Northwest Pipe Company Announces Third Quarter 2020 Financial Results

Rhea-AI Summary

Northwest Pipe Company (NASDAQ: NWPX) reported a 3.2% increase in net sales for Q3 2020, totaling $77.6 million, driven by contributions from its acquired Geneva operations. However, legacy revenue decreased due to a 37% drop in production volume. Gross profit rose slightly to $15.6 million, maintaining a margin of 20.1%. Net income fell to $7.3 million ($0.73 per diluted share), down from $10.7 million in Q3 2019. Backlog decreased to $231 million, reflecting impacts from project delays.

Positive

• Net sales increased by 3.2% to $77.6 million.
• Gross profit margin exceeded 20% at 20.1%.
• Total cash and cash equivalents rose to $30.4 million.

Negative

• Net income declined to $7.3 million from $10.7 million year-over-year.
• Legacy revenue decreased due to a 37% drop in production volume.
• Backlog reduced to $231 million from $246 million in the previous quarter.

VANCOUVER, Wash., Nov. 4, 2020 /PRNewswire/ -- Northwest Pipe Company (NASDAQ: NWPX), an industry leader of engineered pipeline systems for water infrastructure, today announced its financial results for the third quarter ended September 30, 2020. The Company will broadcast its third quarter 2020 earnings conference call on Thursday, November 5, 2020 at 7:00 a.m. PT.

Third Quarter 2020 Results

Net sales increased 3.2% to $77.6 million in the third quarter of 2020 from $75.2 million in the third quarter of 2019 due to a $12.5 million contribution from the Company's acquired Geneva Pipe and Precast Company ("Geneva") operations. Legacy revenue decreased from the third quarter of 2019 due to a 37% decrease in tons produced as a result of project timing, partially offset by a 37% increase in selling price per ton due to a change in product mix.

Gross profit increased 0.9% to $15.6 million, or 20.1% of net sales, in the third quarter of 2020 from $15.5 million, or 20.6% of net sales, in the third quarter of 2019, primarily due to the margin contribution from Geneva, partially offset by lower production volume at legacy facilities.

Net income was $7.3 million, or $0.73 per diluted share, in the third quarter of 2020 compared to $10.7 million, or $1.10 per diluted share, in the third quarter of 2019. The third quarter of 2020 included increased selling, general, and administrative expenses of $0.8 million primarily due to the addition of Geneva and higher compensation expenses. The third quarter of 2019 included other income of $2.3 million related to a legal settlement, and a lower than normal estimated income tax rate of 19.0% impacted by the estimated changes in the Company's valuation allowance. After considering non-recurring items, adjusted net income was $7.7 million, or $0.78 per diluted share, in the third quarter of 2020, compared to $8.9 million, or $0.91 per diluted share, in the third quarter of 2019. See the Company's "Reconciliation of Non-GAAP Financial Measures" in the table below.

Backlog represents the balance of remaining performance obligations under signed contracts for water infrastructure steel pipe projects. Backlog was approximately $143 million as of September 30, 2020 compared to $159 million as of June 30, 2020 and $211 million as of September 30, 2019. The Company also has projects for which it has been notified that it is the successful bidder, but a binding agreement has not been executed ("confirmed orders"). Backlog including confirmed orders was $231 million as of September 30, 2020 compared to $246 million as of June 30, 2020 and $270 million as of September 30, 2019.

Management Commentary

"Despite experiencing COVID–19 related project and bidding delays in the second half of the year, our third quarter produced solid revenue and a gross profit margin that exceeded 20%. The bidding delays caused our quarter ending backlog to moderate down to $231 million, a level that is still very high by historic standards and that represents the ninth straight quarter over $200 million," said Scott Montross, President and CEO of the Company. "Due to customer driven project delays, we expect fourth quarter revenues and the resulting gross profit margin to be lower than the third quarter. However, as we look into 2021, the structure of our business remains strong."

Balance Sheet Details

Total cash and cash equivalents were $30.4 million as of September 30, 2020, up from $19.2 million as of June 30, 2020 primarily due to increased operating cash flows.

As of September 30, 2020, the Company had $14.6 million of outstanding term loan borrowings and no borrowings under its revolving line of credit with additional borrowing capacity of approximately $55 million.

Conference Call Details

A conference call and simultaneous webcast to discuss the Company's third quarter 2020 financial results will be held on Thursday, November 5, 2020 at 7:00 a.m. PT. The call will be broadcast live over the Internet hosted on the Investor Relations section of the Company's website at investor.nwpipe.com and will be archived online upon completion of the conference call. For those unable to listen to the live call, a replay will be available approximately one hour after the event and will remain available until Thursday, November 19, 2020 by dialing 1–877–344–7529 in the U.S. or 1–412–317–0088 internationally and entering the replay access code: 10148734.

About Northwest Pipe Company

Founded in 1966, Northwest Pipe Company is a leading manufacturer for water related infrastructure products. In addition to being the largest manufacturer of engineered steel water pipeline systems in North America, the Company produces high-quality precast and reinforced concrete products, Permalok® steel casing pipe, bar-wrapped concrete cylinder pipe, as well as custom linings, coatings, joints, and one of the largest offerings of fittings and specialized components. Northwest Pipe Company provides solution-based products for a wide range of markets including water transmission and infrastructure, water and wastewater plant piping, structural stormwater and sewer systems, trenchless technology, and piping rehabilitation. Strategically positioned to meet growing water and wastewater infrastructure needs, the Company is headquartered in Vancouver, Washington, and has manufacturing facilities across North America.

