Welcome, and thank you for standing by. At this time all participants are in a listen-only mode until the question-and-answer period. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this point. Now, let me hand the call over to Scott Montross, CEO. Sir, you may begin.

Thank you, Al. Good morning, and welcome to Northwest Pipe's conference call. My name is Scott Montross, and I'm President and CEO of the company. And I'm joined by Robin Gantt, our Chief Financial Officer. As we begin, I would like to remind everyone that the statements we make in this call about our expectations for the future are forward-looking statements and actual results could differ materially. Please refer to our most recent SEC filing on Form 10-K for a discussion of risk factors that could cause actual results to differ materially from expectations. I will now turn to Robin, who will discuss our full year and fourth quarter results.

Thank you, Scott. Our fourth quarter loss from continuing operations was $14 million or $1.47 per diluted share. This included a non-cash goodwill impairment charge of $16.1 million. Excluding this charge, adjusted income from continuing operations in the fourth quarter of 2014 was $2.1 million or $0.21 per diluted share compared to income from continuing operations of $2.4 million or $0.25 per diluted share in the fourth quarter of 2013. Water Transmission sales increased 32% to $56 million in the fourth quarter of 2014 from $43 million in the fourth quarter of 2013. Water Transmission gross profit as a percent of sales increased to 17.5% in the fourth quarter of 2014 from 16.4% in the fourth quarter of 2013. There was a net credit in the fourth quarter of 2014 of $1.1 million for insurance reimbursement. Excluding this net credit gross profit as a percent of sales would have been 15.5% in the fourth quarter of 2014. Tubular Product sales from continuing operations increased 7% to $46 million in the fourth quarter of 2014 from $43 million in the fourth quarter of 2013. Volume increased as we sold 45,000 tons in the fourth quarter of 2014 compared to 43,000 in the fourth quarter of 2013. Tubular Product had a gross loss as a percent of sales of negative 1.7% in the fourth quarter of 2014 compared to a positive 8.9% from the fourth quarter of 2013. We continue to be negatively impacted by imports, which compressed our margins in the fourth quarter. Total company inventory decreased by $4.5 million in the fourth quarter from the third quarter of 2014. Moving on to the full year results, our loss from continuing operations was $6.2 million or $0.65 per diluted share. This included the non-cash goodwill impairment charge of $16.1 million. Excluding…

As of December 31, 2014, our backlog in Water Transmission was approximately $121 million; as of December 31, 2013 our backlog was $103 million. We expect that the first quarter of 2015 will continue to present significant challenges. The backlog in Water Transmission has decreased from third quarter levels due to a smaller and therefore more competitive bidding environment in the fourth quarter. We expect Water Transmission sales to be in line with the fourth quarter with gross profit margins in the low to mid-teens. The following is an outlook on upcoming Water Transmission projects. The first segment of IPL completed production in the fourth quarter. The second segment of IPL had half its production in the fourth quarter and the second half will be mostly completed by the end of the first quarter. Based on the current construction timeline, we expect two more segments of IPL bid in 2015. The next segment would bid by the end of April with bid award in May or June, and the fourth segment is expected to bid near the end of the year. The 22-mile Madison Wyoming project was mostly complete by year-end. We have two segments of the San Antonio Water Resource Integration Project; production would take place in the first and second quarters. We believe that the 140-mile Red River job in North Dakota maybe delayed due to political and economic reasons. While, we are watching the drought situation in California very closely, we have not yet seen an increase in bidding activity. California voters approved Proposition 1 in November $7.5 billion bond measure that authorizes the state to issue new bonds to pay for a wide variety of water related projects. There are some longer term speculative projects that could start appearing in 2016 and later as a result…

Yes, sir. We will now begin the question-and-answer. [Operator Instructions] We have our first question from [Frank Affleck] [ph]. Sir, your line is open.

Yes. Scott, can you please give us the outlook for steel prices?

Well, I guess Frank, this morning we got the latest update at CRU and actually saw that the steel prices had actually fallen to – I guess it’s $488 this morning based on CRU. And obviously, we look at that from the end of the year, if you look at fourth quarter numbers at the end of fourth quarter the steel price I guess averages about $629 a ton. So we are in excess of $140 a ton down. And I think, I believe and we believe and starting to get toward the bottom, I think we may see a little bit more price movement down maybe down to around $470 number. But, we actually hope that it hits bottom and starts to move a little bit up again because we certainly feel that that is one of the major things that has slowed the line pipe order intake over the last several weeks. And we hope that it's getting relatively close to its bottom now.

