Nov 11, 2015
Executives
Scott Montross - CEO Robin Gantt - CFO
Analysts
Brent Thielman - D.A. Davidson
Operator
Welcome and thank you all for standing by. Your lines have been placed on listen-only for the duration of today’s call.
At the end of the conference, we will conduct a question-and-answer session. [Operator Instructions] Today’s conference is being recorded.
If you have any objections, you may disconnect at this time. Now, I would like to hand the meeting over to your host, CEO, Scott Montross.
Sir, you may now begin.
Scott Montross
Thanks, Torrey. Good morning and welcome to Northwest Pipe’s conference call.
My name is Scott Montross, and I’m President and CEO of the Company; and I’m joined by Robin Gantt, our Chief Financial Officer. As we begin, I would like to remind everyone that the statements we make in this call about our expectations for the future are forward-looking statements, and actual results could differ materially.
Please refer to our most recent SEC filing on Form 10-K for a discussion of risk factors that could cause actual results to differ materially from expectations. I will now turn to Robin who will discuss our third quarter results.
Robin Gantt
Thank you, Scott. Our third quarter loss was $1.5 million or $0.16 per diluted share compared to income from continuing operation of $5.9 million or $0.62 per diluted share in the third quarter of 2014.
Water Transmission sales decrease 48% to $40 million in the third quarter of 2015 from $77 million in the third quarter of 2014. Water Transmission gross loss as a percent of sale was negative 1.8% in the third quarter of 2015 from income of 21.5% in the third quarter of 2014.
Our volume dropped 35% and our selling price per ton decreased 21%. These results were negatively impacted by reduced demand and project timing with some work being pushed out for later in 2015.
In addition, steel costs have decreased 19% per ton. As steel tends to be a pass-through, lower steel costs lead to lower total sales and sales per ton.
Gross profit was negatively impacted by depressed market conditions and the resulting extremely competitive bidding landscape along with the mix of products produced. In addition, we had about $1.1 million in lower cost or market inventory adjustments related to the rapid decline in steel prices along with about $4,000 in additional costs related to a steel quality issue from one of our suppliers.
Selling, general and administrative costs decreased to $4.8 million in the third quarter of 2015 from $6.5 million in the third quarter of 2014. This decrease was due to lower wage, benefit and incentive plan expense, and decreased travel and entertainment.
Earlier in 2015, we completed a restructuring plan that decreases our manufacturing overhead and G&A by about 15%. And those decreases can be seen in the third quarter results.
Interest expense was $195,000 in the third quarter of 2015 and $457,000 in the third quarter of 2014. The decrease was due to lower average borrowings and lower capital lease balances.
Our effective tax benefit rate was 79.7% in the third quarter of 2015 compared to an effective tax rate of 35.9% in the third quarter of 2014. We completed our research and development tax credit study for the 2014 tax year in the third quarter of 2015, resulting in significantly higher credit of $2.5 million than previously estimated.
We expect the rate will be 33% to 34% for all of 2015. In the first nine months of 2015, the Company generated $37.8 million in cash from operations, mainly through decreases in accounts receivable and inventory.
Depreciation and amortization were $7.1 million in the first nine months of 2015 and $7.5 million in the first nine months of 2014. We generated $30.1 million of free cash flow in the first nine months of 2015 and have generated $50.9 million or $5.32 per share since the beginning of 2014.
As of market close yesterday that is equal to 38% of our market cap. Inventories decreased $23.6 million from year-end 2014.
This was primarily due to a decrease in inventory at Atchison. Capital expenditures were $7.7 million in the first nine months of 2015, which was for ongoing maintenance capital expenditures.
As noted in an 8-K filing, we refinanced our credit agreement on October 26th. The old agreement had several income based financial covenants that were becoming difficult to meet with the downturn in both of our primary market segments.
Therefore, we’ve switched to covenant light agreement that is based on the levels of our accounts receivable, inventory, costs and estimated earnings in excess of billings and fixed assets. The agreement provides for amounts up to $60 million, based on our working capital balances.
As of the date of the refinancing, we did not have any outstanding borrowing on the agreement, which means that we had a small cash balance on hand. In fact we did not have any outstanding borrowings for most of October and this has continued through early November.
