net of cash acquired (4,413) (47,856) --
Other assets (15) 259 (2,081)
----------- ------------ -----------
Net cash used in investing activities (17,894) (62,112) (22,432)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net 113 41 49
Proceeds from long-term debt -- 40,000 35,000
Payments on long-term debt (788) (740) (8,410)
Net proceeds (payments) under notes payable 3,591 27,200 (302)
Net proceeds (payments) on capital lease obligations 223 (1,629) (299)
Payments on capital lease obligations to related party -- -- (2,671)
----------- ------------ -----------
Net cash provided by financing activities 3,139 64,872 23,367
----------- ------------ -----------
Net increase (decrease) in cash and cash equivalents 445 (380) (3,398)
Cash and cash equivalents, beginning of period 524 904 4,302
----------- ------------ -----------
Cash and cash equivalents, end of period $ 969 $ 524 $ 904
=========== ============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, net of amounts capitalized $ 6,968 $ 3,836 $ 1,450
Cash paid during the period for income taxes 7,164 5,836 6,741
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
Tax benefit of nonqualified stock options exercised $ 5 $ 83 $ 130
Capital lease obligations incurred -- -- 1,869
Acquisitions:
Cost in excess of fair value of assets acquired $ - $ 23,717 $ --
Fair value of assets acquired 8,692 32,941 --
Fair value of liabilities assumed 4,279 8,802 --
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements include the accounts of Northwest Pipe
Company and its wholly owned subsidiaries (the "Company"). All significant
intercompany balances have been eliminated. The Company manufactures Water
Transmission products in its Portland, Oregon; Denver, Colorado; Adelanto and
Riverside, California; Parkersburg, West Virginia; and Saginaw, Texas
facilities. Tubular Products are manufactured in the Company's Portland, Oregon;
Atchison, Kansas; Houston, Texas; Bossier City, Louisiana; and Monterrey, Mexico
facilities.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and short term highly liquid
investments with remaining maturities of three months or less when purchased.
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. Raw material inventories of steel coil are stated at cost on a
specific identification basis. Raw material inventories of coating and lining
materials, as well as materials and supplies, are stated on an average cost
basis.
PROPERTY AND EQUIPMENT
Property and equipment, including land, buildings and equipment under capital
leases, are stated at cost. Maintenance and repairs are expensed as incurred and
costs of improvements and renewals, including interest, are capitalized.
Depreciation and amortization are determined by the straight-line method based
on the estimated useful lives of the related assets, except for the depreciation
of the Tubular Products mill in Portland, Oregon, which is determined by the
units of production method. Upon disposal, costs and related accumulated
depreciation of the assets are removed from the accounts and resulting gains or
losses are reflected in operations. The Company leases land, buildings and
equipment under long-term capital leases, which are being amortized on a
straight-line basis over estimated useful lives.
Estimated useful lives by major classes of property and equipment are as
follows:
<TABLE>
<S> <C>
Land and improvements 20 years
Buildings 30 years
Equipment 5-18 years
</TABLE>
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of the
net assets of companies acquired in purchase transactions. Net goodwill was
$22.6 million and $23.2 million, at December 31, 1999 and 1998, respectively.
Goodwill is amortized on the straight-line method over 40 years. Amortization
charged to operations was $586 and $494 for 1999 and 1998, respectively. At each
balance sheet date, the Company evaluates the realizability of goodwill based on
expectations of non-discounted cash flows and operating income for each
subsidiary having a material goodwill balance. Based on its most recent
analysis, the Company believes that no material impairment of goodwill exists at
December 31, 1999.
F-6
<PAGE>
REVENUE RECOGNITION
Revenue from construction contracts in the Company's Water Transmission segment
is recognized on the percentage-of-completion method, measured by the percentage
of total costs incurred to date to the estimated total costs of each contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation. Selling, general and administrative costs are charged
to expense as incurred. Provisions for losses on uncompleted contracts are made
in the period such losses are known. Changes in job performance, job conditions
and estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions to costs and
income and are recognized in the period in which the revisions are determined.
Revenue from the Company's Tubular Products segment is recognized when all four
of the following criteria have been satisfied: persuasive evidence of an
arrangement exists; delivery has occurred; the price is fixed or determinable;
and collectibility is reasonably assured.
INCOME TAXES
The Company records deferred income tax assets and liabilities based upon the
difference between the financial statement and income tax bases of assets and
liabilities using enacted income tax rates. Valuation allowances are established
when necessary to reduce deferred income tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the period and the change
during the period in net deferred income tax assets and liabilities.
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 159,288, 192,590 and 216,989 for the years ended December 31, 1999,
1998, 1997, respectively, were used in the calculations of diluted earnings per
share. Options to purchase 269,395 shares of common stock at prices of $15.75 to
$22.875 per share were outstanding during 1999, 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. The options were outstanding at December 31, 1999.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Trade receivables are with
a large number of customers, including municipalities, manufacturers,
distributors and contractors, dispersed across a wide geographic base.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments are the amounts at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The carrying amounts reflected in the
consolidated balance sheets for cash and cash equivalents, trade receivables,
other current assets and current liabilities approximate fair value because of
the short maturity for these instruments. The fair value approximates the
carrying value of the Company's borrowings under its long-term arrangements
based upon interest rates available for the same or similar loans.
F-7
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company's long-lived assets are reviewed for impairment when circumstances
indicate that the carrying amount may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the asset, a loss
is recognized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" which establishes
requirements for disclosure of comprehensive income. Comprehensive income is the
total of net income and all other non-owner changes in equity.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Net income $ 13,285 $ 12,581 $ 11,100
Minimum pension liability adjustment 56 231 (194)
=========== =========== ============
Comprehensive income $ 13,341 $ 12,812 $ 10,906
=========== =========== ============
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative instrument's fair value be recognized currently in results of
operations unless specific hedge accounting criteria are met. SFAS No. 133, as
amended by SFAS No. 137, is effective for fiscal years beginning after June 15,
2000. The Company's management has studied the implications of SFAS 133 and
based on the initial evaluation, expects the adoption to have no impact on the
Company's financial condition or results of operations.
2. ACQUISITIONS:
In June 1999, the Company acquired all of the outstanding common stock of North
American Pipe, Inc. ("North American") of Saginaw, Texas. North American
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 North American.
In June 1998, the Company acquired from L.B. Foster Company the plant,
equipment, leasehold and contract rights and miscellaneous assets of its
Fosterweld Division manufacturing facility (the "Parkersburg Facility") for $5.3
million, and acquired the Parkersburg Facility's inventory net of assumed
accounts payable. The Parkersburg Facility is employed in the manufacture of
large diameter, high pressure steel pipe products.
F-8
<PAGE>
In March 1998, the Company acquired all of the outstanding capital stock of
Southwestern Pipe, Inc. ("Southwestern") and P&H Tube Corporation ("P&H") for
$40.1 million. The excess of the acquisition cost over the fair value of the net
assets acquired of $23.7 million is being amortized over 40 years using the
straight-line method. The principal business of both Southwestern and P&H is the
manufacture and sale of structural and mechanical tubing products.
All of the above acquisitions were accounted for using the purchase method of
accounting, which requires that the purchase price be allocated to the net
assets acquired based upon the relative fair value of assets acquired. The
accompanying consolidated financial statements include the results of operations
from the dates of acquisition.
3. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
----------- ----------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 79,361 $ 69,214
Estimated earnings 30,561 22,264
----------- ----------
109,922 91,478
Less billings to date (87,533) (68,208)
=========== ==========
$ 22,389 $ 23,270
=========== ==========
</TABLE>
Costs and estimated earnings in excess of billings on uncompleted contracts
represents revenue earned under the percentage of completion method but not
billable based on the terms of the contracts. These amounts are billed based on
the terms of the contracts which include achievement of milestones, partial
shipments or completion of the contracts.
4. INVENTORIES:
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
--------- ----------
<S> <C> <C>
Finished goods $ 18,107 $ 12,404
Raw materials 24,156 34,769
Materials and supplies 2,099 2,096
========= ==========
$ 44,362 $ 49,269
========= ==========
</TABLE>
5. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
---------- -----------
<S> <C> <C>
Land and improvements $ 13,550 $ 10,387
Buildings 23,912 19,655
Equipment 86,964 71,893
Property and equipment under capital leases 2,413 2,733
Construction in progress 4,790 7,964
---------- -----------
131,629 112,632
Less accumulated depreciation and amortization (30,389) (25,493)
========== ===========
$ 101,240 $ 87,139
========== ===========
</TABLE>
Accumulated amortization associated with property and equipment under capital
leases was $129 at December 31, 1999 and 1998.
F-9
<PAGE>
6. NOTE PAYABLE TO FINANCIAL INSTITUTION:
At December 31, 1999, the Company had a $55.0 million line of credit agreement,
under which $40.0 million was outstanding, with $33.0 million bearing interest
at a weighted average IBOR interest rate of 7.55%, $7.0 million bearing interest
at 8.0% and additional borrowing capacity under the line of credit of $15.0
million. 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% (7.4% at December 31, 1999), or at prime less 0.5% (8.0% at December 31,
1999). The line of credit agreement contains the following covenants; minimum
debt service ratio, maximum funded debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA"), and minimum tangible net worth. In
June 1999, the Company amended its line of credit agreement to include a $10.0
million bridge loan commitment, which expired on December 31, 1999. Amounts
outstanding under the bridge loan commitment were transferred to the Company's
line of credit, which was increased to $55.0 million on December 30, 1999.