Where is it now again, I'm sorry, I didn't get that.

The CRU said it was at $488 this morning from the weekly publication.

So you see it's getting down possibly to about $470?

No. I think that that's the number based on what we are looking at for scrap prices in the marketplace and what we are seeing the moment on that and obviously, that continues to move down. And just hearing, we are hearing more rumblings, I think it's getting toward its end and I would like to think that it hits $470 and ultimately stabilizes and maybe starts to move back up because like I said, it certainly – it certainly – we think putting a crimp in the line pipeline at this point in time.

Thank you.

Thank you, Frank.

Thank you. Our next question is from Matt Sherwood [Cooper Creek Partners]. Your line is open.

Hi, guys.

Hey, Matt.

Just going to start with easy one, just starting up, you talked about the decline in steel prices and also the reduction in volume in Tubular business. Can you sort of talk about how that impacts your cash flow statement and whether we should see that coming down in the coming quarters?

Well, obviously, the higher the Tubular business in [indiscernible] cash and generally we get a little bit higher into our line. Like I said, it's in the script that at the end of February, we were actually down to about $27 million on our credit facility and our debt was less than $30 million. And if you look at that versus what the end of 2014 or, excuse me, end of 2013 was, I think we were about $87 million. So ultimately we are closing the debt down and looking at cash flow figures, we had cash from operations a little over $35 million. I think that was actually better cash flow than what we saw 2013, pretty close to it.

That's good.

We expect to continue to keep working on our current assets Matt not only accounts receivable, inventory, we think we have some room to bring those things down, specifically on the [asset] [ph] side with the business levels that we are seeing and ultimately continue to work our debt level down, so that's what we are doing now.

That's great. So I mean, you have done all this hard work to clean up your balance sheet, you sold the OCTG business, your stock is trading at like 80% of book value, I think the enterprise value is pretty much when you add that to the market cap as low as it's been since the financial crisis. The number three pioneer industry Hansen was acquired for a nosebleed a couple of months ago. It seems also your shares are undervalued. Have you considered using your materially improved balance sheet to enhance shareholder value?

I'm assuming you are talking about share buybacks and things like that. But obviously, Matt, as we’ve talked before, we are pretty aggressively focused on the M&A drive. It was point - and we can't talk about a lot of the details but we are certainly working with these strategic firms to understand the places where, where we have strength and ultimately leverage that strength into either close in [gentle] [ph] areas or areas that are pretty adjacent. And that's the current focus, on the M&A side.

And I mean just based on your $30 million at debt, how much capacity would you have in an M&A transaction because it seems like with $25 a share -- $26 a share of book value, which has just been adjusted with an impairment plus only $30 million of debt against it, you would have a lot of financial flexibility.

Well, we do. And we are pretty lowly leveraged at this point, lower leverage. I think we are less than time and a half of leverage, so we have a lot of flexibility. And again, ultimately our focus is on driving an acquisition that ultimately is transformative for the company and generates the shareholder value.

I mean, do you have a sense of what the biggest size that could be without knowing specifically what you are going to do?

No. I mean, we are starting to get into some of the details but we don't really talk about the M&A stuff on the calls. But ultimately all that's depending on what the M&A situation is, the total financial structure of the situation, so there is a lot that goes into that. And I would rather not get into more detail on that at this point.

Fair enough. And just final question Scott, you spend all those capital to upgrade the Saginaw plant, you have done a lot of work to take cost out of the water business, yet gross margin levels are seem to be sort of turning back right to where they were when you began your whole margin improvement journey. Obviously, the water municipalities around the country are getting a lot better deal for their pipe. Why do you think that shareholders are not seeing the benefit of your cost cutting work?

Actually I think you are, when we start looking at what our revenue level was in 2014 and looking at a gross margin that's raised around 16% the last time we were at those kind of revenue levels, we were really in the 2009/2010 timeframe and our gross margin grew more like 7% or 8%. So you are seeing those cost reductions showing up at the lower margin levels, excuse me, at a lower revenue levels. So we do think that’s showing up and I think with as low as the business has been, ultimately when you look back at how we were running these plants in 2011/2012, when our top-line in the Water Transmission business was I think 270 million or so, the margin levels then were 15% or 16%. And at that point, we were running major jobs at our Denver plant, we were running major jobs at our Saginaw plant and then we had a Pleasant Grove plant that was running [indiscernible], so we were running the assets pretty full in developing 15% or 16% gross margins. Right now, I would say that we are running really only one plant relatively full and you mentioned that as Saginaw and we were still able to generate those 16% gross margins. So we think there is cost reductions that are showing up there in the lower revenue environment and then when you look back at 2013, we are coming off of some pretty major jobs [indiscernible] 20%. So if you look at the trend line, it's certainly moving up and those are certainly related to the cost reduction work that our Water Transmission people have done.