We had unamortized costs related to our old credit agreement that have the written-off in October of approximately 400,000. This will appear in interest expense in the fourth quarter.
Since we announced, we’re exploring a sale of the Tubular Products business, I’ll provide a quick summary of those results. As of September 30, 2015, the net assets for the Tubular business were around $51 million.
Sales decreased 68% to $13 million in the third quarter of 2015 from $40 million in the third quarter of 2014. Volume decreased as we sold 17,200 tons in the third quarter of 2015 compared to 39,700 tons in the third quarter of 2014.
Tubular Products had a gross loss as a percent of sales of negative 14% in the third quarter of 2015 compared to negative 2% in the third quarter of 2014. Pipe pricing, particularly line pipe, continues to fall and is negatively impacted by continued high import levels.
Now, I will turn it to over to Scott for an update on our business.
Scott Montross
As of September 30, 2015, our backlog in Water Transmission was approximately $101 million, a 7% decrease from the $109 million as of June 30, 2015. Even though our backlog has decreased in dollars from the end of last quarter, the tons are almost exactly the same, reflecting the impact of falling steel prices and the harsh bidding environment.
The backlog was about $138 million a year ago, as of September 30, 2014, and yet the tons in backlog now are higher by 21%. We expect the fourth quarter of 2015 will have higher revenue in backlog than the third quarter, but it will still be challenging.
The collapse in steel coil prices has reduced our revenue and the cutthroat bidding environment has severely impacted margins. We expect a large volume of bidding in the fourth quarter with about 35% to 40% of the year’s volume of bidding.
The following is an outlook of upcoming Water Transmission projects. The third segment of IPL, 15-2 started production in the third quarter and is expected to run through the end of 2015.
The bid for the fourth second of IPL segment 14 was recently delayed and is now scheduled to be during the week of November 16. Trinity River Main Stem, part of Lake Texoma project has bid and we’re expecting the project to award in the next couple of weeks.
Luce Bayou Interbasin Transfer Project in Houston, which was previously known as Houston MSA is a major project that we expect to start bidding in mid-2016. This project is expected to represent in excess of 90,000 tons steel pipe and will take place over a several-year period.
The Lower Bois D’arc Reservoir is a pipeline being planned by the North Texas Municipal Water District, which represents approximately 30,000 tons of pipe requirements, which we expect to start in 2017. We also expect additional opportunities to develop in Texas from the SWIFT program.
We continue to monitor the market developments in California closely. The Fresno surface water program has started bidding and it will be several segments representing 20,000 tons of pipe bidding into 2017.
The Cadiz [ph] water storage and transmission project 25,000 tons of pipe is in progress of obtaining right-aways and the expectations are that pipeline construction will begin in 2016 and water delivery in 2017. The Southern California re-liner program is expected to spend $2.6 billion over the next 20 years re-lining existing pre-stressed concrete pipelines.
The Los Angeles pipeline replacement program will begin to replace large segments of the 550 miles of existing water lines. This program will extend through 2026.
The 127-mile Red River Valley Water Supply project has recently been revitalized. The goal is to have project design completed by 2018 and construction beginning in 2019.
The Southeast Oklahoma Raw Water Supply System also known as Atoka is a 100-mile pipeline with bidding expected to start in late 2016 and early 2017. We have planned $8 million to $9 million of total capital expenditures for 2015, matching our depreciation.
We continue to be very cautious in our capital spending due to the current market conditions. As of September 30th, our tangible book value was approximately 231 million or about $24 per share.
As of market close yesterday, we are trading at a 42% discount to tangible book value. Obviously we believe very strongly in the long-term prospects of the Water Transmission business as we move to become a pure play water company.
Our quality, nationwide footprint, cost position and 45 plus percent market share uniquely position us to thrive as the market improves. In Tubular Products, we implemented a production curtailment early in 2015, to address the challenging market conditions that have been created by extreme levels of imports and inventory.
We have continued selling and shipping finished products, and performing limited manufacturing as needed to fill customer orders. As we announced in July of this year, we’re exploring the sale of our remaining energy tubular facility in Atchison, Kansas.
