Northwest Pipe Company Announces Fourth Quarter and Full Year 2023 Financial Results
- Strong annual cash generation with net cash provided by operating activities of $53.5 million.
- Record safety performance with an annual total recordable incident rate of 1.51.
- SPP net sales increased by 4.1% in the fourth quarter of 2023.
- Precast net sales increased by 1.1% in the fourth quarter of 2023.
- The Company repurchased $4.4 million of common stock through February 29, 2024.
- Backlog of $273 million for SPP and order book of $46 million for Precast.
- Annual gross profit decreased by 9.6% year-over-year to $77.6 million.
- Net income was $2.09 per diluted share in 2023 compared to $3.11 per diluted share in 2022.
- Full year 2023 net sales decreased by 2.9% to $444.4 million.
- SPP gross profit decreased by 6.8% in the fourth quarter of 2023.
- Precast gross profit decreased by 17.8% in the fourth quarter of 2023.
- Capital expenditures were $18.3 million in 2023 compared to $22.8 million in 2022.
- Annual gross profit decreased by 9.6% year-over-year.
- Net income decreased to $2.09 per diluted share in 2023 from $3.11 per diluted share in 2022.
- SPP gross profit decreased by 6.8% in the fourth quarter of 2023.
- Precast gross profit decreased by 17.8% in the fourth quarter of 2023.
Reviewing the financial results of Northwest Pipe Company, several key metrics draw attention. The annual net sales decline of 2.9% and the more pronounced 9.6% decrease in annual gross profit indicate a contraction in both revenue and profitability. This contraction could be attributed to external economic factors such as interest rate fluctuations impacting demand, especially within the Precast segment. However, the company's ability to generate strong cash flow, as evidenced by the $53.5 million net cash from operating activities, showcases effective working capital management. This liquidity improvement, coupled with the strategic stock repurchase, reflects a confident management stance on intrinsic value.
The reported backlog figures, particularly the $319 million for SPP, despite a challenging bidding environment, suggest a healthy pipeline that could translate into future revenue stability. Investors should monitor backlog trends as they can be leading indicators of future performance. The capital expenditure reduction year-over-year signals a cautious approach to investment, likely a response to the uncertain market conditions faced in 2023.
It is crucial to consider the SPP segment's slight net sales increase against the backdrop of steel price volatility and reduced bidding activity. This resilience may point to the effectiveness of the company's growth strategy and its impact on through-cycle stability. However, the anticipated first-quarter sales decline due to seasonality and unscheduled downtime presents a near-term challenge that stakeholders should be aware of.
From a market perspective, Northwest Pipe Company's performance reflects broader industry trends, such as the impact of high interest rates on construction-related demand, particularly within the Precast segment. The reported record safety performance and the emphasis on reducing cyclicality through diversification into the Precast business align with industry norms where companies are increasingly focusing on ESG (Environmental, Social and Governance) factors and operational resilience.
The strength of the company's SPP backlog, including confirmed orders, despite a decrease in bidding volume, indicates a competitive positioning within the Engineered Steel Pressure Pipe market. However, the decline in the Precast order book year-over-year could be seen as a cause for concern, potentially indicating a need for strategic adjustments to counteract the effects of the interest rate environment.
The company's strategic share repurchases suggest a perceived undervaluation by management, which might be of interest to investors as a signal of confidence. However, such buybacks also reduce the equity available and can affect the stock's liquidity and volatility.
Examining the economic context, Northwest Pipe Company's financial results can be partially understood through the lens of macroeconomic conditions. The influence of interest rates on the Precast segment underscores the sensitivity of infrastructure and construction sectors to monetary policy. The Federal Reserve's actions throughout 2023 have likely played a role in shaping demand patterns for the company's products.
The reduced overhead absorption due to lower demand in the Precast segment suggests a need for flexible cost structures to maintain profitability in varying economic climates. As the company anticipates a stronger bidding environment in 2024, it is important to consider potential economic recovery scenarios and infrastructure spending as key drivers for future growth.
The company's focus on margin improvement and cash flow generation is a prudent approach in an environment where operating leverage can be both a risk and an opportunity. The ability to navigate economic headwinds while maintaining strong liquidity positions the company favorably for capitalizing on potential market upswings.
