Northwest Pipe Company
Annual Report 2012

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the Fiscal Year Ended: December 31, 2012OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from to Commission File Number: 0-27140NORTHWEST PIPE COMPANY(Exact name of registrant as specified in its charter) OREGON 93-0557988(State or other jurisdictionof incorporation or organization) (I.R.S. EmployerIdentification No.)5721 SE Columbia Way, Suite 200Vancouver, WA 98661(Address of principal executive offices and zip code)360-397-6250(Registrant’s telephone number including area code)Securities registered pursuant to Section 12(b) of the Act: Title of Each Class of Stock Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share NASDAQ Global Select MarketPreferred Stock Purchase Rights NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). 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, tothe 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 tothis Form 10-K. ¨Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xThe aggregate market value of the common equity that was held by non-affiliates of the Registrant was $188,446,682 as of June 30, 2012 based uponthe last sales price as reported by Nasdaq.The number of shares outstanding of the Registrant’s Common Stock as of February 25, 2013 was 9,437,387 shares. Documents Incorporated by ReferenceThe registrant has incorporated into Parts II and III of Form 10-K by reference certain portions of its Proxy Statement for its 2013 Annual Meeting ofShareholders. Table of ContentsNORTHWEST PIPE COMPANY2012 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS Page Cautionary Statement Regarding Forward-Looking Statements 1 Part I Item 1 Business 2 Item 1A Risk Factors 7 Item 1B Unresolved Staff Comments 17 Item 2 Properties 17 Item 3 Legal Proceedings 18 Item 4 Mine Safety Disclosures 21 Part II Item 5 Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22 Item 6 Selected Financial Data 24 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A Quantitative and Qualitative Disclosures About Market Risk 36 Item 8 Financial Statements and Supplementary Data 37 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 37 Item 9A Controls and Procedures 37 Item 9B Other Information 38 Part III Item 10 Directors, Executive Officers and Corporate Governance 39 Item 11 Executive Compensation 40 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 41 Item 13 Certain Relationships and Related Transactions, and Director Independence 41 Item 14 Principal Accountant Fees and Services 41 Part IV Item 15 Exhibits and Financial Statement Schedule 42 Table of ContentsCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSCertain statements in this Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”), other than purely historicalinformation, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”) that are based on current expectations, estimates and projections about our business, management’sbeliefs, and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “forecasts,”“should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guaranteesof future performance and involve a number of risks and uncertainties that are difficult to predict. Actual outcomes and results may differ materially from theresults anticipated in these forward-looking statements as a result of a variety of important factors. While it is impossible to identify all such factors, thosethat could cause actual results to differ materially from those estimated by us include the important factors discussed in Part I—Item 1A, “Risk Factors.”Such forward-looking statements speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statements toreflect events or circumstances after the date of this 2012 Form 10-K. If we do update one or more forward-looking statements, investors and others should notconclude that we will make additional updates or corrections with respect thereto or with respect to other forward-looking statements. 1Table of ContentsPART I Item 1.BusinessOverviewWe are a leading North American manufacturer of large diameter, high-pressure steel pipeline systems for use in water infrastructure applications,primarily related to drinking water systems, and we also manufacture other welded steel pipe products for use in a wide range of applications, includingenergy, construction, agriculture, and industrial uses. Our pipeline systems are also used for hydroelectric power systems, wastewater systems and otherapplications. In addition, we make products for industrial plant piping systems and certain structural applications. With a history that dates back more than100 years, we have established a prominent position based on a strong and widely recognized reputation for quality, service and an extensive range of productsengineered and manufactured to meet expectations in all categories of performance including highly corrosive environments.We manufacture water infrastructure steel pipe products through our Water Transmission Group, which in 2012, 2011 and 2010 generatedapproximately 51%, 53%, and 57%, respectively, of our net sales. The Water Transmission Group produces large diameter, high pressure, engineered weldedsteel pipe products for use in water transmission applications. With six Water Transmission manufacturing facilities, we are ideally located to meet NorthAmerica’s growing needs for water and wastewater infrastructure. We market our water infrastructure products through an internal sales force. Our sales havehistorically been driven by the need for new water infrastructure, which is based primarily on overall population growth and population movement betweenregions.We also manufacture smaller diameter electric resistance welded (“ERW”) steel pipe and other welded steel pipe products through our Tubular ProductsGroup, which in 2012, 2011, and 2010 generated approximately 49%, 47%, and 43%, respectively, of our net sales. Our smaller diameter pipe is used forapplications in energy, structural, commercial and industrial uses. We have three centrally located Tubular Products manufacturing facilities in the UnitedStates and we market our products through an internal sales force.Our IndustriesWater Transmission. The American Society of Civil Engineers 2009 Report Card for America’s Infrastructure estimates that the United States willneed to spend an additional $11 billion annually to replace aging facilities that are near the end of their useful life and to comply with existing and futurefederal water regulations. Within this market, we focus on large diameter, engineered welded steel pipeline systems utilized in water, energy, structural andplant piping applications. Our core market is the large diameter, high-pressure portion of a water transmission pipeline that is typically at the “upper end” of apipeline system. This is the portion of the overall water pipeline that generally transports water from the source to a treatment plant or from a treatment plantinto the distribution system, rather than the small lines that deliver water directly into households. We believe the addressable market for the products sold byour Water Transmission Group will total approximately $1.32 billion over the next three years.A combination of population growth, movement to new population centers, dwindling supplies from developed water sources, substantialunderinvestment in water infrastructure over the past several decades, and an increasingly stringent regulatory environment are driving demand for waterinfrastructure projects in the United States. These trends are increasing the need for new water infrastructure as well as the need to upgrade, repair and replaceexisting water infrastructure. While we believe this offers the potential for increased demand for our water infrastructure products and other products related towater transmission, we also expect current governmental and public water agency budgetary pressures will impact near-term demand.The primary drivers of growth in new water infrastructure installation are population growth and movement as well as dwindling supplies fromdeveloped water sources. According to the United States Census Bureau, the 2Table of Contentspopulation of the United States will increase by over 86 million people between 2013 and 2050. The resulting increase in demand will require substantial newinfrastructure, as the existing United States water infrastructure is not equipped to provide water to millions of new residents. In addition, many current watersupply sources are in danger of being exhausted. The development of new sources of water at greater distances from population centers will drive the demandfor new water transmission lines. Our six Water Transmission manufacturing facilities are well located to take advantage of the anticipated growth anddemand.Much of the United States water infrastructure is antiquated and many authorities, including the United States Environmental Protection Agency (the“EPA”), believe the United States water infrastructure is in critical need of updates, repairs or replacements. The American Society of Civil Engineers hasgiven poor ratings to many aspects of the United States water infrastructure in their 2009 Report Card for America’s Infrastructure. In its most recent study ofcurrent infrastructure, the American Society of Civil Engineers estimates there will be an $84 billion funding gap for water and wastewater infrastructure by2020, and a $144 billion gap by 2040.Increased public awareness of problems with the quality of drinking water and efficient water usage has resulted in more stringent application of federaland state environmental regulations. The need to comply with these regulations in an environment of heightened public awareness towards water issues isexpected to contribute to demand in the water infrastructure industry over the next several years as water systems will need to be installed, upgraded andreplaced.Tubular Products. The tubular products industry encompasses a wide variety of products serving a diverse group of end markets. We have beenactive in several of these markets, including energy, construction, commercial, and industrial systems. In 2009, the tubular products industry experienced acombination of an oversaturation of imported pipe, a collapse of natural gas prices in a very short time frame, and a decline in non-residential construction, allof which had a severe negative impact on our entire segment of the industry. However, trade cases limited the importation of some energy pipe, and thatsegment of the business, including line pipe and oil country tubular goods (“OCTG”) products, substantially improved. Beginning in 2010, we redirected thefocus of our Houston, Texas plant from mechanical tubing to energy pipe production and began producing it in April 2010. In 2011 we upgraded one of ourmills to produce 2.375 and 2.875 inch tubing capable of being heat treated into alloy grades. These upgrades provided an opportunity to offer products in anew segment of the energy market. We were also able to capitalize on improved market conditions through an expansion at our Atchison, Kansas facility thatincreased its production capacity by more than 50%, improved productivity and enabled the facility to produce product with wall thickness up to 0.375inches.Our emphasis on energy products reflects what we believe will be steady demand from the energy markets. The price per barrel of crude oil has steadilyincreased since 2009 and is currently trading around $95 per barrel. Natural gas production remained at historically high levels during 2012 according to theUnited States Energy Information Administration. Of the active oil and natural gas rigs, approximately one quarter of the rigs are drilling for natural gas andthe other three quarters are drilling for oil. Although rig counts in the United States are down approximately 12 percent from a year ago, we believe drillingactivity and the demand for energy pipe will remain at relatively strong levels.ProductsWater Transmission. Water transmission pipe is used for high-pressure applications, typically requiring pipe to withstand pressures in excess of 150pounds per square inch. Most of our water transmission products are made to custom specifications for fully engineered, large diameter, high-pressure waterinfrastructure systems. Other uses include pipe for piling and hydroelectric projects, wastewater treatment plants and other applications. Our primarymanufacturing process has the capability to manufacture water transmission pipe in diameters ranging from 12 inches to 156 inches with wall thickness of0.135 inch to 1.00 inch. We also have the ability to manufacture even larger and heavier pipe with other processes. We can coat and/or line these products withcement mortar, polyethylene tape, polyurethane paints, epoxies, Pritec, and coal tar enamel according to our 3®Table of Contentscustomers’ specifications. We maintain fabrication facilities that provide installation contractors with custom fabricated sections as well as straight pipesections. We typically deliver a complete pipeline system to the installation contractor.Tubular Products. Our tubular products range in size from 1.315 inches to 16 inches in diameter with wall thickness from 0.035 inch to 0.375 inch.These products are typically sold to distributors or Original Equipment Manufacturers (“OEMs”) and are used for a wide variety of applications, includingenergy, construction, agriculture, and other commercial and industrial uses. The Tubular Products Group also manufactured and marketed welded steel pipeused in traffic signpost applications through June 1, 2011.MarketingWater Transmission. The primary customers for water transmission products are installation contractors for projects funded by public water agencies.In 2012, Garney Construction accounted for 12% of our total Company net sales. No customer accounted for more than 10% of our total net sales in 2011 or2010. Our plant locations in Oregon, Colorado, California, West Virginia, Texas and Mexico allow us to efficiently serve customers throughout the UnitedStates, as well as Canada and Mexico. Our Water Transmission marketing strategy emphasizes early identification of potential water projects, promotion ofspecifications consistent with our capabilities and close contact with the project designers and owners throughout the design phase. Our in-house sales force iscomprised of sales representatives, engineers and support personnel who work closely with public water agencies, contractors and engineering firms, oftenyears in advance of projects being bid. This allows us to identify and evaluate planned projects at early stages, participate in the engineering and designprocess, and ultimately promote the advantages of our systems. After an agency completes a design, they publicize the upcoming bid for a water transmissionproject. We then obtain detailed plans and develop our estimate for the pipe portion of the project. We typically bid to installation contractors who include ourbid in their proposals to public water agencies. A public water agency generally awards the entire project to the contractor with the lowest responsive bid.Tubular Products. Our tubular products are marketed through an in-house sales force. Our tubular product manufacturing facilities are located inKansas, Texas, and Louisiana. Our marketing strategy focuses on quality, customer service and customer relationships. Our tubular products are primarilysold to distributors, although to a lesser extent we also sell to OEMs. Our sales effort emphasizes regular personal contact with current and potential customers.We supplement this effort with targeted advertising, brochures and participation in trade shows. No customers of our Tubular Products business accountedfor more than 10% of our total net sales during 2012, 2011 or 2010.ManufacturingWater 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 our proprietary computer-aided design system and are used as blueprints for the manufacture of the pipe. After the drawingsare completed and approved, manufacturing begins by feeding steel coil continuously at a specified angle into a spiral weld mill which cold-forms the bandinto 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 inaccordance 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, polyethylene tape, polyurethane paint, epoxies, Pritec and cement mortar. Linings may be 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 ourfabrication facilities. Upon final inspection, the pipe is prepared for shipment. We ship our products to project sites principally by truck. 4®Table of ContentsTubular Products. Tubular products are manufactured by an ERW process in diameters ranging from 1.315 inches to 16 inches. This process beginsby 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 materialhandling 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 iswelded by high-frequency electric resistance welders. After exiting the mill, the products are straightened, inspected, tested and end-finished. Certain productsare coated. With our focus on the OCTG market, we also use the services of third party processors to finish the pipe. These finishing operations includethreading, inspecting, testing and heat treating. Securing adequate finishing capacity is key to the Tubular Product Group’s success in the OCTG market.Technology. Advances in technology help us produce high quality products at competitive prices. We have invested in modern welding and inspectionequipment to improve both productivity and product quality. To stay current with technological developments in the United States and abroad, we participatein trade shows, industry associations, research projects and vendor trials of new products.Quality Assurance. We have quality management systems in place that assure we consistently provide products that meet or exceed customer andapplicable regulatory requirements. The Quality Assurance department reports directly to the Chief Executive Officer. All of our quality management systemsin the United States are registered by the International Organization for Standardization, or ISO, under a multi-site registration. In addition to ISOqualification, the American Institute of Steel Construction, American Petroleum Institute, American Society for Mechanical Engineers, Factory Mutual,National Sanitation Foundation, and Underwriters Laboratory have certified us for specific products or operations. The Quality Assurance department isresponsible for monitoring and measuring characteristics of the product. Inspection capabilities include, but are not limited to, visual, dimensional, liquidpenetrant, magnetic particle, hydrostatic, ultrasonic, phased array ultrasonics, real-time imaging enhancement, real-time radioscopic, base material tensile,yield and elongation, sand sieve analysis, coal-tar penetration, concrete compression, lining and coating dry film thickness, adhesion, absorption, guidedbend, charpy impact, hardness, metallurgical examinations, chemical analysis, spectrographic analysis and finished product final inspection. Product is notreleased for shipment to our customers until there is verification that all product requirements have been met.Product Liability. The manufacturing and use of our products involves a variety of risks. Certain losses may result, or be alleged to result, fromdefects in our products, thereby subjecting us to claims for damages, including consequential damages. We warrant our products to be free of certain defectsfor one year. We maintain insurance coverage against potential product liability claims in the amount of $52 million, which we believe to be adequate.Historically, product liability claims against us have not been material. However, there can be no assurance that product liability claims exceeding ourinsurance coverage will not be experienced in the future or that we will be able to maintain such insurance with adequate coverage.BacklogOur backlog includes confirmed orders, including the balance of projects in process, and projects for which we have been notified that we are thesuccessful bidder even though a binding agreement has not been executed. Projects for which a binding contract has not been executed could be cancelled.Binding orders received by us may be subject to cancellation or postponement; however, cancellation would generally obligate the customer to pay the costsincurred by us. As of December 31, 2012, the backlog of orders for our Water Transmission Group was approximately $173 million. Binding contracts hadbeen executed for approximately 92% of the Water Transmission backlog as of February 28, 2013. At December 31, 2011, the backlog of orders for our WaterTransmission Group was approximately $138 million. Backlog as of any particular date may not be indicative of actual operating results for any fiscalperiod. There can be no assurance that any amount of backlog ultimately will be realized. 5Table of ContentsCompetitionWater Transmission. We have several regional competitors in the Water Transmission business. Most water transmission projects are competitivelybid and price competition is vigorous. Price competition may reduce the gross margin on sales, which may adversely affect overall profitability. Othercompetitive factors include timely delivery, ability to meet customized specifications and high freight costs which may limit the ability of manufacturerslocated in other market areas to compete with us. With Water Transmission manufacturing facilities in Oregon, Colorado, California, West Virginia, Texas,and Mexico, we believe we can more effectively compete throughout the United States, Canada and Mexico. Our primary competitor in the WaterTransmission business in the western United States and southwestern Canada is National Oilwell Varco, Inc. East of the Rocky Mountains, our primarycompetition includes: American Cast Iron Pipe Company and U.S. Pipe, which manufacture ductile iron pipe; American Spiral Weld Pipe Company, whichmanufactures spiral welded steel pipe; and Hanson Pipe & Precast, which manufactures concrete pressure pipe and spiral welded steel pipe.No assurance can be given that other new or existing competitors will not establish new facilities or expand capacity within our market areas. New orexpanded facilities or new competitors could have a material adverse effect on our 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 anumber of foreign-based manufacturers that export such pipe into the United States. Manufacturers compete with one another primarily on the basis of price,quality, established business relationships, customer service and delivery. In some of the sectors within the tubular products industry, competition may beless vigorous due to the existence of a relatively small number of companies with the capabilities to manufacture certain products. In particular, we operate in avariety of different markets that require pipe with lighter wall thickness in relation to diameter than many of our competitors can manufacture. In our markets,we typically compete with U.S. Steel, TMK Ipsco, Boomerang, Lakeside Steel, Tex Tube, Tenaris, Evraz, California Steel Industries and JMC Steel Group,as well as foreign competitors.Additionally, several companies have announced new plants or the expansion of product lines at existing facilities. New or expanded facilities or newcompetitors could have a material adverse affect on our ability to capture market share and maintain product pricing.Raw Materials and SuppliesWe purchase hot rolled and galvanized steel coil from both domestic and foreign steel mills. Domestic suppliers include Severstal, ArcelorMittal,ThyssenKrupp Steel USA, Nucor Corporation, SSAB, California Steel Industries, Gallatin Steel Company, New Process Steel, and Steel Dynamics Inc.Foreign suppliers include Ternium and BlueScope Steel. We order steel according to our business forecasts for our Tubular Products business. Steel for theWater Transmission business is normally purchased only after a project has been awarded to us. From time to time, we may purchase additional steel when itis available at favorable prices. Purchased steel represents a substantial portion of our cost of sales. The steel industry is highly cyclical in nature and steelprices are influenced by numerous factors beyond our control, including general economic conditions, availability of raw materials, energy costs, importduties, other trade restrictions and currency exchange rates.We also rely on certain suppliers of coating materials, lining materials and certain custom fabricated items. We have at least two suppliers for most ofour raw materials. We believe our relationships with our suppliers are positive and have no indication that we will experience shortages of raw materials orcomponents essential to our production processes or that we will be forced to seek alternative sources of supply. Any shortages of raw materials may result inproduction delays and costs, which could have a material adverse effect on our financial position, results of operations or cash flows. 6Table of ContentsEnvironmental and Occupational Safety and Health RegulationWe are subject to federal, state, local and foreign environmental and occupational safety and health laws and regulations, violation of which could leadto fines, penalties, other civil sanctions or criminal sanctions. These environmental laws and regulations govern emissions to air; discharges to water(including stormwater); and the generation, handling, storage, transportation, treatment and disposal of waste materials. We operate under numerousgovernmental permits and licenses relating to air emissions, stormwater run-off and other environmental matters, and we are also subject to environmentallaws requiring the investigation and cleanup of environmental contamination at properties we presently own or operate and at third-party disposal or treatmentfacilities to which these sites send or arrange to send hazardous waste. For example, we have been identified as a potentially responsible party at the PortlandHarbor Site discussed in Part I—Item 3, “Legal proceedings” of this 2012 Form 10-K below. We believe we are in material compliance with these laws andregulations and do not currently believe that future compliance with such laws and regulations will have a material adverse effect on our financial position,results of operations or cash flows.Based on our assessment of potential liability, we have no reserves for environmental investigations and cleanup. However, estimating liabilities forenvironmental investigations and cleanup is complex and dependent upon a number of factors beyond our control which may change dramatically.Accordingly, although we believe maintaining no reserve is appropriate based on current information, we cannot assure you that our future environmentalinvestigation and cleanup costs and liabilities will not result in a material expense.EmployeesAs of December 31, 2012, we had approximately 1,100 full-time employees. Approximately 31% were salaried and approximately 69% were employedon an hourly basis. A union represents all of the hourly employees at our Monterrey, Mexico facility. All other employees are non-union. We consider ourrelations with our employees to be good.Available InformationOur internet website address is www.nwpipe.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-Kand amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act are available through our internet website as soon asreasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). All statements madein any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement isincluded, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. Ourinternet website and the information contained therein or connected thereto are not incorporated into this 2012 Form 10-K.Additionally, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, WashingtonD.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC alsomaintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SECat www.sec.gov. Item 1A.Risk FactorsYou should carefully consider the following factors, together with all the other information included in this 2012 Form 10-K, in evaluating ourCompany and our business. If any of the following risks actually occur, our business, financial condition, results of operations, or cash flows could bematerially and adversely affected, and the value of our stock could decline. The risks and uncertainties described below are those that we currentlybelieve may materially affect our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial alsomay impair our business operations. As such, you should not consider this list to be a complete statement of all potential risks or uncertainties. 7Table of ContentsRisks Related to our BusinessWe operate in highly competitive industries, and increased competition could reduce our gross profit and net income. We face significantcompetition in all of our businesses. We have recently seen new domestic and foreign competitors bidding on projects. Orders in the Water Transmissionbusiness are competitively bid, and price competition can be vigorous. Price competition may reduce the gross margin on sales, which may adversely affectoverall profitability. Other competitive factors include timely delivery, ability to meet customized specifications and high freight costs. Although our WaterTransmission manufacturing facilities in Oregon, Colorado, California, West Virginia, Texas, and Mexico allow us to compete throughout the United States,Canada and Mexico, we cannot assure you that new or existing competitors will not establish new facilities or expand capacity within our market areas. Newor expanded facilities or new competitors could have a material adverse effect on our market share and product pricing in our Water Transmission business.There are many competitors in the Tubular Products business, and price is often a prime consideration for purchase of our products. Price competition mayreduce our gross profit, which may adversely affect our net income. Some of our competitors have greater financial, technical and marketing resources than wedo. We cannot assure you that we will be able to compete successfully with our competitors. Failure to compete successfully could reduce our gross profit andnet income, as well as have a material adverse effect on our business, financial position, results of operations or cash flows.Our Tubular Products business is facing intense competition from other North American suppliers. With the increase in energy pipe demand,there have been significant increases in available capacity in North America. Approximately 1.6 million tons of tubular pipe capacity has been added in thelast few years. Approximately 700,000 tons of tubular pipe capacity is currently under construction and another 1.4 million tons has been announced.Increased domestic capacity and production in the United States and Canada could adversely affect our business, financial position, results of operations orcash flows.Our exposure to the energy market is growing. Products serving the energy market, including line pipe and OCTG products, comprise 74%, 70%and 62% of our tons sold in 2012, 2011, and 2010, respectively, for our Tubular Products Group. Sales of these products are tied to the exploration,development, and production of natural gas and oil reserves. Factors affecting the profitability of exploration and production of hydrocarbons, such as theprice of oil and gas, will have an effect on the market for energy pipe products. A decline in the levels of exploration and production activity could adverselyaffect our business, financial position, results of operations, or cash flows.We depend on third party processors to provide finishing services on certain of our energy market products. Certain products supplied to theOCTG market require finishing services currently provided by third parties to finish the pipe to customer specifications. These finishing operations include,but are not limited to, threading, inspection, testing and heat treating. Our dependency on these processors has increased along with our increased productionof OCTG products. Because we cannot perform these processes internally, our inability to secure production time at these processors could negatively impactour revenues from the energy market and puts us at a disadvantage with our domestic competitors.Increased levels of imports have and could continue to adversely affect pricing and demand for our products. We believe import levels areaffected by, among other things, overall worldwide demand, lower cost of production in other countries, the trade practices of foreign governments,government subsidies to foreign producers and governmentally imposed trade restrictions in the United States. Although certain imported steel products fromChina have been curtailed by anti-dumping duties, imported products from other countries have increased, notably from Canada, Italy, Korea, India, andVietnam, which continue to command significant market share. The level of imports of tubular products has historically impacted the domestic tubularproducts market and is currently reducing the demand for our energy products. Increased imports in the United States and Canada which compete with ourother tubular product and water transmission products could reduce demand for our products in the future and adversely affect our business, financialposition, results of operations or cash flows. 