This process has been slowed by the depressed oil price, unfavorable trade case ruling, and decline in energy tubular demand. This process in ongoing and we have nothing further that we can discuss at this time.
As we have mentioned in the past, we are looking at a wide range of strategic opportunities for our Water Transmission business. It is the bedrock of our Company and we have many of the experts of the industry within our Company.
A potential opportunity that we’ve also considered is a share buyback. While our new credit agreement allows us to contemplate share buybacks, our income level continues to be low.
We intend to be cautious with the potential share buyback while market conditions remain depressed in prior to a sale of our Atchison facility. Even though we currently have no borrowings under our credit facility, as water transmission market recovers, we’ll need to build up our working capital to meet the market requirements.
And we do not wish to limit the Company’s business opportunities by overextending the credit facility. In closing, as we have previously mentioned, we expect our water transmission market to remain challenging for the near-term, as the municipal market is still working its way out of a trough.
The bidding environment remains very competitive with low market segment wide backlogs and we’re also seeing non-traditional water market players testing the markets due to extreme conditions in other markets such as the energy market. All of these factors will continue to make 2015 a very challenging year.
But remember, 2011 through 2014 were four of the best earning years in a row that the Company has seen in the Water Transmission business. 2015 is the normal cyclical down year.
The fact remains that we are the dominant player in our segment of the water business. And we have over 45% market share with our sight set on achieving 50 plus percent of the market share.
We have an extreme focus on cost and we have a long-term commitment to the water business that is demonstrated by our move to become a pure play water company. And there continues to be a growing build up of water infrastructure requirements.
In fact, we’re starting to hear water being referred to as a mega trend. And finally, due to the population growth and ongoing drought conditions, water resources will need to be moved from one place to another.
That’s our specialty and that’s what we do. At this time, we’ll be happy to take any of your questions.
Operator
Thank you, speakers. We will now begin our question-and-answer session.
[Operator Instructions] Our first question is from Bhupender Bohra. [Ph] Your line is now open, sir.
Unidentified Analyst
You mentioned, in this particular quarter Water Transmission sales; you mentioned something on the timing of projects if you can, can you just give some color on that?
Scott Montross
I guess I don’t understand the question, the timing of the projects?
Unidentified Analyst
I mean you mentioned the sales were down I believe 48 and then 35% due to tons, due to reduced demand and project timing, were there some projects which were supposed to…
Scott Montross
Okay. We originally expected the next segment -- segment 14 of IPL to be earlier bidding than it is right now; it’s been delayed actually until September 16 week.
So, that’s actually pushed out. But Bhupender, we’ve actually seen a number of projects throughout this year, projects that are anywhere from $500,000 projects up to $2 million, $3 million, $4 million projects that continue to push out.
So, that’s something that we’ve seen throughout the year from quarter-to-quarter. One of the other things when you look at what the top line is for the water transmission business being about $40 million in the third quarter, the steel prices actually are having a pretty major impact on that also, because really what that’s become is almost a pass-through especially with the market being in this condition.
Steel prices versus last year at this time, are probably down somewhere in the area of 35 or so percent. That alone can take probably 15% or so out of the top line of what the water transmission business has been.
Not to mention, what the very aggressive bidding environment is actually due to lower prices. So, I think all those things together are things that push to a lower Water Transmission top line.
But I think one of the other things to note, as we said in the script, when we look at our backlog, if you look at the backlog at the end of last quarter, it was a $109 million; right now it’s $101 million at the end of this quarter on almost exactly the same amount of tons. Again, the effect on price of steel and the bidding environment.
Looking at it a year ago, was a $138 million and right now we 21% more tons in backlog than we had a year ago. So, I think those factors are all starting to really press on what the top line in the water is, as we go through this period of time.
Unidentified Analyst
Okay. And Robin, on the free cash flow, year-to-date $30 million, is there a goal; I mean how should we think about like how you end 2015 on free cash flow?
Robin Gantt
Right, I think it’ll probably be a little bit higher in the fourth quarter. But practically speaking, as the backlog increases, we’re going to start buying some inventory to do some job, so may get a little more in fourth quarter but I’d expect in the first quarter of next year moving on with that higher backlog that the free cash flow is going to start going the other direction.