- Fourth quarter 2023 net sales of
$110.2 million 3.1% year-over-year - Annual net sales of
$444.4 million 2.9% year-over-year - Annual gross profit of
$77.6 million 9.6% year-over-year from 2022 record - Annual net income of
$2.09 - Strong annual cash generation with net cash provided by operating activities of
$53.5 million - Backlog1 of
$273 million $319 million - Order book3 of
$46 million - Repurchased
$4.4 million - Record safety performance; annual total recordable incident rate of 1.51
Management Commentary
"Despite the challenging circumstances of 2023, we generated annual net sales of
Mr. Montross continued, "Our SPP revenue of
Mr. Montross concluded, "We were pleased to have improved our liquidity position in the fourth quarter by continuing to pay down debt and generating strong cash flow from operations given our effective management of working capital despite reduced levels of profitability. Our growth strategy remains focused on growing our Precast business to reduce the cyclicality of our SPP operations and improving our overall margins and cash flow generation."
Fourth Quarter 2023 Financial Results
Consolidated
- Net sales increased
3.1% to$110.2 million $106.8 million - Gross profit decreased
11.8% to$19.3 million 17.5% of net sales, from$21.9 million 20.5% of net sales, in the fourth quarter of 2022. - Net income was
$5.4 million $0.54 $8.0 million $0.79
Engineered Steel Pressure Pipe Segment (SPP)
- SPP net sales increased
4.1% to$75.1 million $72.1 million 2% increase in tons produced resulting primarily from changes in project timing and a2% increase in selling price per ton primarily due to product mix. - SPP gross profit decreased
6.8% to$11.2 million 14.9% of SPP net sales, from$12.0 million 16.6% of SPP net sales, in the fourth quarter of 2022 primarily due to changes in product mix. - SPP backlog was
$273 million $253 million $274 million $319 million $335 million $372 million
Precast Infrastructure and Engineered Systems Segment (Precast)
- Precast net sales increased
1.1% to$35.1 million $34.7 million 25% increase in volume shipped due to product mix, partially offset by a19% decrease in selling prices due to both product mix and decreased demand. - Precast gross profit decreased
17.8% to$8.1 million 23.2% of Precast net sales, from$9.9 million 28.5% of Precast net sales, in the fourth quarter of 2022 primarily due to decreased demand and related decreased cost absorption. - Precast order book was
$46 million $52 million $64 million
Full Year 2023 Financial Results
Consolidated
- Net sales decreased
2.9% to$444.4 million $457.7 million - Gross profit decreased
9.6% to$77.6 million 17.5% of net sales, in 2023 from$85.9 million 18.8% of net sales, in 2022. - Net income was
$21.1 million $2.09 $31.1 million $3.11
Engineered Steel Pressure Pipe Segment (SPP)
- SPP net sales decreased
3.6% to$296.4 million $307.6 million 6% decrease in tons produced resulting primarily from changes in project timing, partially offset by a2% increase in selling price per ton primarily due to product mix. - SPP gross profit decreased
4.6% to$42.4 million 14.3% of SPP net sales, in 2023 from$44.5 million 14.5% of SPP net sales, in 2022 primarily due to changes in production volume.
Precast Infrastructure and Engineered Systems Segment (Precast)
- Precast net sales decreased
1.4% to$148.0 million $150.1 million 3% decrease in selling prices due to decreased demand, partially offset by a2% increase in volume shipped primarily due to product mix. - Precast gross profit decreased
14.9% to$35.2 million 23.8% of Precast net sales, in 2023 from$41.4 million 27.6% of Precast net sales, in 2022 primarily due to decreased demand.
