Feb 25, 2009
Executives
Brian W. Dunham - President and Chief Executive Officer Stephanie Welty - Senior Vice President and Chief Financial Officer
Analysts
Brent Thielman - D.A. Davidson & Co.
Ryan Connors - Boenning & Scattergood John L. Trey Snow III - Priority Capital Management
Operator
Good morning and welcome to the fourth quarter 2008 earnings release conference call. At this time, all participants are in a listen-only mode.
(Operator Instructions). Today's conference is being recorded.
If you have any objections you may disconnect at this time. Now, I'll turn the meeting over to Mr.
Brian Dunham, CEO and President.
Brian W. Dunham
Thank you Corey. My name is Brian Dunham, I am the President and CEO of the company.
I am joined 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. I'm pleased to announce record sales and record earnings for 2008.
This is the fifth consecutive year that we have generated record sales. For the last four years we have added record earnings as well.
For 2008 we generated revenue of $439.7 million and earnings of $32.3 million. This is an increase in revenue of 14.9% over 2007 and an increase in earnings of 55%.
This equates to earnings per share of $3.46 in 2008 compared to $2.26 last year. With that, I will turn this over to Stephanie to review our financial results focusing on the fourth quarter.
Stephanie Welty
Thank you Brian. Fourth quarter revenues were 110.2 million compared to 98.2 million in the fourth quarter of 2007.
Net income for the fourth quarter of 2008 was 8.6 million while net income for the fourth quarter of '07 was 5.6 million. This translates to $0.92 per diluted share in the fourth quarter of 2008 versus $0.60 in the fourth quarter of 2007.
Moving on to the quarterly result through the two business groups, Water Transmission revenue was 55.7 million in the fourth quarter of '08 compared to 80.3 million in the fourth quarter of '07. Gross profit was 11 million or 19.7% of revenue compared to 17 million or 21.2% of revenue last year.
Fourth quarter results in the Water Transmission Group were affected by production downtime caused by the postponement of a major project, inclement weather and the installation of new equipment. Weather accounted for approximately 12 days of downtime and affected all but two plants.
The installation of new equipment in our California plant accounted for a partial loss of production over about 50 days. In Tubular Products, we are happy to report that revenue and gross profit posted record levels in the fourth quarter for the third consecutive quarter.
Tubular Products sales were 54.5 million in the fourth quarter of '08 up from 17.9 million in the fourth quarter of '07. In the fourth quarter a year ago we had virtually no energy pipe sales.
We were in the process of establishing our relationship with our current sales agent and over the course of 2008 we saw rapid growth in our energy pipe business which drove our overall revenue growth. Gross profit for the Tubular Products was $13.5 million or 24.7% of revenues compared to $1 million or 5.5% of revenue in the fourth quarter of '07.
In addition to volume growth we saw significant increases in selling prices that accompanied rising steel costs and the shift to products with higher growth margins within our historical product mix. We do not expect this combination of factors to repeat in '09.
Brian will provide some additional color on our expectations for the Tubular Products Group in just a few moments. Selling, general and administrative costs were 8.9 million in the fourth quarter of '08.
While an increase from last year this is down slightly from the third quarter of 2008. We expect SG&A spending to be a bit lower in '09 compared to '08.
Interest expense is 1.9 million for the fourth quarter of 2008 compared to 1.7 million for the fourth quarter of '07. Total debt grew 21.8 million as a result of financing working capital growth driven by higher volume and compounded by higher steel cost.
For the first quarter of '09 we expect interest expense to be down slightly from the fourth quarter. Our tax rate for 2008 was approximately 38%, and we expect the tax rate to be 37 to 38% in 2009.
After adjusting for taxes we generated net income for the quarter of 8.6 million which equates to $0.92 per share. In the third quarter of '08, we saw significant increases in inventory which were first in the fourth quarter.
We reduced inventory by 12.7 million and reduced our net unbilled revenues, the equivalent of work-in process in the water business by 12.8 million, both positive trends for cash flow. However, simply due to timing of raw material and capital purchases, accounts payable came down 30.4 million in the fourth quarter.
The net result of these offsetting cash flows provided 4 million of cash flow from operation in the fourth quarter. Capital expenditures in the fourth quarter were 6.2 million and depreciation and amortization expense was 1.3 million.