Operator
Thank you speakers. Our next question is from Brent Thielman.
Your line is now open.
Brent Thielman
Scott, on Water Transmission, understand you’re kind of burning through some competitive rebid work right now. But should we take from some of your comments that it’s gotten incrementally worse out there in terms of the bid margins?
Scott Montross
I think Brent, it’s actually -- it’s pretty much settled in right now to kind of even situation because I think everybody in the business right now is dealing with pretty low backlogs. So, as the backlogs remain in this kind of a situation, every job that goes out there is pretty hotly contended.
Okay, even the bigger jobs. For example we’re seeing this IPL segment 14 bid, November 16th week.
We expect that to be an absolute war of bidding. So, ultimately everybody is becoming very focused on trying to put as much into the backlog as they can.
And I think that’s what you’re seeing. And like we’ve mentioned in the past, where this thing starts to loosen up on the margin and the competitive bidding landscape is as this water market improves.
And obviously we expect that to happen because the buildup requirements and people’s backlogs start to grow, then price will start to move up because every job doesn’t become as critical as the bidding situation. So, I think it’s going to be a period of time.
I think we certainly see that into the fourth quarter. I think that, like I said in the call, or on the script that we’re also seeing some non-traditionals in the water market that are maybe trying to escape some of the issues in the large diameter API market right now and coming in and really blasting some of these projects, maybe not knowing what the market is in particular, and it’s creating a few problems.
So, I think over time that abates as not only the API market improves in the future but the water market. And I think for a period of time, it’s still going to be contested.
Brent Thielman
Scott, these untraditional competitors, where are they having success, or what sorts of projects that they’re having success winning? Is it the…
Scott Montross
No, I think -- say that again Brent, say the last piece again.
Brent Thielman
Is it the large projects or the smaller work that they’re…
Scott Montross
Well, to this point, it’s been really the smaller work. But I think we’ve also seen some of that show up on the larger projects where we haven’t seen those people win any of those larger projects but they certainly can do damage to the pricing on those projects, right?
And really when you’re in a situation like that where you’re taking stabs to a market like that, you maybe don’t know what the bidding environment should be. And ultimately you get a price situation that’s probably not a great price situation.
But what we’re seeing is them going in and just really driving down on some of these smaller jobs, to try to get a foot into the door on the water business. But ultimately, it’s a performance thing.
And depending on how they perform, we’ll ultimately cast the die and where they are in the business. We don’t expect -- you know when you have people that come in that are trying to flee a market where the majority of their capital is spent and things like that and dip their toe in a market like the water transmission business obviously that becomes a short-term escape from a market situation.
So ultimately, we expect that to abate as things go forward. But they are having an impact on the pricing right now.
Brent Thielman
And then, Robin on the -- in terms of fuel prices today, are your raw material inventories generally reflecting current market prices, or is there some more room to go?
Robin Gantt
Well, they are right now, but as deals continue to drop, which does seem highly likely based what we think, we will have additional LCM adjustments. It’s falling a lot.
Since our last conference call, when we talked in early August, CRE was at 466 a ton and this week it is at 393; that is a very big drop for a quarter.
Unidentified Analyst
And then just one more if I could, I mean, you guys have done a ton here in terms of the cost structure of the Company in recent years. And I know there is always a point you don’t want to go beyond because you want to be ready when the work essentially comes back.
But kind of based on what you see out there over the next 12 months or next two to three years, however you want to look at it, do you feel like the water business is right-sized enough that the capacity you have in place is appropriately for the size of the market, all the opportunities you mentioned in that timeframe?
Scott Montross
I would say that one of the things -- obviously we look at these facilities all the time because there is always the idea while there is too much capacity out there. One of the problems is that as soon as you shut that capacity -- any capacity down, you’re basically ceding that piece of the marketplace because these markets are very, very geographically distinct markets and this pipe doesn’t really travel very well because when you’re shipping 108-inch pipe that has a half inch to three quarter of inch of cement mortar lining in it, it doesn’t ship very far and it ships by truck.