Balance Sheet and Cash Flow Details
- As of December 31, 2023, the Company had
$54.5 million $69 million - Net cash provided by (used in) operating activities was
$9.0 million ( in the fourth quarter of 2022 primarily due to a$8.0) million $21.7 million $4.7 million $53.5 million $17.5 million $46.6 million $10.7 million - Capital expenditures were
$5.0 million $11.0 million $6.9 million $18.3 million $22.8 million - The Company repurchased approximately 29,000 shares of its common stock at an average price of
$29.20 $0.8 million $29.32 $4.4 million
1 Northwest Pipe Company defines "backlog" as the balance of remaining performance obligations under signed contracts for Engineered Steel Pressure Pipe products for which revenue is recognized over time. | ||||||
2 Northwest Pipe Company defines "confirmed orders" as Engineered Steel Pressure Pipe projects for which the Company has been notified that it is the successful bidder, but a binding agreement has not been executed. | ||||||
3 Northwest Pipe Company defines "order book" as unfulfilled orders outstanding at the measurement date for its Precast Infrastructure and Engineered Systems segment. | ||||||
Conference Call Details
A conference call and simultaneous webcast to discuss the Company's fourth quarter and full year 2023 financial results will be held on Tuesday, March 5, 2024, at 7:00 a.m. Pacific Time. The call will be broadcast live on the Investor Relations section of the Company's website at investor.nwpipe.com and will be archived online upon completion of the conference call. For those unable to listen to the live call, a replay will be available approximately three hours after the event and will remain available until Tuesday, March 19, 2024, by dialing 1-844-512-2921 in the
About Northwest Pipe Company
Founded in 1966, Northwest Pipe Company is a leading manufacturer of water-related infrastructure products. In addition to being the largest manufacturer of engineered steel water pipeline systems in
Forward-Looking Statements
Statements in this press release by Scott Montross contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on current expectations, estimates, and projections about the Company's business, management's beliefs, and assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements as a result of a variety of important factors. While it is impossible to identify all such factors, those that could cause actual results to differ materially from those estimated by the Company include changes in demand and market prices for its products, product mix, bidding activity and order modifications or cancelations, timing of customer orders and deliveries, production schedules, price and availability of raw materials, excess or shortage of production capacity, international trade policy and regulations, changes in tariffs and duties imposed on imports and exports and related impacts on the Company, economic uncertainty and associated trends in macroeconomic conditions, including potential recession, inflation, and the state of the housing market, interest rate risk and changes in market interest rates, including the impact on the Company's customers and related demand for its products, the Company's ability to identify and complete internal initiatives and/or acquisitions in order to grow its business, the Company's ability to effectively integrate Park Environmental Equipment, LLC and other acquisitions into its business and operations and achieve significant administrative and operational cost synergies and accretion to financial results, effects of security breaches, computer viruses, and cybersecurity incidents, timing and amount of share repurchases, impacts of
Non-GAAP Financial Measures
The Company is presenting backlog including confirmed orders. This non-GAAP financial measure is provided to better enable investors and others to assess the Company's ongoing operating results and compare them with its competitors. This should be considered a supplement to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP.
For more information, visit www.nwpipe.com.
Contact:
Aaron Wilkins
Chief Financial Officer
Northwest Pipe Company
investors@nwpipe.com
Or
Addo Investor Relations
nwpx@addo.com
NORTHWEST PIPE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net sales: | ||||||||||||||||
Engineered Steel Pressure Pipe | $ | 75,087 | $ | 72,126 | $ | 296,381 | $ | 307,572 | ||||||||
Precast Infrastructure and Engineered Systems | 35,077 | 34,702 | 147,974 | 150,093 | ||||||||||||
Total net sales | 110,164 | 106,828 | 444,355 | 457,665 | ||||||||||||
Cost of sales: | ||||||||||||||||
Engineered Steel Pressure Pipe | 63,924 | 60,143 | 253,954 | 263,099 | ||||||||||||