Fair. Have your competitors done similar work or they just making just because it seems like there has been a lot of pressure on the margin side to sort of compete and why some of the gains you have made?

What I would say Matt is, as you are seeing, we have seen one of our competitors Hansen who was only idle work exit the business, so you got a little bit of a look at what they have been doing margin wise and ultimately they decided to exit the business. And I'm not sure what kind of work they were doing. But, I think we will speculate on what they are doing other than we are still able to maintain what our market shares been in Water Transmission between 42% and 45%. And even then these low revenue or low market volume situation, we are still able to get the 16% margin because of the cost. I think it would be significantly less than that if the value at the Water Transmission plants and Water Transmission management hadn't done all the cost what they have done.

Great. Thanks so much guys.

No problem. Thanks.

Thank you, Mr. Sherwood. Our next question is from Bhupinder Bahra [JPMorgan Asset Management]. Sir, your line is open.

Hey, good morning, guys. How are you?

Hi, Bhupinder.

Very good. Bhupinder, how are you?

Just a question on Permalok actually, how much did that acquisition bring in this quarter in terms of revenue?

We don't break that out specifically Bhupinder, it was somewhat less than 10% of the total top line for Water Transmission.

Okay. On an annual basis, right, you are talking about?

Yes. On an annual basis.

Okay.

The business was – has actually the top-line is growing from the average trend of what we saw from the company that we purchased and we are really starting to – get our feet under microtunneling business. I mean the sales group is doing a pretty good job of starting to move the levels up and the revenue that we are seeing levels and just starting to get really into the guts of the cost reduction into those plants. So a lot of R&D work going on with those facilities. We think there is a lot of possibilities to be able to do, things with that proprietary connection and expect some pretty good things in that going forward.

Okay. And the other question on the outlook for first quarter Water Transmission, now you expect revenue levels to be at par or similar to 4Q and your margins are actually coming down. I think you expect like low to mid-teens compared to like fourth quarter. Can you just explain bridge that gap like what is driving margins down?

I think actually when we did the last earnings announcement that we did back in almost like November?

November, yes.

For the third quarter, I think we used for the third quarter, the projections of low to mid-teens. So I mean, I think you are kind of looking at a pretty similar area that we have seen. I think it's still the same competitive environment that we are seeing. We see periods of time where the bidding activity seems to pick up the small job pick-up, the number of small jobs pick-up. But, it doesn't have received the sustained for a year so that the total number of jobs are moving up from the year. So we are seeing the level for 2014 that level of job really kind of continuing into 2015. So what we do know is, we – what we are looking at from the bidding side of 2015 is in the second half of the year. We expect the bid somewhere in the area of about $250 million worth of book, okay? So bidding starts to pick-up as we get toward the second half of the year, you got another segment, the third segment of IPL goes in April, May timeframe and we will ultimately start to impact the second half of the year. Then you have another segment, the fourth segment of IPL that bids late during the year along with some additional work that are $8 million to $10 million projects that are out there that should have a pretty decent bidding environment for the second half of the year.

And the $8 million to $10 million is that different from IPL, right, you are talking about those of the smaller ones?

Yes. That smaller job. The IPL job – the segments we are looking at, the first two segments that we did were in the area of – we got all of the first segment, which was about 22,000 tons, we got half of the 23,000 tons. We got half of the next segment which is about half of that value about 12,000 or 13,000 tons. So we expect the next two segments that we are looking at to be somewhere in the area of that 22,000 or 23,000 tons.

Okay. Okay. Now, you did actually mentioned in your release about lower oil prices impacting TP segment, now, can you just walk us through if there was any impact in 4Q and how – we are seeing like capital spending declines out there like in North America about like 25% or 30% numbers, how does that built into your expectations for 1Q and maybe if you can just give us some color on 2015, first half and second half?