Additionally on December 30, 1999, the maturity date of the agreement was
extended to September 30, 2002 and the ratio of maximum funded debt to EBITDA
was adjusted to 3.75:1.0 until March 31, 2000, 3.50:1.0 until September 30, 2000
and 3.25:1.0 until December 31, 2000. At December 31, 1999, the Company was in
compliance with all covenants specified in the line of credit agreement, as
amended.
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
----------- ------------
<S> <C> <C>
Industrial Development Bond, issued in accordance with Internal Revenue
Code Section 144(a), variable interest (4.19% at December 31, 1999 and
3.27% at December 31, 1998) payable monthly; annual principal payments of
$250, collateralized by property and equipment and guaranteed by an
irrevocable letter
of credit from a bank $ 2,750 $ 3,000
Senior Notes, due in annual payments of $5.0 million beginning November 15,
2001, plus interest at 6.87% paid semi-annually, on May 15 and November 15,
without collateral 35,000 35,000
Series A Senior Notes, due in annual payments of $1.4 million beginning
April 1, 1999, plus interest at 6.63% paid
semi-annually, on April 1 and October 1, without collateral 8,571 10,000
Series B Senior Notes, due in annual payments of $4.3 million beginning
April 1, 2002, plus interest at 6.91% paid
semi-annually, on April 1 and October 1, without collateral 30,000 30,000
Other 891 --
----------- ------------
Total long-term debt $ 77,212 $ 78,000
=========== ============
Amounts are displayed on the consolidated balance sheet as follows:
Current portion of long-term debt $ 2,124 $ 1,679
Long-term debt, less current portion 75,088 76,321
----------- ------------
$ 77,212 $ 78,000
=========== ============
</TABLE>
F-10
<PAGE>
The Company is required to maintain certain financial ratios under its long-term
debt agreements. As of December 31, 1999, the most restrictive of these was a
requirement to maintain consolidated indebtedness at or below 58% of
consolidated total capitalization. At December 31, 1999, the Company was in
compliance with all financial ratios specified in its long-term debt agreements.
Future principal payments are as follows:
<TABLE>
<S> <C>
2000 $ 2,124
2001 7,124
2002 10,964
2003 10,964
2004 10,964
Thereafter 35,072
---------
$ 77,212
=========
</TABLE>
Interest expense was $8,065, net of amounts capitalized of $163 in 1999.
Interest expense was $4,835, net of amounts capitalized of $1,554, in 1998.
Interest expense was $1,817, net of amounts capitalized of $707, in 1997.
8. LEASES:
CAPITAL LEASES
The Company leases certain hardware and software related to a new company-wide
enterprise resource planning system and other equipment. The future minimum
lease payments under these capital leases and the present value of the minimum
lease payments as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $ 648
2001 605
2002 583
2003 583
2004 437
---------
Total minimum lease payments 2,856
Less - Amount representing interest 476
---------
Present value of minimum lease payments with interest rates of 7.9% - 10.75% $ 2,380
=========
</TABLE>
OPERATING LEASES
The Company has entered into various equipment leases with terms of eight years
or less. Total rental expense for 1999, 1998, and 1997 was $868, $967, and
$1,323, respectively. Future minimum payments for operating leases with initial
or remaining terms in excess of one year are:
<TABLE>
<S> <C>
2000 $ 441
2001 400
2002 318
2003 198
2004 182
Thereafter 618
---------
$ 2,157
=========
</TABLE>
9. RETIREMENT PLANS:
The Company has a defined contribution retirement plan that covers substantially
all of its employees and provides for Company matches of up to 50% of employee
contributions to the plan, subject to certain limitations. The
F-11
<PAGE>
Company also has two noncontributory defined benefit plans, which cover
substantially all employees at its Denver, Colorado facility. Benefits under the
union pension plan are based upon a flat benefit formula, while benefits under
the salaried benefit plan are based upon a final pay formula. The funding policy
for each noncontributory defined benefit plan is based on current plan costs
plus amortization of the unfunded plan liability. Total expense for all
retirement plans was in 1999, 1998, and 1997 was $513, $533, and $412,
respectively.
10. STOCK-BASED COMPENSATION PLANS:
EMPLOYEE STOCK PURCHASE PLAN
The Company has an Employee Stock Purchase Plan (the "ESPP"), which allows
employees of the Company to purchase shares of the Company's common stock
through accumulated payroll deductions. Participating employees may elect to
contribute up to 10% of their eligible compensation, subject to certain
limitations, during each pay period to the ESPP. The ESPP provides for two
semi-annual offering periods beginning May 1 and November 1 of each year.
Participant funds are accumulated during the offering period and used to
automatically purchase shares of the Company's common stock at 85% of the lower
of the fair market value of such stock at the beginning of the offering period
or the fair market value at the purchase date. The Company has made 300,000
shares of common stock available for sale under the ESPP and had issued 8,195
shares as of December 31, 1999.
STOCK OPTION PLANS
The Company has two stock option plans for employees and directors. The Amended
1995 Stock Incentive Plan provides for the grant of incentive options at an
exercise price which is 100 percent of the fair value of the Company's stock on
the date of grant. The 1995 Stock Option Plan for Nonemployee Directors provides
for the grant of nonqualified options at an exercise price which is not less
than 100 percent of the fair value on the grant date. The plans provide that
options become exercisable according to vesting schedules which range from
immediate for nonemployee directors to ratably over a 60 month period for all
other options. Options terminate 10 years from the date of grant. There were
780,375, 784,594, and 820,928 shares of common stock reserved for issuance under
the Company's stock compensation plans at December 31, 1999, 1998 and 1997,
respectively.
F-12
<PAGE>
A summary of status of the Company's stock options as of December 31, 1999, 1998
and 1997 and changes during the year ended on those dates is presented below:
<TABLE>
<CAPTION>
Exercise Price
----------------------------------
Weighted
Options Average
Outstanding Exercise Price
-------------- ----------------
<S> <C> <C>
Balance, December 31, 1996 280,810 $3.85
Options granted 155,500 18.60
Options exercised (22,416) 2.20
Options canceled -- --
------------ ---------------
Balance, December 31, 1997 413,894 9.48
Options granted 109,613 21.15
Options exercised (36,334) 1.25
Options canceled (3,039) 20.00
------------ ---------------
Balance, December 31, 1998 484,134 12.67
Options granted 176,573 14.74
Options exercised (4,219) 3.24
Options canceled (5,697) 16.02
------------ ---------------
Balance, December 31, 1999 650,791 $ 13.27
============ ===============
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- --------------------------------------------------------------------- ---------------------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Exercise Prices Number of Contractual Price Number of Price
Per Share Options Life (Years) Per Share Options Per Share
--------------- --------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C>
$0.87 - $1.00 67,219 2.75 $ 0.96 67,219 $ 0.96
$4.78 130,622 5.47 4.78 118,524 4.78
$11.50 - $14.75 183,951 8.97 14.58 44,465 14.21
$15.75 - $18.75 158,000 7.10 18.52 96,463 18.37
$18.88 - $22.88 110,999 8.11 21.06 46,588 21.21
----------- ------------
650,791 373,259
=========== ============
</TABLE>
The following are the options exercisable at the corresponding weighted average
exercise price at December 31, 1999, 1998 and 1997, respectively: 373,259 at
$10.78, 266,206 at $9.05, and 221,899 at $5.55.
F-13
<PAGE>
SFAS 123, "Accounting for Stock-Based Compensation" was issued by the FASB in
1995 and, if fully adopted, changes the methods for the recognition of cost
related to stock compensation plans. Adoption of the accounting requirements of
SFAS 123 is optional. As a result, the Company continues to apply Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
its stock compensation plans. However, in accordance with SFAS 123, pro forma
disclosures as if the Company adopted the cost recognition requirements under
SFAS 123 are presented below. The fair value of options granted in 1999, 1998
and 1997 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1999 1998 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Risk-free interest rate 4.91% - 5.44% 5.55% - 5.64% 6.12% -6.61%
Expected dividend yield 0% 0% 0%
Expected volatility 30.73% 29.31% 24.70%
Expected lives five years five years five years
</TABLE>
The weighted average grant date fair value of options granted during 1999, 1998
and 1997 was $5.67, $7.69, and $6.17, respectively. The weighted average
purchase price and weighted average fair value of shares issued under the ESPP
in 1999 were $11.48 and $13.00, respectively.