So, one of the reasons why we’ve been able to have the 45 plus percent market share and we’re in excess of 45 is because we have that nationwide footprint, unlike any of our other competitors. And I think ultimately, the market share is up simply because we have that nationwide footprint.
But to go, a little further on your question Brent, we’ve done a lot of work in these plants with cost reductions. The direct costs in these plants are down by 15%.
The overhead costs are down by 15%. We’ve taken about 15% out of our SG&A.
As a Company, we will continue to look at rightsizing our SG&A to our business levels in the water transmission business. So, there’s always more cost work to be done.
But I think our big advantage right now is the fact that we do have that market share, we have the ability continue to grow our market share, and that’s why we are the big player in this market. And that’s why it puts us probably in a significantly stronger position than our competitors.
Operator
Thank you, speakers. Next question is from Karen Bertram [ph].
Your line is now open.
Unidentified Analyst
Hi, Scott, my name Karen [ph]. One of the things that I wanted to ask about, I am going to kind of follow up on this last conversation with the cost reductions, are you planning any additional reductions in force and/or curtailments at any other plants right now to continue the cost cutting plan?
Scott Montross
Karen [ph], where are you from?
Unidentified Analyst
Las Angeles.
Scott Montross
No. What company are you with?
Unidentified Analyst
I am an independent investor.
Scott Montross
Okay, we just, obviously -- we haven’t talked to you before. So, hello Karen.
I guess what I would say is we’re constantly rightsizing our plants for the production levels that we have. Obviously different plants in different regions have loads that are different in different times.
For example our Saginaw facility is deep in the middle of running the integrated pipeline job right now, so where we’ve been fully staffed at our Saginaw facility for quite some period of time. But some of the other facilities, as the work continue to drop down or drops down in any point of time in those facilities, we will right-size those facilities.
And as look at where we’re, if you look at right now our five main water transmission plants outside of Permalok and outside of our Monterey plant, we were probably at somewhere in the area of about 600 people in 2013 and we’re down to about 484. Those are all reductions that we’ve taken in those plants during the period of time when the work has been less, and we always right-size those.
Now obviously we’re going through a lean manufacturing program right now. So, we’re continuing to find ways to do that.
So, we’ll continue to work through leaning out what we have in the plants to be as efficient as we can. That cost work never ever stops.
And quite frankly, we have done that at the corporate level too, as business levels have subsided. We’ve looked at our corporate structure.
And over the last few months, we have eliminated three senior level management positions. So, those are things that we’ll keep doing over time, as the market keeps presenting us with these challenges.
Unidentified Analyst
With regards to the credit line and actually the reduction in credit line, my question is a $60 million line going to be able to facilitate you through a project which is near and dear to my heart, which is the LA pipeline replacement program, how do you expect to continue to operate to fulfill the program through 2026 with negative margins, reduced borrowing due to the reductions that you just went through on the refi and continued negative gross margins? I’m just curious on how you can talk about some of these big projects that would require several years considering the tightness of the situation right now?
Scott Montross
At this point, I’m going to let Robin answer to the credit facility, but I think obviously we talked about exploring the sale of our energy tubular facility, the final one that we have in Atchison, Kansas. That’s provided a significant amount of drag on the Company this year because of the market conditions.
When you look at Water Transmission, the gross margins this quarter were slightly negative. There was a couple of factors for that.
Obviously we had an LCM adjustment in that that wasn’t expected because of the speed at which the coil price has fallen as well as the steel claim issue that we have that we’re working to resolve. So, I don’t think we see ongoing negatives in that.
And one of the things that’s been a big consumer of our credit facility in the recent past is the energy tubular business because of the inventory levels that we’ve seen on that. So, that’s a bit of the frontline on that.
And I’ll let Robin answer the rest regarding the overall credit facility.
Unidentified Analyst
I was saying before turning to the credit facility, I wanted to ask one more question. We’ll go back to it, I’ll let you go ahead Robin.
Robin Gantt
I was just going to say, with $60 million, we can accordion upto $100 million as need develops, so as market turns around. Presumably the market is turning around, volume picking up, the backlogs for everybody increase, the margins tick up.