8Table of ContentsWe may be unable to develop or successfully market new products or our products might not obtain necessary approvals or achievemarket acceptance, which could adversely affect our growth. We will continue to actively seek to develop new products and to expand our existingproducts into new markets, but we cannot assure you that we will be successful in these efforts. If we are unsuccessful in developing and marketing newproducts, expanding into new markets, or we do not obtain or maintain requisite approvals for our products, the demand for our products could be adverselyaffected, which could affect our business, financial position, results of operations or cash flows.The success of our business is affected by general economic conditions, and our business may be adversely affected by an economicslowdown or recession. Periods of economic slowdown or recession in the United States, or the public perception that one may occur, have and could furtherdecrease the demand for our products, affect the price of our products and adversely impact our business. We have been impacted in the past by the generalslowing of the economy, and the economic slowdown has had an adverse impact on our business, financial position, results of operations or cash flows. Inparticular, our Tubular Products Group is exposed to the energy exploration, non-residential construction, and agriculture markets, and a significantdownturn in any one of these markets could cause a reduction in our revenues that could be difficult to offset.A downturn in government spending related to public water transmission projects would adversely affect our business. Our WaterTransmission business accounted for approximately 51% of our net sales in 2012. Our Water Transmission business is primarily dependent upon spendingon public water transmission projects, including water infrastructure upgrades, repairs and replacement and new water infrastructure spending, which, inturn, depends on, among other things: • the need for new or replacement infrastructure; • the priorities placed on various projects by governmental entities; • federal, state and local government spending levels, including budgetary constraints related to capital projects and the ability to obtain financing;and • the ability of governmental entities to obtain environmental approvals, right-of-way permits and other required approvals and permits.Decreases in the number of, or government funding of, public water transmission projects would adversely affect our business, financial position,results of operations, or cash flows.Project delays in public water transmission projects could adversely affect our business. The public water agencies constructing watertransmission projects generally announce the projects well in advance of the bidding and construction process. It is not unusual for projects to be delayed andrescheduled. Projects are delayed and rescheduled for a number of reasons, including changes in project priorities, difficulties in complying withenvironmental and other government regulations and additional time required to acquire rights-of-way or property rights. Delays in public water transmissionprojects may occur with too little notice to allow us to replace those projects in our manufacturing schedules. As a result, our business, financial position,results of operations or cash flows may be adversely affected by unplanned downtime.Fluctuations in steel prices may affect our future results of operations. Purchased steel represents a substantial portion of our cost of sales,particularly in our Tubular Products business. The steel industry is highly cyclical in nature, and, at times, pricing can be highly volatile due to a number offactors beyond our control, including general economic conditions, import duties, other trade restrictions and currency exchange rates. Over the past threeyears, steel prices have fluctuated significantly. Our cost for a ton of steel was approximately $663 per ton in 2010, $766 per ton in 2011, and $748 per tonin 2012. In 2012, our monthly average steel purchasing costs ranged from a high of approximately $825 per ton to a low of approximately $690 per ton. Thisvolatility can significantly affect our gross profit. Although we seek to recover increases in steel prices through price increases in our products, we have notalways been completely successful. Any increase in steel prices that 9Table of Contentsis not offset by an increase in our prices could have an adverse effect on our business, financial position, results of operations or cash flows.Operating problems in our business could adversely affect our business, financial position, results of operations or cash flows. Ourmanufacturing operations are subject to typical hazards and risks relating to the manufacture of similar products such as: • explosions, fires, inclement weather and natural disasters; • mechanical failure; • unscheduled downtime; • labor difficulties; • loss of process control and quality; • disruptions to supply; • raw materials quality defects; • service provider delays or failures; • transportation delays or failures; • an inability to obtain or maintain required licenses or permits; and • environmental hazards such as chemical spills, discharges or releases of toxic or hazardous substances or gases into the environment orworkplace.The occurrence of any of these operating problems at our facilities may have a material adverse effect on the productivity and profitability of a particularmanufacturing facility or on our operations as a whole, during and after the period of these operating difficulties. These operating problems may also causepersonal injury and loss of life, severe damage to or destruction of property and equipment, and environmental damage. In addition, individuals could seekdamages for alleged personal injury or property damage. Furthermore, we could be subject to present and future claims with respect to workplace injury,exposure to hazardous materials, workers’ compensation and other matters. Although we maintain property and casualty insurance of the types and in theamounts that we believe are customary for our industries, we cannot assure you that our insurance coverage will be adequate for liability that may beultimately incurred or that such coverage will continue to be available to us on commercially reasonable terms. Any claims that result in liability exceeding ourinsurance coverage could have an adverse effect on our business, financial position, results of operations or cash flows.Our Water Transmission business faces competition from concrete, ductile iron, polyvinyl chloride (“PVC”) and high density polyethylene(“HDPE”) pipe manufacturers. Water transmission pipe is manufactured generally from steel, concrete, HDPE, PVC or ductile iron. Each pipe materialhas advantages and disadvantages. Steel and concrete are more common materials for larger diameter water transmission pipelines because ductile iron pipegenerally is limited in diameter due to the manufacturing process. The public agencies and engineers who determine the specifications for water transmissionprojects analyze these pipe materials for suitability for each project. Individual project circumstances normally dictate the preferred material. If we experiencecost increases in raw materials, labor and overhead specific to our industry or the location of our facilities, while competing products or companies do notexperience similar changes, we could experience an adverse change in the demand, price and profitability of our products, which could have a material adverseeffect on our business, financial position, results of operations or cash flows.Our quarterly results of operations are subject to significant fluctuation. Our net sales and operating results may fluctuate significantly fromquarter to quarter due to a number of factors, including: • the commencement, completion or termination of contracts during any particular quarter; 10Table of Contents • unplanned down time due to project delays or mechanical failure; • underutilized capacity or factory productivity; • the seasonal variation in demand for tubular products; • adverse weather conditions; • fluctuations in the cost of steel and other raw materials; and • competitive pressures.Results of operations in any period are not indicative of results for any future period, and comparisons between any two periods may not be meaningful.We depend on our senior management team, and the loss of any member could adversely affect our operations. Our success depends on themanagement and leadership skills of our senior management team. The loss of any of these individuals, or our inability to attract, retain and maintainadditional personnel, could prevent us from fully implementing our business strategy. We cannot assure you that we will be able to retain our existing seniormanagement personnel or to attract qualified personnel when needed.We may be subject to claims for damages for defective products, which could adversely affect our business, financial position, results ofoperations or cash flows. We warrant our products to be free of certain defects. We have, from time to time, had claims alleging defects in our products. Wecannot assure you that we will not experience material product liability losses in the future or that we will not incur significant costs to defend such claims.While we currently have product liability insurance, we cannot assure you that our product liability insurance coverage will be adequate for liabilities that maybe incurred in the future or that such coverage will continue to be available to us on commercially reasonable terms. Any claims relating to defective productsthat result in liabilities exceeding our insurance coverage could have an adverse effect on our business, financial position, results of operations or cash flows.We may not be able to recover costs and damages from vendors that supply defective materials. We may receive defective materials from ourvendors that are incorporated into our products during the manufacturing process. The cost to repair, remake or replace defective products could be greaterthan the amount that can be recovered from the vendor. Such excess costs could have an adverse effect on our business, financial position, results ofoperations or cash flows.We have a foreign operation which exposes us to the risks of doing business abroad. Our fabrication facility in Monterrey, Mexico primarilyexports products to the United States. We may operate in additional countries in the future. Any material changes in the quotas, regulations or duties onimports imposed by the United States government and our agencies or on exports imposed by these foreign governments and their agencies could adverselyaffect our foreign operations.We also sell some of our products internationally. Our foreign activities are also subject to various other risks of doing business in a foreign country,including: • currency fluctuations; • transportation delays and interruptions; • political, social and economic instability and disruptions; • government embargoes or foreign trade restrictions; • the imposition of duties, tariffs and other trade barriers; • import and export controls; 11Table of Contents • labor unrest and current and changing regulatory environments; • limitations on our ability to enforce legal rights and remedies; and • potentially adverse tax consequences.No assurance can be given that our operations may not be adversely affected in the future. Any of these events could have an adverse effect on ouroperations in the future by reducing the demand for our products and services, decreasing the prices at which we can sell our products or increasing costssuch that there would be an adverse effect on our business, financial position, results of operations or cash flows. We cannot assure you that we will continueto operate in compliance with applicable customs, currency exchange control regulations, transfer pricing regulations or any other laws or regulations to whichwe may be subject, or that any such regulations or laws will not be modified. Any failure by us to comply with any such applicable regulations or laws, orany changes in any such regulations or laws could have a material adverse effect on our business, financial position, results of operations or cash flows.Our use of the percentage-of-completion method of accounting could result in a change to previously recorded revenue and profit. In particular,revenue from construction contracts in our Water Transmission segment is recognized on the percentage-of-completion method, measured by the costs incurredto date as a percentage of the estimated total costs of each contract (the cost-to-cost method). Estimated total costs of each contract are reviewed on a monthlybasis by project management and operations personnel for all active projects. All cost revisions that result in the gross profit as a percent of sales increasing ordecreasing by more than two percent are reviewed by senior management personnel.The use of estimated cost to complete each contract is a significant variable in the process of determining income earned and is a significant factor in theaccounting for contracts. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which thesechanges become known. Due to the variability of events affecting our estimates which have a material impact on our contract accounting, actual results coulddiffer from those estimates, which could adversely affect our financial position, results of operations or cash flows.Our Water Transmission backlog is subject to reduction and cancellation. Backlog represents products or services that our customers havecommitted to purchase from us and projects for which we have been notified that we are the successful bidder even though a binding agreement has not beenexecuted. Projects for which a binding contract has not been executed could be cancelled. Our backlog of orders for our Water Transmission segment wasapproximately $173 million at December 31, 2012. Our backlog is subject to fluctuations; moreover, cancellations of purchase orders, change orders oncontracts, or reductions of product quantities could materially reduce our backlog and, consequently, future revenues. Our failure to replace canceled orreduced backlog could result in lower revenues, which could adversely affect our business, financial position, results of operations or cash flows.We are subject to stringent environmental and health and safety laws, which may require us to incur substantial compliance andremediation costs, thereby reducing our profits. We are subject to many federal, state, local and foreign environmental and health and safety laws andregulations, particularly with respect to the use, handling, treatment, storage, discharge and disposal of substances and hazardous wastes used or generated inour manufacturing processes. Compliance with these laws and regulations is a significant factor in our business. We have incurred, and expect to continue toincur, significant expenditures to comply with applicable environmental laws and regulations. Our failure to comply with applicable environmental laws andregulations and permit requirements could result in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoiningor curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial actions.We are currently, and may in the future be, required to incur costs relating to the environmental assessment or environmental remediation of ourproperty, and for addressing environmental conditions, including, but not 12Table of Contentslimited to, the issues associated with our Portland, Oregon facility as discussed in Part I—Item 3, “Legal Proceedings” below. Some environmental laws andregulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities andsites without regard to causation or knowledge of contamination. Consequently, we cannot assure you that existing or future circumstances, the development ofnew facts or the failure of third parties to address contamination at current or former facilities or properties will not require significant expenditures by us.We expect to continue to be subject to increasingly stringent environmental and health and safety laws and regulations. It is difficult to predict the futureinterpretation and development of environmental and health and safety laws and regulations or their impact on our future earnings and operations. Weanticipate that compliance will continue to require capital expenditures and operating costs. Any increase in these costs, or unanticipated liabilities arising, forexample, out of discovery of previously unknown conditions or more aggressive enforcement actions, could adversely affect our results of operations, andthere is no assurance that they will not have a material adverse effect on our business, financial position, results of operations or cash flows.We face risks in connection with potential acquisitions. Acquiring businesses that complement or expand our operations has been an importantelement of our business strategy, and we continue to evaluate potential acquisitions that may expand and complement our business. We may not be able tosuccessfully identify attractive acquisition candidates or negotiate favorable terms in the future. Furthermore, our ability to effectively integrate any futureacquisitions will depend on, among other things, the adequacy of our implementation plans, the ability of our management to oversee and operate effectivelythe combined operations and our ability to achieve desired operational efficiencies. If we are unable to successfully integrate the operations of any businessesthat we may acquire in the future, our business, financial position, results of operations or cash flows could be adversely affected.Sustained increases in fuel costs could have an adverse impact on our profitability. We have periodically experienced significant fluctuations infuel costs primarily as a result of macro-economic factors beyond our control. The price of fuel fluctuates significantly over time, and events beyond ourcontrol could adversely affect the supply and cost of fuel. Although we seek to recover increases in fuel costs through price increases in our products, we havenot always been completely successful. Any increase in fuel costs that is not offset by increases in our prices could have an adverse impact on our business,financial position, results of operations or cash flows.Risks Related to the Pending SEC Investigation and Pending LitigationThe SEC’s formal investigation and pending putative securities class action and derivative litigation have resulted in significant costs andexpenses, have diverted resources and could have a material adverse effect on our business, financial condition, results of operations or cashflows. As further described in Part I—Item 3, “Legal Proceedings” of this 2012 Form 10-K, on March 10, 2010 we were advised by the staff of the SECEnforcement Division that the SEC had commenced a formal investigation. This investigation is ongoing and we are cooperating fully with the SEC inconnection with these matters. We have incurred significant professional fees and other costs in responding to the SEC investigation. If the SEC were toconclude that enforcement action is appropriate, we could be required to pay large civil penalties and fines. The SEC also could impose other sanctions againstus or certain of our current and former directors and officers. Any of these events could have a material adverse effect on our business, financial condition,results of operations, or cash flows. Additionally, while we believe we have made appropriate judgments in determining the correct adjustments in preparingour restated consolidated financial statements in 2011, the SEC may disagree with the manner in which we have accounted for and reported these adjustments.Accordingly, there is a risk that we may have to restate our historical consolidated financial statements, amend prior filings with the SEC or take other actionsnot currently contemplated.As also further described in Part I—Item 3, “Legal Proceedings” of this 2012 Form 10-K, several lawsuits, including two putative shareholder classaction complaints (that have since been consolidated into one action) 13Table of Contentsand three putative derivative complaints, have been filed against us and certain of our current and former officers and directors arising out of ourannouncement of the Audit Committee investigation and related matters during 2010 which resulted in the restatement of our 2009 financials, as well therestatement of our financials in 2011. We have incurred significant professional fees and other costs defending against the lawsuits. Pending court approval, asettlement of the class action plaintiff’s claims in the amount of $12.5 million has been reached. All of this amount will be paid by the Company’s insurerswith the exception of $200,000 in retention which was expensed in the second quarter of 2010 and $200,000 which was expensed in the second quarter of 2012.We expect to incur significant professional fees and other costs if the settlement is not approved by the courts. In addition, our Board of Directors, managementand employees have expended a substantial amount of time on pending litigation, diverting a significant amount of resources and attention that wouldotherwise be directed toward our operations and implementation of our business strategy, all of which could materially adversely affect our business, financialcondition, results of operations or cash flows.Our indemnification obligations and limitations of our director and officer liability insurance may have a material adverse effect on ourfinancial condition, results of operations and cash flows. Under Oregon law, our articles of incorporation and bylaws and certain indemnificationagreements to which we are a party, we have an obligation to indemnify, or we have otherwise agreed to indemnify, certain of our current and former directorsand officers with respect to current and future investigations and litigation, including the matters discussed in Part I—Item 3, “Legal Proceedings.” Inconnection with some of these pending matters, we are required to, or we have otherwise agreed to, advance, and have advanced, legal fees and related expensesto certain of our current and former directors and officers and expect to continue to do so while these matters are pending. Certain of these obligations may notbe “covered matters” under our directors’ and officers’ liability insurance, or there may be insufficient coverage available. Further, in the event the directorsand officers are ultimately determined to not be entitled to indemnification, we may not be able to recover the amounts we previously advanced to them.In addition, we have incurred significant expenses in connection with the pending SEC investigation and litigation. We cannot provide any assurancesthat pending claims, or claims yet to arise, will not exceed the limits of our insurance policies, that such claims are covered by the terms of our insurancepolicies or that our insurance carrier will be able to cover our claims. The insurers also may seek to deny or limit coverage in some or all of these matters.Furthermore, the insurers could become insolvent and unable to fulfill their obligation to defend, pay or reimburse us for insured claims. Accordingly, wecannot be sure that claims will not arise that are in excess of the limits of our insurance or that are not covered by the terms of our insurance policy. Due tothese coverage limitations, we may incur significant unreimbursed costs to satisfy our indemnification obligations, which may have a material adverse effecton our business, financial condition, results of operations or cash flows.Negative publicity due to the SEC investigation and shareholder and derivative litigation may have a material adverse effect on ourbusiness, financial condition, results of operations or cash flows. As a result of the outstanding SEC investigation and the pending settlement of theshareholder and derivative litigation and related matters, we have been the subject of negative publicity. This negative publicity may adversely affect our stockprice and may harm our reputation and our relationships with current and future investors, lenders, customers, suppliers and employees. As a result, ourbusiness, financial condition, results of operations or cash flows may be materially adversely affected.Risks Related to Our Financial ConditionOur significant debt obligations and the restrictions under which we operate as a result of our debt obligations could have a materialadverse effect on our business, financial condition, results of operations or cash flows. We have financed our operations through cash flows fromoperations, available borrowings and other financing arrangements. As of December 31, 2012, we had approximately $72.1 million of outstanding debt andcapital lease obligations. 14Table of ContentsOur debt and our debt service obligations could: • limit our ability to obtain additional financing for working capital or other purposes in the future; • reduce the amount of funds available to finance our operations, capital expenditures and other activities; • increase our vulnerability to economic downturns, illiquid capital markets, and adverse industry conditions; • limit our flexibility in responding to changing business and economic conditions, including increased competition; • place us at a disadvantage when compared to our competitors that have less debt; and • with respect to our borrowings that bear interest at variable rates, cause us to be vulnerable to increases in interest rates.Our ability to make scheduled payments on our debt will depend on our future operating performance and cash flows, which are subject to prevailingeconomic conditions, prevailing interest rate levels and other financial, competitive and business factors, many of which are beyond our control. Our inabilityto make scheduled payments on our debt or any of the foregoing factors would have a material adverse effect on our business, financial condition, results ofoperations, or cash flows.We will need to substantially increase working capital as market conditions and customer order levels improve. As market conditions andcustomer order levels improve we will have to increase our working capital substantially, as it will take several months for new orders to be translated intocash receipts. In general, availability under our Amended Credit Agreement while remaining in compliance with our financial covenants is limited to $90.8million as of December 31, 2012. We may not have sufficient availability under this agreement to borrow the amounts we need, and other opportunities toborrow additional funds or raise capital in the equity markets may be limited or nonexistent. A shortage in the availability of working capital would have amaterial adverse effect on our business, financial condition, results of operations, or cash flows.Our failure to comply with covenants in our debt instruments could result in our indebtedness being immediately due and payable, whichwould have a material adverse effect on our business, financial condition, results of operations or cash flows. The agreements governing ouroutstanding debt include financial and other restrictive covenants that impose certain requirements with respect to our financial condition and results ofoperations and general business activities. These covenants require us to maintain certain financial ratios and place restrictions on, among other things, ourability to incur certain additional debt and to create liens or other encumbrances on assets.Our ability to comply with the financial and other covenants under our debt instruments in the future is uncertain and will be affected by our results ofoperations and financial condition as well as other events and circumstances beyond our control. If market and other economic conditions do not improve, ourability to comply with these covenants may be impaired. A failure to comply with the requirements of these covenants, if not waived or cured, could permitacceleration of the related debt and acceleration of debt under other instruments that include cross-acceleration or cross-default provisions. If any of our debt isaccelerated, we cannot assure you that we would have sufficient assets to repay such debt or that we would be able to refinance such debt on commerciallyreasonable terms or at all. The acceleration of a significant portion of our debt would have a material adverse effect on our business, financial condition,results of operations, or cash flows.Disruptions in the financial markets and the general economic slowdown could cause us to be unable to obtain financing and expose us torisks related to the overall macro-economic environment, which could have a material adverse effect on our business, financial condition, results ofoperations or cash flows. The United States equity and credit markets have experienced significant price volatility, dislocations and liquidity 15Table of Contentsdisruptions, which have caused market prices of many equities to fluctuate substantially and the spreads on prospective debt financings to widenconsiderably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and insome cases have resulted in the unavailability of financing, even for companies who are otherwise qualified to obtain financing. These events may make it lesslikely that we will be able to obtain additional financing and also may make it more difficult or prohibitively costly for us to raise capital through the issuanceof debt or equity securities.Risks Related to Our Internal Control Over Financial ReportingWe have identified material weaknesses in internal control in prior years. For the year ended December 31, 2011, material weaknesses in ourinternal control over financial reporting were identified. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control overfinancial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would notbe prevented or detected. We believe these material weaknesses have been remediated as of December 31, 2012. However, we cannot assure you that additionalmaterial weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new orimproved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, or could result in materialmisstatements in our financial statements. These misstatements could result in a restatement of financial statements, cause us to fail to meet our reportingobligations or cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.Risks Related to Our Failure to Timely File Periodic Reports with the SECOur failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equitycapital. We did not file our 2011 Form 10-K, nor our Form 10-Q for the third quarter of 2011, within the timeframe required by the SEC. Because of our latefilings, we may be limited in our ability to access the public markets to raise debt or equity capital, which could prevent us from pursuing transactions orimplementing business strategies that we believe would be beneficial to our business. Until May 2013, twelve months after the month in which we regainedcompliance with our SEC reporting obligations, we will be ineligible to use shorter and less costly filings, such as Form S-3, to register our securities for sale.We may use Form S-1 to register a sale of our stock to raise capital or complete acquisitions, but doing so would likely increase transaction costs andadversely impact our ability to raise capital or complete acquisitions of other companies in a timely manner.Risks Related to Our Common StockThe relatively low trading volume of our common stock may limit your ability to sell your shares. Although our shares of common stock arelisted on the Nasdaq, we have historically experienced a relatively low trading volume. If we have a low trading volume in the future, holders of our sharesmay have difficulty selling a large number of shares of our common stock in the manner or at a price that might otherwise be attainable.The market price of our common stock could be subject to significant fluctuations. The market price of our common stock has experienced, andmay continue to experience, significant volatility. Among the factors that could affect our stock price are: • our operating and financial performance and prospects; • quarterly variations in the rate of growth of our financial indicators, such as earnings per share, net income and sales; • changes in revenue or earnings estimates or publication of research reports by analysts; • loss of any member of our senior management team; • speculation in the press or investment community; 16Table of Contents • strategic actions by us or our competitors, such as acquisitions or restructuring; • sales of our common stock by shareholders; • relatively low trading volume; • general market conditions and market expectations for our industry and the financial health of our customers; and • domestic and international economic, legal and regulatory factors unrelated to our performance.The stock markets in general have experienced broad fluctuations that have often been unrelated to the operating performance of particular companies.These broad market fluctuations may adversely affect the trading price of our common stock.Certain provisions of our governing documents and Oregon law could discourage potential acquisition proposals. Our articles of incorporationcontain provisions that: • classify the board of directors into three classes, each of which serves for a three-year term with one class elected each year; • provide that directors may be removed by shareholders only for cause and only upon the affirmative vote of 75% of the outstanding shares ofcommon stock; and • permit the board of directors to issue preferred stock in one or more series, fix the number of shares constituting any such series and determine thevoting powers and all other rights and preferences of any such series, without any further vote or action by our shareholders.In addition, we are subject to the Oregon Business Combination Act, which imposes certain restrictions on business combination transactions and mayencourage parties interested in acquiring us to negotiate in advance with our board of directors. We also have a shareholder rights plan that acts to discourageany person or group from making a tender offer for, or acquiring, more than 15% of our common stock without the approval of our board of directors. Any ofthese provisions could discourage potential acquisition proposals, could deter, delay or prevent a change in control that our shareholders consider favorableand could depress the market value of our common stock. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesPropertiesThe following table provides certain information about our nine operating facilities as of December 31, 2012: Location ManufacturingSpace(approx.sq. ft.) PropertySize(approx.acres) Products Number and Type of MillsPortland, Oregon 300,000 25 Water transmission 3 spiral millsAtchison, Kansas 106,000 60 Tubular products 2 electric resistance millsAdelanto, California 200,000 100 Water transmission 3 spiral millsDenver, Colorado 182,000 40 Water transmission 2 spiral millsHouston, Texas 175,000 15 Tubular products 3 electric resistance millsParkersburg, West Virginia 145,000 90 Water transmission 2 spiral millsSaginaw, Texas (2 facilities) 170,000 50 Water transmission 2 spiral millsMonterrey, Mexico 40,000 5 Water transmission Multiple line fabricationcapabilityBossier City, Louisiana 180,000 25 Tubular products 1 electric resistance mill 17Table of ContentsAs of December 31, 2012, we owned all of our facilities except for one of our Saginaw, Texas facilities, and property adjacent to our Oregon facility,which are leased. During the first half of 2012, we began shutting down production at our Pleasant Grove, Utah facility and transferring its property andequipment to other manufacturing locations. Operations have ceased at Pleasant Grove as of December 31, 2012.Our facilities serve regional markets, which vary in the number and sizes of projects year-over-year. Consequently, we have excess manufacturingcapacity from time to time at each of our facilities. We believe the quality and productive capacity of our facilities are sufficient to maintain our competitiveposition for the foreseeable future. Item 3.Legal ProceedingsClass Action and Derivative LawsuitsOn November 20, 2009, a complaint against the Company, captioned Richard v. Northwest Pipe Co. et al., No. C09-5724 RBL (“Richard”), was filedin the United States District Court for the Western District of Washington. The plaintiff is allegedly a purchaser of the Company’s stock. In addition to theCompany, Brian W. Dunham, the Company’s former President and Chief Executive Officer, and Stephanie J. Welty, the Company’s former Chief FinancialOfficer, are named as defendants. The complaint alleges that defendants violated Section 10(b) of the Securities Exchange Act of 1934 by making false ormisleading statements between April 23, 2008 and November 11, 2009, subsequently extended to December 22, 2011 (the “Class Period”). Plaintiff seeks torepresent a class of persons who purchased the Company’s stock during the same period, and seeks damages for losses caused by the alleged wrongdoing.A similar complaint, captioned Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust Fund v. Northwest Pipe Co. et al., No. C09-5791 RBL (“Plumbers”), was filed against the Company in the same court on December 22, 2009. In addition to the Company, Brian W. Dunham,Stephanie J. Welty and William R. Tagmyer, the Company’s Chairman of the Board, are named as defendants in the Plumbers complaint. In the Plumberscomplaint, as in the Richard complaint, the plaintiff is allegedly a purchaser of the Company’s stock and asserts that defendants violated Section 10(b) of theSecurities Exchange Act of 1934 by making false or misleading statements during the Class Period. Plaintiff seeks to represent a class of persons whopurchased the Company’s stock during that period, and seeks damages for losses caused by the alleged wrongdoing.The Richard action and the Plumbers action were consolidated on February 25, 2010. Plumbers and Pipefitters Local No. 630 Pension-Annuity TrustFund was appointed lead plaintiff in the consolidated action. A consolidated amended complaint was filed by the plaintiff on December 21, 2010, and ourmotion to dismiss was filed on February 25, 2011, as were similar motions filed by the individual defendants. On August 26, 2011, the Court denied alldefendants’ motions to dismiss, and the Company filed its answer to the consolidated amended complaint on October 24, 2011. The parties participated in aninitial settlement mediation on January 30, 2012. On July 19, 2012 the parties participated in a second settlement mediation at which the parties agreed,subject to court approval, to settle all of the plaintiff’s claims for $12.5 million. All of this amount will be paid by the Company’s insurers with the exceptionof $200,000 in retention which was expensed in the second quarter of 2010 and $200,000 which was expensed in the second quarter of 2012. The fullsettlement amount has been placed into escrow. On November 27, 2012, the Court issued an order preliminarily approving the class action settlement andsetting a settlement hearing for final approval for March 22, 2013.On March 3, 2010, the Company was served with a derivative complaint, captioned Ruggles v. Dunham et al., No. C10-5129 RBL (“Ruggles”), andfiled in the United States District Court for the Western District of Washington. The plaintiff in this action is allegedly a current shareholder of the Company.The Company is a nominal defendant in this litigation. Plaintiff seeks to assert, on the Company’s behalf, claims against Brian W. Dunham, Stephanie J.Welty, William R. Tagmyer, Keith R. Larson, Wayne B. Kingsley, Richard A. Roman, Michael C. Franson and Neil R. Thornton. The asserted basis of theclaims is that defendants breached fiduciary 18Table of Contentsduties to the Company by causing the Company to make improper statements between April 23, 2008 and August 7, 2009. Plaintiff seeks to recover, on theCompany’s behalf, damages for losses caused by the alleged wrongdoing.On September 23, 2011, the Company was served with a derivative complaint, captioned Grivich v. Dunham, et al., No. 11-2-03678-6 (“Grivich”),and filed in the Superior Court of Washington for Clark County. The plaintiff in this action is allegedly a current shareholder of the Company. The Companyis a nominal defendant in this litigation. Plaintiff seeks to assert, on the Company’s behalf, claims against Brian W. Dunham, Stephanie J. Welty, William R.Tagmyer, Keith R. Larson, Wayne B. Kingsley, Richard A. Roman, Michael C. Franson and Neil R. Thornton. The asserted basis of the claims is thatdefendants breached fiduciary duties to the Company between April 2, 2007 and the date of the Complaint. Plaintiff seeks to recover, on the Company’sbehalf, damages for losses caused by the alleged wrongdoing.On October 14, 2011, another derivative complaint, captioned Richard v. Dunham, et al., No. 11-2-04080-5 (“Richard Deriv.”), was filed in theSuperior Court of Washington for Clark County. The plaintiff in this action is allegedly a current shareholder of the Company. The Company is a nominaldefendant in this litigation. Plaintiff seeks to assert, on the Company’s behalf, claims against Brian W. Dunham, Stephanie J. Welty, William R. Tagmyer,Keith R. Larson, Wayne B. Kingsley, Richard A. Roman, Michael C. Franson and Neil R. Thornton. The asserted basis of the claims is that defendantsbreached fiduciary duties to the Company between April 2, 2007 and the date of the Complaint. Plaintiff seeks to recover, on the Company’s behalf, damagesfor losses caused by the alleged wrongdoing.An amended complaint in the Ruggles action was filed on November 10, 2011, and the defendants responded to the complaint by filing a motion todismiss. The derivative parties participated in both of the settlement mediations described above. At the mediation on July 19, 2012, the parties agreed, subjectto court approval, to settle all of the above derivative plaintiffs’ claims in all of the above-described derivative actions, with the Company agreeing to makecertain corporate governance modifications and pay plaintiffs the amount of $750,000 for plaintiffs’ attorneys’ fees. All of this amount will be paid by theCompany’s insurers. The full settlement amount is included in accrued liabilities. The amount that will be paid by the insurers is included in trade and otherreceivables. On December 19, 2012, the Court issued an order preliminarily approving the settlement of the derivative actions and setting a settlement hearingfor final approval for March 29, 2013.SEC InvestigationOn March 8, 2010, the staff of the Enforcement Division of the SEC advised our counsel that they had obtained a formal order of investigation withrespect to matters related to the Audit Committee investigation. We are cooperating fully with the SEC in connection with these matters. We cannot predict if,when or how they will be resolved or what, if any, actions we may be required to take as part of any resolution of these matters. Any action by the SEC orother governmental agency could result in civil or criminal sanctions against us and/or certain of our current and former officers, directors and employees. Theinvestigation is at an early stage and, at this time, it is not possible to predict its outcome. Therefore, we have not accrued any charges related to thisinvestigation.Other MattersPortland Harbor SuperfundOn December 1, 2000, a section of the lower Willamette River known as the Portland Harbor was included on the National Priorities List at the requestof the United States Environmental Protection Agency (the “EPA”). While the Company’s Portland, Oregon manufacturing facility does not border theWillamette River, an outfall from the facility’s stormwater system drains into a neighboring property’s privately owned stormwater system and slip. Since thelisting of the site, the Company was notified by the EPA and the Oregon Department of 19Table of ContentsEnvironmental Quality (the “ODEQ”) of potential liability under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”).In 2008, the Company was asked to file information disclosure reports with the EPA (CERCLA 104 (e) information request). By agreement with the EPA, theODEQ is responsible for overseeing remedial investigation and source control activities for all upland sites to investigate sources and prevent futurecontamination to the river. A remedial investigation and feasibility study (“RI/FS”) of the Portland Harbor has been directed by a group of potentiallyresponsible parties known as the Lower Willamette Group (the “LWG”) under agreement with the EPA. The Company made a payment of $175,000 to theLWG in June 2007 as part of an interim settlement, and is under no obligation to make any further payment. The final draft RI was submitted to the EPA bythe LWG in fall of 2011 and the draft FS was submitted by the LWG to the EPA in March 2012. As of the filing of this 2012 Form 10-K, the final RI isscheduled to be submitted to the EPA in the fall of 2013, and the final FS is scheduled to be submitted to the EPA by November 30, 2013.In 2001, groundwater containing elevated volatile organic compounds (“VOCs”) was identified in one localized area of leased property adjacent to thePortland facility furthest from the river. Assessment work in 2002 and 2003 to further characterize the groundwater was consistent with the initial conclusionthat the source of the VOCs is located off of Company-owned property. In February 2005, the Company entered into a Voluntary Agreement for RemedialInvestigation and Source Control Measures (the “Agreement”) with the ODEQ. The Company is one of many Upland Source Control Sites working with theODEQ on Source Control and is considered a “medium” priority site by the ODEQ. The Company performed remedial investigation work required under theAgreement and submitted a draft Remedial Investigation/Source Control Evaluation Report in December 2005. The conclusions of the report indicated that theVOCs found in the groundwater do not present an unacceptable risk to human or ecological receptors in the Willamette River. The report also indicated there isno evidence at this time showing a connection between detected VOCs in groundwater and Willamette River sediments. In 2009, the ODEQ requested that theCompany revise its Remedial Investigation/Source Control Evaluation Report from 2005 to include more recent information from focused supplementalsampling at the Portland facility and more recent information that has become available related to nearby properties. The Company submitted the ExpandedRisk Assessment for the VOCs in Groundwater in May 2012, and comments from the ODEQ were received in November 2012. The Company is currentlydiscussing additional sampling requirement with the ODEQ.Also, based on sampling associated with the Portland facility’s remedial investigation and on sampling and reporting required under the Portland,Oregon manufacturing facility’s National Pollutant Discharge Elimination System permit for storm water, the Company and the ODEQ have periodicallydetected low concentrations of polynuclear aromatic hydrocarbons (“PAHs”), polychlorinated biphenyls (“PCBs”), and trace amounts of zinc in storm water.Storm water from the Portland, Oregon manufacturing facility site is discharged into a communal storm water system that ultimately discharges into theneighboring property’s privately owned slip. The slip was historically used for shipbuilding and subsequently for ship breaking and metal recycling. Studiesof the river sediments have revealed trace concentrations of PAHs, PCBs and zinc, along with other constituents which are common constituents in urbanstorm water discharges. To minimize the zinc traces in its storm water, the Company painted a substantial part of the Portland facility’s roofs, and zinc hasremained below storm water benchmark levels ever since. In June 2009, under the ODEQ Agreement, the Company submitted a Final Supplemental WorkPlan to evaluate and assess soil and storm water, and further assess groundwater risk. In May 2010, the Company submitted a remediation plan related to soilcontamination, which the ODEQ approved in August 2010. The Company has completed the approved remediation plan which has included excavation of alocalized soil area to remove soil containing PAHs (completed in the third quarter of 2011), an upgrade to the fuel and waste storage systems (completed in thefourth quarter of 2011), a storm water filtration system (completed in the first quarter of 2012), and paving of any permeable surfaces (completed in thesecond quarter of 2012).During the localized soil excavation in the third quarter of 2011, additional stained soil was discovered. At the request of the ODEQ, the Companydeveloped an additional Work Plan to characterize the nature and extent of soil and/or groundwater impacts from the staining. The Company beganimplementing this Work Plan in the 20Table of Contentssecond quarter of 2012 and submitted sampling results to the ODEQ in the third quarter of 2012. Comments from the ODEQ were received in November2012. The Company is currently discussing additional sampling requirements with the ODEQ.The Company has spent approximately $2.5 million in 2012 to complete the Source Control work specified in the Work Plans, and anticipates havingto spend approximately $50,000 for further Source Control work in 2013.Concurrent with the activities of the EPA and the ODEQ, the Portland Harbor Natural Resources Trustee Council (“Trustees”) sent some or all of thesame parties, including the Company, a notice of intent to perform a Natural Resource Damage Assessment (“NRDA”) for the Portland Harbor Site todetermine the nature and extent of natural resource damages under CERCLA section 107. The Trustees for the Portland Harbor Site consist of representativesfrom several Northwest Indian Tribes, three federal agencies and one state agency. The Trustees act independently of the EPA and the ODEQ. In 2009, theTrustees completed phase one of their three-phase NRDA. Phase one of the NRDA consisted of environmental studies to fill gaps in the information availablefrom the EPA, and development of a framework for evaluating, quantifying and determining the extent of injuries to the natural resource. Phase two of theNRDA began in 2010 and consists largely of implementing the framework developed in phase one.The Trustees have encouraged potentially responsible parties to voluntarily participate in the funding of their injury assessments and several of thoseparties have agreed to do so. In 2009, one of the Tribal Trustees (the Yakima Nation) resigned and has requested funding from the same parties to support itsown assessment. The Company has not assumed any payment obligation or liability related to either request. The extent of the Company’s obligation withrespect to Portland Harbor matters is not known, and no further adjustment to the consolidated financial statements has been recorded as of December 31,2012.All SitesWe operate our facilities under numerous governmental permits and licenses relating to air emissions, storm water run-off, and other environmentalmatters. Our operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally theOccupational Safety and Health Act and regulations there under which, among other requirements, establish noise and dust standards. We believe we are inmaterial compliance with our permits and licenses and these laws and regulations, and we do not believe that future compliance with such laws andregulations will have a material adverse effect on our financial position, results of operations or cash flows.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. TheCompany maintains insurance coverage against potential claims in amounts that are believed to be adequate. The Company believes that it is not presently aparty to any other litigation, the outcome of which would have a material adverse effect on its business, financial condition, results of operations or cashflows.Executive Officers of the RegistrantInformation regarding the Company’s executive officers is set forth under the caption “Directors, Executive Officers and Corporate Governance” in PartIII—Item 10 of this 2012 Form 10-K and is incorporated herein by reference. Item 4.Mine Safety DisclosuresNot applicable. 21Table of ContentsPART II Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is quoted on the Nasdaq under the symbol “NWPX”. The high and low sales prices as reported on the Nasdaq for each quarter inthe years ended December 31, 2012 and 2011 were as follows. Low High 2012 First Quarter $20.88 $25.53 Second Quarter 19.59 24.32 Third Quarter 22.81 27.02 Fourth Quarter 20.42 25.11 2011 First Quarter $20.50 $24.94 Second Quarter 21.25 26.89 Third Quarter 20.08 30.92 Fourth Quarter 19.20 27.66 There were 57 shareholders of record at February 26, 2013. A substantially greater number of holders of our common stock are beneficial holders,whose shares of record are held by banks, brokers, and other financial institutions. There were no cash dividends declared or paid in fiscal years 2012 or2011, and we do not intend to pay cash dividends in the foreseeable future. 22Table of ContentsStock Performance GraphThe following graph compares the performance of our common stock to the performance of the Russell 2000 Index and a weighted composite index ofcertain peer companies (the “Peer Group”) selected by us. The Peer Group is comprised of Mueller Water Products, Lindsay Corporation and ValmontIndustries, Inc.The comparisons in the chart below are provided in response to SEC disclosure requirements and, therefore, are not intended to forecast or be indicativeof future performance of our common stock. Indexed Return Northwest PipeCompany Russell 2000Index Peer Group December 31, 2007 100.00 100.00 100.00 December 31, 2008 108.87 66.21 65.00 December 31, 2009 68.63 84.20 78.77 December 31, 2010 61.39 106.82 87.96 December 31, 2011 58.41 102.36 82.32 December 31, 2012 60.96 119.09 131.37 Securities Authorized for Issuance under Equity Compensation PlansThe information with respect to equity compensation plans is included under Part III—Item 12, “Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters” of this 2012 Form 10-K. 23Table of ContentsItem 6.Selected Financial DataThe following tables include selected summary financial data for each of our last five years and should be read in conjunction with Part II—Item 8,“Financial Statements and Supplementary Data,” and Part II—Item 7, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” included in this 2012 Form 10-K.The following selected consolidated financial data as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 arederived from our audited consolidated financial statements included in this 2012 Form 10-K. As of December 31, 2012 2011 2010 2009 2008 (In thousands, except per share amounts) Consolidated Statement of Operations Data: Net sales $524,503 $511,668 $386,750 $278,654 $451,419 Gross profit 56,198 59,138 29,688 6,684 79,803 Net income (loss) 16,244 12,660 (5,440) (11,075) 28,165 Basic earnings (loss) per share 1.73 1.36 (0.59) (1.20) 3.08 Diluted earnings (loss) per share 1.72 1.35 (0.59) (1.20) 3.01 As of December 31, 2012 2011 2010 2009 2008 (In thousands) Consolidated Balance Sheet Data: Working capital $167,392 $170,614 $152,810 $120,377 $192,163 Total assets 422,422 413,373 414,883 378,114 452,562 Long-term debt and capital lease obligations, less current portion 63,069 86,418 101,491 61,384 115,250 Stockholders’ equity 259,432 240,267 226,292 230,951 240,954 24Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking StatementsThis Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this 2012 Form 10-K containforward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 and Section 21E of the Exchange Act that are based on currentexpectations, estimates and projections about our business, management’s beliefs, and assumptions made by management. Words such as “expects,”“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “forecasts,” “should,” and variations of such words and similar expressions are intendedto identify such forward-looking statements. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult topredict. Therefore, actual outcomes and results may differ materially from the results anticipated in these forward-looking statements as a result of a variety ofimportant factors. While it is impossible to identify all such factors, those that could cause actual results to differ materially from those estimated by usinclude the important factors discussed in Part 1—Item 1A, “Risk Factors.” Such forward-looking statements speak only as of the date on which they aremade and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this 2012 Form 10-K.If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates orcorrections with respect thereto or with respect to other forward-looking statements.OverviewWe are a leading North American manufacturer of large diameter, high-pressure steel pipeline systems for use in water infrastructure applications,primarily related to drinking water systems, and we also manufacture other welded steel pipe products for use in a wide range of applications, includingenergy, construction, agriculture, and industrial uses. Our pipeline systems are also used for hydroelectric power systems, wastewater systems and otherapplications. In addition, we make products for industrial plant piping systems and certain structural applications. With a history that dates back more than100 years, we have become a leading manufacturer in the welded steel pipe industry. These pipeline systems are produced by our Water Transmission Groupfrom six manufacturing facilities located in Portland, Oregon; Denver, Colorado; Adelanto, California; Parkersburg, West Virginia; Saginaw, Texas; andMonterrey, Mexico. Our Water Transmission Group accounted for approximately 51% of net sales in 2012. During the second half of 2012, we permanentlyclosed our facility located in Pleasant Grove, Utah, and have transferred its property and equipment to other manufacturing locations. Until April 1, 2011, wealso invested in an unconsolidated subsidiary, Northwest Pipe Asia, located in Singapore, that produced steel pipe mills.Our water infrastructure products are sold generally to installation contractors, who include our products in their bids to municipal agencies orprivately-owned water companies for specific projects. We believe our sales are substantially driven by spending on new water infrastructure with a recenttrend towards spending on water infrastructure replacement, repair and upgrade. Within the total range of pipe products, our products tend to fit the largerdiameter, higher-pressure applications.Our Tubular Products Group manufactures ERW steel pipe in three facilities: Atchison, Kansas; Houston, Texas; and Bossier City, Louisiana. Weproduce a range of products used in several different markets. The Tubular Products Group makes pipe focused on the energy industry. We also produce pipeused in industrial, construction, and agricultural applications. Until June 1, 2011, we also made pipe for traffic signpost systems. Our Tubular ProductsGroup generated approximately 49% of our net sales in 2012. Our Tubular Products Group’s sales volume is typically driven by energy spending, non-residential construction spending and general economic conditions. We currently believe the greatest potential for significant sales growth in our TubularProducts Group is through our energy products, which include line pipe and OCTG products. 25Table of ContentsOur Current Economic EnvironmentWe are monitoring the current economic environment, and we believe there are growth opportunities based on key factors impacting demand for ourproducts. The price per barrel of crude oil has steadily increased since 2009 and is currently trading around $95 per barrel. Natural gas production remainedat historically high levels during 2012 according to the United States Energy Information Administration. Of the active oil and natural gas rigs, approximatelyone quarter of the rigs are drilling for natural gas and the other three quarters are drilling for oil. Although rig counts in the United States are downapproximately 12 percent from a year ago, we believe drilling activity and the demand for energy pipe will remain at relatively strong levels. With regard to ourWater Transmission Group, we operate our business with a long-term time horizon. Projects are often planned for many years in advance, and are sometimespart of fifty-year build out plans. However, in the near term, we expect strained governmental and water agency budgets will impact the Water TransmissionGroup. Fluctuating steel costs will be a factor in both our Tubular Products Group and our Water Transmission Group, as the ability to adjust our sellingprices as steel costs fluctuate will depend on market conditions.Critical Accounting PoliciesThe discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in the United States.Management EstimatesThe preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenuesand expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that arebelieved to be reasonable under the circumstances. On an on-going basis, we evaluate all of our estimates, including those related to revenue recognition,allowance for doubtful accounts, goodwill, property and equipment, including depreciation and amortization, inventories, income taxes, and litigation andother contingencies. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accountingpolicies and related judgments and estimates affect the preparation of our consolidated financial statements.Revenue Recognition:Revenue from construction contracts in our Water Transmission Group is recognized on the percentage-of-completion method. For a majority ofcontracts, revenue is measured by the costs incurred to date as a percentage of the estimated total costs of each contract (cost-to-cost method). For a smallnumber of contracts, revenue is measured using units of delivery as progress is best estimated by the number of units delivered under the contract. Contractcosts include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs anddepreciation. Selling, general and administrative costs are charged to expense as incurred. The cost of steel is recognized as a project cost when the steel isintroduced into the manufacturing process. Estimated total costs of each contract are reviewed on a monthly basis by project management and operationspersonnel for all active projects. All cost revisions that result in the gross profit as a percent of sales increasing or decreasing by more than two percent arereviewed by senior management personnel.We begin recognizing revenue on a project when persuasive evidence of an arrangement exists, recoverability is reasonably assured, and project costs areincurred. Costs may be incurred before we have persuasive evidence of an arrangement. In those cases, if recoverability from that arrangement is probable, theproject costs are deferred and revenue recognition is delayed. 26Table of ContentsProvisions for losses on uncompleted contracts are made in the period such losses are known. Changes in job performance, job conditions and estimatedprofitability, including those arising from contract penalty provisions, foreign currency exchange rate movements, changes in raw materials costs, and finalcontract settlements may result in revisions to estimates of revenue, costs and income and are recognized in the period in which the revisions are determined.Revenue from our Tubular Products Group is recognized when all four of the following criteria have been satisfied: persuasive evidence of anarrangement exists; the price is fixed or determinable; delivery has occurred; and collectability is reasonably assured. Deferred revenue is recorded when themanufacturing process is complete and customers are invoiced prior to physical delivery of the product.Allowance for Doubtful Accounts:We maintain allowances for estimated losses resulting from the inability of our customers to make required payments based on historical experience andmanagement’s judgment. The extension and revision of credit is established by obtaining credit rating reports or financial information on the customer. Anallowance is recorded based on a variety of factors, including our historical collection experience and our historical product quality claims. At least monthly,we review past due balances to identify the reasons for non-payment. We will write down or write off a receivable account once the account is deemeduncollectible for reasons such as customer quality claims, a contract dispute, deterioration in the customer’s financial position, a bankruptcy filing or otherevents. We believe the reported allowances at December 31, 2012 are adequate. If the customer’s financial conditions were to deteriorate resulting in theirinability to make payments, additional allowances may need to be recorded which would result in additional expenses being recorded for the period in whichsuch determination was made.Goodwill:Goodwill related to our Tubular Products Group, one of our operating segments and reporting units, represents the excess of cost over the assigned valueof the net assets in connection with the segment’s acquisitions. Goodwill is reviewed for impairment annually at December 31 or whenever events occur orcircumstances change that would more likely than not reduce the fair value of the Tubular Products Group below its carrying amount. Fair value of theTubular Products Group’s goodwill is evaluated under a qualitative approach which takes into account industry and market conditions, cost factors, overallfinancial performance, and other relevant entity specific events and changes. We periodically perform a quantitative analysis, even when the qualitativeanalysis indicates that fair value of goodwill is above its carrying amount. This analysis quantitatively calculates fair value of the Tubular Products groupwith consideration of the income and market approaches as applicable. The income approach is based upon projected future after-tax cash flows (less capitalexpenditures) discounted to present value using factors that consider the timing and risk associated with the future after-tax cash flows. The key assumptionsin the discounted cash flow analysis are the long-term growth rate, the discount rate, and the annual free cash flow. The market approach is based uponhistorical measures using multiples of EBITDA. We utilize a weighted average of the income and market approaches, with a heavier weighting on the incomeapproach because of the relatively limited number of comparable entities for which relevant multiples are available. We also utilize a sensitivity analysis todetermine the impact of changes in discount rates and cash flow forecasts on the valuation of the Tubular operating segment.We determined that the fair value of the Tubular Products Group is greater than its carrying amount at December 31, 2012. If our assumptions aboutgoodwill change as a result of events or circumstances, and management believes the assets may have declined in value, then impairment charges will berecorded, resulting in lower profits. The operations of the Tubular Products Group are cyclical and its sales and profitability may fluctuate from year to year.In the evaluation of our operating segment, we look at the long-term prospects for the reporting unit and recognize that current performance may not be the bestindicator of future prospects or value, which requires management judgment. 27Table of ContentsProperty and Equipment:Property and equipment are recorded at cost. We depreciate the net book value using either the units of production method or a straight-line methoddepending on the classification of the asset. Depreciation expense calculated under the units of production method may be less than, equal to, or greater thandepreciation expense calculated under the straight-line method. We evaluate historical and projected units of production at each plant to reassess the units ofproduction expected on an annual basis. We assess impairment of property and equipment whenever changes in circumstances indicate that the carryingvalues of the assets may not be recoverable. The recoverable value of long-lived assets is determined by estimating future undiscounted cash flows usingassumptions about our expected future operating performance. Our estimates of undiscounted cash flows may differ from actual cash flow due to, amongother things, technological changes, economic conditions, or changes to our business operations. If we determine the carrying value of the property andequipment will not be recoverable, we calculate and record an impairment loss.Inventories:Inventories are stated at the lower of cost or market. Determining market value of inventories involves judgments and assumptions made by us,including projecting selling prices and cost of sales. To project market value, we review recent sales and gross profit history, existing customer orders, currentcontract prices, industry supply and demand, forecasted steel prices, replacement costs, seasonal factors, general economic trends and other information, asapplicable. If future market conditions are less favorable than those projected by us, inventory write-downs may be required. At December 31, 2012, theinventory balance of $115.2 million is reported net of lower of cost or market adjustments totaling $3.5 million. Raw material inventories of steel are stated atcost either on a specific identification basis or on an average cost basis. All other raw materials, as well as supplies, are stated on an average cost basis.Finished goods are stated at cost using the first-in, first-out method of accounting.Income Taxes:We account for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected futuretax consequences of events that have been recognized in our financial statements or tax returns. Valuation allowances are established when necessary to reducedeferred income tax assets to the amount expected to be realized. The determination of our provision for income taxes requires significant judgment, the use ofestimates and the interpretation and application of complex tax laws. Our provision for income taxes primarily reflects a combination of income earned andtaxed in the various United States federal and state and, to a lesser extent, foreign jurisdictions. Jurisdictional tax law changes, increases or decreases inpermanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our changein the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.We record tax reserves for federal, state, local and international exposures relating to periods subject to audit. The development of reserves for theseexposures requires judgments about tax issues, potential outcomes and timing, and is a subjective estimate. We assess our tax positions and record tax benefitsfor all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting dates. Forthose tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions where it is notmore-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. 28Table of ContentsResults of OperationsThe following table sets forth, for the periods indicated, certain financial information regarding costs and expenses expressed in dollars (in thousands)and as a percentage of total net sales and net sales of our business segments. Year EndedDecember 31, 2012 Year EndedDecember 31, 2011 Year EndedDecember 31, 2010 $ % ofNet Sales $ % ofNet Sales $ % ofNet Sales Net sales: Water transmission $269,203 51.3% $271,885 53.1% $221,251 57.2% Tubular products 255,300 48.7 239,783 46.9 165,499 42.8 Total net sales 524,503 100.0 511,668 100.0 386,750 100.0 Cost of sales 468,305 89.3 452,530 88.4 357,062 92.3 Gross profit 56,198 10.7 59,138 11.6 29,688 7.7 Selling, general and administrative expenses 28,638 5.4 26,315 5.2 29,093 7.5 Operating income (loss) 27,560 5.3 32,823 6.4 595 0.2 Other (income) expense, net 339 0.1 1,338 0.3 (413) (0.1) Interest income (160) (0.0) (99) (0.0) (846) (0.2) Interest expense 5,616 1.1 9,306 1.7 8,942 2.3 Income (loss) before income taxes 21,765 4.1 22,278 4.4 (7,088) (1.8) Provision (benefit) for income taxes 5,521 1.1 9,618 1.9 (1,648) (0.4) Net income (loss) $16,244 3.0% $12,660 2.5% $(5,440) (1.4)% Segment gross profit as a percentage of net sales: Water transmission 16.7% 15.9% 8.8% Tubular products 4.4 6.7 6.2 Year Ended December 31, 2012 Compared to Year Ended December 31, 2011Net sales. Net sales increased by $12.8 million to $524.5 million in 2012 from $511.7 million in 2011. One customer accounted for 12% of net salesin 2012. No single customer accounted for 10% or more of total net sales in 2011.Water Transmission sales decreased 1.0% to $269.2 million in 2012 from $271.9 million in 2011. The minor decrease in net sales was due to an 8.9%decrease in the average selling price per ton offset by an 8.7% increase in tons produced. The decrease in average selling prices per ton in 2012 was primarilydue to a 6% decrease in average material cost per ton including steel. Lower steel costs generally lead to lower contract values, and therefore lower selling pricesper ton as contractors and municipalities are aware of the widely available steel costs and market conditions. The expectation of contractors and municipalitiesis that the bid values will decrease when steel costs decrease. We have occasionally negotiated contracts with customers that allow for selling price escalationsor reductions that correspond to changes in steel costs. However, once a bid is accepted, there is typically no opportunity to increase our selling price if steelcosts increase. Tons produced in 2012 was positively impacted by production for the Lake Texoma project during the second half of the year. Biddingactivity, backlog and production levels may vary significantly from period to period affecting sales volumes.Tubular Products sales increased 6.5% to $255.3 million in 2012 from $239.8 million in 2011. The sales increase was due to a 2% increase in tonssold from 202,359 tons to 206,195 tons and a 4% increase in the 29Table of Contentsaverage selling price per ton. The increase in tons sold was driven by an 8% increase in sales of energy tons, partially offset by a net volume decline in otherproduct lines. The increase in the average selling price per ton was due to favorable product mix, partially offset by downward price pressure driven byincreased competition from imported pipe. Energy pipe represented 74% of tons sold in 2012 compared to 70% for the same period of 2011. Within total energypipe sales, the proportion of line pipe and heat treated OCTG product sales increased as compared with 2011. Average selling prices per ton for line pipe andheat treated OCTG products are higher than average selling prices for other product lines.Gross profit. Gross profit decreased 5.0% to $56.2 million (10.7% of total net sales) in 2012 from $59.1 million (11.6% of total net sales) in 2011.Water Transmission gross profit increased 4.3% to $45.1 million (16.7% of segment net sales) in 2012 from $43.2 million (15.9% of segment net sales)in 2011. The increase in gross profit was driven by the decline in material costs including steel and the increase in tons produced as discussed above, ashigher production reduced our fixed costs per ton. However, this was partially offset by a corresponding decrease in the selling price per ton as discussedabove.Gross profit from Tubular Products decreased 30.1% to $11.1 million (4.4% of segment net sales) in 2012 from $16.0 million (6.7% of segment netsales) in 2011. Gross profit was negatively impacted by increases in materials cost per ton including steel, which increased 7% as compared with 2011, andby the negative impact on average selling price per ton driven by competition from imports, partially offset by the increase in tons sold. The increase inmaterials cost per ton for Tubular Products as compared with the decrease in materials cost per ton for Water Transmission was due to timing of purchases.Gross profit was also negatively impacted by a $1.6 million lower of cost or market adjustment to inventory recorded in 2012. There was no lower of cost ormarket adjustment in 2011.Additional information regarding our exposure to volatile steel prices is set forth in Item 7A “Quantitative and Qualitative Disclosures About MarketRisk.”Selling, general and administrative expenses. Selling, general and administrative expenses increased 8.8%, to $28.6 million (5.4% of net sales) in2012 from $26.3 million (5.2% of net sales) in 2011. The increase of $2.3 million as compared to the prior year was primarily driven by a $1.4 millionincrease in wages and benefits, a $1.3 million increase in stock based compensation expense, and a $0.9 million increase in professional fees and outsideservices. In addition, due to the timing of insurance reimbursements, we had expense of $0.2 million in 2012 related to our 2011 restatement as compared to anet credit of $0.4 million in 2011 when we received insurance proceeds related to our previous accounting investigation. This was partially offset by a $2.2million decrease in bonus expense and a decrease of $0.9 million in Tubular Product sales commission expense following the termination of an external salesgroup for energy pipe sales.Other (income) expense, net. Other (income) expense, net decreased to expense of $0.3 million in 2012 from expense of $1.3 million in 2011. Theexpense recorded in 2011 was primarily driven by transactions which did not recur in 2012. These transactions included an allowance of $4.1 million takenon notes receivable, partially offset by a $2.9 million gain on the sale of all assets of the traffic systems product line of the Tubular Products facility inHouston, Texas.Interest expense. Interest expense decreased to $5.6 million in 2012 from $9.3 million in 2011. The decrease in interest expense was a result of loweraverage borrowings and lower average interest rates.Income taxes. Our effective tax provision rates were 25.4% and 43.2% in 2012 and 2011, respectively. During the third quarter of 2012, we performeda research and development tax credit study for fiscal years 2010 through 2011. We recorded a net tax benefit of $1.8 million resulting from this study in thethird quarter of 2012. which reduced our effective rate for 2012 below our federal statutory rate of 35%. 30Table of ContentsYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Net sales. Net sales increased by $124.9 million to $511.7 million in 2011 from $386.8 million in 2010. No single customer accounted for 10% ormore of total net sales in 2011 or 2010.Water Transmission sales increased 22.9% to $271.9 million in 2011 from $221.3 million in 2010. The increase in net sales was due to a 3% increasein tons produced and a 19% increase in the selling price per ton. The increase in selling prices per ton in 2011 was due to an increase in steel costs over 2010and our mix of contracts produced during 2011. The cost of steel per ton for Water Transmission projects increased 19% from 2010 to 2011. Higher steelcosts generally lead to higher contract values. Bidding activity, backlog and production levels may vary significantly from period to period affecting salesvolumes.Tubular Products sales increased 44.9% to $239.8 million in 2011 from $165.5 million in 2010. The sales increase was due to a 29% increase in tonssold from 156,840 tons to 202,359 tons and a 14% increase in the average selling price per ton. The most significant increase in total sales was the result ofincreases in sales related to oil and natural gas drilling operations, with energy pipe representing 96% of the total Tubular Product volume increase in 2011.Certain import duties imposed by the United States Government took effect in the second quarter of 2010, and the volume of energy pipe imported in theUnited States declined. The higher production volume needed to support these increased sales was enabled by our investment in our Bossier City, Louisianafacility in 2010, and upgrades to our Houston, Texas facility, which increased our energy pipe manufacturing capacity. The increases in average selling pricesprincipally reflect higher steel costs. Steel costs per ton increased by 13% in 2011 compared to 2010.Gross profit. Gross profit increased 99.2% to $59.1 million (11.6% of total net sales) in 2011 from $29.7 million (7.7% of total net sales) in 2010.Water Transmission gross profit increased 122.2% to $43.2 million (15.9% of segment net sales) in 2011 from $19.4 million (8.8% of segment netsales) in 2010. The increase in gross profit was driven by the increases in tons produced and the increases in average selling price per ton. The increase wasalso driven by a more favorable mix of contracts, partially as a result of the completion of lower margin contracts awarded in 2009, which flowed through theincome statement in 2010 and which were replaced by higher margin contracts bid in 2010 and reflected in the 2011 income statement, and by the favorableimpact of higher volume on the fixed portion of our cost of goods sold as a percent of sales. This was partially offset by an increase in steel cost per ton,discussed above in the net sales analysis.Gross profit from Tubular Products increased 55.5% to $16.0 million (6.7% of segment net sales) in 2011 from $10.3 million (6.2% of segment netsales) in 2010. As noted above, demand for our tubular products increased significantly, particularly for our energy products. Energy pipe, which has ahigher gross profit as a percent of sales than other tubular products, represented 70% of tons sold in 2011 compared to 62% in 2010. The significant increasein volume also contributed to the increase in gross profit in 2011, as improved market conditions led to higher production which reduced our fixed costs perton, although this was partially offset by higher steel costs per ton of 13% in 2011 compared to 2010.Additional information regarding our exposure to volatile steel prices is set forth in Item 7A “Quantitative and Qualitative Disclosures About MarketRisk.”Selling, general and administrative expenses. Selling, general and administrative expenses decreased 9.5%, to $26.3 million (5.2% of net sales) in2011 from $29.1 million (7.5% of net sales) in 2010. The decrease of $2.8 million as compared to the prior year was driven by a $0.4 million net creditdriven by insurance proceeds received related to our accounting investigation compared to expense of $7.7 million in 2010. This was partially offset by a $4.2million increase in bonus and share-based compensation due to improved operating results. 31Table of ContentsOther (income) expense, net. Other (income) expense, net increased to an expense of $1.3 million in 2011 from income of $0.4 million in 2010. Theincrease in expense in 2011 compared to 2010 was driven by an allowance of $4.1 million taken on notes receivable, partially offset by a $2.9 million gain onthe sale of all assets of the traffic systems product line of the Tubular Products facility in Houston, Texas recognized in the second quarter of 2011.Interest expense. Interest expense increased to $9.3 million in 2011 from $8.9 million in 2010. The increase in interest expense was a result of higheraverage borrowings partially offset by lower average interest rates.Income taxes. Our effective tax provision rate was 43.2% in 2011 and our effective tax benefit rate was 23.2% in 2010. The change in the tax rate wasprimarily attributable to an increase to the valuation allowance of $0.9 million, as a result of an expected capital loss from which we do not expect to benefit,and the sale of all assets of the traffic systems product line of the Tubular Products facility in Houston, Texas, which included the disposal of goodwill of$1.0 million that had no corresponding tax basis.Liquidity and Capital ResourcesSources and Uses of CashOur principal sources of liquidity generally include operating cash flow and our Amended Credit Agreement. From time to time our long term capitalneeds may be met through the issuance of long term debt or additional equity. Our principal uses of liquidity generally include capital expenditures, workingcapital and debt service. Information regarding our cash flows for the twelve months ended December 31, 2012 is presented in our consolidated statements ofcash flows contained in this 2012 Form 10-K, and is further discussed below.As of December 31, 2012, our working capital (current assets minus current liabilities) was $167.4 million as compared to $170.6 million as ofDecember 31, 2011. Cash and cash equivalents totaled $46,000 as of December 31, 2012 and $182,000 as of December 31, 2011.Net Cash Provided by (Used in) Operating ActivitiesNet cash provided by operating activities in 2012 was $44.5 million. This was primarily the result of net income, depreciation, and fluctuations in ourworking capital accounts, including decreases in our accounts receivable of $28.3 million and increases in accrued liabilities of $11.4 million, partially offsetby increases in costs and estimated earnings in excess of billings on uncompleted contracts of $36.6 million.Net cash provided by operating activities in 2011 was $12.3 million. This was primarily the result of net income, depreciation, and fluctuations in ourworking capital accounts, including a $29.8 million increase in inventories, offset by a $15.1 million decrease in refundable income taxes. This was furtheroffset by $4.1 million in allowances taken on notes receivable.Net cash used in operating activities in 2010 was $21.3 million. This was primarily the result of a net loss, depreciation, and fluctuations in ourworking capital accounts, including a $28.8 million increase in our accounts receivable and an $8.1 million increase in refundable income taxes, partiallyoffset by a $9.3 million net decrease in deferred income taxes.Fluctuations in our working capital accounts result from timing differences between production, shipment and invoicing of our products, as well aschanges in levels of production and costs of materials. We typically have a relatively large investment in working capital, as we are generally obligated to payfor goods and services early in the project while cash is not received until much later in the project. Our revenues in the Water Transmission segment arerecognized on a percentage-of-completion method; therefore, there is little correlation between revenue and cash receipts and the elapsed time can be significant.As such, our payment cycle is a significantly shorter interval than our collection cycle, although the effect of this difference in the cycles may vary fromperiod to period. 32Table of ContentsNet Cash (Used in) Provided by Investing ActivitiesNet cash used in investing activities in 2012 was $19.3 million, primarily related to capital expenditures of $16.8 million. These expenditures relate tostorm water upgrades at our Portland, Oregon facility and planned capacity expansion in our Tubular Products plants. Capital expenditures in 2013 areexpected to be approximately $30 million to $35 million for standard capital replacement and recently announced strategic investment projects. These projectsinclude the installation of an additional horizontal accumulator, hydrotester, and replacement of existing front end forming and finishing equipment at ourAtchison plant, as well as expansion at our Saginaw plant, which will enable production of pipe up to 126 inches in diameter as well as increase overallcapacity.Net cash provided by investing activities in 2011 was $0.9 million, primarily related to proceeds received from the sale of the traffic systems productline at the Houston facility for $13.7 million during the second quarter of 2011 and an increase in restricted cash from the cash collateralization of certainletters of credit at December 31, 2011. This was offset by capital expenditures of $16.3 million. The most significant capital projects in 2011 were anexpansion at our Atchison, Kansas facility that increased its production capacity by more than 50%, improved productivity and enabled the facility tomanufacture product with wall thickness up to 0.375 inches. In addition, we upgraded our Houston, Texas mill to facilitate production of 2.375 and 2.875inch tubing with physical properties suitable for heat treating.Net cash used in investing activities in 2010 was $18.5 million, primarily related to capital expenditures of $18.6 million. The most significant capitalprojects in 2010 were the new mill installation at our Pleasant Grove, Utah facility and preparation and installation of manufacturing equipment in our BossierCity, Louisiana facility to manufacture OCTG products.Net Cash (Used in) Provided by Financing ActivitiesNet cash used in financing activities in 2012 was $25.3 million, which resulted primarily from net borrowings of $119.0 million under our AmendedCredit Agreement, offset by note payable and long term debt payments of $139.2 million.Net cash used in financing activities in 2011 was $13.1 million, which resulted primarily from net borrowings of $132.1 million under our CreditAgreement, offset by note payable and long term debt payments of $143.8 million.Net cash provided by financing activities in 2010 was $39.9 million, primarily due to a $48.6 million net increase in the amount outstanding under ourCredit Agreement, partially offset by a decrease in long-term debt balances outstanding of $5.7 million and payment of debt amendment costs of $3.4 million.We anticipate that our existing cash and cash equivalents, cash flows expected to be generated by operations, and amounts available under our AmendedCredit Agreement will be adequate to fund our working capital and capital expenditure requirements for at least the next twelve months. We also expect tocontinue to rely on cash generated from operations or funds available from our line of credit to make required principal payments on our long-term debt during2013. To the extent necessary, we may also satisfy capital requirements through additional bank borrowings, senior notes, term notes, subordinated debt, andcapital and operating leases, if such resources are available on satisfactory terms. See the discussion below under “Line of Credit and Long-Term Debt” for adiscussion of recent developments regarding compliance with the terms of our Amended Credit Agreement. We have from time to time evaluated and continue toevaluate opportunities for acquisitions and expansion. Any such transactions, if consummated, may use a portion of our working capital or necessitateadditional bank borrowings or other sources of funding. 33Table of ContentsLine of Credit and Long-Term DebtWe had the following significant components of debt at December 31, 2012: a $165.0 million Amended Credit Agreement, under which $47.5 millionwas outstanding; $4.3 million of a Series A Term Note, $3.0 million of Series B Term Notes, $2.9 million of Series C Term Notes, and $1.9 million ofSeries D Term Notes.On October 24, 2012, the Company entered into the Amended Credit Agreement, which amends, supersedes and restates the Credit Agreement datedMay 31, 2007, and provides for a revolving loan, swing line loan and letters of credit in the aggregate amount of up to $165 million. In addition, the AmendedCredit Agreement reflects reductions in the interest rates charged on outstanding balances and a reduction in the number of financial covenants. The AmendedCredit Agreement bears interest at rates related to LIBOR plus 1.75% to 2.75%, or the lending institution’s prime rate plus 0.75% to 1.75%. The AmendedCredit Agreement will expire on October 24, 2017. At December 31, 2012 we had $90.8 million available under the Amended Credit Agreement whileremaining in compliance with our financial covenants, net of outstanding letters of credit. The Amended Credit Agreement bears interest at a weighted averagerate of 2.31% at December 31, 2012. We were able to borrow at LIBOR plus 2.0% under the Amended Credit Agreement at December 31, 2012. Borrowingsunder the Amended Credit Agreement are collateralized by substantially all of our personal property. At December 31, 2011, we had $62.0 million outstandingunder the Credit Agreement bearing interest at a weighted average rate of 3.03%.The Series A Term Note in the principal amount of $4.3 million matures on February 25, 2014 and requires annual payments in the amount of $2.1million plus interest of 10.50% paid quarterly on February 25, May 25, August 25 and November 25. The Series B Term Notes in the principal amount of$3.0 million mature on June 21, 2014 and require annual payments in the amount of $1.5 million plus interest of 10.22% paid quarterly onMarch 21, June 21, September 21 and December 21. The Series C Term Notes in the principal amount of $2.9 million mature on October 26, 2014 andrequire annual payments of $1.4 million plus interest of 9.11% paid quarterly on January 26, April 26, July 26 and October 26. The Series D Term Notesin the principal amount of $1.9 million mature on January 24, 2015 and require annual payments in the amount of $643,000 plus interest of 9.07% paidquarterly on January 24, April 24, July 24 and October 24. The Series A Term Note, the Series B Term Notes, the Series C Term Notes, and the Series DTerm Notes (together, the “Term Notes”) are collateralized by accounts receivable, inventory and certain equipment.We had a total of $12.5 million in capital lease obligations outstanding at December 31, 2012. The weighted average interest rate on all of our capitalleases is 7.68%. Our capital leases are for certain equipment used in the manufacturing process. Approximately $6.6 million of our capital leases outstandingas of December 31, 2012 represents an agreement entered into as of September 2009 to finance our Bossier City, Louisiana facility (the “FinancingArrangement”) under which certain equipment used in the manufacturing process at the facility is leased. As part of the Financing Arrangement, a $10 millionescrow account was provided for the Company by a local government entity through a financial institution and funds are released upon qualifying purchaserequisitions. As we purchase equipment for the facility, we enter into a sale-leaseback transaction with the governmental entity as part of the FinancingArrangement. As of December 31, 2012, $0.9 million was held in the escrow account, which is included in Other Assets, as a result of proceeds from theFinancing Arrangement. The Financing Arrangement requires us to meet certain loan covenants, measured at the end of each fiscal quarter. These loancovenants follow the covenants required by our Amended Credit Agreement.The Amended Credit Agreement, the Term Notes and the Financing Arrangement and certain lease agreements place various restrictions on our ability to,among other things; incur certain additional indebtedness, create liens or other encumbrances on assets, and incur additional capital expenditures. TheAmended Credit Agreement, Term Notes, and the Financing Arrangement and certain lease agreements require us to be in compliance with certain financialcovenants. The results of our financial covenants as of December 31, 2012 are below. • The Consolidated Total Leverage Ratio must not be greater than 3.5:1.0. Our ratio as of December 31, 2012 is 1.56:1.0. 