We continue to invest in production capacity to prepare to serve the water infrastructure market in excess of 1 billion. We have just completed installation of a new mill in California that will provide increased throughput and process higher gauge steel.
We also focused a great deal of attention on improving our manufacturing processes to increase capacity with minimal capital investment. We expect capital expenditures excluding the Bossier City facility to be roughly 10 to 12 million.
In December, Northwest Pipe Asia acquired Byard Limited, a leading designer and builder of spiral pipe mills. The new mill in California is a Byard mill.
We expect this relationship to generate a positive return from Byard's space business as well as provide new insight into international water infrastructure market and potentially lead us into new ventures. Brian will now discuss our expectations for 2009.
Brian W. Dunham
Thank you. Obviously we are very pleased to be able to report the record results for 2008 and a very strong fourth quarter that Stephanie has just described.
As you all know, the economic environment has changed significantly in the last five months. As we look forward to the first quarter of 2009 and beyond, I will focus on the recession, the financial crisis, the changing cost of steel and finally the stimulus plan and how each of these may affect our businesses.
As of the end of 2008, our backlog was approximately $190 million. While this is down from the 235 million we reported at the end of the third quarter, it is still at quite a healthy level.
The change in the backlog was virtually entirely due to the Tubular Products business. The Water Transmission backlog has stayed at approximately the same level from Q3 to Q4.
The change in the backlog brings us to the discussion about the recession and its effects on our Tubular Products Group. As most of you know, the bulk of our Tubular Products business is a short term inventory type business.
During 2008, sales of our energy products grew dramatically. Demand is so high for these products that we began to build a longer-term backlog than we would normally expect.
As the recession hit late in Q3 and early in Q4, one of the consequences was the decline in natural gas drilling activity and the decline in order activity for our energy products. Throughout the fourth quarter; however, we continue to supply our customers with pipe that they had previously ordered.
This drove strong results in Q4 even if demand declined precipitously and have resulted in the decline in the backlog at year-end. In addition to energy products, for which demand is driven by drilling activity, the key drivers for Tubular Products Group include highway spending, non-residential construction and agricultural spending.
As we look ahead in this recessionary environment, we expect all of these to be down at least through the first half of 2009. Accordingly, we are not expecting the same kind of results in 2009 that we were able to generate last year.
We also believe we are seeing a magnified effect right now because our customers are now the distributors reducing their own stocks. Accordingly demand for our tubular products is very low.
Conversely, we expect to see a somewhat oversize increase in demand later in the year when inventories need to be restocked at the same time user demand increases. Steel cost will also be a significant factor in our 2009 results.
In 2008, steel climbed almost $1200 per ton for the grades that we use in this business. Today those same grades of steel are selling for approximately half this amount.
Historically our selling prices have adjusted to changes in steel costs. As we look ahead, we expect steel cost will increase this year to probably only about 150 to $250 per ton.
Accordingly we expect a lower average selling price throughout the year. The financial crisis has not altered our business model on Tubular Products so far as near as we can tell.
Certainly some of our customers maybe having more difficulty with credit lines and if so this may reduce the amount of inventory they ultimately will carry as things improve. To date we have not seen any financial difficulties in our customers such as bankruptcies or even dramatic changes in payment patterns and we do not believe there is a very high risk here.
Drilling activity however can be traced to both economic conditions, i.e., the recession and the credit crunch. This is generally a highly leveraged business and the lack of credit may be exacerbating a slowdown that we currently see.
Obviously trying to separate the impact of the financial crisis from the recession is difficult. The stimulus plan could provide some benefits to the tubular products group.
Obviously there are dollars in the plan for highway spending and this could filter down into our traffic signpost business. Perhaps more importantly we do make some structural products at our Atchison, Kansas division, construction spending may increase demand for these products.
At this time however we do not expect much of the benefit from the stimulus in the Tubular Products Group. The real boost for this business will come as the natural gas exploration market improves.
We continue to expect improvement in demand for the API products that we currently make. Obviously gas exploration has now stopped and this country's reliance on natural gas will not end.
The long-term fundamentals for this business are still strong and we have a good position in this market. We are also in the process of re-commissioning our plant in Bossier City, Louisiana and modifying it to focus on OCTG products for natural gas drilling.
Because we already own the land and buildings and the major manufacturing equipment we will be able to enter this market on very cost effective basis. However, when we began this project we certainly planed on higher drilling activity that is currently forecasted.