Had the Company used the fair value methodology for determining compensation
expense, the Company's net income and earnings per share would approximate the
pro forma amounts below (in thousands except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income - as reported $ 13,285 $ 12,581 $ 11,100
Net income - pro forma 12,887 12,244 10,507
Diluted earnings per share - as reported 2.01 1.90 1.68
Diluted earnings per share - pro forma 1.95 1.85 1.59
</TABLE>
11. SHAREHOLDER RIGHTS PLAN:
In June 1999, the Board of Directors adopted a Shareholder Rights Plan (the
"Plan") designed to ensure fair and equal treatment for all shareholders in the
event of a proposed acquisition of the Company by enhancing the ability of the
Board of Directors to negotiate more effectively with a prospective acquiror,
and reserved 150,000 shares of Series A Junior Participating Preferred Stock
("Preferred Stock") for purposes of the Plan. In connection with the adoption of
the Plan, the Board of Directors declared a dividend distribution of one
preferred stock purchase right (a "Right") per share of common stock, payable to
shareholders of record on July 9, 1999. Each right represents the right to
purchase one one-hundredth of a share of Preferred Stock at a price of $83.00,
subject to adjustment. The Rights will be exercisable only if a person or group
acquires, or commences a tender offer to acquire, 15% or more of the Company's
outstanding shares of common stock. Subject to the terms of the Plan and upon
the occurrence of certain events, each Right would entitle the holder to
purchase common stock of the Company, or of an acquiring company in certain
circumstances, having a market value equal to two times the exercise price of
the Right. The Company may redeem the Rights at a price of $0.01 per Right under
certain circumstances.
F-14
<PAGE>
12. COMMITMENTS AND CONTINGENCIES:
LITIGATION
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company
maintains insurance coverage against potential claims in amounts which it
believes to be adequate. Management believes that it is not presently a party to
any litigation, the outcome of which would have a material adverse effect on the
Company's business, financial condition, results of operations or cash flows.
COMMITMENTS
As of December 31, 1999, the Company had outstanding raw material purchase
commitments of approximately $10.8 million.
13. INCOME TAXES:
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
Current:
Federal $ 6,845 $ 5,076 $ 3,189
State 1,092 1,114 619
Deferred:
Federal 742 1,972 2,624
State 85 227 386
----------- ---------- -----------
$ 8,764 $ 8,389 $ 6,818
=========== ========== ===========
</TABLE>
The difference between the effective income tax rate and the statutory U.S.
Federal income tax rate is explained as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
Provision at statutory rate $ 7,717 $ 7,340 $ 6,092
State provision, net of federal benefit 766 951 896
Other 281 98 (170)
=========== ========== ===========
$ 8,764 $ 8,389 $ 6,818
=========== ========== ===========
</TABLE>
F-15
<PAGE>
The tax effect of temporary differences that give rise to significant portions
of deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Trade receivables, net $ 29 $ --
Property and equipment -- 69
Accrued employee benefits 611 632
Inventories 460 378
Net operating loss carryforwards 1,493 1,980
Other -- 65
---------- ----------
Total deferred tax assets $ 2,593 $ 3,124
---------- ----------
Deferred tax liabilities:
Trade receivables, net $ -- $ (895)
Property and equipment (10,065) (7,620)
---------- ----------
Total deferred tax liabilities (10,065) (8,515)
---------- ----------
Net deferred tax liabilities $ (7,472) $ (5,391)
========== ==========
Deferred tax assets and liabilities are included in the
consolidated balance sheets as follows:
Deferred tax assets - current $ 1,502 $ 1,794
Deferred tax liabilities - noncurrent (8,974) (7,185)
---------- -----------
Net deferred tax liabilities $ (7,472) $ (5,391)
========== ==========
</TABLE>
As of December 31, 1999, the Company had approximately $3.8 million of net
operating loss carryforwards as a result of the acquisition of Thompson Pipe and
Steel which are limited in their use to approximately $348 per year during the
15 year carryforward period which expires in 2011.
14. SEGMENT INFORMATION:
The Company has adopted SFAS No. 131, "Disclosures about Segments of and
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.
The Company's Water Transmission segment manufactures and markets large
diameter, high pressure steel pipe used primarily for water transmission. Water
Transmission products are custom manufactured in accordance with project
specifications and are used primarily for high pressure water transmission
pipelines in the United States and Canada. Water Transmission products are
manufactured in Portland, Oregon; Denver, Colorado; Adelanto and Riverside,
California; Parkersburg, West Virginia and Saginaw, Texas facilities and are
sold primarily to public water agencies either directly or through an
installation contractor.
F-16
<PAGE>
The Company's Tubular Products segment manufactures and markets smaller
diameter, electric resistance welded steel pipe for use in a wide range of
construction, agricultural and industrial applications. Tubular Products are
manufactured in the Company's Portland, Oregon; Atchison, Kansas; Houston,
Texas; Bossier City, Louisiana; and Monterrey, Mexico facilities. Tubular
Products are marketed through a network of direct sales force personnel and
independent distributors throughout the United States and Canada.
Based on the location of the customer, the Company sold products only in the
United States and Canada. As of December 31, 1999, all material long-lived
assets are located in the United States.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1999 1998 1997
------------- --------------- --------------
<S> <C> <C> <C>
Net sales:
Water transmission $ 137,418 $ 124,612 $ 99,317
Tubular products 102,889 84,904 51,516
---------- ----------- -----------
Total $ 240,307 $ 209,516 $ 150,833
========== =========== ===========
Gross profit:
Water transmission $ 32,348 $ 28,718 $ 22,733
Tubular products 16,556 12,946 8,384
---------- ----------- -----------
Total $ 48,904 $ 41,664 $ 31,117
========== =========== ===========
Interest expense, net:
Water transmission $ 3,056 $ 2,220 $ 1,681
Tubular products 5,009 2,615 136
---------- ----------- -----------
Total $ 8,065 $ 4,835 $ 1,817
========== =========== ===========
Depreciation and amortization
of Property and Equipment:
Water transmission $ 2,587 $ 1,916 $ 1,781
Tubular products 1,750 1,150 387
---------- ----------- -----------
Total 4,337 3,066 2,168
Corporate 167 125 74
---------- ----------- -----------
Total $ 4,504 $ 3,191 $ 2,242
========== =========== ===========
Amortization of intangible assets:
Water transmission $ - $ - $ -
Tubular products 586 494 -
---------- ----------- -----------
Total $ 586 $ 494 $ -
========== =========== ===========
Capital expenditures:
Water transmission $ 5,673 $ 7,302 $ 8,235
Tubular products 2,948 8,656 12,898
---------- ----------- -----------
Total 8,621 15,958 21,133
Corporate 5,532 227 1,087
---------- ----------- -----------
Total $ 14,153 $ 16,185 $ 22,220
========== =========== ===========
Net sales by geographic area:
United States $ 232,663 $ 204,904 $ 144,399
Canada 7,644 4,612 6,434
---------- ----------- -----------
Total $ 240,307 $ 209,516 $ 150,833
========== =========== ===========
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Total assets:
Water transmission $ 116,022 $ 117,128
Tubular products 119,529 108,853
---------- -----------
Total 235,551 225,981
Corporate 12,720 8,170
---------- -----------
Total $ 248,271 $ 234,151
========== ===========
</TABLE>
No one customer represented more than 10% of total sales in 1999, 1998 or 1997.
15. QUARTERLY DATA (UNAUDITED):
Summarized quarterly financial data for 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
1999:
Net sales:
Water transmission $ 35,706 $ 33,014 $ 36,086 $ 32,612
Tubular products 21,825 27,997 27,236 25,831
---------- ---------- --------- ----------
Total net sales $ 57,531 $ 61,011 $ 63,322 $ 58,443
Gross profit:
Water transmission $ 8,149 $ 7,384 $ 7,980 $ 8,835
Tubular products 2,865 4,414 5,294 3,983
---------- ---------- --------- ----------
Total gross profit $ 11,014 $ 11,798 $ 13,274 $ 12,818
Net income $ 2,643 $ 3,095 $ 3,864 $ 3,683
Earnings per share:
Basic $ 0.41 $ 0.48 $ 0.60 $ 0.57
Diluted $ 0.40 $ 0.47 $ 0.58 $ 0.56
1998:
Net sales:
Water transmission $ 21,904 $ 27,866 $ 36,214 $ 38,628
Tubular products 16,336 26,144 23,054 19,370
---------- ---------- --------- ----------
Total net sales $ 38,240 $ 54,010 $ 59,268 $ 57,998
Gross profit:
Water transmission $ 3,997 $ 6,151 $ 9,383 $ 9,187
Tubular products 2,504 4,850 2,814 2,778
---------- ---------- --------- ----------
Total gross profit $ 6,501 $ 11,001 $ 12,197 $ 11,965
Net income $ 1,723 $ 3,241 $ 4,226 $ 3,391
Earnings per share:
Basic $ 0.27 $ 0.50 $ 0.66 $ 0.53
Diluted $ 0.26 $ 0.49 $ 0.64 $ 0.51
</TABLE>
F-18
<PAGE>
<PAGE>
EXHIBIT 10.14
THIRD AMENDMENT TO LOAN AGREEMENT
This amendment to Loan Agreement ("Amendment") is made as of November
30, 1999 by and among the following parties:
Bank of America, N.A., formerly known as Bank of America National Trust
and Savings Association ("Bank of America" and a "Lender")
U.S. Bank National Association ("U.S. Bank" and a "Lender")
Bank of America, N.A., formerly known as Bank of America National Trust
and Savings Association, in its capacity as Agent ("Agent")
Each of the several financial institutions which subsequently becomes
party to the Loan Agreement pursuant to Section 11.7 (each individually a
"Lender")
Northwest Pipe Company, an Oregon corporation ("Borrower")
R E C I T A L S
A. The Borrower, the Lenders and the Agent are parties to that certain
Amended and Restated Loan Agreement dated as of June 30, 1998, as amended as of
December 23, 1998 and as of June 16, 1999 and as the same may be further
amended, modified or extended from time to time (the "Loan Agreement") and the
related Loan Documents described therein.
