Brian Dunham - President and CEO Stephanie Welty - our CFO

Ryan Connors - Boenning & Scattergood Brent Thielman - D.A. Davidson Chris Terry - Hodges Capital Management Bob Schenosky - Jefferies Chad Woodson - Paradigm Capital Ari Reivitz - RNK Capital

Thank you. Good morning and welcome to Northwest Pipe's conference call and the announcement of earnings for the first quarter of 2008.

My name is Brian Dunham. I am the President and CEO of Northwest Pipe Company, and I am joined today by Stephanie Welty, our Chief Financial Officer.

Before we begin, I would like to remind everyone that the statements we make in this call about our expectations for the future are forward-looking statements and actual results could differ materially. Please refer to our most recent filing with the SEC for a discussion of risk factors that could cause actual results to differ materially.

With that, I'll turn this over to Stephanie to review our financial results.

Thank you, Brian. For the first quarter of 2008, we generated $94 million in revenue, $5 million in net income and $0.54 per diluted share.

For the business groups, in Water Transmission, sales were up $63.9 million for the quarter, compared to $67.8 million in the first quarter of 2007. Gross profit was $14.5 million for the quarter or 22.6% of revenue compared to $13.8 million or 20.4% of revenue for the first quarter last year.

We expect strong bookings in the second quarter to drive revenue growth in the second half of the year. In Tubular Products, sales were $30.1 million in the first quarter of 2008, up from $23 million in the first quarter of 2007.

As expected, we have seen a significant increase in the sales of energy products and continued growth in pipe for agricultural and fire protection markets, driven primarily by volume growth. Gross profit for this group in the first quarter was $3.3 million compared to $2.3 million last year.

Gross profit as a percent of revenue was 11.1% in the current quarter, a significant recovery from the 5.5% recorded in the fourth quarter of 2007, and slightly better than the margin recorded in the first quarter of 2007. This improvement in gross margin is the result of both increased volume and some higher unit sales prices.

In the past, we recorded a Fabricated Products group, which does its manufacturing in Mexico. That group is in transition and will focus on fabricating products for the Water Transmission group going forward.

Accordingly, we have included the results of operations in Mexico in the Water Transmission group. We believe that this change will better reflect our organizational structure and strategic direction.

SG&A for the company was $8 million in the first quarter of 2008 compared to $7.3 million in the first quarter of 2007. We expect SG&A costs to be flat to slightly up in the second quarter of 2008, consistent with expectation.

Interest expense was $1.8 million for the quarter. After adjusting for taxes, we reported net income of $5 million compared to $4.5 million in Q1 of 2007.

Net income per diluted share was $0.54 on 9.3 million shares, compared to $0.49 per diluted share on 9.2 million shares. In Q1 of 2008, depreciation and amortization expense was $1.1 million, and our CapEx was $5.6 million.

Several key indicators on working capital, we are at $192.2 million compared to $181.5 million last quarter, I should say December 12th, '07. Current ratio currently, 4.6%, compared to 3.9%, and debt as a percent of capitalization at 28.3% compared to 27.1%.

Total assets have increased from $424.5 million to $453.6 million and equity has increased from $230.8 million to $256.3 million. Brian will now discuss our expectations.

Thank you. As we look ahead to the rest of the year, we continue to have high expectations.

As we have said earlier, the Water Transmission group will generate slightly better results in the second quarter and then should show a significant improvement in Q3 and Q4. Bidding activity continues to develop as expected, with much greater activity planned in the second and third quarters.

Obviously, this supports our revenue forecast, which trailed bidding activity by several months. At the end of Q2, if the market continues to develop as we expect, we should see a strong backlog and a good production schedule going into the second half of the year.

Margins in the Water Transmission group were quite strong at 22.6% this quarter, a 230 basis point improvement over last year. While we continue to believe some additional margin expansion is possible, we do not expect to see this in the second quarter, when the overall volume will not be as high as it is later in the year.

We are pleased to report the margins in the Tubular Products group have returned to the low double-digit range that we've been aiming for after a one-quarter dip in Q4 of 2007, and also that volume was so high in Q1. Increases in volume were driven by strength in energy, non-residential construction, and agricultural end markets.

