Northwest Pipe Company Announces Third Quarter 2021 Financial Results

Rhea-AI Summary

Northwest Pipe Company (NASDAQ: NWPX) reported third-quarter 2021 results with net sales rising 9% to $84.6 million, driven by higher pricing and increased shipments of precast concrete. However, gross profit fell 20.8% to $12.4 million due to pressure on project pricing and changes in product mix. Net income decreased to $4.9 million, or $0.50 per diluted share, compared to $7.3 million, or $0.73 per diluted share, in the previous year. The backlog as of September 30, 2021, was approximately $273 million, indicating strong demand, despite some project bidding delays due to COVID-19.

Positive

• Net sales increased 9% to $84.6 million.
• Acquisition of ParkUSA expected to be immediately accretive.
• Backlog rose to $273 million, up from $234 million in Q2 2021.

Negative

• Gross profit decreased 20.8% to $12.4 million.
• Net income fell to $4.9 million from $7.3 million year-over-year.
• COVID-19 delays impacting project bidding into 2022.

VANCOUVER, Wash., Nov. 8, 2021 /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, 2021. The Company will broadcast its third quarter 2021 earnings conference call on Tuesday, November 9, 2021 at 7:00 a.m. PT.

Third Quarter 2021 Results

Net sales increased 9.0% to $84.6 million in the third quarter of 2021 from $77.6 million in the third quarter of 2020. This increase was due to both higher pricing and shipments of precast concrete products, which contributed $2.6 million of the third quarter increase, as well as a 7% increase in net sales at the Company's steel pipe facilities, which is attributable to a 17% increase in selling price per ton due to increased materials costs and changes in product mix, partially offset by a 9% decrease in tons produced resulting from changes in project timing.

Gross profit decreased 20.8% to $12.4 million, or 14.6% of net sales, in the third quarter of 2021 from $15.6 million, or 20.1% of net sales, in the third quarter of 2020, primarily due to the combination of changes in product mix and pressure on project pricing realized at the Company's steel pipe facilities, partially offset by increased gross profit on higher precast concrete revenues.

Net income was $4.9 million, or $0.50 per diluted share, in the third quarter of 2021 compared to $7.3 million, or $0.73 per diluted share, in the third quarter of 2020. The third quarter of 2021 included $0.6 million of pre-tax acquisition related transactions costs associated with the ParkUSA acquisition. After considering non-recurring items, adjusted net income was $5.4 million, or $0.54 per diluted share, in the third quarter of 2021, compared to $7.3 million, or $0.74 per diluted share, in the third quarter of 2020. 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 products for which revenue is recognized over time. Backlog was approximately $191 million as of September 30, 2021 compared to $195 million as of June 30, 2021 and $143 million as of September 30, 2020. 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 $273 million as of September 30, 2021 compared to $234 million as of June 30, 2021 and $231 million as of September 30, 2020.

Management Commentary

"We are very excited about our acquisition of ParkUSA, which was executed early in the fourth quarter. This was the natural next step in our precast concrete related growth strategy, which is expected to be immediately accretive and provide organic growth opportunities for the Company. Our third quarter precast revenues remained at elevated levels with strong margins that have continued to rise. Our existing precast and ParkUSA's order books are both at historically high levels as we move into the traditionally slower time of the year for precast shipments. The existing precast business is expected to have slightly higher revenue and margins than in the fourth quarter of 2020. We expect to carry strong momentum into 2022 with our precast related business," said Scott Montross, President and Chief Executive Officer of the Company.

"Third quarter water transmission project bidding volume improved, but at a slower than expected rate as COVID–19 related delays continue to push bidding into 2022. However, despite the slower improvement in bidding, we ended the quarter with a near record backlog of $273 million. The quality of the backlog has also continued to improve in 2021, leading to higher third quarter water transmission revenues and upward movement of margins. As we move into the time of the year affected by major holidays and weather events, we expect water transmission revenue to be a little lower than third quarter. However, we expect the upward movement of backlog and margins to continue through year end and lead to a stronger start to 2022."

Acquisition of ParkUSA

The Company continued to execute on its growth strategy by completing the acquisition of ParkUSA, a precast concrete and steel fabrication-based company that develops and manufactures water, wastewater, and environmental solutions, on October 5, 2021 for cash consideration of $87.4 million. The acquisition was funded through borrowings on the Company's line of credit. For the year ended December 31, 2020, ParkUSA's total revenue was approximately $66.5 million. Subsequent to this acquisition, the Company entered into an amendment to its credit agreement that provides for $125 million in total availability under the line of credit.

Balance Sheet Details

Total cash and cash equivalents were $3.2 million as of September 30, 2021, down from $23.2 million as of June 30, 2021 primarily due to changes in working capital.

As of September 30, 2021, the Company had $2.2 million of outstanding revolving loan borrowings, $1.6 million of outstanding letters of credit, and additional borrowing capacity of approximately $96 million. Near-term repayment of outstanding debt will be a priority and derived from the cash flows of the combined business.

Conference Call Details

A conference call and simultaneous webcast to discuss the Company's third quarter 2021 financial results will be held on Tuesday, November 9, 2021 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 Tuesday, November 23, 2021 by dialing 1–877-344-7529 in the U.S. or 1–412-317-0088 internationally and entering the replay access code: 10160825.