B. The parties desire to amend the Loan Agreement as set forth below:
NOW, THEREFORE, the parties agree as follows:
A G R E E M E N T
DEFINITIONS. Capitalized terms used herein and not otherwise defined
shall have the meaning given in the Loan Agreement.
AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is amended
by revising the definition of "Bridge Loan Commitment" as follows:
"`BRIDGE LOAN COMMITMENT' shall mean $10,000,000 until December 31,
1999, after which there shall be no Bridge Loan Commitment."
AMENDMENT TO SECTION 10.5 "MANNER OF BORROWING BRIDGE LOANS." Section
10.5 is amended by changing the Notice(s) of Borrowing date from no later than
November 15, 1999 to no later than December 15, 1999.
AMENDMENT TO SECTION 10.6 "REPAYMENT OF PRINCIPAL." Section 10.6 is
amended by changing the expiration date of the Bridge Loans from December 1,
1999 to December 31, 1999.
<PAGE>
MISCELLANEOUS.
ENTIRE AGREEMENT. This Amendment comprises the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, representations or commitments.
COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same Amendment.
GOVERNING LAW. This Amendment and the other agreements provided for
herein and the rights and obligations of the parties hereto and thereto shall be
construed and interpreted in accordance with the laws of the State of Oregon.
CERTAIN AGREEMENTS NOT ENFORCEABLE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE
LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY
BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION, AND
BE SIGNED BY THE LENDERS TO BE ENFORCEABLE.
EXECUTED AND DELIVERED by the duly authorized officers of the parties
as of the date first above written.
BORROWER: NORTHWEST PIPE COMPANY
By: /s/ JOHN D. MURAKAMI
Its: VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
LENDER: BANK OF AMERICA, N.A.
By: /s/ ED KLUSS
Its: VICE PRESIDENT
Address: Commercial Banking
121 S.W. Morrison Street, Suite 1700
Portland, OR 97204
Fax No. (503) 275-1391
Attn: Larry C. Ellis
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ GREG SALIBA
Its: ASSISTANT VICE PRESIDENT
Address: Oregon Corporate Banking, T-4
111 S.W. Fifth Avenue, Suite 400
Portland, OR 97208
Fax No. (503) 275-7290
Attn: Rick S. Williams
AGENT: BANK OF AMERICA, N.A.
By: /s/ DORA A. BROWN
Its: VICE PRESIDENT
Address: Agency Services
701 Fifth Avenue, Floor 16
Seattle, WA 98104
Fax No. (206) 358-0971
Attn: Dora A. Brown
<PAGE>
EXHIBIT 10.15
FOURTH AMENDMENT TO LOAN AGREEMENT
This amendment to Loan Agreement ("Amendment") is made as of December
30, 1999 by and among the following parties:
Bank of America, N.A., formerly known as Bank of America National Trust
and Savings Association ("Bank of America" and a "Lender")
U.S. Bank National Association ("U.S. Bank" and a "Lender")
Bank of America, N.A., formerly known as Bank of America National Trust
and Savings Association, in its capacity as Agent ("Agent")
Each of the several financial institutions which subsequently becomes
party to the Loan Agreement pursuant to Section 11.7 (each individually a
"Lender")
Northwest Pipe Company, an Oregon corporation ("Borrower")
R E C I T A L S
A. The Borrower, the Lenders and the Agent are parties to that certain
Amended and Restated Loan Agreement dated as of June 30, 1998, as
amended as of December 23, 1998, June 16, 1999 and November 30, 1999,
and as the same may be further amended, modified or extended from time
to time (the "Loan Agreement") and the related Loan Documents
described therein.
B. The parties desire to amend the Loan Agreement as set forth below:
NOW, THEREFORE, the parties agree as follows:
A G R E E M E N T
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
shall have the meaning given in the Loan Agreement.
2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is
amended by revising the following definitions:
(A) "APPLICABLE MARGIN" means, with respect to Offshore
Related Rate Loans, a margin determined as set forth below depending on the
ratio of Funded Debt to EBITDA. Adjustments, with respect to borrowings or
selections of Applicable Interest Rates, will be effective the first day of the
month after Agent has received financial information needed to determine the
relevant ratio with respect to future selections or borrowings. However, if such
information is not given to Agent within the time required by Section 5.9, Agent
may, at its option, adjust the Applicable Margin for Offshore Related Rate
upwards, if applicable, as of the first day of the month following the date by
which such information should have been received. The Applicable Margin which
will be in effect from January 1, 2000 until adjusted as provided herein will be
1.750%.
<PAGE>
<TABLE>
<CAPTION>
RATIO AT END OF PRIOR APPLICABLE MARGIN FOR
FISCAL QUARTER OFFSHORE RELATED RATE LOANS
- ------------------------------------------ ------------------------------------------------------
<S> <C>
Less than 2.26:1 0.650%
Equal to or greater than 2.26:1 0.750%
Up to and including 3.00:1
Greater than 3.00:1 1.000%
Up to and including 3.25:1
Greater than 3.25:1 1.750%
Up to and including 3.50:1
Greater than 3.51 2.250%
</TABLE>
For purposes of calculating this ratio, the EBITDA for the prior fiscal
year for the "Acquisitions," as defined in SECTION 6.6 shall be included in
the calculation. The Acquisitions' EBITDA shall be incorporated on a
decreasing pro-rata basis, with 100% of the Acquisitions' EBITDA included
in the calculation for the first calendar quarter-end following closing of
the Acquisitions, 75% included in the second quarter-end, 50% included in
the third quarter-end, and 25% included in the fourth quarter-end.
Beginning with the fifth quarter following the closing of the Acquisitions,
the EBITDA for the Acquisitions' prior fiscal year shall no longer be
incorporated in this calculation.
(B) "REVOLVING LOAN MATURITY DATE" means September 30, 2002.
Agent and Lenders will consider a one year extension to the Revolving Loan
Maturity Date on each anniversary of this Agreement. However, any extension will
require the consent of Agent and all Lenders in their sole discretion."
(C) "TOTAL COMMITMENT" means $55,000,000.00.
(D) "UNUSED COMMITMENT FEE RATE" means an annual rate
determined as set forth below depending upon the ratio of Funded Debt to EBITDA.
The adjustment will be effective the first day of the month after Agent has
received information needed to determine the relevant ratio. However, if such
information is not given to Agent within the time required by SECTION 5.9, Agent
may, at its option, adjust the Annual Unused Commitment Fee Rate upwards, if
applicable, as of the first day of the month following the date by which such
information should have been received. The Unused Commitment Fee Rate which will
be in effect from January 1, 2000 until adjusted as provided herein will be
0.250%.
<TABLE>
<CAPTION>
RATIO AT END OF PRIOR ANNUAL UNUSED
FISCAL QUARTER COMMITMENT FEE
- ------------------------------------------ ------------------------------------------------------
<S> <C>
Less than 2.26:1 0.200%
Equal to or greater than 2.26:1 0.225%
Up to and including 3.00:1
Greater than 3.00:1 0.250%
Up to and including 3.25:1
Greater than 3.25:1 0.250%
Up to and including 3.50:1
Greater than 3.51 0.275%
</TABLE>
For purposes of calculating this ratio, the EBITDA for the prior fiscal
year for the "Acquisitions," as defined in SECTION 6.6, shall be included
in the calculation. The Acquisitions' EBITDA shall be incorporated on a
decreasing pro-rata basis, with 100% of the Acquisitions' EBITDA included
in the calculation for the first calendar quarter-end following closing of
the Acquisitions, 75% included in the second quarter-end, 50% included in
the third quarter-end, and 25% included in the fourth quarter-end.
Beginning with the
<PAGE>
fifth quarter following the closing of the Acquisitions, the EBITDA for the
Acquisitions' prior fiscal year shall no longer be incorporated in this
calculation.
3. AMENDMENT TO SECTION 2.5 "OPTIONAL CONVERSION OF UP TO $10,000,000 OF
REVOLVING LOANS." Section 2.5 is amended to read as follows:
"OPTIONAL CONVERSION OF UP TO $10,000,000 OF REVOLVING LOANS. On the first
day of any month, up to and including October 1, 2001, if at that time, the
conditions set forth in Section 3.1 are satisfied, Borrowers may convert a
portion of not less than $500,000 of the Revolving Loans in increments of
$100,000 to a Term Loan, but Borrowers shall not convert more than a total
of $10,000,000 of Revolving Loans to Term Loans. Each such conversion will
be accomplished by Borrowers giving written notice to Agent at least 5
business days prior to the date selected by Borrowers for conversion. Such
notice will specify what portions of the Term Loan will bear interest at
the available alternative rates described in Section 2.6(b). Principal
payments on each Term Loan will be paid in 16 equal consecutive quarterly
installments with the first principal payment being due at the end of the
calendar quarter following conversion. Interest on each Term Loan will be
payable monthly in arrears on the last day of the month. All then unpaid
principal and interest on each Term Loan will be due and payable no later
than 48 months following such conversion."