Precast Infrastructure and Engineered Systems | 26,950 | 24,814 | 112,759 | 108,711 | ||||||||||||
Total cost of sales | 90,874 | 84,957 | 366,713 | 371,810 | ||||||||||||
Gross profit: | ||||||||||||||||
Engineered Steel Pressure Pipe | 11,163 | 11,983 | 42,427 | 44,473 | ||||||||||||
Precast Infrastructure and Engineered Systems | 8,127 | 9,888 | 35,215 | 41,382 | ||||||||||||
Total gross profit | 19,290 | 21,871 | 77,642 | 85,855 | ||||||||||||
Selling, general, and administrative expense | 10,665 | 10,885 | 43,784 | 41,034 | ||||||||||||
Operating income | 8,625 | 10,986 | 33,858 | 44,821 | ||||||||||||
Other income | 500 | 41 | 276 | 97 | ||||||||||||
Interest expense | (1,133) | (1,175) | (4,855) | (3,568) | ||||||||||||
Income before income taxes | 7,992 | 9,852 | 29,279 | 41,350 | ||||||||||||
Income tax expense | 2,548 | 1,891 | 8,207 | 10,201 | ||||||||||||
Net income | $ | 5,444 | $ | 7,961 | $ | 21,072 | $ | 31,149 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.54 | $ | 0.80 | $ | 2.11 | $ | 3.14 | ||||||||
Diluted | $ | 0.54 | $ | 0.79 | $ | 2.09 | $ | 3.11 | ||||||||
Shares used in per share calculations: | ||||||||||||||||
Basic | 10,010 | 9,927 | 9,991 | 9,914 | ||||||||||||
Diluted | 10,105 | 10,061 | 10,081 | 10,012 | ||||||||||||
NORTHWEST PIPE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) | ||||||||
December 31, | ||||||||
2023 | 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,068 | $ | 3,681 | ||||
Trade and other receivables, net | 47,645 | 71,563 | ||||||
Contract assets | 120,516 | 121,778 | ||||||
Inventories | 91,229 | 71,029 | ||||||
Prepaid expenses and other | 9,026 | 10,689 | ||||||
Total current assets | 272,484 | 278,740 | ||||||
Property and equipment, net | 143,955 | 133,166 | ||||||
Operating lease right-of-use assets | 88,155 | 93,124 | ||||||
Goodwill | 55,504 | 55,504 | ||||||
Intangible assets, net | 31,074 | 35,264 | ||||||
Other assets | 6,709 | 5,542 | ||||||
Total assets | $ | 597,881 | $ | 601,340 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Current debt | $ | 10,756 | $ | 10,756 | ||||
Accounts payable | 31,142 | 26,968 | ||||||
Accrued liabilities | 27,913 | 30,957 | ||||||
Contract liabilities | 21,450 | 17,456 | ||||||
Current portion of operating lease liabilities | 4,933 | 4,702 | ||||||
Total current liabilities | 96,194 | 90,839 | ||||||
Borrowings on line of credit | 54,485 | 83,696 | ||||||
Operating lease liabilities | 85,283 | 89,472 | ||||||
Deferred income taxes | 10,942 | 11,402 | ||||||
Other long-term liabilities | 10,617 | 7,657 | ||||||
Total liabilities | 257,521 | 283,066 | ||||||
Stockholders' equity | 340,360 | 318,274 | ||||||
Total liabilities and stockholders' equity | $ | 597,881 | $ | 601,340 | ||||
NORTHWEST PIPE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) | ||||||||
For the Year Ended December 31, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 21,072 | $ | 31,149 | ||||
Depreciation and finance lease amortization | 11,616 | 12,664 | ||||||
Amortization of intangible assets | 4,190 | 4,439 | ||||||
Deferred income taxes | (172) | 514 | ||||||
Gain on insurance proceeds | (466) | - | ||||||
Share-based compensation expense | 3,672 | 3,702 | ||||||
Other, net | 1,547 | (286) | ||||||
Changes in working capital | 11,996 | (34,642) | ||||||
Net cash provided by operating activities | 53,455 | 17,540 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (18,291) | (22,829) | ||||||
Purchases of intangible assets | - | (327) | ||||||
Payment of working capital adjustment in acquisition of business | (2,731) | - | ||||||
Proceeds from insurance | 431 | - | ||||||
Other investing activities | 219 | 106 | ||||||
Net cash used in investing activities | (20,372) | (23,050) | ||||||
Cash flows from financing activities: | ||||||||
Borrowings on line of credit | 155,398 | 177,634 | ||||||
Repayments on line of credit | (184,609) | (180,699) | ||||||
Borrowings on other debt | - | 10,756 | ||||||
Payments on finance lease obligations | (826) | (597) | ||||||
Tax withholdings related to net share settlements of equity awards | (1,652) | (853) | ||||||
Repurchase of common stock | (707) | - | ||||||
Other financing activities | (300) | (47) | ||||||
Net cash provided by (used in) financing activities | (32,696) | 6,194 | ||||||
Change in cash and cash equivalents | 387 | 684 | ||||||
Cash and cash equivalents, beginning of period | 3,681 | 2,997 | ||||||
Cash and cash equivalents, end of period | $ | 4,068 | $ | 3,681 | ||||
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SOURCE Northwest Pipe Company
FAQ
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