Forward Looking Statements

This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Report contain forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 that are based on current expectations, estimates and projections about our business, management's beliefs, and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "should," "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. 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 due to numerous factors including changes in demand for our products, product mix, bidding activity, the timing of customer orders and deliveries, the price and availability of raw materials, excess or shortage of production capacity, international trade policy and regulations and other risks discussed from time to time in our other Securities and Exchange Commission filings and reports, including our Annual Report on Form 10-K for the year ended December 31, 2007. In addition, such statements

could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.

Overview

Our Water Transmission Group is the leading North American manufacturer of large-diameter, high-pressure steel pipeline systems for use in water infrastructure applications, primarily related to drinking water systems. Our products are also used for hydroelectric power systems, wastewater systems and other applications. We also make products for industrial plant piping systems and certain structural applications. These products are produced from seven manufacturing facilities strategically located across the United States and Mexico in Portland, Oregon; Denver, Colorado; Adelanto, California; Parkersburg, West Virginia; Saginaw, Texas; Pleasant Grove, Utah, and Monterrey, Mexico. Our Water Transmission Group accounted for approximately 66% of net sales in the first nine months of 2008.

Our water infrastructure products are sold generally to installation contractors, who include our products in their bids to municipal agencies or privately-owned water companies for specific projects. We believe our sales are substantially driven by spending on new water infrastructure with additional spending on water infrastructure replacement, repair and upgrade. Within the total pipeline, our products best fit the larger-diameter, higher-pressure applications.

Our Tubular Products Group operates two manufacturing facilities in Atchison, Kansas, and Houston, Texas. We also own a facility in Bossier City, Louisiana, at which operations have been temporarily suspended, but will start up again upon the relocation of a mill to address the oil country tubular goods market. We produce a range of products used in several different markets. We currently make energy pipe, mechanical tubing, fire protection sprinkler pipe, agricultural pipe, traffic signpost systems and structural tubing that is sold to distributors and used in many different applications. Our Tubular Products Group generated approximately 34% of net sales in the first nine months of 2008.

Our Tubular Products Group's sales volume is currently driven by energy spending in the oil country tubular goods market, non-residential construction spending, highway spending, agricultural spending and general economic conditions. We focus on products for which we believe we have a sustainable advantage.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition and allowance for doubtful accounts. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies and related judgments and estimates that affect the preparation of our consolidated financial statements is set forth in our Annual Report on Form 10-K for the year ended December 31, 2007.

Recent Accounting Pronouncements

See Note 10 of the Consolidated Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial position.

Results of Operations

The following table sets forth, for the period indicated, certain financial
information regarding costs and expenses expressed as a percentage of total net
sales and net sales of our business segments.



                                        Three months ended September 30,            Nine months ended September 30,
                                           2008                   2007                2008                  2007
Net sales
Water Transmission                              62.8 %                 72.6 %              65.6 %                72.9 %
Tubular Products                                37.2                   27.4                34.4                  27.1

Total net sales                                100.0                  100.0               100.0                 100.0
Cost of sales                                   78.3                   81.2                79.0                  81.7

Gross profit                                    21.7                   18.8                21.0                  18.3
Selling, general and
administrative expense                           7.3                    8.3                 8.0                   8.0

Operating income                                14.4                   10.5                13.0                  10.3
Interest expense, net                            1.0                    1.8                 1.3                   1.8

Income before income taxes                      13.4                    8.7                11.7                   8.5
Provision for income taxes                       5.1                    3.2                 4.5                   3.1

Net income                                       8.3 %                  5.5 %               7.2 %                 5.4 %

Gross profit as a percentage of
segment net sales:
Water Transmission                              18.4 %                 21.3 %              20.1 %                20.8 %
Tubular Products                                27.3                   12.2                22.7                  11.7

Three Months and Nine Months Ended September 30, 2008 Compared to Three Months and Nine Months Ended September 30, 2007

Net Sales. Net sales increased 34.2% to $123.4 million for the third quarter of 2008 compared to $92.0 million for the third quarter of 2007, and increased 15.8% to $329.5 million in the first nine months of 2008 from $284.6 million in the first nine months of 2007.

Water Transmission sales increased 16.1% to $77.5 million in the third quarter of 2008 from $66.8 million in the third quarter of 2007 and increased 4.2% to $216.2 million in the first nine months of 2008 from $207.5 million in the first nine months of 2007. Net sales for the three months and the nine months ended September 30, 2008 increased from the same periods in the prior year as a result of increased prices in the current year, attributable to a strong demand for our products. Bidding activity, backlog and sales resulting from the award of new projects, or the production of current projects, may vary significantly from period to period.