Right, I think there is – it was a little bit of a perfect storm energy in the second half of the year. As you mentioned we were having a twist on $100 barrel oil price to dropping to half of that in a period of only 5 or 6 months. During that time, especially the E&P companies and a lot of the end users start to say, hey, we are cutting our capital budgets by 30% to 40%, right? So that was going on. And at the same time that started to go on. We also started to see the hot-rolled coil price start to drop. And then the hot-rolled coil price started in the middle of the year and probably $680 a ton and now it's dropped to almost $200 a ton less than that at this point. So you had the perfect storm in that back half of the year, during the middle part of the year, you had all the compression going on between the sales price and the higher coil price. But, then as we moved into the fourth quarter, all those things that we announced and the coil price falling basically started to freeze a lot off the line pipe value especially distribution from buying. So the oil in-take with the last few months has been significantly slower than it was previous to that. So that's why as we look into the first quarter, we are saying well, I think the other intake in the first quarter is going to stay like that like – we laid it what I mentioned before. If the coil price is still falling, which it has and it may you don't think there is going to be a lot of distribution buying going on the line pipe side…

Okay. Thanks a lot guys.

Thank you.

Thank you. [Operator Instructions] Our next question is from [Frank Affleck] [ph]. Sir, your line is open.

Yes. Scott, one further question on steel, what about the – your own purchases, how competitive do you find imports now of coil and can you take advantage of them or the lead times discouraging or versus domestic et cetera?

Well, I think that we certainly have the ability to take advantage of import signs, some of the longer lead time projects that we had, Water Transmission, we consistently look at with the import market looks like. So we do have the ability to use imports and quite frankly have these imports in the recent past. I think that when you start looking at import pricing versus the domestic pricing is, they are starting to get somewhat closer together, and ultimately I think as they get closer together, the idea is buying imports and speculating on imports gets to be a little bit more, I guess what I would call the stressing. So everybody gets locked out and wanting to speculate, but I do think that it certainly going to act as a mechanism to hold what the steel prices can rise to domestically, right? So ultimately there is a lot of things in play here. But, imports are a credible option to us. I think as an industry, as a slow consuming industry, they get less and less competitive as the steel price goes down and ultimately starts to balance more what the prices are in the world markets.

Right. How – percentage wise can you say how much imports you bought last year versus 2013?

I rather not talk about this synergy. But, I would say Frank that normally we buy majority of our steel domestically.

Okay.

And would rather do that.

And still represents what 60%, 70% of your costs, how do you – what's a rough, it looks on?

Well, it's different for both sides of the business. I mean when you look at tubular and especially when we saw the steel price run up in 2014, it represented closer to 85% to 90% of the cost at one-point because it run up so much. When you look at our Water Transmission business, it's less – it's probably more like 40% to 45% of our cost.

And today it's much – it's less than 85% to 90% for tubular, I would assume also?

Well, that's assuming the pricing stays the same in line-pipe. One of the phenomenons that we see in the businesses is that ultimately if steel prices are dropping on the tubular side obviously, we have seen for years on the structural tubing side that the phenomenon is now that it starts to drive the line-pipe price down a bit.

Okay. Thank you.

Thanks.

Thank you, Mr. Affleck. [Operator Instructions] Don't have any further questions on queue at this time, sir.

No further question did you say Al?

Yes, sir. No further questions on queue at this time.

Okay. I think just like to say a couple of things, obviously, that we are seeing a couple of pretty challenging markets. I think when you look at the positioning of the company on Tubular Products; we are going through a very similar situation everybody else in this business is going through. You see companies like US Steel; [they are] [ph] often closing plants, TMK, Tenaris. And we think on Tubular Products business with the modernization project we have taken large chunks of costs out of that business. And we are going to be positioned pretty well in that business returns. And it's just going to be tough – it's going to be a tough market for a while. And when we look at Water Transmission, I think it was addressed a little bit – when Matt Sherwood was asking his question. With 16% margins in 2014 compared to what we saw the 7%, 8% margins in 2009 and 2010 that's where the cost reductions are showing up. And even in a tough market conditions we were able to develop those kind of margins in Water Transmission. So we think we are on a pretty solid track with the things that we are doing organically in this and not only the business but managing the balance sheet and managing the cash, the way we are managing it, but looking at aggressively seeking M&A opportunities. We think that is the thing – those are the things you are going to help us continue to transform the company. So I think it's just kind of a little bit of a summary of things we talked about, but certainly important to note. So with that I guess your next call is in May and we will talk to everybody then. Thank you.

Thank you.

Thank you, speakers. And that concludes today's call. Thank you everyone for joining. You may now disconnect.