As we move into the second quarter, we expect higher revenues as the forecast for these market segments continue to be encouraging. And if we can continue to be successful at raising our prices, we may see some margin expansion as well.

As you are probably aware, steel costs are increasing rapidly and steel is our primary raw material in both groups. In Tubular Products, steel can be 75% to 80% of our costs.

Our average steel cost has gone from $550 per ton in December of 2007 to a forecasted amount of $1,000 per ton by the end of June. Obviously, this creates the requirement to raise our prices in order to offset this increased cost.

So far, we have generally been able to pass cost increases along. Demand from our customers continues to be strong even with these rapidly escalating costs.

While we have been successful so far, increasing steel costs in the face of an uncertain economic environment is clearly a risk factor for our performance. In the Water Transmission group, we purchased steel specifically for individual projects.

If the cost of steel were to change from our original estimate, we would have exposure because we probably could not change our contract price. However, our risk is generally for the relatively short period between the contract bid date and the date that we purchase the steel.

And at this time, we do not see any material exposure. This could certainly change, but we do not see much risk today.

Steel supply is often an issue as well in a rising market. During the first quarter, we had some steel come in later than we had wanted due to increasing lead times.

While lead times are still long, we have adjusted and we do not believe this will have a further impact on us. We are reasonably comfortable that we will be able to acquire the supply we need as we go through 2008.

So at this time, we are watching steel carefully, but we do not believe we currently have much exposure. In closing, we are pleased with the results for the first quarter and our outlook continues to be positive.

Q2 will be good, and based on what we see right now, Q3 and Q4 should be better. In spite of uncertain economic news, we see high demand in both our groups and in most of our product lines.

The Tubular Products group is performing well and the Water Transmission group is poised for a strong year. We continue to be excited by the challenges and opportunities that we see ahead of us, and we continue to expect another record year in 2008.

At this time, I'll be happy to answer any questions that you have.

Good morning.

Good morning.

Brian, I had a couple of questions. First off, I kind of wanted to touch on the Tubular business first, actually.

I know there's been a lot of talk about the shift toward the ISS group in terms of being the new distribution channel and obviously that was part of the growth, the sequential growth there. If you could just update us on where we are in that process of sort of re-ramping the energy-related volumes, vis-à-vis ISS -- LSS?

Yeah. LSS.

Thank you. Because I'm sitting here going ISS, Ryan, what are we talking about?

LSS, and they changed their name, and I apologize. I don't have it off the tip of my tongue, but they have a different name in that now.

But they are definitely off and running. I think it is Tubular Sales Group, TSG, I think is the name of it now.

They are definitely off and running and booking orders for us and we are clearly seeing an increase in the energy side of the business in Q1 over Q4, and we expect that to continue to be pretty strong.

Okay. And then just more generally, I mean you talked in your comments about the margin improvement in Tubular Products being based in large part on volume growth.

But I know in the past, you've talked about trying to move that business toward some of the more differentiated products, whether it be in traffic applications or agricultural applications. If you can just give us an update on where we are in that segment from a mix standpoint and sort of how we are progressing in that sort of transition of the product mix?

I think that transition is in effect at this point in time and essentially complete. Over the last two years, Ryan, we have hit the double-digit margins, seven out of eight quarters and that's really a result of making that transition.

As we look ahead now, we see the opportunity obviously for a higher volume, so better utilization of our facilities, and also, of course, we are seeing price changes as we go forward.

Okay, that's helpful. And then, just shifting over to the Water Transmission business, I know you've talked in the past about some capacity expansion initiatives this year and that you had hoped to kind of have those completed somewhere around mid-year 2008.

Where do we stand in the process of capacity expansions this year? Are you still on your plan or ahead and behind?

We are still on our plan in terms of what we are trying to achieve in overall capacity, but we are probably looking at September and not June, to be in that position.

Okay. And then finally, I just had more of a bigger picture question for you, Brian.

Just, you talk about the fact that you expect very strong second half of 2008, and I just wondered if you could talk conceptually about how you view the growth within that water conveyance end market. In other words, do you see it as cyclical growth or do you really see it as more of a secular growth pattern with the migratory patterns toward the Southwest and so forth?

Just curious, how you sort of envision the market.