4. AMENDMENT TO SECTION 5.13 "MAXIMUM FUNDED DEBT TO EBITDA." Section 5.13 is
amended to read as follows:
Borrowers and their Subsidiaries, on a consolidated basis, shall maintain
for each period of four consecutive fiscal quarters a ratio of Funded Debt
to EBITDA of no greater than:
<TABLE>
<CAPTION>
PERIOD RATIO
- ------------------------------------------------------------------------------- ------------
<S> <C>
For the four consecutive fiscal quarters ending December 31, 1999 3.75:1
For the four consecutive fiscal quarters ending March 31, 2000 3.75:1
For the four consecutive fiscal quarters ending June 30, 2000 3.50:1
For the four consecutive fiscal quarters ending September 30, 2000 3.50:1
For any four consecutive fiscal quarters ending on or after December 31, 2000 3.25:1
</TABLE>
For purposes of calculating this covenant, the EBITDA for the prior fiscal
year for the "Acquisitions," as defined in Section 6.6, shall be included
in the calculation. The Acquisitions' EBITDA shall be incorporated on a
decreasing pro-rata basis, with 100% of the Acquisitions' EBITDA included
in the calculation for the first calendar quarter-end following closing of
the Acquisitions, 75% included in the second quarter-end, 50% included in
the third quarter-end, and 25% included in the fourth quarter-end.
Beginning with the fifth quarter following the closing of the Acquisitions,
the EBITDA for the Acquisitions' prior fiscal year shall no longer be
incorporated in this calculation.
5. NO FURTHER AMENDMENT, FEES. Except as expressly modified by this Amendment,
the Loan Agreement and the other Loan Documents shall remain unmodified and
in full force and effect and
<PAGE>
the parties hereby ratify their respective obligations thereunder. Without
limiting the foregoing, the Borrower expressly reaffirms and ratifies its
obligation to pay or reimburse the Agent and the Lender on request for all
reasonable expenses, including legal fees, actually incurred by the Agent
or such Lender in connection with the preparation of this Amendment, the
other Amendment Documents, and the closing of the transactions contemplated
hereby and thereby. Borrowers shall pay Agent for the pro rata benefit of
Lenders a fee of $10,000 for the increase in the Total Commitment provided
herein. Such $10,000 fee shall be paid on execution of this Amendment.
6. MISCELLANEOUS.
C. ENTIRE AGREEMENT. This Amendment comprises the entire agreement of the
parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements, representations or commitments.
D. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and
all of which taken together shall constitute one and the same
Amendment.
E. GOVERNING LAW. This Amendment and the other agreements provided for
herein and the rights and obligations of the parties hereto and
thereto shall be construed and interpreted in accordance with the laws
of the State of Oregon.
F. CERTAIN AGREEMENTS NOT ENFORCEABLE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE
LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY
BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION, AND
BE SIGNED BY THE LENDERS TO BE ENFORCEABLE.
<PAGE>
EXECUTED AND DELIVERED by the duly authorized officers of the parties
as of the date first above written.
BORROWER: NORTHWEST PIPE COMPANY
By: /s/ JOHN D. MURAKAMI
Its: VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
LENDER: BANK OF AMERICA, N.A.
By: /s/ ED KLUSS
Its: VICE PRESIDENT
Address: Commercial Banking
121 S.W. Morrison Street, Suite 1700
Portland, OR 97204
Fax No. (503) 275-1391
Attn: Larry C. Ellis
U.S. BANK NATIONAL ASSOCIATION
By: /s/ GREG SALIBA
Its: VICE PRESIDENT
Address: Oregon Corporate Banking, T-4
111 S.W. Fifth Avenue, Suite 400
Portland, OR 97208
Fax No. (503) 275-7290
Attn: Rick S. Williams
AGENT: BANK OF AMERICA, N.A.
By: /s/ KEN PURO
Its: VICE PRESIDENT
Address: Agency Services
701 Fifth Avenue, Floor 16
Seattle, WA 98104
Fax No. (206) 358-0971
Attn: Dora A. Brown
<PAGE>
EXHIBIT 10.17
July 28, 1999
TO THE CEO OR PRESIDENT:
Northwest Pipe Company, an Oregon corporation (the "Company"),
considers the establishment and maintenance of a sound and vital management to
be essential to protecting and enhancing the best interest of the Company and
its shareholders. In this connection, the Company recognizes that, as is the
case with many publicly held corporations, the possibility of a Change in
Control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the "'Board") has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management to their
assigned duties without distraction in circumstances arising from the
possibility of a Change in Control of the Company.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a ?Change in Control? of
the Company under the circumstances described below.
1. RIGHT TO TERMINATE. The Company or you may terminate your employment
at any time, subject to the Company's obligations to provide the benefits
hereinafter specified in accordance with the terms hereof.
2. TERM OF AGREEMENT. This Agreement shall commence on the date hereof
and shall continue in effect until July 19, 2001; provided, however, that
commencing on July 19, 2001 and each July 19 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless at
least 90 days prior to such July 19 date, the Company or you shall have given
notice that this Agreement shall not be extended; provided, however, that this
Agreement shall continue in effect for a period of twenty-four (24) months
beyond the term provided herein if a Change in Control, as defined in Section 3
hereto shall have occurred during such term. Notwithstanding anything in this
Section 2 to the contrary, this Agreement shall terminate if you or the Company
terminate your employment prior to a Change in Control as defined in Section 3
hereof.
3. CHANGE IN CONTROL; PERSON.
3.1 For purposes of this Agreement, a "Change in Control"
shall mean the occurrence of any of the following events:
3.1.1 The approval by the shareholders of the Company
of:
(a) any consolidation, merger or plan of
share exchange involving the Company (a "Merger") in which the Company is not
the continuing or surviving corporation or pursuant to which shares of Common
Stock of the Company ("Company Shares") would be converted into cash, securities
or other property, other than a Merger involving Company Shares in which the
holders of Company Shares immediately prior to the Merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the Merger,
(b) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, the assets of the Company; or
(c) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
<PAGE>
3.1.2 At any time during a period of two consecutive
years, individuals who at the beginning of such period constituted the Board
("Incumbent Directors") shall cease for any reason to constitute at least a
majority thereof unless each new director elected during such two-year period
was nominated or elected by two-thirds of the Incumbent Directors then in office
and voting (with new directors nominated or elected by two-thirds of the
Incumbent Directors also being deemed to be Incumbent Directors); or
3.1.3 Any Person (as hereinafter defined) shall, as a
result of a tender or exchange offer, open market purchases, or privately
negotiated purchases from anyone other than the Company, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934), directly or indirectly, of securities of the Company ordinarily
having the right to vote for the election of directors ("'Voting Securities")
representing thirty percent (30%) or more of the combined voting power of the
then outstanding Voting Securities.
Notwithstanding anything in the foregoing to the contrary, unless otherwise
determined by the Board, no Change in Control shall be deemed to have occurred
for purposes of this Agreement if (1) you acquire (other than on the same basis
as all other holders of the Company Shares) an equity interest in an entity that
acquires the Company in a Change in Control otherwise described under
subparagraph 3.1.1 above, or (2) you are part of a group that constitutes a
Person which becomes a beneficial owner of Voting Securities in a transaction
that otherwise would have resulted in a Change in Control under subparagraph
3.1.3 above.
3.2 For purposes of this Agreement, the term "'Person" shall
mean and include any individual, corporation, partnership, group, association or
other "person," as such term is used in Section 13(d)(3) or Section 14 (d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company
or any employee benefit plan(s) sponsored by the Company.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in Control
shall have occurred, you shall be entitled to the benefits provided in Section
5.3 hereof upon the termination of your employment within twenty-four (24)
months after such Change in Control unless such termination is (a) because of
your death, (b) by the Company for Cause or Disability or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4.1 DISABILITY. Termination by the Company of your employment
based on "Disability" shall mean termination because of your absence from your
duties with the Company on a full-time basis for one hundred eighty (180)
consecutive days as a result of your incapacity due to physical or mental
illness, unless within thirty (30) days after Notice of Termination (as
hereinafter defined) is given to you following such absence you shall have
returned to the full-time performance of your duties.
4.2 CAUSE. Termination by the Company of your employment for
"Cause" shall mean termination upon (a) the willful and continued failure by you
to substantially perform your reasonably assigned duties with the Company
consistent with those duties assigned to you prior to the Change in Control
(other than any such failure resulting from your incapacity due to physical or
mental illness) which failure shall not have been corrected within thirty (30)
days after a demand for substantial performance is delivered to you by the
Chairman of the Board or President of the Company which specifically identifies
the manner in which such executive believes that you have not substantially
performed your duties, or (b) the willful engaging by you in illegal conduct
which is materially and demonstrably injurious to the Company. For purposes of
this paragraph 4.2, no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you in knowing bad faith and
without reasonable belief that your action or omission was in, or not opposed
to, the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advise of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by you in good faith and in the best interests of the
corporation. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the
<PAGE>
Board you were guilty of the conduct set forth above in (a) or (b) of this
paragraph 4.2 and specifying the particulars thereof in detail.