Tubular Products sales increased 82.1% to $45.9 million in the third quarter of 2008 from $25.2 million in the third quarter of 2007 and increased 46.9% from $77.1 million in the first nine months of 2007 to $113.3 million in the first nine months of 2008. Sales increased over the same periods last year due most significantly to increased sales of energy products, as well as due in part to increased prices across the majority of our product lines.

During the three and nine months ended September 30, 2008 and 2007, no single customer accounted for 10% or more of net sales.

Gross Profit. Gross profit increased 55.0% to $26.8 million (21.7% of total net sales) in the third quarter of 2008 from $17.3 million (18.8% of total net sales) in the third quarter of 2007 and increased 32.6% from $52.2 million (18.3% of total net sales) in the first nine months of 2007 to $69.2 million (21.0% of total net sales) in the first nine months of 2008.

Water Transmission gross profit increased $46,000, or 0.3%, to $14.3 million (18.4% of segment net sales) in the third quarter of 2008 from $14.2 million (21.3% of segment net sales) in the third quarter of 2007 and increased $319,000, or 0.7%, from $43.2 million (20.8% of segment net sales) in the first nine months of 2007 to $43.5 million (20.1% of segment net sales) in the first nine months of 2008. Water Transmission gross profit as a percentage of segment net sales decreased for the three and nine months ended September 30, 2008 over the same periods last year due to the effect of higher steel costs, which was partially offset by the somewhat better pricing and improved operational efficiencies experienced in the first quarter of 2008.

Gross profit from Tubular Products increased 307.2% to $12.6 million (27.3% of segment net sales) in the third quarter of 2008 from $3.1 million (12.2% of segment net sales) in the third quarter of 2007 and increased 185.2% to $25.7 million (22.7% of segment net sales) in the first nine

months of 2008 from $9.0 million (11.7% of segment net sales) in the first nine months of 2007. The majority of the increase in gross profit is a result of increased volume of energy product at higher unit sales prices compared to the previous mix of products, combined with generally higher selling prices.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $9.0 million (7.3% of total net sales) in the third quarter of 2008 from $7.6 million (8.3% of total net sales) in the third quarter of 2007 and increased to $26.2 million (8.0% of total net sales) in the first nine months of 2008 from $22.9 million (8.0% of total net sales) in the first nine months of 2007. The increase from the same periods last year was primarily attributable to higher salary and wage expense, including sales commissions, increased professional fees, and the costs associated with the move of the headquarters to Vancouver, Washington.

Interest Expense, net. Interest expense, net decreased to $1.3 million in the third quarter of 2008 from $1.7 million in the third quarter of 2007 and decreased to $4.5 million in the first nine months of 2008 from $5.1 million in the first nine months of 2007. The decrease in the expense compared to the same periods last year was a result of lower average interest rates, partially offset by higher average borrowings.

Income Taxes. The provision for income taxes was $6.3 million in the third quarter of 2008, based on an effective tax rate of approximately 38.0%, compared to $3.0 million for the same period last year, based on an expected tax rate of approximately 37.0%. The provision for income taxes was $14.8 million for the first nine months of 2008, based on an effective tax rate of approximately 38.5%, compared to $9.0 million for the same period last year, based on an effective tax rate of approximately 37.0%. The increase in our effective tax rate was mainly due to the additional accrual of a contingent liability related to ongoing income tax audits.

Liquidity and Capital Resources

Sources and Uses of Cash

Our principal sources of liquidity generally include operating cash flow and our bank credit agreement. From time to time our long term capital needs may be met through the issuance of long term debt or additional equity. Our principal uses of liquidity generally include capital expenditures, working capital and debt service. Information regarding our cash flows for the nine months ended September 30, 2008 is presented in our condensed consolidated statements of cash flows contained in this Form 10-Q, and is further discussed below.

As of September 30, 2008, our working capital (current assets minus current liabilities) was $213.6 million as compared to $181.5 million as of December 31, 2007.

Net cash used in operating activities in the first nine months of 2008 was $2.5 million. This was primarily the result of an increase in inventories of $37.2 million and an increase in trade and other receivables of $25.2 million, offset in part by our net income of $23.7 million combined with an increase in accounts payable of $15.5 million and a decrease in costs and estimated earnings in excess of billings on uncompleted contracts, net of $7.6 million, as well as other non-cash adjustments such as depreciation and amortization. The decrease in costs and estimated earnings in excess of billings on uncompleted contracts and the increase in trade and other receivables and accounts payable resulted from timing differences between production, shipment and invoicing of products. We are typically obligated to pay for goods and services within 30 days of receipt, while cash collected from our construction contracts typically extends for several months. Our construction contract revenues in the water transmission segment are recognized on a percentage-of-completion method; therefore, there is little correlation between revenue and cash receipts and the elapsed time can be significant. As such, our payment cycle is a significantly shorter interval compared to our collection cycle.