Well, I think we are seeing the market with basically the same drivers we've seen in the past. I mean it is population growth and migration as the primary driver, but we are seeing the additional driver now that I think is having an impact and it's going to continue to have an impact over the next several years is the water scarcity issue.

Simply put, the agencies are having to go further away to find that next gallon of water than they had to in the past. And so that's resulting in longer pipelines, and obviously that works in our favor.

So, I think on top of continuing to have to provide water for a greater population base and a significantly greater population base in the South and the West, where water is more scarce we are also seeing longer pipelines being planned and obviously that bodes well for our business. The other driver has been, for the last few years, talked about extensively is the placement markets, the Asian infrastructure that's crumbling underground and needs to be replaced, that market is still there.

However, still a relatively small part of the total market opportunity that we see. We do think that's going to be increasing over time though.

As we look ahead here over the next several years, we will see a greater component replacement market come into play to go along with these longer pipelines that we think of as new construction.

Okay, very helpful to get your perspective on that. Thank you both and take care.

Thank you.

Thanks.

Hey, good morning. Congratulations on the quarter.

Thank you.

Brian, on the backlog, I was just curious, how much of the USEC award is included in that backlog number?

All of it.

Okay. Okay, and then when you talk about strong sort of second quarter bookings, which should increase the backlog, are you sort of factoring in orders that you've already booked or stuff that's on [payment]?

I'm sorry. That broke up.

I didn't understand the question.

Sorry, can you hear me, okay?

Yeah. It just broke up there for a second.

Okay. Sorry about that.

When you made the comment I guess in the press release about second quarter bookings picking up, is this a factor of orders that you have already won, or is this stuff on the radar that should increase the backlog number?

No, this is what's on the radar. And obviously we've already booked some things here in April.

But no, this is, as we expect to see jobs bid in the second quarter. If look at the year, at the beginning of the year and today it hasn't changed much.

Q2 and Q3 were clearly targeted as the strongest quarters for bidding activity. And then of course, our revenue stream tends to follow that by somewhere in the neighborhood of three to six months depending on how these jobs layout because there's lead times between bidding the job and starting to produce the orders.

Okay. And then I guess just to elaborate a little bit more on the Water Transmission revenues in the quarter, were they down really as a function of availability of steel or was there something else factored in there?

Just anything else you could provide would be --

Yes. Some of it was certainly the availability of steel because we lost a little bit there as lead times extended, but some of it was just the way the jobs laid out during the quarter at our various facilities.

So the backlog, as I think I said last time, the backlog never is perfect. It's never even across the country.

So, you don't always have all your facilities operating at high levels even if you have a strong backlog. So in this case, we have a little bit of holes here and there around the country, and so, we didn't generate the type of revenue that we think we can as we go forward.

Okay. And then, finally, I know one of your competitors had sort of talked about soft market conditions in the Southwest.

Maybe, could you just sort of talk about where regionally you are seeing better or worse activity?

I think generally I would say without getting real specific, I think the activity is pretty strong throughout the country. It's probably weakest in the East, which is not unusual, and may be strongest in the Midwest right now.

But we continue to see, particularly in the Southwest corner, we continue to see that market improving as we go forward.

Great. Thank you very much.

Yeah.

Good morning, guys. Congratulations on a great quarter.

Good morning.

Brian, going back to the Tubular segment, curious what specific drivers are you seeing there, in the energy market?

Our product in energy is primarily gas gathering lines.

Okay.

That market continues to be pretty strong, and we think it's going to be pretty strong going forward. None of our stuff is really going down; it's not oil country.

Okay. What's your sense on order trends?

Did they accelerate as the quarter progressed and especially as we've seen energy prices soar?

Yes. We think order trends certainly have been accelerating.

Okay, great. And then my last question, looking at your debt commitments for this year and next, do you have the dollar amount of the notes that are maturing this year?

I don't have it right in front of me. I'm looking to see if I do.

I don't think I have it, but I don't think it was a very big amount this year.

Okay.

Now, with respect to maturities, a lot of the debt is on a laddered set of tranches. So, we have a certain amount that rolls on a quarterly basis.

Okay. It's nothing too significant, though, you guys, I mean, feel more significant than comfortable with the cash flow you are generating to pay those off?