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 manufactures high-quality precast and reinforced concrete products; water, wastewater, and stormwater equipment; steel casing pipe; bar-wrapped concrete cylinder pipe; and one of the largest offerings of pipeline system joints, fittings, and specialized components. Strategically positioned to meet growing water and wastewater infrastructure needs, Northwest Pipe Company provides solution-based products for a wide range of markets under the ParkUSA, Geneva Pipe and Precast, and Permalok® lines. The Company's diverse team is committed to quality and innovation while demonstrating the Company's core values of accountability, commitment, and teamwork. The Company is headquartered in Vancouver, Washington, and has 13 manufacturing facilities across North America. Please visit www.nwpipe.com for more information.

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 and order cancelations, timing of customer orders and deliveries, production schedules, price and availability of raw materials, 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 ParkUSA, Geneva Pipe and Precast Company, and other acquisitions into its business and operations and achieve significant administrative and operational cost synergies and accretion to financial results, impacts of recent U.S. tax reform legislation on the Company's results of operations, adequacy of the Company's insurance coverage, operating problems at the Company's manufacturing operations including fires, explosions, inclement weather, and natural disasters, impacts of pandemics, epidemics, or other public health emergencies, such as coronavirus disease 2019, and other risks discussed in the Company's Annual Report on Form 10–K for the year ended December 31, 2020 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,
	2021			2020			2021			2020
Net sales	$	84,643		$	77,632		$	230,766		$	216,526
Cost of sales		72,280			62,013			200,090			178,370
Gross profit		12,363			15,619			30,676			38,156
Selling, general, and administrative expense		5,562			5,656			17,729			19,185
Operating income		6,801			9,963			12,947			18,971
Other income		171			157			260			815
Interest income		-			16			-			49
Interest expense		(112)			(238)			(687)			(719)
Income before income taxes		6,860			9,898			12,520			19,116
Income tax expense		1,914			2,631			3,268			5,287
Net income	$	4,946		$	7,267		$	9,252		$	13,829
Net income per share:
Basic	$	0.50		$	0.74		$	0.94		$	1.41
Diluted	$	0.50		$	0.73		$	0.93		$	1.40
Shares used in per share calculations:
Basic		9,871			9,802			9,849			9,782
Diluted		9,921			9,861			9,918			9,851

 

NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
			September 30, 2021			December 31, 2020
Assets
	Current assets:
		Cash and cash equivalents	$	3,188		$	37,927
		Trade and other receivables, net		38,885			42,680
		Contract assets		111,239			76,985
		Inventories		43,042			29,177
		Prepaid expenses and other		1,915			5,194
		Total current assets		198,269			191,963
	Property and equipment, net			111,157			110,184
	Operating lease right-of-use assets			32,769			30,813
	Goodwill			22,985			22,985
	Intangible assets, net			9,571			10,518
	Other assets			6,216			6,552
		Total assets	$	380,967		$	373,015
Liabilities and Stockholders' Equity
	Current liabilities:
		Current portion of long-term debt	$	-		$	7,701
		Accounts payable		20,148			12,993
		Accrued liabilities		17,406			16,814
		Contract liabilities		5,388			6,189
		Current portion of operating lease liabilities		2,401			2,204
		Total current liabilities		45,343			45,901
	Borrowings on line of credit			2,153			-
	Long-term debt			-			5,888
	Operating lease liabilities			30,004			27,911
	Deferred income taxes			12,391			12,481
	Other long-term liabilities			10,767			11,208
		Total liabilities		100,658			103,389
	Stockholders' equity			280,309			269,626
		Total liabilities and stockholders' equity	$	380,967		$	373,015

 

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,
		2021		2020		2021		2020
Net income, as reported		$ 4,946		$ 7,267		$ 9,252		$ 13,829
Adjustments for non-recurring items:
Acquisition-related transaction costs		564		40		800		2,624
Saginaw fire insurance recoveries, net		-		-		-		(1,399)
Saginaw fire gain on property and equipment replacement		-		-		-		(951)
Acquisition-related inventory charges		-		-		-		266
Estimated tax impact of non-recurring items		(140)		(10)		(198)		(135)
Adjusted net income		$ 5,370		$ 7,297		$ 9,854		$ 14,234
Diluted net income per share, as reported		$   0.50		$   0.73		$   0.93		$     1.40
Adjusted diluted net income per share		$   0.54		$   0.74		$   0.99		$     1.44

 

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SOURCE Northwest Pipe Company

FAQ

What were the third quarter 2021 results for NWPX?

NWPX reported net sales of $84.6 million, a 9% increase year-over-year, but gross profit decreased by 20.8%.

How did the acquisition of ParkUSA affect NWPX?

The acquisition is expected to be immediately accretive and provide organic growth opportunities.

What is the current backlog for NWPX?

As of September 30, 2021, NWPX's backlog was approximately $273 million.

What is NWPX's net income for the third quarter of 2021?

Net income for the third quarter of 2021 was $4.9 million, down from $7.3 million in Q3 2020.

How have COVID-19 delays affected NWPX's project bidding?

Bidding volume improved but at a slower rate, with delays pushing some bids into 2022.