Welcome and thank you for standing by. At this time, all participants will be in a listen-only mode until the question-and-answer session of today's conference. [Operator Instructions] This call is also being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the call over to, Scott Montross. You may begin.

Thank you, Bill. 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 that 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 second quarter results.

Thank you, Scott. Our third quarter loss from continuing operation was $1.6 million or $0.16 per diluted share compared to income from continuing operations of $1.4 million or $0.15 per diluted share in the third quarter of 2016. As you may recall, our results in the third quarter of 2016 were significantly impacted by the expected taxable gain on sale of the Denver real property, which caused the reduction in the expected increase in the valuation allowance for 2016. This caused our results in 2016 to swing from a loss before taxes to pause of the net income. U.S. GAAP required us to consider the impact on the valuation allowance in the third quarter, even though the gain was not realized until the fourth quarter of 2016. Water Transmission sales decreased to $30.8 million in the third quarter of 2017 from $41.1 million in the third quarter of 2016. Water Transmission gross profit as a percent of sales, was 4.9% in the third quarter of 2017, a decrease from 7.2% in the third quarter of 2016. The decrease in gross profit was due to a change in product mix and product timing. Sales volume decreased 12%, which was partially offset as selling prices increased 7%. The sales price increase was impacted by an increase in material cost including steel of 5%. Selling, general and administrative costs decreased to $3.4 million in the third quarter of 2017 from $3.9 million in the third quarter of 2016. This decrease was due to lower wage and benefit expense from reduced headcount. We expect that our selling, general and administrative costs will run between $14 million and $15 million in 2017. Interest expense remained low in the third quarter. We expect that the interest expense in 2017 will be about $500,000. Our cash balances…

As of September 30, 2017, our backlog was approximately $109 million, compared to $101 million at the end of the second quarter and $96 million at the end of the third quarter of 2016. We expect that revenue will stay about even in the fourth quarter while margins will be a little higher. Margin recovery remained slow, but steady. Even though pressure from nontraditional supply has subsided. delay related to job pushouts and severe weather have made 2017 a small demand year. The following is an outlook of current and upcoming water transmission projects. The Houston project is a major program with multiple small segments that started bidding in the second quarter of 2016. This is a multiyear series of segments that are expected to represent 90,000 tons of pipe. The first larger segment Capers Ridge Phase 2 bid on July 26, and we were the successful bidder. The scope of this project has increased and it will now exceed 8,000 tons. Production will begin late fourth quarter. There are several other smaller segments scheduled to bid throughout 2017 that represent an additional 7,000 tons in total. The Lake Houston inlet project bid in the third quarter and we have been notified that we are the winning bidder. This represents over 3,000 tons of production for 2018. Another major segment of the Houston project is the Surface Water Supply Project Segment A, which is currently scheduled to bid late 2018 and could represent 15,000 tons. Bidding on the entire Houston project is expected to continue into 2019. The Lower Bois d’Arc Reservoir project is a pipeline being planned by the North Texas Municipal Water District, which represents approximately 60,000 tons of pipe. Garney Construction is the Manager, and they announced that procurement is anticipated to begin in the summer of…

Thank you. We'll now begin the question-and-answer session for today's conference. [Operator instructions] Speakers we have our first question. This one comes from Brent Thielman. Your line is now open.

Hey. Good morning.

Good morning, Brent.

Good morning, Brent.

Scott and Robin, a lot of encouraging things here. I guess first question would be I know these timelines on jobs can shift around, but as you look at the bid schedule Scott over the course of '18, is there some seasonality to it? Is the opportunity to build the backlog further, front half, back half loaded, any thoughts there?

Yeah it is. We've got the Houston project going on right now Brent. As I mentioned, we've gotten the Capers Ridge section. So, we've got that going on and there's another piece of the Houston, the inlet that we discussed in the script. It's another few thousand tons. And there's another project Navajo-Gallup that we've got a big piece of. So that's obviously starting to build the backlog. We see the first part of the year being probably a little higher than normal bidding that we saw in 2017 because '17 has developed into a pretty small year with Atoka shifting out with some of the other jobs shifting out and some severe weather delays that we saw. So, we see a little bit more bidding in the first quarter of 2018 than we did in '17, probably the second quarter is about the same. The third quarter is really large, when you start looking at what's going on with Lower Bois d’Arc in Texas and also with Atoka. So, the third quarter's big and I would classify the fourth quarter as probably a little bigger than we saw 2017. So, we're seeing a pretty substantial year coming at us in 2018 and it's I guess to directly your question, it is more scheduled toward the second half of the year, but we're seeing the first half look bigger obviously than what we've seen in 2017. So, it's very encouraging and plus the fact that these programs are multi-year programs it's encouraging that the demand stays pretty strong out well past 2018. So, there's a lot of good signs out there and we've done -- we've done a lot of visits lately with people talking about these programs. So, I think it's pretty encouraging the things that we're seeing out there right now.

That's great. Lot's changed in terms of that competitive bid environment I think over the last six months. Scott, I don't think in your comments you talk much about it. Any thoughts there? I know pricing is getting better as a function of materials cost moving higher, but what are you seeing from a competitive bid perspective?