Forward-Looking Statements

Statements in this press release by Scott Montross are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on current expectations, estimates, and projections about the Company's business, management's beliefs, and assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements as a result of a variety of important factors. While it is impossible to identify all such factors, those that could cause actual results to differ materially from those estimated by the Company include changes in demand and market prices for its products, product mix, bidding activity, the timing of customer orders and deliveries, production schedules, the price and availability of raw materials, price and volume of imported product, excess or shortage of production capacity, international trade policy and regulations, changes in tariffs and duties imposed on imports and exports and related impacts on the Company, the Company's ability to identify and complete internal initiatives and/or acquisitions in order to grow its business, the Company's ability to effectively integrate Geneva and other acquisitions into its business and operations and achieve significant administrative and operational cost synergies and accretion to financial results, the impacts of recent U.S. tax reform legislation on the Company's results of operations, the adequacy of the Company's insurance coverage, operating problems at the Company's manufacturing operations including fires, explosions, inclement weather, natural disasters, and the impact of pandemics, epidemics, or other public health emergencies, such as the recent outbreak of coronavirus disease 2019, and other risks discussed in the Company's Annual Report on Form 10–K for the year ended December 31, 2019 and from time to time in its other Securities and Exchange Commission filings and reports. 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 release. If the Company does update or correct one or more forward-looking statements, investors and others should not conclude that it will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.

Non-GAAP Financial Measures

The Company is presenting backlog including confirmed orders, adjusted net income, and adjusted diluted net income per share. These non-GAAP financial measures are provided to better enable investors and others to assess the Company's results and compare them with its competitors. This should be considered a supplement to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP.

For more information, visit www.nwpipe.com.

Contact:
Aaron Wilkins
Chief Financial Officer
Northwest Pipe Company
(360) 397-6294 • investors@nwpipe.com

Or Addo Investor Relations
(310) 829-5400

NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net sales	$	77,632		$	75,226		$	216,526		$	207,072
Cost of sales		62,013			59,751			178,370			176,808
Gross profit		15,619			15,475			38,156			30,264
Selling, general, and administrative expense		5,656			4,900			19,185			13,852
Operating income		9,963			10,575			18,971			16,412
Other income		157			2,792			815			2,976
Interest income		16			23			49			30
Interest expense		(238)			(114)			(719)			(365)
Income before income taxes		9,898			13,276			19,116			19,053
Income tax expense		2,631			2,529			5,287			3,167
Net income	$	7,267		$	10,747		$	13,829		$	15,886
Net income per share:
Basic	$	0.74		$	1.10		$	1.41		$	1.63
Diluted	$	0.73		$	1.10		$	1.40		$	1.63
Shares used in per share calculations:
Basic		9,802			9,745			9,782			9,739
Diluted		9,861			9,785			9,851			9,762

 

NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
			September 30,  2020			December 31, 2019
Assets
	Current assets:
		Cash and cash equivalents	$	30,363		$	31,014
		Trade and other receivables, net		43,624			38,026
		Contract assets		76,276			91,186
		Inventories		31,945			30,654
		Prepaid expenses and other		3,374			4,159
		Total current assets		185,582			195,039
	Property and equipment, net			109,172			99,631
	Operating lease right-of-use assets			31,538			7,683
	Goodwill			22,985			-
	Intangible assets, net			11,116			1,231
	Other assets			6,432			6,661
		Total assets	$	366,825		$	310,245
Liabilities and Stockholders' Equity
	Current liabilities:
		Current portion of long-term debt	$	3,132		$	-
		Accounts payable		13,702			15,493
		Accrued liabilities		14,046			12,150
		Contract liabilities		4,540			12,281
		Current portion of operating lease liabilities		2,303			1,642
		Total current liabilities		37,723			41,566
	Long-term debt			11,244			-
	Operating lease liabilities			28,448			6,247
	Deferred income taxes			14,611			4,265
	Other long-term liabilities			11,107			10,009
		Total liabilities		103,133			62,087
	Stockholders' equity			263,692			248,158
		Total liabilities and stockholders' equity	$	366,825		$	310,245

 

NORTHWEST PIPE COMPANY AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands, except per share amounts)
		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Net income, as reported		$                 7,267		$               10,747		$               13,829		$               15,886
Adjustments for non-recurring items:
Acquisition-related transaction costs		40		506		2,624		515
Saginaw fire incremental production costs (insurance recoveries), net		-		(304)		(1,399)		2,943
Saginaw fire gain on property and equipment replacement		-		(431)		(951)		(431)
Amortization of acquired intangibles		518		-		1,383		-
Acquisition-related inventory charges		-		-		266		-
Legal settlement other income		-		(2,284)		-		(2,284)
Estimated tax impact of non-recurring items		(140)		657		(481)		(194)
Adjusted net income		$                 7,685		$                 8,891		$               15,271		$               16,435
Diluted net income per share, as reported		$                    0.73		$                    1.10		$                    1.41		$                    1.63
Adjusted diluted net income per share		$                    0.78		$                    0.91		$                    1.55		$                    1.68

 

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SOURCE Northwest Pipe Company

FAQ

What were Northwest Pipe Company's Q3 2020 earnings?

Northwest Pipe Company reported Q3 2020 net sales of $77.6 million and net income of $7.3 million.

How did the backlog change for NWPX in Q3 2020?

NWPX's backlog decreased to $231 million in Q3 2020 from $246 million in the previous quarter.

What is the impact of project delays on NWPX's performance?

Project delays resulted in a decline in legacy revenue and reduced backlog, affecting Q3 financial results.