If we weren't comfortable, I guess we would know the number off the top of our head.

Fair enough. Thanks, Brian.

Good morning.

Good morning.

Couple of questions here for you. The first one, are you seeing any delays in any of your projects as a function of higher steel prices and/or regional financial crunches?

No. There's delays all the time, as you know, as we've talked before, for a variety of reasons.

But I can't think of any project that would be specifically tied to either of those issues.

Okay. And I know by including the Fabricated Products and Water, I'm sure you probably don't want to separate that out.

But given that this is the first quarter, can you give us any color at all in terms of the impact?

I think the impact was relatively light in terms of overall volume. I would guess it was probably less than 5%, certainly less than 5% of the total volume.

The margin was certainly lower. So, it certainly dragged down the overall margin a little bit, but not very significantly.

Okay. And with that in mind, can you give us some color in terms of what you did to drive the substantial margin improvement in the Water business?

The Water margin has been improving as we've worked through some things internally in terms of our own capacity and our efficiency in our plants. It certainly improves some with higher volume going through, and if you go back, getting into the 60s is not the highest volume we've ever had, but it's getting to a reasonable level.

I think we will see the margin improve a little bit more as we get into the '70s with a little bit more leverage against fixed costs. But we are about where I thought we would be.

We talked about this, in 2006 when we went out and did the public offering, we talked about the possibility of 300 basis points improvement, and we are about there.

Right.

A component of that, remember, Rob, was price increases. And we certainly did see prices get better in Q4.

They got a little bit better in Q3 last year, then they got better in Q4. So we are seeing a little bit of that rolling through now.

And we should see that, I hope, as we go ahead here into the next quarter. But I don't think we are going to see it be -- going up dramatically from here, at least until we see another round maybe of pricing getting a little bit better.

Okay. And then finally, just do you have any update on the Nevada project bidding and so on?

And also, anything in Texas?

Yes, in Texas, there are several projects. I don't really have any specific updates on any of those right now.

Some of the bigger ones are still out there and still I don't think we have bid dates that are certain, at least not in the next several months. The Nevada project, as it was about a month ago, not a lot has changed.

We understand that there is a draft specification. But it has not yet been released to industry.

It's still undergoing internal review at the agency, so we have yet to see what that specification looks like. There certainly have been discussion about some of the key factors, one of which is that it will be 100 miles of pipe is going to be in the first bid.

But other than that, we don't really know anything different. We hope to see that within the next couple of weeks.

But I think we hope to see it within about two weeks, a month ago, as well. So, we just have to wait until they get it out to us and go from there.

Okay, but you still expect it to be a 2008 event for the bidding process and finalization of the winners of the bids?

Well, the longer it goes, the more difficult that assumption becomes. So, if they get it out quickly, if they want to move quickly on it, they can certainly still bid it in 2008.

But we'll have to wait and see when it comes out.

Okay. So then, as you talked earlier to a question about building backlog and you are seeing good visibility in the second quarter and expect strength in the third quarter then, just to be clear, so you are not including any expectation of any projects in Nevada or Texas included in that backlog?

I wouldn't say there aren't any in Texas because there certainly are some.

Right, but not the major ones.

Not a mega project in Texas. And, as far as southern Nevada goes, we still hope to see it bid this year.

But we think the market is going to be pretty strong even if it postpones until next year.

Okay, excellent. Thanks, Brian.

You bet.

Good morning. I know Bob touched on it just briefly, but are you guys not hearing any anything with respect to the, kind of the freeze-up in the municipal funding markets, kind of vis-à-vis, new project bidding and things like that?

No, we are not.

Okay. That's good.

Do you guys have any kind of view on that? I mean is that really in your opinion just sort of a shorter-term financial dislocation that's not going to really have any impact on longer-tailed projects of this nature in the Water business?

Yeah, that's exactly our view. We think, if anything, there's a bit of a glut of re-financings that have to be sorted through.

And so, there could be a little bit extra bonds out there that need to be absorbed kind of into the system. So, it might slow down a couple of things.

But we don't see any major issue with that or long-term issue with that.

Okay, thanks.

My question has already been answered. Thank you.

Okay. If there are no further questions, then thank you for your interest in Northwest Pipe and this will conclude our conference call.

Thank you.