Yeah, I think we've had the non-traditional guy that got into the business sometime in 2014 really get out of the business. So that's really taken a lot of the harsh pressure on some of the projects in the Central region of the country off. We also obviously saw some assets change hands from one of the major competitors in Texas to Thompson Pipe. I think that's also been a stabilizing factor to what we're seeing in the Central region. So, we're starting to get back to a footprint or a supply footprint nationwide that we've seen prior to the I guess additional people getting into the business in the longer run of smaller markets. So, it really has stabilized the bidding environment and its allowed the pricing to continue to move up, which is obviously a reason why the backlog continues to improve and the really good thing is like I said is we're seeing with the job push outs like Atoka and some of the job delays that are just delays in the severe weather delays, we're seeing a pretty small market in 2017. But the really encouraging thing is that we're seeing a very stable market with prices moving in the right direction and also margins moving in the right direction. So that really bodes well as you get into a little bit of a bigger market. The things really start to normalize and get better as we get out in 2018.

Okay. And Scott, how can we think about the lower margin work that you've got now filtering out over the next three to four quarters? Would you be through I guess most of that or all that by the end of first half of next year?

Yeah, I think that we're getting through a lot of it now Brent in the third quarter and some in the fourth quarter. Part of the issue with the fourth quarter we've got some nice work in our backlog now with nice margins that we originally thought we're going to be done in the fourth quarter, obviously with the delays something gets pushed to the late fourth quarter and into the first quarter. So, we think that as we get through the fourth quarter that that continues to get better with getting into the higher margin work and obviously as we get into next year you have quarters that will fluctuate a little bit as the backlog develops, but we expect to continue to see that backlog develop and as a whole, we expect to continue to see that market or margin flow upwards. As the backlogs get bitter, not bigger, not only on our side, but across the industry, obviously that creates the upward pressure on price and creates the upward pressure on margins and that's a lot of what we're starting to see.

That's great. I'll get back in queue. Thank you.

Thank you.

Thank you. And speakers we show no questions in queue at this time. [Operator instructions] Excuse me speakers, Brent Thielman, just came back in queue. Thank you.

Hey guys. Not getting off that easy. Scott, there has been a little bit of talk from some of the companies in our coverage about Houston taking a look at some preventative measures as far as flood prevention. Is that any sense you could potentially participate there or is it too early to tell?

I think it's a little too early to tell. Some of it depends on if it's federal programs and how that comes to pass. One of the problems you see with and you hear that Brent and I think that's something that will eventually happen. I think some of the issue is those are probably two, three, four years out into the future and we probably don't even see some of that stuff yet because it still has to be planned. And as you know from being around us for a long time, some of things take a while to be planned. So that could only add to do what we're seeing. There is a lot of things that could add to what we're seeing over the next few years. That situation the administration focus on infrastructure, which seems to have become a little bit sidetracked at this point for obvious reasons with many other things going on. But there's also this Cadiz Project in California and we're very close to the Cadiz people and we visit with them and have visited with them in the last couple weeks and they're clearing a lot of their hurdles that they have and we don't have that anywhere in our forecast at this point where if that shows up, obviously we believe being in San Bernardino County where they are and which would be benefited by this kind of project, we would be relatively large participant in that, that could create even more upside. So, we're pretty bullish on the upside potentials we go into next year.

That's great. Maybe one for Tubular, I know you've been talking about monetizing that asset for quite some time, the decision to go discontinued this period suggest you're certainly looking to sell it. Could we infer that you're just starting to quote some potential buyers there or any thought on that?

Yeah, what I would say Brent is we're in a process right now with that facility. Obviously, it doesn't guarantee that there is a transaction there, but we are in a process. There has been significantly more interest in that facility, especially since the oil prices have continued to come back albeit slowly, but there is more interest in that facility. Even with being in a process, we still have other people that will continue to contact us and talk about their interest, but obviously we're in a process right now. So, we think that there is obviously being in discontinued ops as Robin has continued to beyond this, we believe that we're going to sell that in a 12-month period. So, I think that based on what's going on right now, it looks like it's a decent possibility.

Okay. Great. And maybe one or two for Robin I think the SG&A side, thanks for the guidance for this year. Could we figure that to be relatively fixed into next year a pickup in business and then a follow-up Robin would be as you guys pick up more work, how do we think about you need to borrow on that revolver as activity picks up or do you think you can you self-fund a lot of this working capital?

Well G&A even with the pick-up in business, we think it should hold steady. The one thing that as the business improves, we of course hope that everyone participates, the shareholders, everybody else as well as incentive compensation, which hasn’t been in the numbers the past two years. So, we may have some slight increases from that, but we're not looking to add staff or anything like that. So, there could be a little bit higher but that should track with higher profitability. With the availability borrowing all that, our current revolver expires in October of next year. So clearly next year at some point I'll be looking to negotiate a new one, but right now, we may have little periods of needs to borrow with a working capital but just based on the water transmission business alone of what we're looking at, it should generate the cash that we need to continue. Otherwise if when you look for challenges to your worst-case scenarios, if we have to borrow because the business really does jump a lot, we'll have plenty of availability, plenty of room and be able to support that. So, it just looks great as we go into '18.

Okay. Thanks so much for taking the questions.

Thank you, Brent.

And speakers we show no further questions in queue. [Operator instructions]

No other questions Bill.

We show no further questions at the queue.

Okay. Well, we appreciate everybody's attendance on the call. Next call will be…

It will be about early March.

Early March. So obviously we are focused on continuing to make the improvements here. So, thank you very much and we'll talk again then, bye, bye.

That concludes today's conference. Thank you for your participation. You may disconnect at this time.