So, this idea of negative margins continuing indefinitely. And yes, we’re doing these big projects, doesn’t really fit in our plans right now.
That’s just not what we see, but we do believe that those backlogs will fill up, margins will improve. As we develop those needs and things pick up, we’ll be able to borrow more and like I said we an accordion up to a $100 million if need be.
Scott Montross
Yes, we’ve become significantly stronger at being able to manage our current assets. Especially as we kind of gotten smaller in the energy tubular business, that consumes a lot of cash when we do that.
So, obviously we’ve looked at all of this pretty in-depth with what we see in the markets, over the next five years. So, we don’t see any issues in front of us with that.
Unidentified Analyst
So, with regards to the potential sale of the energy tubular business, what do you expect potential book losses to be that we could look forward to and how will that impact your cash flow once the facility has been sold?
Scott Montross
We can’t really comment on any of the pricing or things that we see related to the sale of that facility, simply because that’s an ongoing process. What we can tell you is and I think we’ve talked about this before, the total PP&E on that facility is about $36 million and our inventory levels are relatively low at this point but we’re engaged in a process on that right now, and so we can’t really comment on valuation.
Operator
Thank you, speakers. Our next question is from Matt Sherwood.
[Ph] Your line is now open.
Unidentified Analyst
Just a quick question, so going to that prior answer that you gave, do you think that the NAV is like 51 million at the Atchison facility and PP&E is 36 million. So, that leaves about 15 million of working capital.
Is that right?
Scott Montross
I think that’s about right at this point, Matt. Obviously that can -- some of the working capital is in coil plum obviously.
And as that stuff is converted into finished pipe, that could adjust those working capital numbers. But those working capital numbers and what I would call I guess the more or less the inventory and receivables have continued to come down over the last probably four quarters, since we’ve really tried to drive that down at this point.
So, we’re seeing that at a pretty low level and we expect that to continue. I think that the energy business is going to be challenged for a period of time, simply because of the larger structural issues that we see in that business.
So, our game plan on that is obviously to get that inventory value as low as we can while still servicing our customers’ needs while we’re exploring the sale of the facility.
Unidentified Analyst
And then can you sort of give an update if there’s anything on the land from the OCTG sale and what -- how that situation is playing out?
Scott Montross
Yes. We’re still -- we’re actually still working through the environmental cleanup on that property that we had when we went through the sale of the equipment there.
We’re working with a couple of different environmental firms and that is progressing. But what I would say is we’ve seen a level of interest in people wanting to buy that property.
So far what we’ve seen is valuations that what I would say, don’t represent what the value of that property is. And you know obviously we’re in a little bit of a trough with the real estate market in Houston too with what’s going on with the energy business there.
So, obviously we want to get as good of value out of that as we possibly can. So, we’re working to see if there’s some kind of better offer that we can get on that.
In the meantime, if we can’t, what our process would be is just to hold on to it until those real estate values come up, so. But, we are seeing some interest in that Matt.
Unidentified Analyst
I guess you’re not Houston real estate company, so sort of why wouldn’t you just accept what the market -- assuming that you’ve done the environmental cleanup and you have a clean piece of land, do you know what’s the difference in -- why not get cash now rather than own a piece of land in Houston? And I guess just the second part of the question is like, can you give us any color on the acreage of the land, potential use cases whereby or something like that?
Scott Montross
Yes, I think one of the things -- with the acreage, I’ll answer that first. It’s around 12 acres, 12.5 acres in that area.
And we are not a real estate company but we certainly want to get the maximum value out of it for the shareholders. So that’s what we’re looking at.
What we’ve seen as far as offers on that to this point Matt, doesn’t represent anywhere close to what we had the land appraised at when we were going through the sale process on OCTG. So, obviously we’re not in the Houston real estate business and we want to monetize that as quickly as we can, but we do want to make sure we’re getting enough value out of it.
Because really what it’s turned into is it’s surrounded by residential neighborhoods now and ultimately with the pretty loose zoning restrictions in the Houston area, it’s going to end up as a residential property. So, there’s multiple parties looking at it and hopefully those values come up because we do want to monetize that as quickly as we can.