34Table of Contents • The Consolidated Tangible Net Worth must be greater than $202.3 million. Our tangible net worth as of December 31, 2012 is $239.0 million. • The Consolidated Fixed Charge Coverage ratio must not be less than 1.25:1.0. Our ratio as of December 31, 2012 is 1.91:1.0.Based on our business plan and forecasts of operations, we believe we will remain in compliance with our covenants in 2013.The following table sets forth our scheduled contractual commitments that will affect our future liquidity as of December 31, 2012 (in thousands): Payments due by period Total Less than1 year 1 - 3years 3 - 5years More than5 years Amended Credit Agreement $47,533 $47,533 $— $— $— The Term Notes 12,071 5,714 6,357 — — Capital leases 12,474 3,295 5,888 3,291 — Operating leases 9,434 2,421 3,772 2,542 699 Interest payments (1) 3,117 1,737 1,212 168 — Total obligations $84,629 $60,700 $17,229 $6,001 $699 1)These amounts represent estimated future interest payments related to our debt obligations, excluding the Amended Credit Agreement.Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2012, we are unableto make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, approximately $5.2 million in uncertaintax positions has been excluded from the contractual table above. For further information, see Note 14 in Part II—Item 8, “Financial Statements andSupplementary Data” of the Consolidated Financial Statements.We also have entered into stand-by letters of credit that total approximately $3.2 million as of December 31, 2012. The stand-by letters of credit relate tofinancing arrangements and workers’ compensation insurance. Based on the nature of these arrangements and our historical experience, we do not expect tomake any material payments under these arrangements.Off Balance Sheet ArrangementsWe do not have any off balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial position, resultsof operations or cash flows.Adoption of New Accounting PronouncementsThe Company adopted the following new accounting pronouncements during the year end December 31, 2012: • ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and InternationalFinancial Reporting Standards”, as required. • ASU No. 2011-05 and 2011-12, “Presentation of Comprehensive Income”, as required.The Company adopted the following new accounting pronouncements on January 1, 2013: • ASU No. 2011-11, “Balance Sheet: Disclosures about Offsetting Assets and Liabilities”, including clarifications released in ASU No. 2013-01,“Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. 35Table of Contents • ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. Item 7A.Quantitative and Qualitative Disclosures About Market RiskThe primary market risks affecting our business relate to our exposure to commodity risk, interest rate risk, and foreign currency exchange rate risk.Commodity RiskCertain materials we use in our business are classified as commodities traded in the worldwide markets, of which the most significant commodity issteel, used in the manufacturing of pipe. We do not hedge our commodity risk. The impact of volatility in steel prices to each of our operating segments variessignificantly.Steel comprises approximately 30% to 40% of Water Transmission project costs. As steel represents a substantial portion of our cost of sales, wegenerally place orders for steel as soon as possible after a project is awarded. Most projects are awarded within thirty to ninety days of the bid date, and thuswe are subject to some market fluctuations involving steel. In order to minimize our risk exposure to steel volatility, we typically submit bids based on generalassumptions of the price of steel when we would receive a purchase order or contract. In addition, we typically order steel at the beginning of the project inorder to minimize our exposure to fluctuations in steel prices.By contrast, steel comprises approximately 75% to 85% of total product costs for Tubular Products. Historically, we have been able to adjust ourselling prices to reflect fluctuations in our cost of steel; however, we are exposed to volatile steel prices in those instances in which we carry steel inventory thatis not already assigned to sales orders. To minimize this risk, we monitor steel inventory and purchasing actions. If steel costs were to decline afterDecember 31, 2012, our Tubular Products division would have approximately three months of steel inventory exposed to the risk of declining gross margins.Interest Rate RiskOur debt at December 31, 2012 bears interest at both fixed and variable rates. At December 31, 2012, approximately $47.5 million of our debt accruesinterest at a variable rate as compared to $62.0 million at December 31, 2011. Assuming average interest rates and borrowings on variable rate debt, ahypothetical 1.0%, or 100 basis point change in interest rates would not have a material impact on our interest expense in either year.Foreign Currency Exchange Rate RiskWe transact business in various foreign countries, and, from time to time, settle our transactions in foreign currencies. We have established a programthat utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures, typically arising from salescontracts denominated in Canadian currency. These contracts are not used for trading or for speculative purposes. Foreign currency forward contracts areconsistent with our strategy for financial risk management and have maturities generally less than one year. As of December 31, 2012, the total notionalamount of these derivative contracts was $12.4 million (CAD$12.3 million), of which we applied hedge accounting to $9.7 million (CAD$9.7 million). AtDecember 31, 2012, one of the Company’s contracts with a notional value of $3.1 million (CAD$3.1 million) had a remaining maturity of 15 months. As ofDecember 31, 2011, the total notional amount of our derivative contracts was $10.0 million (CAD$10.1 million).A hypothetical 10% change in the Canadian Dollar foreign currency exchange rate would not have a material impact on our reported 2012 or 2011 netsales. 36Table of ContentsItem 8.Financial Statements and Supplementary DataThe consolidated financial statements required by this item are included on pages F-1 to F-34 at the end of this 2012 Form 10-K. The financial statementschedule required by this item is included on page S-1. The quarterly information required by this item is included under the caption Quarterly Data(unaudited) in Note 16 of the Notes to Consolidated Financial Statements in Part II—Item 8, “Financial Statements and Supplementary Data” of this 2012Form 10-K. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureThe information required by this item regarding our change in independent registered public accounting firms from Deloitte & Touche LLP, our auditorsfor the years ended December 31, 2011 and 2010, to PricewaterhouseCoopers LLP, for the year ended December 31, 2012, is set forth in our Form 8-K/A filedwith the SEC on September 5, 2012, and is incorporated herein by reference. Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of the CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures as of theend of the period. Based on their evaluation, as of the end of the period covered by this Form 10-K, the Company’s CEO and CFO have concluded that theCompany’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) wereeffective to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed,summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated toour management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in ExchangeAct Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles (“GAAP”). Internal control over financial reporting includes those policies and procedures that (i) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurancethat our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expendituresare being made only in accordance with authorizations of management and our directors; and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an assessment of our internal controlover financial reporting as of December 31, 2012. In making this assessment, we used the criteria set forth in Internal Control-Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the Company’sinternal control over financial reporting was effective as of December 31, 2012. 37Table of ContentsThe effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which appears herein.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2012 that materially affectedor are reasonably likely to materially affect our internal control over financial reporting.Remediation of Prior Material WeaknessesAs of December 31, 2012, we have remediated the previously reported material weaknesses in our internal control over financial reporting related to theprecision of review controls, assessment of useful lives, units of production, existence of our property and equipment, and accounting for complex or non-routine transactions. Item 9B.Other InformationNone. 38Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceDirectors, Executive Officers, Promoters and Control PersonsThe information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of Regulation S-K (except for information required by Paragraph(e) of that Item to the extent the required information pertains to our executive officers) and Item 405 of Regulation S-K is hereby incorporated by reference fromour definitive proxy statement for the 2013 Annual Meeting of Shareholders under the captions Election of Directors and Section 16(A) BeneficialOwnership Reporting Compliance. Name Age Current Position with CompanyScott Montross 48 Director, President and Chief Executive Officer (formerly Executive Vice President and ChiefOperating Officer)Richard A. Roman 61 Executive Chairman of the Board (formerly Chief Executive Officer and President)Robin Gantt 41 Vice President and Chief Financial OfficerRichard Baum 56 Senior Vice President, General Counsel and Corporate SecretaryGreg Carrier 58 Vice President, PurchasingWinsor J.E. Jenkins 65 Vice President, Human ResourcesRobert L. Mahoney 51 Senior Vice President of Strategy and Business DevelopmentGary A. Stokes 60 Senior Vice President of Sales and MarketingGary R. Stone 56 Vice President, Quality AssuranceScott Montross has served as our Director, President and Chief Executive Officer since January 1, 2013. Mr. Montross joined the Company in May,2011 and served as our Executive Vice President and Chief Operating Officer. Mr. Montross has served in Senior Vice President level positions since 2003 withcommercial, operational, and planning responsibilities and has spent a total of 23 years in the steel industry prior to joining the Company. Mr. Montrosspreviously served as the Executive Vice President of the Flat Products Group for Evraz Inc. NA’s Oregon Steel Division from 2010 to 2011, as the VicePresident and General Manager of Evraz, Inc. NA from 2007 to 2010, as the Vice President of Marketing and Sales for Oregon Steel Mills, Inc. from 2003 to2006, and as the Vice President of Marketing and Sales for National Steel Corporation from 2002 to 2003.Richard A. Roman has served as our Executive Chairman of the Board since January 1, 2013. Mr. Roman has been a director of the Company since2003 and served as our Chief Executive Officer from March 29, 2010, and as President from October 5, 2010 until December 31, 2012. In connection withhis appointment as CEO, Mr. Roman resigned his positions as Lead Director and as a member of the Board’s Audit and Compensation Committees, and waselected to the Executive Committee of the Board of Directors. He was a member of our Audit and Compensation Committees since 2003 and 2005, respectively,and the Board’s Lead Director since November 2008. Mr. Roman currently serves on the Board of Directors for ESCO Corporation. Previously, Mr. Romanwas the President of Columbia Ventures Corporation, a private investment company which historically has focused principally on the international metals andtelecommunications industries. Prior to joining Columbia Ventures Corporation in 1992, Mr. Roman was a partner at Coopers & Lybrand, an independentpublic accounting firm.Robin Gantt has served as our Vice President and CFO since January 2011 having joined the company in July 2010. Ms. Gantt served as the CFO andTreasurer of Evraz Inc. NA from September 2007 through January 2010. From July 2005 through August 2007, Ms. Gantt served as Corporate Controller ofOregon Steel Mills, Inc., which became Evraz Inc. NA after its acquisition by Evraz Group SA in January 2007. Ms. Gantt joined Oregon Steel Mills, Inc. in1999, holding several finance and accounting positions of increasing responsibility before being appointed to Controller in 2005.Richard Baum joined the company in April, 2011 and serves as our Senior Vice President, General Counsel and Corporate Secretary. Mr. Baum was alitigation partner with the law firm of Lane Powell LLP from 39Table of ContentsJanuary 1, 2011 through April 2011. Prior to that, he was a litigation partner with the law firm of Roberts Kaplan LLP from November 2008 throughDecember 2010, and was a litigation attorney with the law firm of Perkins Coie LLP from September 1982 through October 2008, including twenty years as apartner. Mr. Baum’s private practice focused on commercial litigation with an emphasis on securities litigation and corporate governance issues.Greg Carrier has served as our Vice President, Purchasing since June 2007. He had served as our Corporate Director of Materials since 2001. Prior to2001, Mr. Carrier served in a succession of positions in purchasing and materials management since joining the Company in 1996.Winsor J.E. Jenkins has served as our Vice President, Human Resources since June 2007. He had served as Corporate Director, Human Resources sinceMarch 1998 when he joined the Company.Robert L. Mahoney has served as our Senior Vice President, Strategy and Business Development since January 2012, responsible for identifying andsecuring growth opportunities across the Company. He had served as the Senior Vice President, Tubular Products Group, since June 2007, as Vice President,Chief Strategic Officer since May 2005, as Vice President, Corporate Development since July 1998, and as Director of Business Planning and Developmentsince 1996. Mr. Mahoney has been with the Company since 1992.Gary A. Stokes has served as our Senior Vice President of Sales and Marketing, responsible for the Water Transmission Group since January 2012. Hehad served as the Senior Vice President, Water Transmission Group, since January 2008, as Senior Vice President, Sales and Marketing since July 2001, andas Vice President, Sales and Marketing since 1993. Mr. Stokes has been with the Company since 1987.Gary R. Stone has served as our Vice President, Quality Assurance since June 2007. He had served as Corporate Director, Quality Assurance since2001. Mr. Stone has been with the Company since 1991.Code of EthicsWe have adopted a Code of Business Conduct and Ethics for all employees and a Code of Ethics for Senior Financial Officers. Copies can be found onour website at www.nwpipe.com in the Corporate Governance area of the Investor Relations section or by writing to Northwest Pipe Company, attn. CorporateSecretary, 5721 SE Columbia Way, Suite 200, Vancouver, WA 98661. None of the material on our website is part of this 2012 Form 10-K. If there is anywaiver from any provision of either the Code of Business Conduct and Ethics or the Code of Ethics for Senior Financial Officers, we will disclose the natureof such waiver on our website or in a Current Report on Form 8-K.Corporate GovernanceThe information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is hereby incorporated by reference from our definitive proxy statementfor the 2013 Annual Meeting of Shareholders under the captions Nominating and Governance Committee; Nominations by Shareholders and AuditCommittee. Item 11.Executive CompensationThe information required by this Item is hereby incorporated by reference from our definitive proxy statement for the 2013 Annual Meeting ofShareholders under the captions Executive Compensation, Compensation Committee Interlocks and Insider Participation, and Compensation CommitteeReport. 40Table of ContentsItem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe following table provides information as of December 31, 2012, with respect to the shares of our Common Stock that may be issued under ourexisting equity compensation plans. Plan Category Number of securitiesto be issued upon exerciseof outstanding options,warrants and rights(a) (1) Weighted-averageexercise price ofoutstandingoptions, warrantsand rights(b) (2) Number of securities remainingavailable for future issuanceunder equity compensation plans(excluding securities reflected incolumn(a)) (c) Equity compensation plans approved by securityholders 290,141 $23.19 227,177 Equity compensation plans not approved bysecurity holders (3) — — — Total 290,141 $23.19 227,177 (1)Consists of our 2007 Stock Incentive Plan and the 1995 Stock Option Plan for Nonemployee directors. Approximately 172,000 Performance StockAwards (“PSAs”) have been included at a target level. The vesting of these awards is subject to the achievement of specific performance-based ormarket-based conditions, and the actual number of common shares that will ultimately be issued will be determined by multiplying this number ofPSAs by a payout percentage ranging from 0% to 200%.(2)The weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock units and PSAs, since recipients are notrequired to pay an exercise price to receive the shares subject to these awards.(3)We do not have any equity compensation plans or arrangements that have not been approved by shareholders.The information required by Item 403 of Regulation S-K is included in our definitive proxy statement for the 2013 Annual Meeting of Shareholders underthe caption Stock Owned by Management and Principal Shareholders and is incorporated herein by reference. Item 13.Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item is hereby incorporated by reference from our definitive proxy statement for the 2013 Annual Meeting ofShareholders under the captions Certain Relationships and Related Transactions and Election of Directors. Item 14.Principal Accountant Fees and ServicesThe information required by this Item is hereby incorporated by reference from our definitive proxy statement for the 2013 Annual Meeting ofShareholders under the caption Independent Registered Public Accounting Firm. 41Table of ContentsPART IV Item 15.Exhibits and Financial Statement Schedule(a) (1) Consolidated Financial StatementsThe consolidated financial statements, together with the reports thereon of PricewaterhouseCoopers LLP and Deloitte & Touche LLP are included on thepages indicated below. Page Reports of Independent Registered Public Accounting Firms F-1 Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 F-3 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2012, 2011 and 2010 F-4 Consolidated Balance Sheets as of December 31, 2012 and 2011 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2012, 2011 and 2010 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 F-7 Notes to Consolidated Financial Statements F-8 (a) (2) Financial Statement ScheduleThe following schedule is filed herewith: Page Schedule II Valuation and Qualifying Accounts S-1 Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is included in the consolidatedfinancial statements or notes thereto. 42Table of Contents(a) (3) Exhibits included herein: ExhibitNumber Description 3.1 Second Restated Articles of Incorporation, incorporated by reference to Exhibits to the Company’s Registration Statement on Form S-1, asamended, effective November 30, 1995, Commission Registration No. 33-97308 (“the S-1”) 3.2 First Amendment to Second Restated Articles of Incorporation, incorporated by reference to Exhibits to the Company’s Registration Statementof Form S-3, as amended, effective November 1, 2006, Commission Registration No. 333-137923 (“the S-3”) 3.3 Second Amended and Restated Bylaws, incorporated by reference to Exhibits to the S-1 3.4 First Amendment to Second Amended and Restated Bylaws of Northwest Pipe Company, incorporated by reference to Exhibits to theCompany’s Report on Form 8-K as filed with the Securities and Exchange Commission on November 19, 2007 4.1 Amended and Restated Rights Agreement, dated as of June 18, 2009, between the Company and Mellon Investor Services LLC as RightsAgent, incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission onJune 19, 2009 10.1 1995 Stock Option Plan for Nonemployee Directors, incorporated by reference to Exhibits to the S-1* 10.2 Northwest Pipe NQ Retirement Savings Plan, dated July 1, 1999, incorporated by reference to Exhibits to the Company’s Quarterly ReportForm 10-Q for the quarter ended June 30, 2000, as filed with the Securities and Exchange Commission on August 11, 2000* 10.3 General Electric Capital Corporation Master Lease Agreement, dated September 26, 2000, incorporated by reference to Exhibits to theCompany’s Quarterly Report Form 10-Q for the quarter ended September 30, 2000 as filed with the Securities and Exchange Commission onNovember 13, 2000 10.4 General Electric Capital Corporation Master Lease Agreement, dated May 30, 2001, incorporated by reference to Exhibits to the Company’sQuarterly Report on Form 10-Q for the quarter ended June 30, 2001 as filed with the Securities and Exchange Commission on August 14,2001 10.5 Long Term Incentive Agreement, incorporated by reference to Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter endedJune 30, 2005 as filed with the Securities and Exchange Commission on August 8, 2005* 10.6 Amended and Restated Note Purchase and Private Shelf Agreement dated as of May 31, 2007 by and among Northwest Pipe Company,Prudential Investment Management, Prudential Retirement Insurance and Annuity Company and Prudential Insurance Company of Americaand certain affiliates, incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the Securities and ExchangeCommission on June 6, 2007 10.7 Northwest Pipe Company 2007 Stock Incentive Plan, incorporated by reference to Appendix A to the Company’s Definitive Proxy Statementdated April 20, 2007, as filed with the Securities and Exchange Commission on April 26, 2007* 10.8 First Amendment and Limited Waiver to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of October 14, 2008by and among Northwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates (certain schedules to theAgreement have been omitted), incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the Securities andExchange Commission on October 20, 2008 10.9 Form of Restricted Stock Unit Agreement, incorporated by reference to Exhibits to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2008 as filed with the Securities and Exchange Commission on November 11, 2008* 43Table of ContentsExhibitNumber Description 10.10 Form of Performance Share Agreement, incorporated by reference to Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarterended September 30, 2008 as filed with the Securities and Exchange Commission on November 11, 2008* 10.11 Amended and Restated Change in Control Agreement, dated December 31, 2008, between Northwest Pipe Company and William R. Tagmyer,incorporated by reference to Exhibits to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as filed with theSecurities and Exchange Commission on March 13, 2009 10.12 Form of Amended and Restated Change in Control Agreement, dated December 31, 2008, between Northwest Pipe Company and Robert L.Mahoney, and Gary A. Stokes, incorporated by reference to Exhibits to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2008, as filed with the Securities and Exchange Commission on March 13, 2009 10.13 Third Amendment to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of February 12, 2010 by and amongNorthwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference to the Company’sCurrent Report on Form 8-K, as filed with the Securities and Exchange Commission on February 19, 2010 10.14 Fourth Amendment to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of April 15, 2010 by and amongNorthwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference to the Company’sCurrent Report on Form 8-K, as filed with the Securities and Exchange Commission on April 26, 2010 10.15 Fifth Amendment and Limited Consent to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of July 23, 2010 byand among Northwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference to theCompany’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on July 29, 2010 10.16 Sixth Amendment and Temporary Waiver to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of July 30, 2010by and among Northwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference to theCompany’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on August 5, 2010 10.17 Seventh Amendment and Limited Waiver to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of September 16,2010 by and among Northwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference tothe Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 5, 2010 10.18 Separation Agreement and Release, dated October 5, 2009, between Northwest Pipe Company and Brian W. Dunham, incorporated byreference to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 8, 2010* 10.19 Eighth Amendment and Limited Waiver to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of October 15, 2010by and among Northwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference to theCompany’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 27, 2010 10.20 Separation Agreement and Release, dated January 20, 2011, between Northwest Pipe Company and Stephanie J. Welty, incorporated byreference to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on January 24, 2011* 44Table of ContentsExhibitNumber Description 10.21 Change in Control Agreement between Northwest Pipe Company and Robin Gantt dated as of April 21, 2011, incorporated by reference to theCompany’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 25, 2011 10.22 Change in Control Agreement between Northwest Pipe Company and Richard Baum dated as of May 27, 2011, incorporated by reference toExhibits to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2011, as filed with the Securities and ExchangeCommission on August 8, 2011 10.23 Northwest Pipe Company 2011 Salaried Employee Cash Incentive Plan, incorporated by reference to Exhibits to the Company’s QuarterlyReport on Form 10-Q for the period ended June 30, 2011, as filed with the Securities and Exchange Commission on August 8, 2011 10.24 Change in Control Agreement between Northwest Pipe Company and Scott Montross dated as of July 6, 2011, incorporated by reference toExhibits to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2011, as filed with the Securities and ExchangeCommission on April 27, 2012 10.25 Form of grant of restricted stock units and performance share units by Northwest Pipe Company to certain Named Officers, incorporated byreference to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 12, 2011* 10.26 Form of grant of restricted stock units and performance share units by Northwest Pipe Company to certain Named Officers, incorporated byreference to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on June 20, 2012* 10.27 Amended and Restated Credit Agreement dated October 24, 2012, by and among Northwest Pipe Company, Bank of America, N.A., USBank National Association, Wells Fargo Bank, National Association and Bank of the West, incorporated by reference to the Company’sCurrent Report on Form 8-K, as filed with the Securities and Exchange Commission on October 29, 2012 10.28 Third Amended and Restated Intercreditor and Collateral Agency Agreement dated as of October 24, 2012 by and between Northwest PipeCompany, Bank of America, N.A., US Bank National Association, Wells Fargo Bank, National Association, Bank of the West, andPrudential Investment Management, Inc. and certain of its affiliates, incorporated by reference to the Company’s Current Report on Form 8-K,as filed with the Securities and Exchange Commission on October 29, 2012 10.29 Executive Employment Agreement dated December 19, 2012 between Northwest Pipe Company and Richard A. Roman, incorporated byreference to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on December 20, 2012 10.30 Ninth Amendment to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of September 16, 2010 by and amongNorthwest Pipe Company and Prudential Investment Management, Inc. and certain affiliates, incorporated by reference to the Company’sCurrent Report on Form 8-K, as filed with the Securities and Exchange Commission on October 29, 2012 14.1 Code of Ethics for Senior Financial Officers as adopted by the Northwest Pipe Company Board of Directors on September 8, 2011,incorporated by reference to Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, as filedwith the Securities and Exchange Commission on April 27, 2012 16 Letter re change in certifying accountant, incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K/A datedAugust 20, 2012, as filed with the Securities and Exchange Commission on September 5, 2012 21.1 Subsidiaries of the Registrant, filed herewith 23.1 Consent of PricewaterhouseCoopers LLP, filed herewith 23.2 Consent of Deloitte & Touche LLP, filed herewith 45Table of ContentsExhibitNumber Description 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith101.INS XBRL Instance Document**101.SCH XBRL Taxonomy Extension Schema Document**101.CAL XBRL Taxonomy Extension Calculation Linkbase Document**101.DEF XBRL Taxonomy Extension Definition Linkbase Document**101.LAB XBRL Taxonomy Extension Label Linkbase Document**101.PRE XBRL Taxonomy Extension Presentation Linkbase Document** *This exhibit constitutes a management contract or compensatory plan or arrangement.**Pursuant to Rule 406T of Regulation S-T, the Interactive data Files on Exhibit 101, submitted electronically herewith, are deemed not filed or part of aregistration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes ofSection 18 or the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. 46Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofNorthwest Pipe CompanyIn our opinion, the accompanying consolidated balance sheet as of December 31, 2012, and the related consolidated statements of operations, ofcomprehensive income (loss), of stockholders’ equity and of cash flows for the year then ended, present fairly, in all material respects, the financial positionof Northwest Pipe Company and its subsidiaries at December 31, 2012 and the results of their operations and their cash flows for the year then ended inconformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for theyear ended December 31, 2012 listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein whenread in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for the financial statements and financialstatement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9a. Our responsibility is toexpress opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based onour integrated audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatementand whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements includedexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reportingincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPPortland, OregonMarch 18, 2013 F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofNorthwest Pipe CompanyVancouver, WashingtonWe have audited the accompanying consolidated balance sheet of Northwest Pipe Company and subsidiaries (the “Company”) as of December 31,2011, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years inthe period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Table of Contents at Item 15. These financialstatements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements and the financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Northwest Pipe Company andsubsidiaries as of December 31, 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31,2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule,when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forththerein.As discussed in Note 1 to the consolidated financial statements, the accompanying 2011 and 2010 financial statements have been retrospectivelyadjusted to apply a change in accounting principle./s/ Deloitte & Touche LLPPortland, OregonApril 27, 2012 (March 18, 2013 as to the change in accounting principle discussed in Note 1) F-2Table of ContentsNORTHWEST PIPE COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) Year Ended December 31, 2012 2011 2010 Net sales $524,503 $511,668 $386,750 Cost of sales 468,305 452,530 357,062 Gross profit 56,198 59,138 29,688 Selling, general and administrative expense 28,638 26,315 29,093 Operating income 27,560 32,823 595 Other expense (income), net 339 1,338 (413) Interest income (160) (99) (846) Interest expense 5,616 9,306 8,942 Income (loss) before income taxes 21,765 22,278 (7,088) Provision (benefit) for income taxes 5,521 9,618 (1,648) Net income (loss) $16,244 $12,660 $(5,440) Basic earnings (loss) per share $1.73 $1.36 $(0.59) Diluted earnings (loss) per share $1.72 $1.35 $(0.59) Shares used in per share calculations: Basic 9,377 9,333 9,278 Diluted 9,445 9,384 9,278 The accompanying notes are an integral part of these consolidated financial statements. F-3Table of ContentsNORTHWEST PIPE COMPANYCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(In thousands) Year Ended December 31, 2012 2011 2010 Net income (loss) $16,244 $12,660 $(5,440) Other comprehensive income (loss): Pension liability adjustment, net of tax 138 (667) 163 Deferred gain (loss) on cash flow derivatives, net of tax (99) 211 (92) Other comprehensive income (loss) 39 (456) 71 Comprehensive income (loss) $16,283 $12,204 $(5,369) The accompanying notes are an integral part of these condensed consolidated financial statements F-4Table of ContentsNORTHWEST PIPE COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Dollar amounts in thousands, except share and per share amounts) December 31, 2012 2011 Assets Current assets: Cash and cash equivalents $46 $182 Trade and other receivables, less allowance for doubtful accounts of $1,748 and $1,650 41,498 69,894 Costs and estimated earnings in excess of billings on uncompleted contracts 73,314 38,029 Inventories 113,545 107,169 Deferred income taxes 5,177 6,391 Prepaid expenses and other 2,558 5,258 Total current assets 236,138 226,923 Property and equipment, net 152,545 152,846 Goodwill 20,478 20,478 Other assets 13,261 13,126 Total assets $422,422 $413,373 Liabilities and Stockholders’ Equity Current liabilities: Current portion of long-term debt $5,714 $5,714 Current portion of capital lease obligations 3,295 3,358 Accounts payable 21,042 20,248 Accrued liabilities 23,424 18,146 Deferred revenue 8,793 1,029 Billings in excess of costs and estimated earnings on uncompleted contracts 6,478 7,814 Total current liabilities 68,746 56,309 Note payable to financial institution 47,533 62,000 Long-term debt, less current portion 6,357 12,071 Capital lease obligations, less current portion 9,179 12,347 Deferred income taxes 15,254 20,588 Pension and other long-term liabilities 15,921 9,791 Total liabilities 162,990 173,106 Commitments and contingencies (Note 13) 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, 9,382,994 and 9,353,201 shares issued andoutstanding 94 94 Additional paid-in-capital 112,230 109,348 Retained earnings 149,381 133,137 Accumulated other comprehensive loss (2,273) (2,312) Total stockholders’ equity 259,432 240,267 Total liabilities and stockholders’ equity $422,422 $413,373 The accompanying notes are an integral part of these consolidated financial statements. F-5Table of ContentsNORTHWEST PIPE COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(Dollar amounts in thousands) Common Stock AdditionalPaid InCapital RetainedEarnings AccumulatedOtherComprehensive(Loss) Income TotalStockholders’Equity Shares Amount Balances, December 31, 2009 9,244,977 $92 $106,869 $125,917 $(1,927) $230,951 Net loss — — — (5,440) — (5,440) Other comprehensive (loss) income: Foreign currency cash flow hedge, net of tax benefit of $27 — — — — (92) (92) Pension liability adjustment, net of tax of $101 — — — — 163 163 Issuance of common stock under stock compensation plans 53,179 1 (88) — — (87) Stock-based compensation expense — — 797 — — 797 Balances, December 31, 2010 9,298,156 93 107,578 120,477 (1,856) 226,292 Net income — — — 12,660 — 12,660 Other comprehensive (loss) income: Foreign currency cash flow hedge, net of tax of $130 — — — — 211 211 Pension liability adjustment, net of tax benefit of $409 — — — — (667) (667) Issuance of common stock under stock compensation plans 55,045 1 66 — — 67 Tax benefit from stock compensation plans — — 243 — — 243 Stock-based compensation expense — — 1,461 — — 1,461 Balances, December 31, 2011 9,353,201 94 109,348 133,137 (2,312) 240,267 Net income — — — 16,244 — 16,244 Other comprehensive (loss) income: Foreign currency cash flow hedge, net of tax benefit of $94 — — — — (99) (99) Pension liability adjustment, net of tax expense of $50 — — — — 138 138 Issuance of common stock under stock compensation plans 29,793 — (175) — — (175) Tax benefit from stock compensation plans — — 9 — — 9 Stock-based compensation expense — — 3,048 — — 3,048 Balances, December 31, 2012 9,382,994 $94 $112,230 $149,381 $(2,273) $259,432 The accompanying notes are an integral part of these consolidated financial statements. F-6Table of ContentsNORTHWEST PIPE COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollar amounts in thousands) Year Ended December 31, 2012 2011 2010 Cash flows from operating activities: Net income (loss) $16,244 $12,660 $(5,440) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 16,267 14,471 13,680 Amortization of intangible assets — 50 185 Allowance on notes receivable — 4,071 — Provision for doubtful accounts 98 (501) 1,358 Equity in earnings of unconsolidated subsidiary, net of dividends received of $600 in 2010 — 394 477 Amortization of debt issuance costs 1,318 2,042 1,418 Deferred income taxes (4,120) 5,908 9,292 Loss (gain) on disposal of property and equipment 998 397 (667) Gain on sale of business — (2,887) — Stock-based compensation expense 3,048 1,461 797 Tax benefit from stock compensation plans 9 243 — Unrealized loss (gain) on foreign currency forward contracts 207 (327) (431) Changes in operating assets and liabilities: Trade and other receivables 28,298 (5,713) (28,818) Costs and estimated earnings in excess of billings on uncompleted contracts, net (36,621) 510 (2,886) Inventories (5,582) (29,794) (4,186) Refundable income taxes — 15,099 (8,070) Prepaid expenses and other 5,480 (5,297) (292) Accounts payable (310) (8,920) 1,160 Deferred revenue 7,764 1,029 — Accrued and other liabilities 11,392 7,379 1,079 Net cash provided by (used in) operating activities 44,490 12,275 (21,344) Cash flows from investing activities: Additions to property and equipment (16,789) (16,333) (18,597) Proceeds from sale of business — 13,727 — Proceeds from sale of property and equipment 1,072 96 19 Issuance of notes receivable (1,000) — (550) Insurance proceeds — — 587 Restricted cash (2,640) 2,640 — Other investing activities 60 800 — Net cash (used in) provided by investing activities (19,297) 930 (18,541) Cash flows from financing activities: Proceeds from sale of common stock 37 147 — Tax witholdings related to net share settlements of restricted share awards and performance shares (212) (80) (87) Payments on long-term debt (5,714) (5,714) (5,714) Borrowings under note payable to financial institutions 119,000 132,050 181,375 Payments on note payable to financial institutions (133,468) (138,050) (132,778) Payments of debt issuance costs (1,599) — (3,381) Borrowings from capital lease obligations — 1,829 2,865 Payments on capital lease obligations (3,373) (3,256) (2,375) Net cash (used in) provided by financing activities (25,329) (13,074) 39,905 Change in cash and cash equivalents (136) 131 20 Cash and cash equivalents, beginning of period 182 51 31 Cash and cash equivalents, end of period $46 $182 $51 Supplemental disclosure of cash flow information: Cash paid during the period for interest, net of amounts capitalized $4,353 $7,220 $8,376 Cash paid (refunded) during the period for income taxes (net of (refunds) payments of ($1,834), $2,292 and $413) 5,007 (12,960) (2,769) Non-cash investing and financing activities: Escrow account related to capital lease financing $898 $897 $2,726 Accrued property and equipment purchases 2,777 1,673 968 Capital lease refinancing — — 481 Capital lease additions 142 — — The accompanying notes are an integral part of these consolidated financial statements. F-7Table of ContentsNORTHWEST PIPE COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:The Company operates in two business segments, Water Transmission and Tubular Products. We have Water Transmission manufacturing facilitiesin Portland, Oregon; Denver, Colorado; Adelanto, California; Parkersburg, West Virginia; Saginaw, Texas and Monterrey, Mexico. During the second half of2012, we permanently closed our facility located in Pleasant Grove, Utah, and have transferred its property and equipment to other manufacturing locations.Tubular Products manufacturing facilities are located in Atchison, Kansas; Houston, Texas; and Bossier City, Louisiana.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and onvarious assumptions that are believed to be reasonable under the circumstances at that time. On an on-going basis, the Company evaluates all of its estimates,including those related to revenue recognition, allowance for doubtful accounts, goodwill, long-lived assets, including depreciation and amortization,inventories, income taxes, and litigation and other contingencies. Actual results could differ from those estimates under different assumptions or conditions.Basis of Consolidation and PresentationThe consolidated financial statements include the accounts of Northwest Pipe Company and its subsidiaries over which the Company exercises controlas of the financial statement date. Intercompany accounts and transactions have been eliminated. Prior period deferred revenue, which was previously reflectedwithin accrued liabilities, has been reclassified (separated) to its own line item within current assets and net cash provided by (used in) operating activities toconform to current period presentation in the consolidated balance sheets and consolidated statements of cash flows. This reclassification had no impact oncash flows from operations, income from operations, net income, or total liabilities.Lucid Energy LLC (“Lucid Energy”), over which the Company exercises significant influence but does not control, is accounted for under the equitymethod of accounting. Lucid Energy is a clean energy company based in Portland, Oregon. At December 31, 2012, we have convertible notes receivable fromLucid Energy, however the carrying value of our notes receivable and investment is zero.Northwest Pipe Asia Pte. Ltd. (“NWPA”) was previously accounted for under the equity method of accounting and was sold to the controlling owners ofthe business for $0.8 million on April 1, 2011. The Company previously exercised significant influence but did not control NWPA. During the year endedDecember 31, 2011, the Company recorded purchases of property and equipment of $0.2 million, net of eliminations. All proceeds from the sale have beenreceived by the Company and no intercompany balances remained outstanding at December 31, 2011.On June 1, 2011, the Company sold all assets of the traffic systems product line of the Tubular Products facility in Houston, Texas. Assets sold as part ofthis sale included the (i) raw materials, work-in-process, finished goods and related fuel and supplies inventories, (ii) tangible personal property located at theHouston facilities or used by the Company in connection with the traffic business, including machinery, equipment, tooling, operating and maintenancemanuals, parts and all other tangible assets used in or related to the traffic business, (iii) receivables, and (iv) other assets. Total consideration of $13.7million was received, resulting in a gain of $2.9 million recognized in other expense (income), net during the second quarter of 2011. The calculation of thegain on sale included a write-off of $973,000 of goodwill. F-8Table of ContentsOut-of-Period AdjustmentIn the first quarter of 2012, net sales was increased by $0.8 million for corrected estimates used in the computation of revenue recognized on thepercentage of completion method that should have been recorded in the year ended December 31, 2011. In the third quarter of 2012, cost of sales was decreasedby $0.4 million to correct an overstatement of expenses that had originally been recorded in the year ended December 31, 2011 ($0.1 million), first quarter of2012 ($0.1 million) and the second quarter of 2012 ($0.2 million). When reviewing these errors in conjunction with other immaterial uncorrected adjustmentsimpacting prior periods, the Company concluded that the adjustments did not, individually or in the aggregate, result in a material misstatement of theCompany’s consolidated financial statements for any prior period, and are not material to the Company’s 2012 annual and quarterly financial statements.Cash and Cash EquivalentsCash and cash equivalents consist of cash and short term highly liquid investments with remaining maturities of three months or less when purchased.Escrow AccountThe escrow account, to be used for qualifying project costs under the financing arrangement for the Bossier City facility, is included in other assets.Funds are released from escrow upon the Company’s payment of qualifying project costs. Restricted cash held in the escrow account totaled $0.9 million and$0.9 million at December 31, 2012 and 2011, respectively.Receivables and Allowance for Doubtful AccountsTrade receivables are reported on the balance sheet net of any doubtful accounts. The Company maintains allowances for estimated losses resulting fromthe inability of its customers to make required payments or from contract disputes. The amounts of such allowances are based on Company history andmanagement’s judgment. At least monthly, the Company reviews past due balances to identify the reasons for non-payment. The Company will write off areceivable account once the account is deemed uncollectible. The Company believes the reported allowances at December 31, 2012 and 2011 are adequate. If thecustomers’ financial conditions were to deteriorate resulting in their inability to make payments, or if contract disputes were to escalate, additional allowancesmay need to be recorded which would result in additional expenses being recorded for the period in which such determination was made.Customer PrepaymentsContractual terms may require prepayment of a portion of a contract value in advance of completing the work. Advanced deposits are recorded inaccrued liabilities and are offset by invoices as work is performed on the contract. Advanced deposits totaled $9.4 million and $2.0 million at December 31,2012 and 2011, respectively.InventoriesInventories are stated at the lower of cost or market. Raw material inventories of steel are stated at cost, either on a specific identification basis or on anaverage cost basis. All other raw material inventories, as well as supplies, are stated on an average cost basis. Finished goods are stated at cost using the first-in, first-out method of accounting.Property and EquipmentProperty and equipment is stated at cost. Maintenance and repairs are expensed as incurred, and costs of new equipment and buildings, as well as costsof expansions or refurbishment of existing equipment and buildings, including interest where applicable, are capitalized. Depreciation and amortization aredetermined by the units of production method for most equipment and by the straight-line method for the remaining assets based F-9Table of Contentson the estimated useful lives of the related assets. Depreciation expense calculated under the units of production method may be less than, equal to, or greaterthan depreciation expense calculated under the straight-line method due to variances in production levels. Upon disposal, costs and related accumulateddepreciation of the assets are removed from the accounts and resulting gains or losses are reflected in operating expenses. The Company leases certainequipment under long-term capital leases, which are being amortized on a straight-line basis over the shorter of its useful life or the lease term.The Company assesses impairment of property and equipment whenever changes in circumstances indicate that the carrying values of the assets maynot be recoverable. The recoverable value of long-lived assets is determined by estimating future undiscounted cash flows using assumptions about theexpected future operating performance of the Company. The estimates of undiscounted cash flows may differ from actual cash flow due to, among otherthings, technological changes, economic conditions, or changes to business operations. If the carrying value of the property and equipment is not estimated tobe recoverable, an impairment loss is calculated and recorded.Estimated useful lives by major classes of property and equipment are as follows: Land improvements 15 – 30 years Buildings 20 – 40 years Machinery and equipment 3 – 30 years GoodwillGoodwill related to the Company’s Tubular Products Group, one of the Company’s operating segments and reporting units, of $20.5 million atDecember 31, 2012 and 2011, represents the excess of purchase price over the assigned value of the net assets in connection with the segment’s acquisitions.The change in the carrying amount of goodwill for the year ended December 31, 2011 was due to the sale of all assets of the traffic systems product line of theTubular Products facility in Houston, Texas. No accumulated impairment charges are included within the Goodwill balance at December 31, 2012. Total Goodwill balance, December 31, 2010 $21,451 Goodwill written off related to sale of business (973) — Goodwill balance, December 31, 2011 20,478 Goodwill balance, December 31, 2012 $20,478 Goodwill is reviewed for impairment annually or whenever events occur or circumstances change that would more likely than not reduce the fair value ofthe Tubular Products Group below its carrying amount. The Company periodically performs a quantitative analysis, even when the qualitative analysisindicates that fair value of goodwill is above its carrying amount. The Company conducts its annual impairment testing as of December 31. In accordancewith our critical accounting policy, fair value of the Tubular Products Group’s goodwill was evaluated under a qualitative approach which took into accountindustry and market conditions, cost factors, overall financial performance, and other relevant entity specific events and changes. A quantitative analysis wasperformed for 2012 given the financial performance of the Tubular Products Group, specifically the declining margins. Fair value was quantitativelydetermined with consideration of the income and market approaches as applicable. The income approach is based upon projected future after-tax cash flows(less capital expenditures) discounted to present value using factors that consider the timing and risk associated with the future after-tax cash flows. The keyassumptions in the discounted cash flow analysis are the long-term growth rate, the discount rate, and the annual free cash flow. The market approach isbased upon historical measures using EBITDA. The Company utilizes a weighted average of the income and market approaches, with a heavier weighting onthe income approach because of the relatively limited number of comparable entities for which relevant multiples are available. The Company also utilizes asensitivity analysis to determine the impact of changes in discount rates and cash flow forecasts on the valuation of the Tubular operating segment. F-10Table of ContentsThe analysis performed concluded that Goodwill is not impaired at December 31, 2012. If the Company’s assumptions about goodwill change as aresult of events or circumstances, and management believes the assets may have declined in value, then impairment charges will be recorded, resulting inlower profits. The operations of the Tubular Products Group are cyclical and its sales and profitability may fluctuate from year to year. In the evaluation of theCompany’s operating segment, the Company looks at the long-term prospects for the reporting unit and recognizes that current performance may not be thebest indicator of future prospects or value, which requires management judgment.Workers Compensation InsuranceThe Company is self-insured, or maintains high deductible policies, for losses and liabilities associated with workers compensation claims. Losses areaccrued based upon the Company’s estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptionsfollowed in the insurance industry.Pension BenefitsThe Company has two defined benefit pension plans that have been frozen since 2001. The Company funds these plans to cover current plan costs plusamortization of the unfunded plan liabilities. To record these obligations, management uses estimates relating to investment returns, mortality, and discountrates. Management reviews all of these assumptions on an annual basis.Derivative InstrumentsThe Company conducts business in foreign countries, and, from time to time, settles transactions in foreign currencies. The Company has establisheda program that utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures, typically arisingfrom sales contracts denominated in Canadian currency. Foreign currency forward contracts are consistent with the Company’s strategy for financial riskmanagement. The Company utilizes cash flow hedge accounting treatment for qualifying foreign currency forward contracts. Instruments that do not qualifyfor cash flow hedge accounting treatment are remeasured at fair value at each balance sheet date and resulting gains and losses are recognized in net income(loss).Foreign Currency TransactionsAssets and liabilities subject to foreign currency fluctuations are translated into United States dollars at the period-end exchange rate, and revenue andexpenses are translated at exchange rates representing an average for the period. Translation adjustments from designated hedges are included in accumulatedother comprehensive loss as a separate component of stockholders’ equity. Gains or losses on all other foreign currency transactions are recognized in thestatement of operations. The functional currency of the Company’s Mexican operations is the United States dollar.Revenue RecognitionRevenue from construction contracts in the Company’s Water Transmission Group is recognized on the percentage-of-completion method. For a majorityof contracts, revenue is measured by the costs incurred to date as a percentage of the estimated total costs of each contract (cost-to-cost method). For a smallnumber of contracts, revenue is measured using units of delivery as progress is best estimated by the number of units delivered under the contract. Contractcosts include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs anddepreciation. Selling, general and administrative costs are charged to expense as incurred. The cost of steel is recognized as a project cost when the steel isintroduced into the manufacturing process. Estimated total costs of each contract are reviewed on a monthly basis by project management and operationspersonnel for all active projects. All cost revisions that result in the gross profit as a percent of sales increasing or decreasing by more than two percent arereviewed by senior management personnel. F-11Table of ContentsThe Company begins recognizing revenue on a project when persuasive evidence of an arrangement exists, recoverability is reasonably assured, andproject costs are incurred. Costs may be incurred before the Company has persuasive evidence of an arrangement. In those cases, if recoverability from thatarrangement is probable, the project costs are deferred and revenue recognition is delayed.Provisions for losses on uncompleted contracts are made in the period such losses are known. Changes in job performance, job conditions and estimatedprofitability, including those arising from contract penalty provisions, foreign currency exchange rate movements, changes in raw materials costs, and finalcontract settlements may result in revisions to estimates of revenue, costs and income and are recognized in the period in which the revisions are determined.Revenue from the Company’s Tubular Products Group is recognized when all four of the following criteria have been satisfied: persuasive evidence ofan arrangement exists, the price is fixed or determinable, delivery has occurred, and collectability is reasonably assured. Deferred revenue is recorded when themanufacturing process is complete and customers are invoiced prior to physical delivery of the product.Income TaxesIncome taxes are recorded using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected futuretax consequences of events that have been recognized in the Company’s financial statements or tax returns. Valuation allowances are established whennecessary to reduce deferred income tax assets to the amount expected to be realized. The determination of the provision for income taxes requires significantjudgment, the use of estimates and the interpretation and application of complex tax laws. The provision for income taxes primarily reflects a combination ofincome earned and taxed in the various United States federal and state and, to a lesser extent, foreign jurisdictions. Jurisdictional tax law changes, increases ordecreases in permanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, andthe change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.The Company records tax reserves for federal, state, local and international exposures relating to periods subject to audit. The development of reservesfor these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective estimate. The Company assesses tax positions andrecords tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at thereporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the largest amount of tax benefit with a greater than50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information has been recorded. For those taxpositions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.Accumulated Other Comprehensive LossAccumulated other comprehensive loss includes unrealized gains and losses on derivative instruments related to the effective portion of cash flow hedgesand changes in the funded status of the defined benefit pension plans, both net of the related income tax effect. Accumulated other comprehensive loss consistsof the following: December 31, 2012 2011 (in thousands) Pension liability adjustment, net of tax benefit of $1,244 and $1,294 $(2,188) $(2,326) Deferred gain (loss) on cash flow derivatives, net of tax benefit of $50 and expense of $44 (85) 14 Total $(2,273) $(2,312) F-12Table of ContentsEarnings (Loss) per ShareEarnings (loss) per basic and diluted weighted average common shares outstanding was calculated as follows for the years ended December 31 (inthousands, except per share data): 2012 2011 2010 Net income (loss) $16,244 $12,660 $(5,440) Basic weighted-average common shares outstanding 9,377 9,333 9,278 Effect of potentially dilutive common shares (1) 68 51 — Diluted weighted-average common shares outstanding 9,445 9,384 9,278 Earnings (loss) per common share: Earnings (loss) per basic common share $1.73 $1.36 $(0.59) Earnings (loss) per diluted common share 1.72 1.35 (0.59) Antidilutive shares excluded from net earnings per diluted common share calculation 92 58 47 (1)Represents the effect of the assumed exercise of stock options and the vesting of restricted stock units and performance stock awards, based on thetreasury stock method.Concentrations of Credit RiskFinancial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables, derivativecontracts, the escrow account and deferred compensation plan assets. Trade receivables generally represent a large number of customers, includingmunicipalities, manufacturers, distributors and contractors, dispersed across a wide geographic base. At December 31, 2012, no customer had a balance inexcess of 10% of total accounts receivable. At December 31, 2011, one customer had a balance which equaled 13% of total accounts receivable. Derivativecontracts are with a financial institution rated A-1 by S&P. The escrow account, which is included in other assets, is held in a money market mutual fund.The Company’s deferred compensation plan assets, also included in other assets, are invested in a diversified portfolio of stock and bond mutual funds.Share-based CompensationThe Company recognizes the compensation cost of employee and director services received in exchange for awards of equity instruments based on thegrant date estimated fair value of the awards. Share-based compensation cost is recognized over the period during which the employee or director is required toprovide service in exchange for the award, and as forfeitures occur, the associated compensation cost recognized to date is reversed. Share-based compensationcost related to awards with a performance-based condition is recognized based on the probable outcome of the performance conditions, which requiresjudgment.The Company estimates the fair value of stock options using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton option pricingmodel requires the Company to estimate key assumptions such as expected term, volatility, risk-free interest rates and dividend yield to determine the fairvalue of stock options, based on both historical information and management judgment regarding market factors and trends. The Company estimates the fairvalue of Restricted Stock Units (“RSUs”) and Performance Stock Awards (“PSAs”) using the value of the Company’s stock on the date of grant, with theexception of market-based PSAs, for which a Monte Carlo simulation model is used. The Monte Carlo simulation model calculates many potential outcomesfor an award and estimates fair value based on the most likely outcome.See Note 11, “Share-based Compensation Plans” for further discussion of the Company’s share-based compensation. F-13Table of ContentsRecent Accounting and Reporting DevelopmentsAccounting ChangesIn May 2011, the FASB issued ASU 2011-04, which amends the wording used to describe the requirements for measuring fair value and expands fairvalue disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Company adopted thisguidance on January 1, 2012 as required. As this guidance only amends disclosure requirements, the adoption did not impact the Company’s consolidatedfinancial position, results of operations or cash flows.In June 2011, the FASB issued ASU 2011-05, which eliminates the option to present components of other comprehensive income as part of theStatement of Stockholders’ Equity. All changes in components of comprehensive income must be presented in (1) a single continuous statement ofcomprehensive income, which presents the total of comprehensive income, the components of net income, and the components of comprehensive income, or(2) two separate but consecutive statements. Under either presentation method, reclassification adjustments between other comprehensive income and netincome are required to be presented on the face of the financial statements. In October 2011, the FASB decided to delay the effective date of the requirement topresent reclassifications of other comprehensive income on the face of the income statement. All other guidance in ASU 2011-05 is effective for interim andannual periods beginning after December 15, 2011 and will be applied retrospectively. The Company adopted the effective portions of this guidance onJanuary 1, 2012 as required. The adoption of this guidance did not change the items that must be reported in other comprehensive income or when an item ofother comprehensive income must be reclassified to net income and thus had an impact on the presentation of comprehensive income in the consolidatedfinancial statements only.Recent Accounting StandardsIn December, 2011, the FASB issued ASU 2011-11 which requires companies to disclose information regarding offsetting and other arrangements forderivatives and other financial instruments. In January 2013, the FASB issued ASU 2013-01, which limited the scope of the balance sheet offsettingdisclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or(2) subject to an enforceable master netting arrangement or similar agreement. This guidance is effective for interim and annual periods beginning on or afterJanuary 1, 2013. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial position as the newrequirements are primarily disclosure related.In February 2013, the FASB issued ASU 2013-02, which clarified the reclassification requirements of ASU 2011-05 which were previously delayed bythe FASB in October 2011. Reclassification adjustments which are not reclassified from other comprehensive income to net income in their entirety mayinstead be parenthetically cross referenced to the related footnote on the face of the financial statements for additional information. This guidance is effective forinterim and annual reporting periods beginning after December 15, 2012 and will have an impact on the presentation of comprehensive income in theconsolidated financial statements only. 2.COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS AND BILLINGS IN EXCESSOF COSTS AND ESTIMATED EARNINGS:The sum of costs and estimated earnings in excess of billings on uncompleted contracts represents revenue earned under the percentage-of-completionmethod but not yet billable based on the terms of the contracts. These amounts are billed based on the terms of the contracts, which include achievement ofmilestones, partial F-14Table of Contentsshipments or completion of the contracts. Billings in excess of costs and estimated earnings represents amounts billed based on the terms of the contracts inadvance of costs incurred and revenue earned. December 31, 2012 2011 (in thousands) Costs incurred on uncompleted contracts $211,801 $356,527 Estimated earnings 32,480 56,227 244,281 412,754 Less billings to date (177,445) (382,539) $66,836 $30,215 Amounts are presented in the Consolidated Balance Sheets as follows: Costs and estimated earnings in excess of billings on uncompleted contracts $73,314 $38,029 Billings in excess of costs and estimated earnings on uncompleted contracts (6,478) (7,814) $66,836 $30,215 3.INVENTORIES:Inventories are stated at the lower of cost or market and consist of the following (in thousands): December 31, 2012 2011 Short-term inventories: Raw materials $56,913 $65,511 Work-in-process 10,157 3,543 Finished goods 43,374 35,000 Supplies 3,101 3,115 113,545 107,169 Long-term inventories: Finished goods 1,608 2,401 Total inventories $115,153 $109,570 Long-term inventories are recorded in other assets. The lower of cost or market adjustment for all inventories was $3.5 million and $3.4 million atDecember 31, 2012 and 2011, respectively. 4.PROPERTY AND EQUIPMENT:Property and equipment consists of the following (in thousands): December 31, 2012 2011 Land and improvements $23,651 $20,101 Buildings 39,834 41,319 Machinery and equipment 155,276 147,814 Equipment under capital lease 21,452 21,310 Construction in progress 9,906 9,210 250,119 239,754 Less accumulated depreciation and amortization (97,574) (86,908) Property and equipment, net $152,545 $152,846 F-15Table of ContentsDepreciation and amortization expense was $16.3 million, $14.5 million, and $13.7 million for the years ended December 31, 2012, 2011, and 2010,respectively. Accumulated amortization associated with property and equipment under capital leases was $8.6 million and $5.4 million at December 31, 2012and 2011, respectively. 5.NOTE PAYABLE TO FINANCIAL INSTITUTION:On October 24, 2012, the Company entered into the Amended Credit Agreement, which amends, supersedes and restates the Credit Agreement datedMay 31, 2007, and provides for a revolving loan, swing line loan and letters of credit in the aggregate amount of up to $165 million. In addition, the AmendedCredit Agreement reflects reductions in the interest rates charged on outstanding balances and a reduction in the number of financial covenants. The AmendedCredit Agreement bears interest at rates related to LIBOR plus 1.75% to 2.75%, or the lending institution’s prime rate plus 0.75% to 1.75%. The AmendedCredit Agreement expires on October 24, 2017.At December 31, 2012, $47.5 million was outstanding under the Amended Credit Agreement. We were able to borrow at LIBOR plus 2.0% atDecember 31, 2012. At December 31, 2012 we had $90.8 million available under the Amended Credit Agreement while remaining in compliance with theCompany’s financial covenants, net of outstanding letters of credit. The Amended Credit Agreement bears interest at a weighted average rate of 2.31% atDecember 31, 2012.At December 31, 2011, the Company had a $125.0 million Credit Agreement, under which $62.0 million was outstanding. The Credit Agreement boreinterest at a weighted average rate of 3.03% at December 31, 2011. We were able to borrow at LIBOR plus 2.5% at December 31, 2011. 6.LONG-TERM DEBT: December 31, 2012 2011 (in thousands) Series A Term Note, maturing on February 25, 2014, due in annual payments of $2.1 million that beganFebruary 25, 2008, plus interest at 10.50% paid quarterly, on February 25, May 25, August 25 andNovember 25, collateralized by accounts receivable, inventory and certain equipment $4,286 $6,429 Series B Term Note, maturing on June 21, 2014, due in annual payments of $1.5 million that began June 21,2008, plus interest at 10.22% paid quarterly, on March 21, June 21, September 21 and December 21,collateralized by accounts receivable, inventory and certain equipment 3,000 4,500 Series C Term Note, maturing on October 26, 2014, due in annual payments of $1.4 million that beganOctober 26, 2008, plus interest at 9.11% paid quarterly, on January 26, April 26, July 26 and October 26,collateralized by accounts receivable, inventory and certain equipment 2,857 4,286 Series D Term Note, maturing on January 24, 2015, due in annual payments of $643,000 that beganJanuary 24, 2009, plus interest at 9.07% paid quarterly, on January 24, April 24, July 24 and October 24,collateralized by accounts receivable, inventory and certain equipment 1,928 2,570 Total long-term debt $12,071 $17,785 Amounts are presented in the Consolidated Balance Sheets as follows: Current portion of long-term debt $5,714 $5,714 Long-term debt, less current portion 6,357 12,071 $12,071 $17,785 F-16Table of ContentsFuture principal payments of long-term debt are as follows (in thousands): 2013 $5,714 2014 5,714 2015 643 2016 — 2017 — Thereafter — $12,071 Interest expense under the Company’s credit agreement and long-term debt was $5.6 million, net of amounts capitalized of $0.2 million in 2012, $9.3million, net of amounts capitalized of $0.2 million in 2011, and $8.9 million, net of amounts capitalized of $0.5 million in 2010. 7.LEASES:Capital LeasesThe Company leases certain equipment used in the manufacturing process. The future minimum payments under the Company’s capital leases are asfollows (in thousands): 2013 $4,129 2014 4,052 2015 2,697 2016 2,145 2017 1,315 Thereafter — Total minimum lease payments 14,338 Amount representing interest (1,864) Present value of minimum lease payments with average interest rates of 7.68% 12,474 Current portion of capital lease obligation 3,295 Capital lease obligation, less current portion $9,179 We had a total of $12.5 million in capital lease obligations outstanding at December 31, 2012. The weighted average interest rate on all of theCompany’s capital leases is 7.68%. The Company’s capital leases are for certain equipment used in the manufacturing process. Of the total capital leasebalance, $6.6 million of the Company’s capital leases outstanding as of December 31, 2012 consists of a Financing Arrangement entered into as of September2009 to finance the Company’s Bossier City, Louisiana facility under which certain equipment used in the manufacturing process at the facility is leased. Aspart of the Financing Arrangement, a $10 million escrow account was provided for the Company by a local government entity through a financial institutionand funds are released upon qualifying purchase requisitions. As we purchase equipment for the facility, we enter into a sale-leaseback transaction with thegovernmental entity as part of the Financing Arrangement. As of December 31, 2012, $0.9 million was held in the escrow account, which is included in OtherAssets, as a result of proceeds from the Financing Arrangement. The Financing Arrangement requires the Company to meet certain loan covenants, measuredat the end of each fiscal quarter. These loan covenants follow the covenants required by the Company’s Amended Credit Agreement.Operating LeasesThe Company has entered into various equipment and property leases with terms of ten years or less. Total rental expense for 2012, 2011, and 2010was $3.2 million, $3.3 million, and $3.2 million, respectively. Certain of F-17Table of Contentsthe Company’s operating lease agreements include renewals and/or purchase options set to expire at various dates. Future minimum payments as ofDecember 31, 2012 for operating leases with initial or remaining terms in excess of one year are (in thousands): 2013 $2,421 2014 2,021 2015 1,751 2016 1,465 2017 1,077 Thereafter 699 $9,434 8.FAIR VALUE MEASUREMENTS:Assets/Liabilities Measured and Recorded at Fair Value on a Recurring BasisThe Company records its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid totransfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at themeasurement date. The guidance for fair value measurements also applies to nonrecurring fair value measurements of nonfinancial assets and nonfinancialliabilities.The authoritative guidance establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into threebroad levels. These levels are: Level 1 (inputs are quoted prices in active markets for identical assets or liabilities); Level 2 (inputs are other than quoted pricesthat are observable, either directly or indirectly through corroboration with observable market data); and Level 3 (inputs are unobservable, with little or nomarket data that exists, such as internal financial forecasts). The Company is required to maximize the use of observable inputs and minimize the use ofunobservable inputs when measuring fair value.The following table summarizes information regarding the Company’s financial assets and financial liabilities that are measured at fair value on arecurring basis (in thousands): Description Balance atDecember 31,2012 Level 1 Level 2 Level 3 Financial assets Escrow account $898 $898 $— $— Deferred compensation plan assets 5,280 5,280 — — Total Assets $6,178 $6,178 $— $— Financial liabilities Derivatives $(353) $— $(353) $— F-18Table of ContentsDescription Balance atDecember 31,2011 Level 1 Level 2 Level 3 Financial assets Escrow account $897 $897 $— $— Deferred compensation plan assets 4,575 4,575 — — Derivatives 153 — 153 — Total Assets $5,625 $5,472 $153 $— Financial liabilities Derivatives $(108) $— $(108) $— The escrow account, consisting of a money market mutual fund, is valued using quoted market prices in active markets classified as Level 1 within thefair value hierarchy. The deferred compensation plan assets consists of cash and several publicly traded stock and bond mutual funds, valued using quotedmarket prices in active markets classified as Level 1 within the fair value hierarchy. The Company’s derivatives consist of foreign currency forwardcontracts, which are accounted for as cash flow hedges, and are valued using various pricing models or discounted cash flow analyses that incorporateobservable market parameters, such as interest rate yield curves and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuationsincorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company.The net carrying amounts of cash and cash equivalents, trade and other receivables, accounts payable, accrued liabilities and note payable to financialinstitution approximate fair value due to the short-term nature of these instruments. The Company is obligated to repay the carrying value of the Company’slong term debt. The fair value of the Company’s debt is calculated using a coupon rate on borrowings with similar maturities, current remaining average life tomaturity, borrower credit quality, and current market conditions all of which are classified as Level 2 inputs within the valuation hierarchy. The fair value ofthe Company’s long-term debt, including the current portion, was $11.5 million and the carrying value was $12.1 million at December 31, 2012. The fairvalue of the Company’s long-term debt, including the current portion, was $16.1 million and the carrying value was $17.8 million at December 31, 2011.Financial Assets Measured and Recorded at Fair Value on a Non-Recurring BasisThe Company measures its financial assets, including loans receivable and non-marketable equity method investments, at fair value on a non-recurringbasis when they are determined to be other-than-temporarily impaired. The fair value of these assets is determined using Level 3 unobservable inputs due to theabsence of observable market inputs and the valuations requiring management judgment. During 2012, there were no impairment charges taken. During 2011,we recognized $4.1 million of impairment charges on loans receivable. The impairment charges were included in other expense (income) in the consolidatedstatement of income. All notes receivable are categorized as Level 3 in the fair value hierarchy. 9.DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:The Company conducts business in various foreign countries and, from time to time, settles transactions in foreign currencies. The Company hasestablished a program that utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures,typically arising from sales contracts denominated in Canadian currency. Instruments that do not qualify for cash flow hedge accounting treatment are re-measured at fair value on each balance sheet date and resulting gains and losses are recognized in net income. As of December 31, 2012 and 2011, the totalnotional amount of the derivative contracts not designated as hedges was $2.7 million (CAD$2.6 million) and $1.5 million (CAD$1.5million), respectively.As F-19Table of Contentsof December 31, 2012 and 2011, the total notional amount of the derivative contracts designated as hedges was $12.4 million (CAD$12.3 million) and $8.5million (CAD$8.6 million), respectively.For each derivative contract entered into in which the Company seeks to obtain cash flow hedge accounting treatment, the Company formally documentsall relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction,the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively,and a description of the method of measuring ineffectiveness. This process includes linking all derivatives to specific firm commitments or forecastedtransactions and designating the derivatives as cash flow hedges. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis,whether the derivative contracts that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The effectiveportion of these hedged items is reflected in other comprehensive income on the Consolidated Statement of Stockholders’ Equity. If it is determined that aderivative contract is not highly effective, or that it has ceased to be a highly effective hedge, the Company will be required to discontinue hedge accountingwith respect to that derivative contract prospectively.All of the Company’s Canadian forward contracts have maturities not longer than 12 months as of December 31, 2012, except one contract with anotional value of $3.1 million (CAD$3.1 million) which has a remaining maturity of 15 months.The balance sheet location and the fair values of derivative instruments are: December 31, Foreign Currency Forward Contracts 2012 2011 (in thousands) Assets Derivatives designated as hedging instrumentsPrepaid expenses and other $— $66 Derivatives not designated as hedging instrumentsPrepaid expenses and other — 87 Total assets $— $153 Liabilities Derivatives designated as hedging instrumentsAccrued liabilities $197 $23 Derivatives not designated as hedging instrumentsAccrued liabilities 156 85 Total liabilities $353 $108 F-20Table of ContentsThe amounts of losses related to the Company’s derivative contracts designated as hedging instruments for the year ended December 31, 2012 and 2011are (in thousands): Pretax LossRecognized in OtherComprehensiveIncome on EffectivePortion of Derivative Pretax LossRecognized in Income onEffective Portion ofDerivative as a Resultof Reclassification fromAccumulated OtherComprehensive Loss Ineffective Portion ofLoss on Derivative andAmount Excluded fromEffectiveness Testing Derivatives in Cash Flow Hedging Relationships Amount Location Amount Location Amount 2012 Foreign currency forward contracts $(234) Net sales $(40) Net sales $(124) 2011 Foreign currency forward contracts $(172) Net sales $(501) Net sales $(69) 2010 Foreign currency forward contracts $(157) Net sales $(31) Net sales $(46) The following table reconciles the beginning and ending balances of the Company’s accumulated other comprehensive income (loss) related to gains orlosses on derivative contracts, as well as amounts reclassified to earnings for the years ended December 31, 2012 and 2011 (in thousands): 2012 2011 Beginning balance $14 $(197) Net unrealized loss from cash flow hedging instruments arising during the period, net of tax (120) (107) Reclassifications into earnings, net of tax 21 318 Ending balance $(85) $14 For the years ended December 31, 2012, 2011 and 2010, gains (losses) of $(0.4) million, $0.1 million and ($0.6) million, respectively, from derivativecontracts not designated as hedging instruments were recognized in net sales. At December 31, 2012, there is $0.1 million of unrealized pretax loss onoutstanding derivatives accumulated in other comprehensive loss, substantially all of which is expected to be reclassified to net sales within the next 12months as a result of underlying hedged transactions also being recorded in net sales. 10.RETIREMENT PLANS:The Company has a defined contribution retirement plan that covers substantially all of its employees and provides for a Company match of up to 50%of the first 6% of employee contributions to the plan, subject to certain limitations. The defined contribution retirement plan offers fourteen investment options.The Company has a non-qualified retirement savings plan that covers officers and selected highly compensated employees. The non-qualified plangenerally matches up to 50% of the first $10,000 of officer contributions to the plan and the first $5,000 of other selected highly compensated employeecontributions, subject to certain limitations. It also provides a Company funded component for the employees with a retirement target benefit. The retirementtarget benefit amount is an actuarially estimated amount necessary to provide 35% of final base pay after a 35-year career with the Company or 1% of finalbase pay per year of service. The actual benefit, however, assumes an investment growth at 8% per year. Should the investment growth be greater than 8%, thebenefit will be more, but if it is less than 8%, the amount will be less and the Company does not make up any deficiency. F-21Table of ContentsThe Company also has two noncontributory defined benefit plans. Effective 2001, both plans were frozen, and participants were fully vested in theiraccrued benefits as of the date each plan was frozen. No additional participants can be added to the plans and no additional service can be earned byparticipants subsequent to the date the plans were frozen. The funding policy for each noncontributory defined benefit plan is based on current plan costs plusamortization of the unfunded plan liability. All current employees covered by these plans are now covered by the defined contribution retirement plan. As ofDecember 31, 2012 the Company had recorded, in accordance with the actuarial valuation, an accrued pension liability of $2.6 million and an unrecognizedactuarial loss, net of tax, of $2.2 million in accumulated other comprehensive loss. As of December 31, 2011, the Company had recorded an accrued pensionliability of $2.6 million and an unrecognized actuarial loss, net of tax, of $2.3 million in accumulated other comprehensive loss. Additionally, as ofDecember 31, 2012 and 2011, the projected and accumulated benefit obligation was $6.7 million and $6.4 million, respectively, and the fair value of planassets was $4.1 million and $3.8 million, respectively. The net periodic benefit cost was $0.4 million for the year ended December 31, 2012, $0.3 million forthe year ended December 31, 2011, and $0.3 million for the year ended December 31, 2010. The weighted average discount rates used to measure the projectedbenefit obligation were 3.52% and 4.06% as of December 31, 2012 and 2011, respectively. The plan assets are invested in growth mutual funds, consisting ofa mix of debt and equity securities, which are categorized as Level 2 under the fair value hierarchy. The expected weighted average long term rate of return onplan assets was 7.5% and 7.5% as of December 31, 2012 and 2011, respectively.Total expense for all retirement plans in 2012, 2011 and 2010 was $1.7 million, $1.3 million and $1.3 million, respectively. 11.SHARE-BASED COMPENSATION PLANS:The Company has one active stock incentive plan for employees and directors, the 2007 Stock Incentive Plan, which provides for awards of stockoptions to purchase shares of common stock, stock appreciation rights, restricted and unrestricted shares of common stock, RSUs and PSAs. In addition,the Company has one inactive stock option plan, the 1995 Stock Options Plan for Nonemployee Directors, under which previously granted options remainoutstanding. The plans provide that options become exercisable according to vesting schedules, which range from immediate to ratably over a 60-monthperiod. Options terminate 10 years from the date of grant. The plans also provide for other equity instruments, such as RSUs and PSAs, which grant the rightto receive a specified number of shares over a specified period of time. RSUs are service-based awards and vest according to vesting schedules, which rangefrom immediate to ratably over a three-year period. PSAs are service-based awards with either a performance or market-based vesting condition. Vesting of theperformance-based PSAs is dependent upon meeting certain strategic goals and ranges from a three-month period to a three-year period. Vesting of the market-based PSAs is dependent upon the performance of the market price of the Company’s stock relative to a comparator group of companies and ranges from twoto three years. The following summarizes share-based compensation expense recorded: Year ended December 31, 2012 2011 2010 (in thousands) Cost of sales $432 $143 $49 Selling, general and administrative expenses 2,616 1,318 748 Total $3,048 $1,461 $797 As of December 31, 2012, unrecognized compensation expense related to the unvested portion of the Company’s RSUs and PSAs was $3.1 million,which is expected to be recognized over a weighted average period of 1.6 years.There were 227,177 shares of common stock available for future issuance under the Company’s stock compensation plans at December 31, 2012; anadditional 47,000 options and 243,141 RSUs and PSAs have been F-22Table of Contentsgranted and remain outstanding. There were 307,984 and 408,434 shares of common stock available for future issuance under the Company’s stockcompensation plans at December 31, 2011 and 2010, respectively.Stock Options AwardsA summary of status of the Company’s stock options as of December 31, 2012 and changes during the three years then ended is presented below: Options WeightedAverageExercisePrice WeightedAverageRemainingContractualLife AggregateIntrinsicValue (in years) (in thousands) Balance, December 31, 2009 213,103 $15.26 Options granted 24,000 24.15 Options exercised or exchanged (87,671) 13.63 Options cancelled (4,223) 17.90 Balance, December 31, 2010 145,209 17.64 Options granted — — Options exercised or exchanged (73,612) 14.12 Options cancelled — — Balance, December 31, 2011 71,597 21.26 Options granted — — Options exercised or exchanged (24,597) 17.58 Options cancelled — — Balance, December 31, 2012 47,000 23.19 Exercisable and Outstanding, December 31, 2012 47,000 23.19 4.86 $122 The total intrinsic value, defined as the difference between the current market value and the grant price, of options exercised during the years endedDecember 31, 2012, 2011 and 2010 was $0.1 million, $0.8 million and $0.8 million, respectively.The following table summarizes information about stock options outstanding at December 31, 2012: Options Outstanding Options Exercisable Range ofExercise PricesPer Share NumberofOptions WeightedAverageRemainingContractualLife (years) WeightedAverageExercisePrice PerShare NumberofOptions WeightedAverageExercisePrice PerShare $10.31 7,000 0.36 $10.31 7,000 $10.31 $14.00 2,000 1.36 14.00 2,000 14.00 $22.07 - $24.15 28,000 6.55 23.85 28,000 23.85 $28.31 4,000 3.36 28.31 4,000 28.31 $34.77 6,000 4.41 34.77 6,000 34.77 47,000 4.86 23.19 47,000 23.19 There were no options granted during 2012 or 2011; the weighted average grant date fair value of options granted during 2010 was $15.35. The fairvalue of options granted in 2010 was estimated as of the date of grant using the Black-Scholes-Merton option-pricing model with the assumptions noted in thefollowing table. The risk-free interest rate is based on the United States Treasury yield curve corresponding to the expected life of the F-23Table of Contentsoption in effect at the time of the grant. The expected life is based on the historical exercise pattern of similar groups of employees. Expected volatility is basedon the historical volatility of the Company’s stock. Year Ended December 31, 2010 Risk-free interest rate 3.74% Expected dividend yield 0% Expected volatility 51.19% Expected lives (in years) 9.25 Restricted Stock Units and Performance AwardsA summary of status of the Company’s RSUs and PSAs as of December 31, 2012 and changes during the three years then ended is presented below: Number ofRSUs and PSAs Weighted Average GrantDate Fair Value Unvested RSUs and PSAs at December 31, 2009 127,487 $41.66 Unvested RSUs and PSAs cancelled (54,986) 44.70 Unvested RSUs and PSAs vested (16,658) 47.27 Unvested RSUs and PSAs at December 31, 2010 55,843 37.00 RSUs and PSAs granted 174,891 23.32 Unvested RSUs and PSAs cancelled (20,997) 47.46 Unvested RSUs and PSAs vested (15,756) 26.27 Unvested RSUs and PSAs at December 31, 2011 193,981 24.41 RSUs and PSAs granted 115,306 29.06 Unvested RSUs and PSAs cancelled (39,306) 28.44 Unvested RSUs and PSAs vested (26,840) 23.13 Unvested RSUs and PSAs at December 31, 2012 243,141 $26.11 The unvested balance of RSUs and PSAs at December 31, 2012 includes approximately 172,000 PSAs included at a target level. The vesting of theseawards is subject to the achievement of specified market-based conditions, and the actual number of common shares that will ultimately be issued will bedetermined by multiplying this number of PSAs by a payout percentage ranging from 0% to 200%.The total fair value of RSUs and PSAs vested during the years ended December 31, 2012, 2011, and 2010 was $0.6 million, $0.4 million, and $0.8million, respectively.Stock AwardsFor the years ended December 31, 2012, 2011 and 2010, stock awards were granted to non-employee directors, which vested immediately uponissuance, as follows: 4,807 shares; 6,261 shares; and 6,615 shares, respectively. The Company recorded compensation expense based on the fair marketvalue per share of the awards on the grant date of $23.40 in 2012, $25.15 in 2011, and $23.81 in 2010. 12.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 inthe event of a proposed acquisition of the Company by enhancing the ability of the Board of Directors to negotiate more effectively with a prospective acquirer,and reserved 150,000 shares of Series A Junior Participating Preferred Stock (“Preferred Stock”) for purposes of the Plan. In connection with the adoption ofthe Plan, the Board of Directors declared a dividend distribution of one non- F-24Table of Contentsdetachable preferred stock purchase right (a “Right”) per share of common stock, payable to shareholders of record on July 9, 2000. Each Right represents theright 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 orgroup 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 Planand upon the occurrence of certain events, each Right would entitle the holder to purchase common stock of the Company, or of an acquiring company incertain 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 perRight under certain circumstances.On June 18, 2009, the Company and Computershare (“Rights Agent”) entered into an Amended and Restated Rights Agreement (the “Amended andRestated Rights Agreement”). The Amended and Restated Rights Agreement amended and restated the Rights Agreement dated as of June 28, 1999 between theCompany and ChaseMellon Shareholder Services, L.L.C. (predecessor to the Rights Agent). The Amended and Restated Rights Agreement extended the FinalExpiration Date of the Rights from June 28, 2009 to June 28, 2019. The Amended and Restated Rights Agreement also reflected certain changes in the rightsand obligations of the Rights Agent and certain changes in procedural requirements under the Amended and Restated Rights Agreement. 