In order to minimize our risk and conserve capital we are not going to finish the plant at this time. We will complete the main manufacturing line though we will not add the downstream operations to finish the product.
This will allow us to access the market by sending products out to a processor for finishing and to rapidly complete the plant when market conditions warrant. We believe this strategy will prove to be very effective in maximizing our return on this investment.
Turning to water transmission and again focusing on the recession, the financial crisis, the cost of steel, and the stimulus package, we see a very different story. First of all, as I have said before, the water transmission business does not always run according to a business cycle.
Projects are often planned for many years in advance and are sometimes part of 50 year build-out plans. Near-term issues can certainly delay projects but fundamentally this is a business with very long time -- long-term time horizon.
As we look at the effect of the recession, we do not see anything like the impact that we are seeing in Tubular product. In fact our three year outlook is actually higher today then it was six months ago or a year ago.
We see a significant number of projects ahead of us, primarily new construction that will provide greater market opportunities on our future than we have seen to date. There are many concerns about funding issues for these projects.
The credit crunch or credit freeze has been widely reported but it is important to make distinctions between markets. First there is a common perception that water projects are funded on tax revenues.
However this is not the case, water projects are typically funded by revenue bonds, which are backed by connection fees amongst the water rates, generally there are no tax dollars involved. The key to funding is the municipal bond market and particularly the revenue bond market.
After temporarily freezing in October, we see the municipal bond market functioning again today. For the first several weeks of this year, bond sales have averaged around $5 billion per week and rates have come down as well.
This market looks to be well on its way to recovery. To be most specific about funding issues, last quarter we surveyed many of the municipal agencies that we felt would have significant activity in 2009.
We found that approximately 90% of these agencies had funding in place for upcoming projects or had no concerns about funding. We have up -- excuse me, we have updated that research in the last four days and generally found the same answers; for most agencies the funding is not the last component to be put in place.
We believe that in most cases the projects we will be bidding in 2009 are already funded. That being said, we always see delays in the water transmission business.
Nearly half of all projects are delayed from their original plan bid dates for a variety of reasons. In the fourth quarter 2008 we saw well over $100 million worth of projects postponed that we'd expected to bid during the quarter.
This obviously affected our backlog at yearend. As we analyze these postponements we found only one agency that has postponed work for a significant period of time due to funding issues.
This particular agency recently adopted an approach that they would get the funding as the last step in developing the project. As they saw the municipal bond market freeze up in the fourth quarter and rates go higher, they moved all of their projects out.
The other projects that delayed out of Q4 generally moved for variety of reasons having nothing to do with funding. All of these projects have new expected bid dates within the next six months.
One or two appear to have delayed as they awaited clarity on the stimulus package. Even though they may have had funding already in place, they wanted to see if a new source of funding might come available.
Now that the stimulus is finalized we hope to see these projects proceed rapidly. The cost of steel will also have an impact on this business.
As steel cost fell our selling prices adjusted as well. Steel is not nearly as bigger component of our costs in the Water Transmission business as it is in Tubular Products.
And the input cost of selling price relationship is not as tight but raw material cost is still an important factor. Based on our forecasted steel cost, we expect our average selling price in 2009 will be lower.
Finally the stimulus package. Obviously this package went through numerous changes before it was finalized and signed by President Obama last week.
There are few pieces of the package that are significant to us. First the act provides for $6.4 billion, primarily for Water infrastructure to be administrated by the EPA.
Of this total, 4 billion is targeted core projects under the Clean Water Act and 2 billion is targeted towards projects under the Safe Drinking Water Act, the most important component for us. In addition, 1.375 billion was appropriated for rural water programs, 200 million was distributed to the Army Corps of Engineers for water related projects and the Bureau of Reclamation also received $1 billion for water projects.
We are tracking a few large projects they are financed at least in part by either the Bureau or the Corps and while it is not a significant part of our overall business, we also make piling products and any increase in highway construction may benefit this segment as well. In spite of the funding provided in the stimulus package, we are not currently counting on any benefits.
We do see upside potential, however. We think the stimulus will tend to accelerate certain projects.
As noted earlier, we know of some agencies who have postponed major projects waiting for some clarity on the package. Based on our review, it appears they may be (inaudible) and will undoubtedly work to get included and this means moving quickly.