4.3 GOOD REASON. Termination by you of your employment for
"Good Reason" shall mean termination based on:
4.3.1 a change in your status, title, position(s) or
responsibilities as an officer of the Company which, in your judgment (which
shall be exercised in good faith), constitutes an adverse change from your
status, title, position(s) and responsibilities as in effect immediately prior
to the Change in Control, or the assignment to you of any duties or
responsibilities which, in your judgment (which shall be exercised in good
faith), are inconsistent with such status, title or position(s), or any removal
of you from or any failure to reappoint or reelect you to such position(s),
except in connection with the termination of your employment for Cause,
Disability or as a result of your death or by you other than for Good Reason;
4.3.2 a reduction by the Company in your base salary
as in effect immediately prior to the Change in Control;
4.3.3 the failure by the Company to continue in
effect any Plan (as hereinafter defined) in which you are participating at the
time of the Change in Control (or Plans providing you with at least
substantially similar benefits) other than as a result of the normal expiration
of any such Plan in accordance with its terms as in effect at the time of the
Change in Control, or the taking of any action, or the failure to act, by the
Company which would adversely affect your continued participation in any of such
Plans on at least as favorable a basis to you as is the case on the date of the
Change in Control or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit enjoyed by you at
the time of the Change in Control;
4.3.4 the failure by the Company to provide and
credit you with the number of paid vacation days to which you are then entitled
in accordance with the Company's normal vacation policy as in effect immediately
prior to the Change in Control;
4.3.5 the Company's requiring you to be based
anywhere other than within ten (10) miles of where your office is located
immediately prior to the Change in Control except for required travel on the
Company's business to an extent substantially consistent with the business
travel obligations which you undertook on behalf of the Company prior to the
Change in Control;
4.3.6 the failure by the Company to obtain from any
Successor (as hereinafter defined) the assumption or assent to this Agreement
contemplated by Section 6 hereof within thirty (30) days after a Change in
Control; or
4.3.7 any purported termination by the Company of
your employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph 4.4 below (and, if applicable,
paragraph 4.2 above); and for purposes of this Agreement no such purported
termination shall be effective.
For purpose of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance, or relocation plan or policy or any other plan, program or policy of
the Company intended to benefit employees.
4.4 NOTICE OF TERMINATION. Any purported termination by the
Company or by you following a Change in Control shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "'Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
<PAGE>
4.5 DATE OF TERMINATION. "Date of Termination" shall mean (a)
if your employment is to be terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (b) if your employment is to be terminated by the Company for Cause,
the date on which a Notice of Termination is given, and (c) if your employment
is to be terminated by you or by the Company for any other reason, the date
specified in the Notice of Termination, which shall be a date no earlier than
ninety (90) days after the date on which a Notice of Termination is given,
unless an earlier date has been agreed to by the party receiving the Notice of
Termination either in advance of, or after, receiving such Notice of
Termination. Notwithstanding anything in the foregoing to the contrary, if the
party receiving the Notice of Termination has not previously agreed to the
termination, then within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination may notify the other party
that a dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of the
parties or by the arbitrators in a proceeding as provided in Section 12 hereof.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
5.1 During any period following a Change in Control that you
fail to perform your duties as a result of incapacity due to physical or mental
illness, you shall continue to receive your full base salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4.1, 4.4
and 4.5 hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
5.2 If your employment shall be terminated for Cause or as a
result of your death following a Change in Control of the Company, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect just prior to the time a Notice of Termination is given plus any
benefits or awards (including both the cash and stock components) which pursuant
to the terms of any Plans have been earned or become payable, but which have not
yet been paid to you. Thereupon the Company shall have no further obligations to
you under this Agreement.
5.3 If within twenty-four (24) months after a Change in
Control shall have occurred, as defined in Section 3 above, your employment by
the Company shall be terminated (a) by the Company other than for Cause or
Disability or (b) by you for Good Reason, then, by no later than the fifth day
following the Date of Termination (except as otherwise provided), you shall be
entitled, without regard to any contrary provisions of any Plan, to a severance
benefit (the "Severance Benefit") equal to either (x) the Specified Benefits (as
defined in subsection 5.3.1 below), or (y) the Capped Benefit (as defined in
subsection 5.3.2 below). You shall be entitled, in your sole discretion, to
elect to receive either the Specified Benefits or the Capped Benefit.
5.3.1 The "Specified Benefits" are as follows:
(a) the Company shall pay your full base
salary through the Date of Termination at the rate in effect just prior to the
time a Notice of Termination is given plus any benefits or awards (including
both cash and stock components) which pursuant to the terms of any Plans have
been earned or become payable, but which have not yet been paid to you
(including amounts which previously had been deferred at your request);
(b) as severance pay and in lieu of any
further salary for periods subsequent to the Date of Termination, the Company
shall pay to you in a single payment an amount in cash equal to (i) an amount
equal to three (3) times the higher of (A) your annual base salary at the rate
in effect just prior to the time a Notice of Termination is given, or (B) your
annual base salary in effect immediately prior to the Change in Control of the
Company, plus (ii) an amount equal to three (3) times the average of the cash
bonuses paid to you during the previous three years;
<PAGE>
(c) for a thirty-six (36) month period after
the Date of Termination, the Company shall arrange to provide you and your
dependents with life, accident, medical and dental insurance benefits
substantially similar to those which you were receiving immediately prior to the
Change in Control of the Company. Notwithstanding the foregoing, the Company
shall not provide any benefit otherwise receivable by you pursuant to this
paragraph 5.3.1(c) to the extent that a similar benefit is actually received by
you from a subsequent employer during such thirty-six (36) month period, and any
such benefit actually received by you shall be reported to the Company;
(d) any and all outstanding options to
purchase stock of the Company (or any Successor) held by you shall immediately
vest and become exercisable in full; and
(e) the Company shall pay you for any
vacation time earned but not taken at the Date of Termination, at an hourly rate
equal to your annual base salary as in effect immediately prior to the time a
Notice of Termination is given divided by 2080.
5.3.2 The "Capped Benefit" equals the Specified
Benefits, reduced by the minimum amount necessary to prevent any portion of the
Specified Benefits from being a "parachute payment" as defined in Section 280G
(b) (2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. The amount of the Capped Benefit shall therefore equal (1)
three times the "base amount" as defined in IRC, Section 280G (b) (3) (A)
reduced by $1 (One Dollar), and further reduced by (2) the present value of all
other payments and benefits you are entitled to receive from the Company that
are contingent upon a Change in Control of the Company within the meaning of IRC
Section 280G (b) (2) (A) (i), including accelerated vesting of options and other
awards under the Company's stock option plans, and increased by (3) all
Specified Benefits that are not contingent upon a Change in Control within the
meaning of IRC Section 280G (b) (2) (A) (i). If you receive the Capped Benefit,
you may determine the extent to which each of the Specified Benefits shall be
reduced. The parties recognize that there is some uncertainty regarding the
computations under IRC Section280G which must be applied to determine the Capped
Benefit. Accordingly, the parties agree that, after the Severance Benefit is
paid, the amount of the Capped Benefit may be retroactively adjusted to the
extent any subsequent Internal Revenue Service regulations, rulings, audits or
other pronouncements establish that the original calculation of the Capped
Benefit was incorrect. In that case, amounts shall be paid or reimbursed between
the parties so that you will have received the Severance Benefit you would have
received if the Capped Benefit had originally been calculated correctly.
5.4 Except as specifically provided above, the amount of any
payment provided for in this Section 5 shall not be reduced, offset or subject
to recovery by the Company by reason of any compensation earned by you as the
result of employment by another employer after the Date of Termination, or
otherwise. Your entitlements under Section 5.3 are in addition to, and not in
lieu of any rights, benefits or entitlements you may have under the terms or
provisions of any Plan.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 The Company will seek to have any Successor (as
hereinafter defined), by agreement in form and substance satisfactory to you,
assume the Company's obligations under this Agreement or assent to the
fulfillment by the Company of its obligations under this Agreement. Failure of
the Company to obtain such assumption or assent prior to or at the time a Person
becomes a Successor shall constitute Good Reason for termination by you of your
employment and, if a Change in Control of the Company has occurred, shall
entitle you immediately to the benefits provided in Section 5.3 hereof upon
delivery by you of a Notice of Termination which the Company, by executing this
Agreement, hereby assents to. This Agreement will be binding upon and inure to
the benefit of the Company and any Successor (and such Successor shall
thereafter be deemed the ?Company? for purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company. For purposes
of this Agreement, "Successor" shall mean any Person that succeeds to, or has
the practical ability to control (either immediately or with the passage of
time), the Company's business directly, by merger, consolidation or purchase of
assets, or indirectly, by purchase of the Company's Voting Securities or
otherwise.