Net cash used in investing activities in the first nine months of 2008 was $17.0 million, which resulted from additions of property and equipment across all of our facilities; the most significant of which was two new spiral weld mills. Capital expenditures are expected to be approximately $20.0 million in 2008, excluding the costs associated with the start up of the facility in Bossier City.

Net cash provided by financing activities in the first nine months of 2008 was $19.3 million, which resulted primarily from increased net borrowings under the notes payable to financial institutions of $20.8 million, which was used to fund operating and investing activities.

We anticipate that our existing cash and cash equivalents, and amounts available under our credit agreement will be adequate to fund our working capital and capital requirements for at least the next twelve months. We also expect to continue to rely on cash generated from operations and other sources of available funds to make required principal payments under our long term debt during 2008. To the extent necessary, we may also satisfy capital requirements through additional bank borrowings, senior notes, term notes and capital and operating leases, if such resources are available. We have from time to time evaluated and continue to evaluate opportunities for acquisitions and expansion. Any such transactions, if consummated, may use a portion of our working capital or necessitate additional bank borrowings.

Debt

We had the following significant components of debt at September 30, 2008: a $100.0 million credit agreement, under which $75.2 million was outstanding; $12.9 million of Series A Term Note, $9.0 million of Series B Term Notes, $10.0 million of Series C Term Notes and $4.5 million of Series D Term Notes.

There have been no changes to the scheduled maturities of the Series A Term Note, the Series B Term Notes, the Series C Term Notes, or the Series D Term Notes (together, the "Term Notes") from that disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007. The Term Notes are collateralized by accounts receivable, inventory and certain machinery and equipment.

We also have entered into stand-by letters of credit that total approximately $13.5 million as of September 30, 2008. The stand-by letters of credit relate to customer owned material and workers' compensation insurance. Due to the nature of these arrangements and our historical experience, we do not expect to make any material payments under these arrangements.

As of September 30, 2008, the credit agreement provided for a revolving loan, swing line loan and letters of credit in the aggregate amount of up to $100 million, with an option for the Company to increase that amount to $110 million upon lender approval. Borrowings under the credit agreement were secured by substantially all of the Company's accounts receivable, inventory and certain machinery and equipment.

The credit agreement expires on May 31, 2012. The balance outstanding under the credit agreement at September 30, 2008 bears interest at rates related to LIBOR plus 0.75% to 1.625%, or the lending institution's prime rate, minus 0.5% to 0.0%. At September 30, 2008, we had $75.2 million outstanding under the credit facility bearing interest at a weighted average rate of 3.90%.

Effective October 15, 2008, we entered into a Second Amended and Restated Credit Agreement (the "Second Amended Credit Agreement"), which amends and restates the Amended and Restated Credit Agreement dated May 31, 2007. The Second Amended Credit Agreement provides for a revolving loan, swing line loan and letters of credit in the aggregate amount of up to $150 million, with an option for us to increase that amount to $200 million, subject to lender approval. The Second Amended Credit Agreement reflects changes in the interest rates charged on outstanding balances and changes in certain financial covenants. Borrowings under the Second Amended Credit Agreement are secured by substantially all of the Company's personal property.

We had $4.2 million of capital leases outstanding at September 30, 2008, under which certain equipment used in the manufacturing process is leased. The average interest rate on the capital leases is 5.7%.

The credit agreement, the Term Notes and certain of our capital leases all require compliance with the following financial covenants: minimum consolidated tangible net worth, maximum consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) ratio, a minimum consolidated fixed charge coverage ratio and a minimum asset coverage ratio. These and other covenants included in our financing agreements impose certain requirements with respect to our financial condition and results of operations, and place restrictions on, among other things, our ability to incur certain additional indebtedness, to create liens or other encumbrances on assets and capital expenditures. A failure by us to comply with the requirements of these covenants, if not waived or cured, could permit acceleration of the related indebtedness and acceleration of indebtedness under other instruments that include cross-acceleration or cross-default provisions. At September 30, 2008, we were not in violation of any of the covenants in our debt agreements.

Off Balance Sheet Arrangements

Other than operating lease commitments made and stand-by letters of credit entered into in the normal course of business, we do not have off-balance sheet arrangements.