We now know that few other agencies that are planning to move bids from 2010 to 2009 for some specific projects in order to access stimulus funds. The act is clear that projects need to be started soon in order to qualify for funding.
The biggest piece of the package that is applicable to us is the $2 billion for the Safe Drinking Water Act. This amount will be distributed to states according to a pre-assisting formula.
The states will then seek to find local projects to qualify and pass the funds through to these projects. Importantly, the requirements for matching funds has been waived and a certain proportion of these funds may be grant, interest free loans, or even negative interest loans.
This will be very attractive to local municipalities. And it is certainly possible that we will see an uptick in near-term bidding activity as the agencies seek to access this funding source.
One last point regarding stimulus packages. Canada has also adopted a package.
In their package they have roughly $10 billion targeted towards construction projects. We are very well situated to serve Western Canada.
To the extent monies are funneled in the water projects in this part of the country, we may also benefit north of the US border. So, as you attempt to pull all this together and get a sense to where Northwest Pipe is going in the next year, I would suggest this in summer.
Tubular Products volume will be challenged in the first two quarters of the year and assuming some improvement in the general economy and the drilling activity will be quite a bit stronger in the second half. Per unit pricing will clearly be down as will raw material cost.
We believe the first quarter revenues will likely be up 20 to 30% year-over-year. Water Transmission revenues in the first quarter will be off somewhat year-over-year due to the down time cost by the insulation of the new mill in Adelanto which was just completed last week, and to weather issues.
Revenues will be somewhat better in the second quarter and quite a bit better in the second half based on expected bidding activity and the timing of production. Benefits from the stimulus package if any will not take effect until the third quarter at the earliest and most likely the fourth quarter.
Because of lower input cost, we expect lower selling prices and this will tend to reduce overall Water Transmission revenues but should not have a detrimental impact on margins. We have made the decision to temporarily close the Pleasant Grove, Utah facility.
This division has performed very well since we acquired it and its people are first rate. However there's simply not enough work locally to maintain this facility.
We do see jobs coming up in the Utah region but they are for pipe sizes that are out of our range at this facility. We hope to see more project activity in the future and the opportunity to reopen this division.
At this time we expect to be operating this facility through the end of April. Overall, we are adjusting our cost structures in order to react to the changing market conditions we see.
Our objective is to find ways to perform well during these challenging times and be prepared to take advantage of better conditions as the economy improves. I am confident that the long term drivers of our businesses are strong and I believe we will come through this economic cycle successfully.
In conclusion, I'm once again very pleased to be able to report these record results for 2008. While we certainly had some favorable market conditions during the year, we also faced many challenges and I am proud of the way our team executed.
I expect to be just as proud of their performance a year from now when we look back at 2009. At this time we will be happy to answer any questions you may have.
Corey?
Operator
Thank you. At this time we are ready to begin the question and answer session.
(Operator Instructions). Our first question comes from Brent Thielman of D.A.
Davidson. Sir your line is open.
Brent Thielman - D.A. Davidson & Co.
Good morning, Brian, Stephanie. Congratulations on a great quarter.
Brian Dunham
Thank you.
Stephanie Welty
Thank you.
Brent Thielman - D.A. Davidson & Co.
Brian, I just wanted to confirm, I think, I've missed the number. Did you say on the tubular business you expected first quarter revenues off 20 to 30% year-over-year?
Brian Dunham
Yes.
Brent Thielman - D.A. Davidson & Co.
Okay. And in water I don't think you gave -- you quantified that you expect it to be down as well on a year-over-year --?
Brian Dunham
Yeah, I think it will be down a little bit year-over-year and as we've said the new mill installation at Adelanto was certainly a big part of that. It carried into 2009.
We've also had several weather events during 2009 as well but even though it didn't seem to be a very extreme winter ahead at the wrong time in the wrong places. So, we were down for several days because of the weather in the first quarter already.
Brent Thielman - D.A. Davidson & Co.
Okay. And I guess in tubular products I mean can you give any sense of where average selling prices are now; I mean, I guess, relative to the fourth quarter.
In other words I mean how much of the strength in price may be you experienced in Q4 will continue into the first quarter?
Brian Dunham
Well it's a little bit difficult to do that because it varies from product to product and as you know we have a variety of different product lines that have different pricing. I would say in Tubular products it is historically true that the price does adjust to the change in cost of steel.