Unidentified Analyst
I mean between that and the potential for working capital on OCTG and the line pipe facility assuming, you haven’t sold it, it seems like you should be well-positioned to support your working capital growth from an increased backlog even without -- with very limited debt?
Scott Montross
I think that our current credit agreement sufficiently supports what we need in the go forward. But we -- again we’ve named in this call a significant amount of large projects, right?
So ultimately, we certainly want to make sure that we have our ducks all in a row to be able to do all the things that we need to handle those projects. Because if two or three of those projects hit at the same time, it could consume a significant amount of cash.
And that’s why we’re being, at least careful and cautious with the idea of a share buyback, especially with the market situation being what it is right now and in front of being able to monetize the Atchison facility and the sale. So we’re just -- we just want to be careful and walk our way through this thing.
Unidentified Analyst
And final question, just when you look at -- as you said it was 35% to 40% of the year’s work being bid in Q4. And then the preliminary project bidding here that you’re seeing in ‘16, how does that look relative to ‘15, in terms of volume?
Scott Montross
Well, just to finish off on the ‘15, I think we have somewhere in area of 35,000 tons alone bidding in November. Okay?
So, obviously you’ve got IPL segment in there and a couple of other thing; you’ve got Madison Gillette going on in there so. So, there’s a lot going on in the fourth quarter with the bidding environment.
As we go into 2016, we’ve talked about some of these projects where we’re starting to see the construction numbers move up. But I don’t know if what we’re starting to see in construction is representative of what we’re actually going to see in the business, especially in the state of California, right?
Because ultimately Proposition 1 in the state of California that’s $7.2 billion general obligation bond is going to create some projects. And I think we’re seeing the beginning of those.
One of the things that’s going to impact on how ‘16 looks versus 2015 is how quickly California develops. Right?
Because you still have Texas going with IPL projects in ‘16 although the IPL projects that we expect in ‘16 are probably a little bit smaller segments. We expect to see two of those in ‘16 but there also is this Luce Bayou project that will start in 2016.
But there’s things that are that I think we’re going to see generated in 2016 because of the buildup requirements that aren’t necessarily apparent right now. So, when we look at 2016, obviously we’ve expected that to grow over what we’ve seen in 2015 because of what we expect from California and Texas.
It’s hard to say how much. Preliminary numbers said somewhere between 10% and 20% in 2016, and I would say that in tons because if you’ve noticed, we started talk about tons, it’s very difficult to represent things in revenue anymore because of the change in pricing and steel pricing.
So, if all those things develop like we think that they could develop, that market could be 10% to 20% higher in 2016. But things have to develop in California.
Unfortunately, and I wish I could control and push this market a little bit more, but ultimately we are little bit at the whim of the development of the market here. So, we’re well-positioned to be able to handle it.
It’s just, when will it develop? I also think that private money is going to start playing more in two of that territories.
Unidentified Analyst
And the last one, the competitive situation in California versus Texas is similar with two major players; and is it any better with these non-traditional players?
Scott Montross
Well, I think the California is a little bit more -- obviously off to the West, okay, if you will. So there is not as much of concentrated competition is what I could call, what we’re seeing in Texas right now.
But that doesn’t mean that ultimately you won’t see people from that are located 1,500 miles, 1,200 miles or 1,000 miles away biding on jobs in California, at some point. What we actually need I think for things to get really healthy and improve is a couple of different geographic regions to hit at one time, kind of like we had in 2011.
We had Southern delivery going on in the middle of the country and in Colorado, we had Provo Canal going in Utah, and we also had stuff going on in Texas. 2011, ‘12, ‘13, even in the ‘14 were pretty healthy markets because of some of that work that was multiple regions and that carrying over but we haven’t seen that recently.
Really for the last couple of years, we’ve really seen only Texas which why the concentration on Texas and the margins are really crushed. Once you see California and Texas, we certainly think that that loosens up the margins and allows the prices to start to move up.
Operator
Thank you, speakers. Our next question is from Ted Beatty [ph].
Your line is now open, sir.
Unidentified Analyst
Just quick question regarding the energy business, just kind of with regard to timing either way; when do you expect to make a decision or announcement?
Scott Montross
An announcement on?