<PAGE>
6.2 This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there be no such designee, to your estate.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
legal expenses incurred by you as a result of (i) your termination following a
Change in Control of the Company (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination) or (ii) your seeking
to obtain or enforce any right or benefit provided by this Agreement.
8. SURVIVAL. The respective obligations of, and benefits afforded to,
the Company and you as provided in Section 5, 6, 7 and 12 of this Agreement
shall survive termination of this Agreement.
9. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed to the
address of the respective party set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Chairman of the Board or President of the Company, with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing. In accordance herewith, except that notice of
change of address shall be effective only upon receipt.
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and the Chairman of the Board or President of the
Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Oregon.
11. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Portland, Oregon by three arbitrators in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 12.
13. RELATED AGREEMENTS. To the extent that any provision of any other
agreement between the Company or any of its subsidiaries and you shall limit,
qualify or be inconsistent with any provision of this Agreement, then for
purposes of this Agreement, while the same shall remain in force, the provision
of this Agreement shall control and such provision of such other agreement shall
be deemed to have been superseded, and to be of no force or effect, as if such
other agreement had been formally amended to the extent necessary to accomplish
such purpose.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
<PAGE>
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
William R. Tagmyer, CEO
Northwest Pipe Company
AGREED AND ACCEPTED:
- ---------------------------------
<PAGE>
EXHIBIT 10.18
July 28, 1999
TO THE VICE PRESIDENT:
Northwest Pipe Company, an Oregon corporation (the "Company"),
considers the establishment and maintenance of a sound and vital management to
be essential to protecting and enhancing the best interest of the Company and
its shareholders. In this connection, the Company recognizes that, as is the
case with many publicly held corporations, the possibility of a Change in
Control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the "'Board") has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management to their
assigned duties without distraction in circumstances arising from the
possibility of a Change in Control of the Company.
In order to induce you to remain in the employ of the Company, this
letter agreement, which has been approved by the Board, sets forth the severance
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "Change in Control" of
the Company under the circumstances described below.
1. RIGHT TO TERMINATE. The Company or you may terminate your employment
at any time, subject to the Company's obligations to provide the benefits
hereinafter specified in accordance with the terms hereof.
2. TERM OF AGREEMENT. This Agreement shall commence on the date hereof
and shall continue in effect until July 19, 2001; provided, however, that
commencing on July 19, 2001 and each July 19 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless at
least 90 days prior to such July 19 date, the Company or you shall have given
notice that this Agreement shall not be extended; provided, however, that this
Agreement shall continue in effect for a period of twenty-four (24) months
beyond the term provided herein if a Change in Control, as defined in Section 3
hereto shall have occurred during such term. Notwithstanding anything in this
Section 2 to the contrary, this Agreement shall terminate if you or the Company
terminate your employment prior to a Change in Control as defined in Section 3
hereof.
3. CHANGE IN CONTROL; PERSON.
3.1 For purposes of this Agreement, a "Change in Control" shall mean
the occurrence of any of the following events:
3.1.1 The approval by the shareholders of the Company of:
(a) any consolidation, merger or plan of share exchange
involving the Company (a "Merger") in which the Company is not the continuing or
surviving corporation or pursuant to which shares of Common Stock of the Company
("Company Shares") would be converted into cash, securities or other property,
other than a Merger involving Company Shares in which the holders of Company
Shares immediately prior to the Merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the Merger,
(b) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
the assets of the Company; or
(c) the adoption of any plan or proposal for the
liquidation or dissolution of the Company.
<PAGE>
3.1.2 At any time during a period of two consecutive years,
individuals who at the beginning of such period constituted the Board
("Incumbent Directors") shall cease for any reason to constitute at least a
majority thereof unless each new director elected during such two-year period
was nominated or elected by two-thirds of the Incumbent Directors then in office
and voting (with new directors nominated or elected by two-thirds of the
Incumbent Directors also being deemed to be Incumbent Directors); or
3.1.3 Any Person (as hereinafter defined) shall, as a result of
a tender or exchange offer, open market purchases, or privately negotiated
purchases from anyone other than the Company, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Company ordinarily having the right
to vote for the election of directors ("'Voting Securities") representing thirty
percent (30%) or more of the combined voting power of the then outstanding
Voting Securities.
Notwithstanding anything in the foregoing to the contrary, unless otherwise
determined by the Board, no Change in Control shall be deemed to have occurred
for purposes of this Agreement if (1) you acquire (other than on the same basis
as all other holders of the Company Shares) an equity interest in an entity that
acquires the Company in a Change in Control otherwise described under
subparagraph 3.1.1 above, or (2) you are part of a group that constitutes a
Person which becomes a beneficial owner of Voting Securities in a transaction
that otherwise would have resulted in a Change in Control under subparagraph
3.1.3 above.
3.2 For purposes of this Agreement, the term "'Person" shall
mean and include any individual, corporation, partnership, group, association or
other "person," as such term is used in Section 13(d)(3) or Section 14 (d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company
or any employee benefit plan(s) sponsored by the Company.
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in Control
shall have occurred, you shall be entitled to the benefits provided in Section
5.3 hereof upon the termination of your employment within twenty-four (24)
months after such Change in Control unless such termination is (a) because of
your death, (b) by the Company for Cause or Disability or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
4.1 DISABILITY. Termination by the Company of your employment
based on "Disability" shall mean termination because of your absence from your
duties with the Company on a full-time basis for one hundred eighty (180)
consecutive days as a result of your incapacity due to physical or mental
illness, unless within thirty (30) days after Notice of Termination (as
hereinafter defined) is given to you following such absence you shall have
returned to the full-time performance of your duties.
4.2 CAUSE. Termination by the Company of your employment for
"Cause" shall mean termination upon (a) the willful and continued failure by you
to substantially perform your reasonably assigned duties with the Company
consistent with those duties assigned to you prior to the Change in Control
(other than any such failure resulting from your incapacity due to physical or
mental illness) which failure shall not have been corrected within thirty (30)
days after a demand for substantial performance is delivered to you by the
Chairman of the Board or President of the Company which specifically identifies
the manner in which such executive believes that you have not substantially
performed your duties, or (b) the willful engaging by you in illegal conduct
which is materially and demonstrably injurious to the Company. For purposes of
this paragraph 4.2, no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you in knowing bad faith and
without reasonable belief that your action or omission was in, or not opposed
to, the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advise of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by you in good faith and in the best interests of the
corporation. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for
<PAGE>
you, together with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of the conduct set forth
above in (a) or (b) of this paragraph 4.2 and specifying the particulars thereof
in detail.
4.3 GOOD REASON. Termination by you of your employment for "Good
Reason" shall mean termination based on:
4.3.1 a change in your status, title, position(s) or
responsibilities as an officer of the Company which, in your judgment (which
shall be exercised in good faith), constitutes an adverse change from your
status, title, position(s) and responsibilities as in effect immediately prior
to the Change in Control, or the assignment to you of any duties or
responsibilities which, in your judgment (which shall be exercised in good
faith), are inconsistent with such status, title or position(s), or any removal
of you from or any failure to reappoint or reelect you to such position(s),
except in connection with the termination of your employment for Cause,
Disability or as a result of your death or by you other than for Good Reason;
4.3.2 a reduction by the Company in your base salary as in
effect immediately prior to the Change in Control;
4.3.3 the failure by the Company to continue in effect any
Plan (as hereinafter defined) in which you are participating at the time of the
Change in Control (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the Change in Control, or
the taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any of such Plans on at least
as favorable a basis to you as is the case on the date of the Change in Control
or which would materially reduce your benefits in the future under any of such
Plans or deprive you of any material benefit enjoyed by you at the time of the
Change in Control;
4.3.4 the failure by the Company to provide and credit you
with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy as in effect immediately
prior to the Change in Control;
4.3.5 the Company's requiring you to be based anywhere other
than within ten (10) miles of where your office is located immediately prior to
the Change in Control except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which you
undertook on behalf of the Company prior to the Change in Control;
4.3.6 the failure by the Company to obtain from any
Successor (as hereinafter defined) the assumption or assent to this Agreement
contemplated by Section 6 hereof within thirty (30) days after a Change in
Control; or
4.3.7 any purported termination by the Company of your
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of paragraph 4.4 below (and, if applicable, paragraph 4.2
above); and for purposes of this Agreement no such purported termination shall
be effective.
For purpose of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance, or relocation plan or policy or any other plan, program or policy of
the Company intended to benefit employees.