Brent Thielman - D.A. Davidson & Co.
Okay.
Brian Dunham
And so steel is down -- figure steel down at least $500 a ton in Q1 from where it was at the peak. And by now prices have pretty much adjusted to that number.
Brent Thielman - D.A. Davidson & Co.
Okay that's helpful. And then on the Utah facility, do you have an estimate of annual cost savings related to that closure?
Stephanie Welty
It will be roughly 2 million annualized.
Brent Thielman - D.A. Davidson & Co.
Okay. And then I guess just looking at the water transmission margins they did take out from the third quarter obviously a positive sign but despite what appeared to be increased downtime in your facilities, can you sort of explain what helped contribute to that in the quarter?
Brian Dunham
Yeah, I think, it really was just a better mix of projects going through the plans because the downtime obviously tends to reduce your overall margins, so that was not a bad performance.
Brent Thielman - D.A. Davidson & Co.
Okay. And I guess do you see any significant near-term margin opportunities with the lower cost of steel for that business right now?
Brian Dunham
There are some possibilities, Brent, nothing that I can quantify at this point.
Brent Thielman - D.A. Davidson & Co.
Sure, sure. Okay and then just lastly, I mean, do you see or foresee any near-term issues with steel availability just given a degree of production cuts by mills?
Brian Dunham
We don't -- at the current time, we do expect supply to get a little tighter. We do think that we'll see probably some increases, small increases starting in April in steel costs and we also think we'll see lead times staring to extend a little bit somewhere in that time frame, but at the moment we have no concern.
Brent Thielman - D.A. Davidson & Co.
Okay, I'll jump back in queue. Thanks guys.
Brian Dunham
Thank you.
Operator
Ryan Connors of Boenning and Scattergood, you may ask your question.
Ryan Connors - Boenning & Scattergood
Good morning Brian and Stephanie.
Brian Dunham
Good morning.
Stephanie Welty
Hi.
Ryan Connors - Boenning & Scattergood
A couple of questions. First off, I wanted to talk about fixed cost leverage.
But Brian I know you talked about the steel prices and the impact of that on variable cost and you talked about some of the facility actions you're taking but I wondered if you could just talk about the fixed cost base in each of the two business units maybe in terms of the breakdown between fixed and variable costs over the last few quarters. Just trying to get an idea of what kind of -- and I guess in particular on Tubular Products trying to get an idea of what kind of negative operating leverage if you will, what the impact of that might be on margins especially in the first half as you discussed with volumes may be down significantly?
Brian Dunham
Well, I'm not exactly sure how you want to approach that discussion. There is the conflict of fixed versus variable cost and accounting is not quite the same the way it works in reality.
So we typically have more what I would call semi-fixed cost within a range of production. And as we'll adjust our production what we will try to do is stay at the right end of that range if you will, and that generally means looking at shifts as opposed to smaller changes in terms of staffing levels.
For example in our Atchison plant, we are at two shifts today where we were at three shifts a few months ago. The true fixed cost in this business you can be -- are not as great as you might expect and I don't have the numbers in front of me Ryan but we can certainly go through that in more detail.
Ryan Connors - Boenning & Scattergood
Okay. So it sounds like you don't expect any kind of major impact in terms of having to spread a fixed cost base over a lower volume even in the Tubular business?
Brian Dunham
We think we are going to adjust reasonably effectively but yes there are some fixed costs and it will be hard to leverage against those fixed costs with lower volumes. So there will be some negative impact, but we should be able to adjust pretty efficiently.
Ryan Connors - Boenning & Scattergood
Okay. And then I guess just the same discussion on the SG&A side, I mean, obviously historically you've run fairly lean there, 7, 8% of sales is how we look at it, percentage of sales.
But given the dollar run rate there, could there be -- will that percentage increase on a percentage of sales basis, and if so, could it be meaningful, at least, in the first half?
Brian Dunham
Yeah, at least in the first half there's a possibility. We do see some reductions in cost there as well.
Obviously we're doing the same types of things that many people are in order to manage our cost better. So we're aiming at not seeing that go up.
But as we look at this year as you just implied, we see a very significant difference between Q -- or between the first half and the second half. And so first half might be a little more challenging.
Ryan Connors - Boenning & Scattergood
Okay. And then just wanted to talk about some of the trade actions, Brian, you've talked in the past on tubular products.