Unidentified Analyst
Of the sale -- those sales, just continuing to bid -- whatever you guys…
Scott Montross
Yes, we’re in middle of the process. So, I can’t really give you a specific timing on, other than that ultimately we think it’s in the best interest of the Company to focus on exploring the sale of that opportunity or that option at this point.
So, we’re focused on getting that done. Obviously we’re working through a bunch of things in relation to that.
But ultimately, if we can’t get a sale done, what we’ll do is we’ll put that in a configuration, so that while the energy markets is in a situation that it’s in right now, which we consider obviously to be extremely poor that it does the least amount of damage to the Company. But unfortunately, I can’t give you a specific timeline on when things would happen with the sale on that.
But I can tell you that it’s a process that’s ongoing right now.
Operator
Thank you. And our next question is from Brent Thielman.
Your line is now open, Mr. Thielman.
Brent Thielman
Thanks. One more, and Matt actually asked my question on the bid opportunity for ‘16 versus ‘15.
Thanks for that. But, on the tubular side, can you refresh us on anything developing with respect to tariff line type business, I can’t remember where that was at?
Scott Montross
Yes. Actually Brent, what we’ve seen is we’ve seen a final determination by the -- I this is Department of Commerce on line pipe trade cases which when the antidumping piece which obviously is the major piece of the trade case, you have two pieces.
You have a countervailing duty piece and you have an antidumping piece. And the countervailing duty piece is usually relatively small.
The antidumping piece is usually what you’ve seen at least in the couple of these cases, holds the biggest impact on people that are violating by dumping in this country. So what we saw the Department of Commence come out with a final determination on the Koreans that are -- that is between 2% and 6%.
Obviously relatively de minimis and significantly less than what they came out with on the OCTG due business. Now the dumping margins that they came out with against Turkey, the countries from Turkey were a little bit higher, I think it was somewhere 15% or 18% to 20%.
But really what we’re seeing is the South Koreans being the bigger -- the biggest impact on that market. And quite frankly those kind of antidumping margins are really de minimis and probably has not a very big impact.
Now, and I think it’s the next step of the process as International Trade Commission now has to rule on if there is injury or harm. So, that’s something that comes out, I believe sometime mid to late this month.
But it certainly wasn’t a very good sign Brent when the Department of Commerce came out with between 2% and 6% in the Koreans, because we don’t -- we certainly don’t think that that has a big impact on the Korean shipping line pipe into this country.
Brent Thielman
And you don’t see anything else kind of developing or possibly building that would be -- trade basis or what how you that would be worth waiting for in terms of…
Scott Montross
I think that there’s been some discussions on broader trade remedies section 201s that obviously become a little bit bigger that could put quotas on the amount of imports that come in. But I think that could be some time off.
And really I think for to have a major impact on certainly the commodity type products, it’s got to be broader than just pipe and tube or steel. And obviously the steel guys are going through their trade cases with what we’ve seen happen to the steel pricing over the last probably almost year, and the impact to the imports there.
So, I think it’s really got to be broader; it’s got to be pipe and tube and steel. But I think that that’s probably sometime out into the future now.
And I really can’t give you a good estimate on when something like that would even be considered. But for right now -- we haven’t seen much of anything that helps on the energy tubular side, especially line pipe.
And obviously the steel guys are going through their trade cases now and starting to get rulings on. Galvanized came out yesterday with some rulings.
But he rulings on cold rolled and hot rolled products will likely come out over the next I guess probably few months. So, we’ll know more on that.
But I think to have an impact overall on these huge amount of imports that are affecting the market Brent, it really has got to be some broader trade remedies that are put into place.
Operator
Thank you, speakers. At this time, we don’t have any other questions in queue.
[Operator Instructions]
Scott Montross
No further questions, Torrey?
Operator
At this time, don’t have further questions on queue. I’d like to hand the call back to you sir.
Scott Montross
We appreciate everybody attending the call. And obviously, we’re looking forward to better times in the future in the water business because demand is building.
So, thank you and we’ll talk to you next time.
Operator
Thank you, speakers. And that concludes today’s conference.
Thank you all for joining. You may now disconnect.