13.COMMITMENTS AND CONTINGENCIES:Class Action and Derivative LawsuitsOn November 20, 2009, a complaint against the Company, captioned Richard v. Northwest Pipe Co. et al., No. C09-5724 RBL (“Richard”), was filedin the United States District Court for the Western District of Washington. The plaintiff is allegedly a purchaser of the Company’s stock. In addition to theCompany, Brian W. Dunham, the Company’s former President and Chief Executive Officer, and Stephanie J. Welty, the Company’s former Chief FinancialOfficer, are named as defendants. The complaint alleges that defendants violated Section 10(b) of the Securities Exchange Act of 1934 by making false ormisleading statements between April 23, 2008 and November 11, 2009, subsequently extended to December 22, 2011 (the “Class Period”). Plaintiff seeks torepresent a class of persons who purchased the Company’s stock during the same period, and seeks damages for losses caused by the alleged wrongdoing.A similar complaint, captioned Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust Fund v. Northwest Pipe Co. et al., No. C09-5791 RBL (“Plumbers”), was filed against the Company in the same court on December 22, 2009. In addition to the Company, Brian W. Dunham,Stephanie J. Welty and William R. Tagmyer, the Company’s Chairman of the Board, are named as defendants in the Plumbers complaint. In the Plumberscomplaint, as in the Richard complaint, the plaintiff is allegedly a purchaser of the Company’s stock and asserts that defendants violated Section 10(b) of theSecurities Exchange Act of 1934 by making false or misleading statements during the Class Period. Plaintiff seeks to represent a class of persons whopurchased the Company’s stock during that period, and seeks damages for losses caused by the alleged wrongdoing.The Richard action and the Plumbers action were consolidated on February 25, 2010. Plumbers and Pipefitters Local No. 630 Pension-Annuity TrustFund was appointed lead plaintiff in the consolidated action. A consolidated amended complaint was filed by the plaintiff on December 21, 2010, and ourmotion to dismiss was filed on February 25, 2011, as were similar motions filed by the individual defendants. On August 26, 2011, the Court denied alldefendants’ motions to dismiss, and the Company filed its answer to the consolidated amended complaint on October 24, 2011. The parties participated in aninitial settlement mediation on January 30, 2012. On July 19, 2012 the parties participated in a second settlement mediation at which the parties agreed,subject to court approval, to settle all of the plaintiff’s claims for $12.5 million. All of this amount will be paid by the Company’s insurers with the exceptionof $200,000 in retention which was expensed in the second quarter of 2010 and $200,000 which was expensed in the second quarter of 2012. The fullsettlement amount has been placed into escrow. On November 27, 2012, the Court issued an order preliminarily approving the class action settlement andsetting a settlement hearing for final approval for March 22, 2013. F-25Table of ContentsOn March 3, 2010, the Company was served with a derivative complaint, captioned Ruggles v. Dunham et al., No. C10-5129 RBL (“Ruggles”), andfiled in the United States District Court for the Western District of Washington. The plaintiff in this action is allegedly a current shareholder of the Company.The Company is a nominal defendant in this litigation. Plaintiff seeks to assert, on the Company’s behalf, claims against Brian W. Dunham, Stephanie J.Welty, William R. Tagmyer, Keith R. Larson, Wayne B. Kingsley, Richard A. Roman, Michael C. Franson and Neil R. Thornton. The asserted basis of theclaims is that defendants breached fiduciary duties to the Company by causing the Company to make improper statements between April 23, 2008 andAugust 7, 2009. Plaintiff seeks to recover, on the Company’s behalf, damages for losses caused by the alleged wrongdoing.On September 23, 2011, the Company was served with a derivative complaint, captioned Grivich v. Dunham, et al., No. 11-2-03678-6 (“Grivich”),and filed in the Superior Court of Washington for Clark County. The plaintiff in this action is allegedly a current shareholder of the Company. The Companyis a nominal defendant in this litigation. Plaintiff seeks to assert, on the Company’s behalf, claims against Brian W. Dunham, Stephanie J. Welty, William R.Tagmyer, Keith R. Larson, Wayne B. Kingsley, Richard A. Roman, Michael C. Franson and Neil R. Thornton. The asserted basis of the claims is thatdefendants breached fiduciary duties to the Company between April 2, 2007 and the date of the Complaint. Plaintiff seeks to recover, on the Company’sbehalf, damages for losses caused by the alleged wrongdoing.On October 14, 2011, another derivative complaint, captioned Richard v. Dunham, et al., No. 11-2-04080-5 (“Richard Deriv.”), was filed in theSuperior Court of Washington for Clark County. The plaintiff in this action is allegedly a current shareholder of the Company. The Company is a nominaldefendant in this litigation. Plaintiff seeks to assert, on the Company’s behalf, claims against Brian W. Dunham, Stephanie J. Welty, William R. Tagmyer,Keith R. Larson, Wayne B. Kingsley, Richard A. Roman, Michael C. Franson and Neil R. Thornton. The asserted basis of the claims is that defendantsbreached fiduciary duties to the Company between April 2, 2007 and the date of the Complaint. Plaintiff seeks to recover, on the Company’s behalf, damagesfor losses caused by the alleged wrongdoing.An amended complaint in the Ruggles action was filed on November 10, 2011, and the defendants responded to the complaint by filing a motion todismiss. The derivative parties participated in both of the settlement mediations described above. At the mediation on July 19, 2012, the parties agreed, subjectto court approval, to settle all of the above derivative plaintiffs’ claims in all of the above-described derivative actions, with the Company agreeing to makecertain corporate governance modifications and pay plaintiffs the amount of $750,000 for plaintiffs’ attorneys’ fees. All of this amount will be paid by theCompany’s insurers. The full settlement amount is included in accrued liabilities. The amount that will be paid by the insurers is included in trade and otherreceivables. On December 19, 2012, the Court issued an order preliminarily approving the settlement of the derivative actions and setting a settlement hearingfor final approval for March 29, 2013.SEC InvestigationOn March 8, 2010, the staff of the Enforcement Division of the SEC advised our counsel that they had obtained a formal order of investigation withrespect to matters which resulted in the restatement of our financial statements completed in November of 2010. We are cooperating fully with the SEC inconnection with these matters. We cannot predict if, when or how they will be resolved or what, if any, actions we may be required to take as part of anyresolution of these matters. Any action by the SEC or other governmental agency could result in civil or criminal sanctions against us and/or certain of ourcurrent and former officers, directors and employees. It is not possible to predict the outcome of the investigation at this time. Therefore, we have not accruedany charges related to this investigation. F-26Table of ContentsOther MattersPortland Harbor SuperfundOn December 1, 2000, a section of the lower Willamette River known as the Portland Harbor was included on the National Priorities List at the requestof the United States Environmental Protection Agency (the “EPA”). While the Company’s Portland, Oregon manufacturing facility does not border theWillamette River, an outfall from the facility’s stormwater system drains into a neighboring property’s privately owned stormwater system and slip. Since thelisting of the site, the Company was notified by the EPA and the Oregon Department of Environmental Quality (the “ODEQ”) of potential liability under theComprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). In 2008, the Company was asked to file information disclosurereports with the EPA (CERCLA 104 (e) information request). By agreement with the EPA, the ODEQ is responsible for overseeing remedial investigation andsource control activities for all upland sites to investigate sources and prevent future contamination to the river. A remedial investigation and feasibility study(“RI/FS”) of the Portland Harbor has been directed by a group of potentially responsible parties known as the Lower Willamette Group (the “LWG”) underagreement with the EPA. The Company made a payment of $175,000 to the LWG in June 2007 as part of an interim settlement, and is under no obligation tomake any further payment. The final draft RI was submitted to the EPA by the LWG in fall of 2011and the draft FS was submitted by the LWG to the EPA inMarch 2012. As of the filing of this 2012 Form 10-K, the final RI is scheduled to be submitted to the EPA in the fall of 2013, and the final FS is scheduled tobe submitted to the EPA by November 30, 2013.In 2001, groundwater containing elevated volatile organic compounds (“VOCs”) was identified in one localized area of leased property adjacent to thePortland facility furthest from the river. Assessment work in 2002 and 2003 to further characterize the groundwater was consistent with the initial conclusionthat the source of the VOCs is located off of Company-owned property. In February 2005, the Company entered into a Voluntary Agreement for RemedialInvestigation and Source Control Measures (the “Agreement”) with the ODEQ. The Company is one of many Upland Source Control Sites working with theODEQ on Source Control and is considered a “medium” priority site by the ODEQ. The Company performed remedial investigation work required under theAgreement and submitted a draft Remedial Investigation/Source Control Evaluation Report in December 2005. The conclusions of the report indicated that theVOCs found in the groundwater do not present an unacceptable risk to human or ecological receptors in the Willamette River. The report also indicated there isno evidence at this time showing a connection between detected VOCs in groundwater and Willamette River sediments. In 2009, the ODEQ requested that theCompany revise its Remedial Investigation/Source Control Evaluation Report from 2005 to include more recent information from focused supplementalsampling at the Portland facility and more recent information that has become available related to nearby properties. The Company submitted the ExpandedRisk Assessment for the VOCs in Groundwater in May 2012, and comments from the ODEQ were received in in November 2012. The Company is currentlydiscussing additional sampling requirements with the ODEQ.Also, based on sampling associated with the Portland facility’s remedial investigation and on sampling and reporting required under the Portland,Oregon manufacturing facility’s National Pollutant Discharge Elimination System permit for storm water, the Company and the ODEQ have periodicallydetected low concentrations of polynuclear aromatic hydrocarbons (“PAHs”), polychlorinated biphenyls (“PCBs”), and trace amounts of zinc in storm water.Storm water from the Portland, Oregon manufacturing facility site is discharged into a communal storm water system that ultimately discharges into theneighboring property’s privately owned slip. The slip was historically used for shipbuilding and subsequently for ship breaking and metal recycling. Studiesof the river sediments have revealed trace concentrations of PAHs, PCBs and zinc, along with other constituents which are common constituents in urbanstorm water discharges. To minimize the zinc traces in its storm water, the Company painted a substantial part of the Portland facility’s roofs, and zinc hasremained below storm water benchmark levels ever since. In June 2009, under the ODEQ Agreement, the Company submitted a Final Supplemental WorkPlan to evaluate and assess soil and storm water, and further assess groundwater risk. In May 2010, the Company submitted a remediation plan related to soilcontamination, which the ODEQ approved in F-27Table of ContentsAugust 2010. The Company has completed the approved remediation plan which has included excavation of a localized soil area to remove soil containingPAHs (completed in the third quarter of 2011), an upgrade to the fuel and waste storage systems (completed in the fourth quarter of 2011), a storm waterfiltration system (completed in the first quarter of 2012), and paving any permeable surfaces (completed in the second quarter of 2012).During the localized soil excavation in the third quarter of 2011, additional stained soil was discovered. At the request of the ODEQ, the Companydeveloped an additional Work Plan to characterize the nature and extent of soil and/or groundwater impacts from the staining. The Company beganimplementing this Work Plan in the second quarter of 2012 and submitted sampling results to the ODEQ in the third quarter of 2012. Comments from theODEQ were received in November 2012. The Company is currently discussing additional sampling requirements with the ODEQ.The Company has spent approximately $2.5 million in 2012 to complete the Source Control work specified in the Work Plans, and anticipates havingto spend approximately $50,000 for further Source Control work in 2013.Concurrent with the activities of the EPA and the ODEQ, the Portland Harbor Natural Resources Trustee Council (“Trustees”) sent some or all of thesame parties, including the Company, a notice of intent to perform a Natural Resource Damage Assessment (“NRDA”) for the Portland Harbor Site todetermine the nature and extent of natural resource damages under CERCLA section 107. The Trustees for the Portland Harbor Site consist of representativesfrom several Northwest Indian Tribes, three federal agencies and one state agency. The Trustees act independently of the EPA and the ODEQ. In 2009, theTrustees completed phase one of their three-phase NRDA. Phase one of the NRDA consisted of environmental studies to fill gaps in the information availablefrom the EPA, and development of a framework for evaluating, quantifying and determining the extent of injuries to the natural resource. Phase two of theNRDA began in 2010 and consists largely of implementing the framework developed in phase one.The Trustees have encouraged potentially responsible parties to voluntarily participate in the funding of their injury assessments and several of thoseparties have agreed to do so. In 2009, one of the Tribal Trustees (the Yakima Nation) resigned and has requested funding from the same parties to support itsown assessment. The Company has not assumed any payment obligation or liability related to either request. The extent of the Company’s obligation withrespect to Portland Harbor matters is not known, and no further adjustment to the consolidated financial statements has been recorded as of December 31,2012.All SitesWe operate our facilities under numerous governmental permits and licenses relating to air emissions, storm water run-off, and other environmentalmatters. Our operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally theOccupational Safety and Health Act and regulations there under which, among other requirements, establish noise and dust standards. We believe we are inmaterial compliance with our permits and licenses and these laws and regulations, and we do not believe that future compliance with such laws andregulations will have a material adverse effect on our financial position, results of operations or cash flows.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. TheCompany maintains insurance coverage against potential claims in amounts that are believed to be adequate. The Company believes that it is not presently aparty to any other litigation, the outcome of which would have a material adverse effect on its business, financial condition, results of operations or cashflows. F-28Table of ContentsGuaranteesThe Company has entered into certain stand-by letters of credit that total $3.2 million at December 31, 2012. The stand-by letters of credit relate toworkers’ compensation insurance and equipment financing. 14.INCOME TAXES:The components of the provision for (benefit from) income taxes are as follows: Year Ended December 31, 2012 2011 2010 (in thousands) Current: Federal $5,428 $2,639 $(11,047) State 130 695 45 Total current tax expense 5,558 3,334 (11,002) Deferred: Federal (296) 5,380 9,743 State 259 904 (389) Total deferred tax expense (37) 6,284 9,354 $5,521 $9,618 $(1,648) The difference between the Company’s effective income tax rates and the statutory United States federal income tax rate of 35% is explained as follows: Year Ended December 31, 2012 2011 2010 (in thousands) Provision (benefit) at statutory rate of 35% $7,618 $7,800 $(2,481) State provision, net of federal benefit 519 922 174 Research and development credits (1,801) — — Domestic manufacturing deduction (762) (389) 772 Sale of business — 341 — Change in valuation allowance — 872 — Other (53) 72 (113) $5,521 $9,618 $(1,648) Effective tax (benefit) rate 25.4% 43.2% (23.2)% The decrease in the tax rate in 2012 was primarily attributable to a research and development tax credit study for years 2010 and 2011 performed during2012, for which a net tax benefit of $1.8 million was recorded. F-29Table of ContentsThe tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities is presented below: December 31, 2012 2011 (in thousands) Current deferred tax assets: Costs and estimated earnings in excess of billings on uncompleted contracts, net $1,323 $1,459 Accrued employee benefits 1,612 3,110 Inventories 1,393 1,337 Trade receivable, net 650 625 Net operating loss carryforwards 364 622 Accrued professional fees — 77 Other 693 176 6,035 7,406 Valuation allowance (146) (350) 5,889 7,056 Current deferred tax liabilities: Prepaid expenses (712) (665) Current deferred tax assets, net 5,177 6,391 Noncurrent deferred tax assets: Net operating loss carryforwards 549 499 Tax credit carryforwards 64 102 Accrued employee benefits 3,673 2,708 Other assets 4,527 3,617 Other 17 219 8,830 7,145 Valuation allowance (794) (576) 8,036 6,569 Noncurrent deferred tax liabilities: Property and equipment (23,290) (27,157) Noncurrent deferred tax liabilities, net (15,254) (20,588) Net deferred tax liabilities $(10,077) $(14,197) As of December 31, 2012, the Company had approximately $18 million of state net operating loss carryforwards which expire on various dates between2018 and 2030. The Company also had state tax carryforwards of $298,000, which begin to expire in 2019.The Company considers the earnings of the Mexican subsidiary to be indefinitely reinvested outside the United States on the basis of estimates thatfuture domestic cash generation will be sufficient to meet future domestic cash needs. Should the Company decide to repatriate the foreign earnings, the incometax provision would be adjusted in the period it is determined that the earnings will no longer be indefinitely reinvested outside the United States, and a deferredtax liability of approximately $600,000 related to the United States federal and state income taxes and foreign withholding taxes on approximately $1.7 millionof undistributed foreign earnings would be recorded. F-30Table of ContentsA summary of the changes in the unrecognized tax benefits during the years ended December 31, 2012, 2011 and 2010 is presented below (inthousands): 2012 2011 2010 Unrecognized tax benefits, beginning of year $309 $125 $185 Decreases for settlements — — (60) Increases for positions taken in prior years 3,571 10 — Decreases for positions taken in prior years (184) — — Increases for positions taken in the current year 1,549 174 — Unrecognized tax benefits, end of year $5,245 $309 $125 The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will change in the following twelve months;however, actual results could differ from those currently expected. Of the balance of unrecognized tax benefits, $1.4 million would affect the Company’seffective tax rate if recognized at some point in the future.The Company files income tax returns in the United States Federal jurisdiction, in a limited number of foreign jurisdictions, and in many statejurisdictions. The Company is currently under examination by the Internal Revenue Service for years 2009 and 2010. With few exceptions, the Company isno longer subject to United States Federal or state income tax examinations for years before 2008.The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2012 and 2011, theCompany has approximately $172,000 and $72,000, respectively, of accrued interest related to uncertain tax positions. Total interest for uncertain taxpositions increased by approximately $100,000 in 2012, increased by approximately $8,000 in 2011, and increased by approximately $4,000 in 2010. 15.SEGMENT INFORMATION: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 whichseparate financial information is available and for which operating results are regularly evaluated by executive management to make decisions about resourcesto be allocated to the segment and assess its performance. Management evaluates segment performance based on operating income.The Company’s Water Transmission segment manufactures and markets large diameter, high-pressure steel pipe used primarily for water transmission.The Company’s Water Transmission products are manufactured at one of six manufacturing facilities located in Portland, Oregon; Denver, Colorado;Adelanto, California; Parkersburg, West Virginia; Saginaw, Texas; and Monterrey, Mexico. During the second half of 2012, we permanently closed ourfacility located in Pleasant Grove, Utah, and have transferred its property and equipment to other manufacturing locations. Products are sold primarily topublic water agencies either directly or through an installation contractor.The Company’s Tubular Products segment manufactures and markets smaller diameter, ERW steel pipe for use in a wide range of applications,including energy, construction, agricultural, and industrial systems. Tubular Products manufacturing facilities are located in Atchison, Kansas; Houston,Texas; and Bossier City, Louisiana. Tubular Products are marketed through a network of direct sales force personnel and sales agents throughout the UnitedStates, Canada and Mexico. F-31Table of ContentsBased on the location of the customer, the Company sold principally all products in the United States, Canada and Mexico. One customer accounted for12% of total net sales in 2012. No one customer represented more than 10% of total net sales in 2011 or 2010. As of December 31, 2012, all material long-livedassets are located in the United States. Year Ended December 31, 2012 2011 2010 (in thousands) Net sales: Water transmission $269,203 $271,885 $221,251 Tubular products 255,300 239,783 165,499 Total $524,503 $511,668 $386,750 Gross profit: Water transmission $45,051 $43,182 $19,430 Tubular products 11,147 15,956 10,258 Total $56,198 $59,138 $29,688 Operating income (loss): Water transmission $36,278 $34,113 $10,825 Tubular products 8,335 12,660 6,963 44,613 46,773 17,788 Corporate (17,053) (13,950) (17,193) Total $27,560 $32,823 $595 Depreciation and amortization expense: Water transmission $10,474 $8,729 $8,282 Tubular products 5,541 5,723 5,005 16,015 14,452 13,287 Corporate 252 69 579 Total $16,267 $14,521 $13,865 Capital expenditures: Water transmission $6,830 $4,765 $9,307 Tubular products 9,813 11,386 9,135 16,643 16,151 18,442 Corporate 146 182 155 Total $16,789 $16,333 $18,597 Net sales by geographic region: United States $473,403 $455,625 $347,028 Other 51,100 56,043 39,722 Total $524,503 $511,668 $386,750 F-32Table of Contents December 31, 2012 2011 (in thousands) Goodwill: Water transmission . $— $— Tubular products . 20,478 20,478 Total . $20,478 $20,478 Total assets: Water transmission . $221,987 $203,073 Tubular products . 174,591 181,058 396,578 384,131 Corporate . 25,844 29,242 Total . $422,422 $413,373 All property and equipment is located in the United States as of December 31, 2012 and 2011, except for a total of $2.4 million which is located inMexico. 16.QUARTERLY DATA (UNAUDITED):Summarized quarterly financial data for 2012 and 2011 is as follows (dollars in thousands, except per share). FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Total For the year ended December 31, 2012 Net sales: Water transmission $58,431 $59,050 $63,487 $88,235 $269,203 Tubular products 83,744 71,991 51,612 47,953 255,300 Total $142,175 $131,041 $115,099 $136,188 $524,503 Gross profit (loss): Water transmission $9,699 $8,149 $9,681 $17,522 $45,051 Tubular products 6,801 5,428 1,919 (3,001) 11,147 Total $16,500 $13,577 $11,600 $14,521 $56,198 Operating income (loss): Water transmission $8,024 $6,130 $6,969 $15,155 $36,278 Tubular products 6,196 4,651 1,134 (3,646) 8,335 Corporate (5,041) (3,811) (4,074) (4,127) (17,053) Total $9,179 $6,970 $4,029 $7,382 $27,560 Net income $4,734 $3,604 $3,396 $4,510 $16,244 Earnings per share: Basic $0.51 $0.38 $0.36 $0.48 $1.73 Diluted $0.50 $0.38 $0.36 $0.48 $1.72 F-33Table of Contents FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Total For the year ended December 31, 2011 Net sales: Water transmission $58,645 $74,459 $76,953 $61,828 $271,885 Tubular products 52,813 69,342 62,312 55,316 239,783 Total $111,458 $143,801 $139,265 $117,144 $511,668 Gross profit: Water transmission $9,894 $11,531 $13,345 $8,412 $43,182 Tubular products 4,874 5,140 3,169 2,773 15,956 Total $14,768 $16,671 $16,514 $11,185 $59,138 Operating income (loss): Water transmission $8,261 $9,142 $10,747 $5,963 $34,113 Tubular products 3,849 4,304 2,349 2,158 12,660 Corporate (4,631) (2,378) (3,049) (3,892) (13,950) Total $7,479 $11,068 $10,047 $4,229 $32,823 Net income $2,932 $4,977 $3,284 $1,467 $12,660 Earnings per share: Basic $0.32 $0.53 $0.35 $0.16 $1.36 Diluted $0.31 $0.53 $0.35 $0.15 $1.35 Out-of-Period AdjustmentIn the first quarter of 2012, net sales was increased by $0.8 million for corrected estimates used in the computation of revenue recognized on thepercentage of completion method that should have been recorded in the year ended December 31, 2011. In the third quarter of 2012, cost of sales was decreasedby $0.4 million to correct an overstatement of expenses that had originally been recorded in the year ended December 31, 2011 ($0.1 million), first quarter of2012 ($0.1 million) and the second quarter of 2012 ($0.2 million). When reviewing these errors in conjunction with other immaterial uncorrected adjustmentsimpacting prior periods, the Company concluded that the adjustments did not, individually or in the aggregate, result in a material misstatement of theCompany’s consolidated financial statements for any prior period, and are not material to the Company’s 2012 annual and quarterly financial statements. F-34Table of ContentsSchedule IINORTHWEST PIPE COMPANYVALUATION AND QUALIFYING ACCOUNTS(Dollars in thousands) Balance atBeginningof Period Chargedto Profitand Loss DeductionfromReserves Balance atEnd ofPeriod Year ended December 31, 2012: Allowance for doubtful accounts $1,650 $1,381 $(1,283) $1,748 Valuation allowance for deferred tax assets 926 14 — 940 Year ended December 31, 2011: Allowance for doubtful accounts $2,151 $3,518 $(4,019) $1,650 Valuation allowance for deferred tax assets 105 872 (51) 926 Year ended December 31, 2010: Allowance for doubtful accounts $793 $3,118 $(1,760) $2,151 Valuation allowance for deferred tax assets 470 — (365) 105 S-1Table of ContentsSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized, on the 18 day of March 2013. NORTHWEST PIPE COMPANYBy /S/ SCOTT MONTROSS Scott Montross Director, President and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant in the capacities indicated, on the 18 day of March 2013. Signature Title/S/ RICHARD A. ROMAN Richard A. Roman Director and Executive Chairman of the Board/S/ SCOTT MONTROSS Scott Montross Director, President and Chief Executive Officer/S/ ROBIN GANTT Robin Gantt Vice President and Chief Financial Officer(Principal Financial Officer)/S/ WILLIAM R. TAGMYER Williams R. Tagmyer Director/S/ JAMES E. DECLUSIN James E. Declusin Director Harry L. Demorest Director/S/ MICHAEL C. FRANSON Michael C. Franson Director/S/ WAYNE B. KINGSLEY Wayne B. Kingsley Director/S/ KEITH R. LARSON Keith R. Larson DirectorththEXHIBIT 21.1NORTHWEST PIPE COMPANYSUBSIDIARIES OF THE REGISTRANTNorthwest Pipe Australia Pty Ltd, AustraliaNorthwest Pipe Mexico S.A. de C.V., MexicoThompson Tank Holdings, Inc., OregonEXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation of Northwest Pipe Company by reference in the Registration Statements on Form S-8 (Nos. 333-20165, 333-20167, 333-64083, 333-68176, and 333-152573) of our report dated March 18, 2013, relating to the financial statements, financial statement schedule, andthe effectiveness of internal control over financial reporting, which appears in this Form 10K./s/ PricewaterhouseCoopers LLPPortland, OregonMarch 18, 2013EXHIBIT 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-20165, 333-20167, 333-64083, 333-68176, and 333-152573 onForm S-8 of our report dated April 27, 2012 (March 18, 2013 as to the change in accounting principle discussed in Note 1), relating to the consolidatedfinancial statements and financial statement schedule of Northwest Pipe Company and subsidiaries as of December 31, 2011 and for each of the two years inthe period ended December 31, 2011 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the retrospectiveadjustment for a change in accounting principle as discussed in Note 1), appearing in this Annual Report on Form 10-K of Northwest Pipe Company for theyear ended December 31, 2012./s/ Deloitte & Touche LLPPortland, OregonMarch 18, 2013EXHIBIT 31.1CERTIFICATIONI, Scott Montross, certify that: 1.I have reviewed this annual report on Form 10-K of Northwest Pipe Company; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this annual report; 3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all materialrespects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this annual report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record,process, summarize and report financial information; and b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrols over financial reporting. Date: March 18, 2013 By: /s/ SCOTT MONTROSS Scott Montross Director, President and Chief Executive OfficerEXHIBIT 31.2CERTIFICATIONI, Robin Gantt, certify that: 1.I have reviewed this annual report on Form 10-K of Northwest Pipe Company; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this annual report; 3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all materialrespects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this annual report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the auditcommittee of the registrant’s board of directors (or persons performing the equivalent function): a.all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record,process, summarize and report financial information; and b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrols over financial reporting. Date: March 18, 2013 By: /s/ ROBIN GANTT Robin GanttVice President, Chief Financial Officer(Principal Financial Officer)EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Northwest Pipe Company (the “Company”) on Form 10-K for the period ending December 31, 2012 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Montross, Director, President and Chief Executive Officer of theCompany, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ SCOTT MONTROSS Scott MontrossDirector, President and Chief Executive OfficerMarch 18, 2013EXHIBIT 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Northwest Pipe Company (the “Company”) on Form 10-K for the period ending December 31, 2012 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Robin Gantt, Vice President, Chief Financial Officer of the Company,certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ ROBIN GANTT Robin GanttVice President, Chief Financial OfficerMarch 18, 2013

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