Obviously there are a few trade actions out there. They are either in place or pending that would levy fairly substantial tariffs against imports of some of the natural gas tubing products that are competing with yours.
So if you can just talk -- update us on your outlook there in terms of how that impacts the outlook in terms of weather, the domestic suppliers, how that impacts volumes for the domestic suppliers and also how that might impact the pricing in the market with those tariffs either in place or coming on?
Brian Dunham
Well there is -- there was a successful trade case that affects ATI pipe and that is in place as well as other products. There is a proposed case on OCTG products but I really don't have any other details about that at this point in time.
I will say that there was a significant amount of OCTG products that came into the country in the last couple of months. So, there is a significant amount of pipe on the ground or in the ports right now.
Ryan Connors - Boenning & Scattergood
Okay, but you don't think for example if someone were to the school a thought that the domestic suppliers will, in theory, outperform the market because the -- some of the imports will be going away, I mean is there any truth to that kind of thinking.
Brian Dunham
That kind of -- that thought process is certainly based in -- on sound logic and there are efforts underway but whether or not those will be successful at this point I can't tell you.
Ryan Connors - Boenning & Scattergood
Okay. And then just finally, just want to talk about the balance sheet.
On the surface it certainly looks -- the balance sheet looks clean and the company looks very well positioned to weather the downturn, but I wondered if you could just address the issue of financial risk and maybe talk about what kind of scenario could possibly developed that you could envision where the company might face some kind of financial distress, how long would the downturn have to last, what kind of scenario would you have to seek?
Brian Dunham
Well I'm thinking about the way that question is phrased, there's always an answer to that, cause it's open-ended. But rather than respond to that let me tell you in terms of what we've looked at as to what we think are the likely scenarios that lay out over the next 12 months, we feel like we are in pretty good shape.
As our business grows down, obviously, let's take the negative scenario where water transmission does not do as well as we think. It -- our balance sheet tends to start to kick out a lot of cash.
So our balance sheet picture gets a lot better as that business slows down. It's almost more challenging if that business does better than we expect in order to have the capability to continue to finance it but we have a significant amount of capacity available as we speak today.
So, we do not see the scenario that really gets us into trouble as being very realistic. Now if the recession carries on for years, obviously we and everybody else will have some problems.
But as we've looked at the different scenarios that we think are likely, we haven't -- we have not been concerned about the financing.
Ryan Connors - Boenning & Scattergood
Okay, well thanks for your time, very helpful.
Operator
Trey Snow with Priority Capital, you may ask your question.
John Snow - Priority Capital Management
Thanks. I also had a question on the imports.
Are there particular products or diameters that are particularly out of balance?
Brian Dunham
I think the answer to that is probably yes. I don't think it's necessarily across the board, the -- in terms of size ranges and so on but I couldn't give you a lot of details regarding that.
OCTG products, those oil country tubular goods, is where the most recent surge has come from, and that is essentially what they -- if you're not familiar with that terminology that essentially think of it as down-hole type products with verticals in gas or oil explorations.
John Snow - Priority Capital Management
Okay. And is there any way to put parameters around the size of this 'glut' I guess as you described in the press release?
Brian Dunham
There are different people -- did I use the word 'glut' in the press release?
Brian Dunham
Yes.
Brian Dunham
I think I will go back and look. There are different analysts who are far more tuned to that overall industry than I am and they have estimates out there, some of them six months supply, some of them 10 months supply, it's probably somewhere in that range.
And of course as I said I don't believe it's across the board, I think it will be higher in some sizes than others.
John Snow - Priority Capital Management
Okay, thanks.
Operator
(Operator Instructions). Brent Thielman of D.A.
Davidson, your line is open.
Brent Thielman - D.A. Davidson & Co.
Hi, just one more from me. I guess Brian as you look at sort of near-term activity out there in Water Transmission and obviously backlog, it's down a little bit year-over-year; I mean do you think backlog has an opportunity to improve from current levels in the first quarter just based on what you see right now?
Brian Dunham
Yes.
Brent Thielman - D.A. Davidson & Co.
Okay. Thank you.
Operator
At this time I am showing no further questions.
Brian Dunham
Okay, well that will then conclude our conference call for the fourth quarter of 2008. Thank you all for your interest in Northwest Pipe Company.
Operator
And this concludes today's conference. Thank you for your participation, you may disconnect at this time.