4.4 NOTICE OF TERMINATION. Any purported termination by the
Company or by you following a Change in Control shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "'Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
<PAGE>
4.5 DATE OF TERMINATION. "Date of Termination" shall mean (a)
if your employment is to be terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (b) if your employment is to be terminated by the Company for Cause,
the date on which a Notice of Termination is given, and (c) if your employment
is to be terminated by you or by the Company for any other reason, the date
specified in the Notice of Termination, which shall be a date no earlier than
ninety (90) days after the date on which a Notice of Termination is given,
unless an earlier date has been agreed to by the party receiving the Notice of
Termination either in advance of, or after, receiving such Notice of
Termination. Notwithstanding anything in the foregoing to the contrary, if the
party receiving the Notice of Termination has not previously agreed to the
termination, then within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination may notify the other party
that a dispute exists concerning the termination, in which event the Date of
Termination shall be the date set either by mutual written agreement of the
parties or by the arbitrators in a proceeding as provided in Section 12 hereof.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
5.1 During any period following a Change in Control that you
fail to perform your duties as a result of incapacity due to physical or mental
illness, you shall continue to receive your full base salary at the rate then in
effect and any benefits or awards under any Plans shall continue to accrue
during such period, to the extent not inconsistent with such Plans, until your
employment is terminated pursuant to and in accordance with paragraphs 4.1, 4.4
and 4.5 hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
5.2 If your employment shall be terminated for Cause or as a
result of your death following a Change in Control of the Company, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect just prior to the time a Notice of Termination is given plus any
benefits or awards (including both the cash and stock components) which pursuant
to the terms of any Plans have been earned or become payable, but which have not
yet been paid to you. Thereupon the Company shall have no further obligations to
you under this Agreement.
5.3 If within twenty-four (24) months after a Change in Control
shall have occurred, as defined in Section 3 above, your employment by the
Company shall be terminated (a) by the Company other than for Cause or
Disability or (b) by you for Good Reason, then, by no later than the fifth day
following the Date of Termination (except as otherwise provided), you shall be
entitled, without regard to any contrary provisions of any Plan, to a severance
benefit (the "Severance Benefit") equal to either (x) the Specified Benefits (as
defined in subsection 5.3.1 below), or (y) the Capped Benefit (as defined in
subsection 5.3.2 below). You shall be entitled, in your sole discretion, to
elect to receive either the Specified Benefits or the Capped Benefit.
5.3.1 The "Specified Benefits" are as follows:
(a) the Company shall pay your full base salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including both cash
and stock components) which pursuant to the terms of any Plans have been earned
or become payable, but which have not yet been paid to you (including amounts
which previously had been deferred at your request);
(b) as severance pay and in lieu of any further salary
for periods subsequent to the Date of Termination, the Company shall pay to you
in a single payment an amount in cash equal to (i) an amount equal to two (2)
times the higher of (A) your annual base salary at the rate in effect just prior
to the time a Notice of Termination is given, or (B) your annual base salary in
effect immediately prior to the Change in Control of the Company, plus (ii) an
amount equal to two (2) times the average of the cash bonuses paid to you during
the previous three years;
<PAGE>
(c) for a twenty-four (24) month period after the Date
of Termination, the Company shall arrange to provide you and your dependents
with life, accident, medical and dental insurance benefits substantially similar
to those which you were receiving immediately prior to the Change in Control of
the Company. Notwithstanding the foregoing, the Company shall not provide any
benefit otherwise receivable by you pursuant to this paragraph 5.3.1(c) to the
extent that a similar benefit is actually received by you from a subsequent
employer during such twenty-four (24) month period, and any such benefit
actually received by you shall be reported to the Company;
(d) any and all outstanding options to purchase stock
of the Company (or any Successor) held by you shall immediately vest and become
exercisable in full; and
(e) the Company shall pay you for any vacation time
earned but not taken at the Date of Termination, at an hourly rate equal to your
annual base salary as in effect immediately prior to the time a Notice of
Termination is given divided by 2080.
5.3.2 The "Capped Benefit" equals the Specified Benefits,
reduced by the minimum amount necessary to prevent any portion of the Specified
Benefits from being a "parachute payment" as defined in Section 280G (b) (2)
of the Internal Revenue Code of 1986, as amended ("IRC"), or any successor
provision. The amount of the Capped Benefit shall therefore equal (1) three
times the "base amount" as defined in IRC, Section 280G (b) (3) (A) reduced by
$1 (One Dollar), and further reduced by (2) the present value of all other
payments and benefits you are entitled to receive from the Company that are
contingent upon a Change in Control of the Company within the meaning of IRC
Section 280G (b) (2) (A) (i), including accelerated vesting of options and other
awards under the Company's stock option plans, and increased by (3) all
Specified Benefits that are not contingent upon a Change in Control within the
meaning of IRC Section 280G (b) (2) (A) (i). If you receive the Capped Benefit,
you may determine the extent to which each of the Specified Benefits shall be
reduced. The parties recognize that there is some uncertainty regarding the
computations under IRC Section 280G which must be applied to determine the
Capped Benefit. Accordingly, the parties agree that, after the Severance Benefit
is paid, the amount of the Capped Benefit may be retroactively adjusted to the
extent any subsequent Internal Revenue Service regulations, rulings, audits or
other pronouncements establish that the original calculation of the Capped
Benefit was incorrect. In that case, amounts shall be paid or reimbursed between
the parties so that you will have received the Severance Benefit you would have
received if the Capped Benefit had originally been calculated correctly.
5.4 Except as specifically provided above, the amount of any
payment provided for in this Section 5 shall not be reduced, offset or subject
to recovery by the Company by reason of any compensation earned by you as the
result of employment by another employer after the Date of Termination, or
otherwise. Your entitlements under Section 5.3 are in addition to, and not in
lieu of any rights, benefits or entitlements you may have under the terms or
provisions of any Plan.
6. SUCCESSORS; BINDING AGREEMENT.
6.1 The Company will seek to have any Successor (as hereinafter
defined), by agreement in form and substance satisfactory to you, assume the
Company's obligations under this Agreement or assent to the fulfillment by the
Company of its obligations under this Agreement. Failure of the Company to
obtain such assumption or assent prior to or at the time a Person becomes a
Successor shall constitute Good Reason for termination by you of your employment
and, if a Change in Control of the Company has occurred, shall entitle you
immediately to the benefits provided in Section 5.3 hereof upon delivery by you
of a Notice of Termination which the Company, by executing this Agreement,
hereby assents to. This Agreement will be binding upon and inure to the benefit
of the Company and any Successor (and such Successor shall thereafter be deemed
the "Company" for purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Company's business directly, by merger, consolidation or purchase of assets,
or indirectly, by purchase of the Company's Voting Securities or otherwise.
<PAGE>
6.2 This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there be no such designee, to your estate.
7. FEES AND EXPENSES. The Company shall pay all legal fees and related
legal expenses incurred by you as a result of (i) your termination following a
Change in Control of the Company (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination) or (ii) your seeking
to obtain or enforce any right or benefit provided by this Agreement.
8. SURVIVAL. The respective obligations of, and benefits afforded to,
the Company and you as provided in Section 5, 6, 7 and 12 of this Agreement
shall survive termination of this Agreement.
9. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed to the
address of the respective party set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Chairman of the Board or President of the Company, with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing. In accordance herewith, except that notice of
change of address shall be effective only upon receipt.
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and the Chairman of the Board or President of the
Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Oregon.
11. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Portland, Oregon by three arbitrators in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 12.
13. RELATED AGREEMENTS. To the extent that any provision of any other
agreement between the Company or any of its subsidiaries and you shall limit,
qualify or be inconsistent with any provision of this Agreement, then for
purposes of this Agreement, while the same shall remain in force, the provision
of this Agreement shall control and such provision of such other agreement shall
be deemed to have been superseded, and to be of no force or effect, as if such
other agreement had been formally amended to the extent necessary to accomplish
such purpose.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
<PAGE>
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
Brian W. Dunham, President
Northwest Pipe Company
AGREED AND ACCEPTED:
- ------------------------------------
<PAGE>
EXHIBIT 21
NORTHWEST PIPE COMPANY
SUBSIDIARIES OF THE REGISTRANT
Southwestern Pipe, Inc. (a Texas Corporation)
P&H Tube Corporation (a Texas Corporation)
Thompson Tanks Mexico S.A. de C.V.
North American Pipe, Inc. (a Texas Corporation)
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Northwest Pipe Company on Form S-8 (File Nos. 333-20165, 333-20167, 333-89949
and 333-64083) of our report dated February 21, 2000 on our audits of the
consolidated financial statements and financial statement schedule of Northwest
Pipe Company and Subsidiaries as of December 31, 1999 and 1998, and for each of
the three years in the period ended December 31, 1999, which report is included
in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Portland, Oregon
March 20, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOUND IN THE COMPANY'S REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 969
<SECURITIES> 0
<RECEIVABLES> 49,830
<ALLOWANCES> 1,896
<INVENTORY> 44,362
<CURRENT-ASSETS> 121,622
<PP&E> 131,629
<DEPRECIATION> 30,389
<TOTAL-ASSETS> 248,271
<CURRENT-LIABILITIES> 65,144
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 97,105
<TOTAL-LIABILITY-AND-EQUITY> 248,271
<SALES> 240,307
<TOTAL-REVENUES> 240,307
<CGS> 191,403
<TOTAL-COSTS> 191,403
<OTHER-EXPENSES> 18,790
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,065
<INCOME-PRETAX> 22,049
<INCOME-TAX> 8,764
<INCOME-CONTINUING> 13,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,285
<EPS-BASIC> 2.06
<EPS-DILUTED> 2.01
</TABLE>
