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 and market prices for our products, product mix, bidding activity, the timing of customer orders and deliveries, production schedules, 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, 2008. 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 in six manufacturing facilities strategically located across the United States and Mexico in Portland, Oregon; Denver, Colorado; Adelanto, California; Parkersburg, West Virginia; Saginaw, Texas, and Monterrey, Mexico. We also own a facility in Pleasant Grove, Utah, at which operations will be temporarily suspended, as we do not currently see sufficient near-term work located nearby to justify its operation at this time. Our Water Transmission Group accounted for approximately 72% of net sales in the first three months of 2009.

Our water infrastructure products are generally sold 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 upgrades, replacements, and repairs. 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 28% of net sales in the first three months of 2009.

Our Tubular Products Group's sales volume is typically driven by energy spending related to natural gas drilling activity, 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, although we have been recently impacted by a combination of recession driven reduced demand and falling prices.

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. We evaluate our estimates on an on-going basis. 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, 2008.

Recent Accounting Pronouncements

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

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
                                                                March 31,
                                                           2009           2008
    Net sales
    Water Transmission                                       72.3 %         67.9 %
    Tubular Products                                         27.7           32.1

    Total net sales                                         100.0          100.0
    Cost of sales                                            84.4           81.1

    Gross profit                                             15.6           18.9
    Selling, general and administrative expense               8.9            8.4

    Operating income                                          6.7           10.5
    Interest expense, net                                     1.5            1.9

    Income before income taxes                                5.2            8.6
    Provision for income taxes                                2.0            3.2

    Net income                                                3.2 %          5.4 %

    Gross profit as a percentage of segment net sales:
    Water Transmission                                       19.2 %         22.6 %
    Tubular Products                                          6.4           11.1

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Net Sales. Net sales decreased 13.4% to $81.4 million for the first quarter of 2009 compared to $94.0 million for the first quarter of 2008.

Water Transmission sales decreased by 7.9% to $58.9 million in the first quarter of 2009 from $63.9 million in the first quarter of 2008. Net sales for the three months ended March 31, 2009 decreased from the same period in the prior year as a result of downtime due to the installation of a new mill at our Adelanto facility, and weather-related delays which caused a decrease in our production. Bidding activity, backlog, and production schedules may vary significantly from period to period.

Tubular Products sales decreased 25.2% to $22.5 million in the first quarter of 2009 from $30.1 million in the first quarter of 2008. Sales decreased over the same period last year due to falling demand and rapidly declining sales prices.

During the three months ended March 31, 2009 and 2008, no single customer accounted for 10% or more of net sales.

Gross Profit. Gross profit decreased 28.4% to $12.7 million (15.6% of total net sales) in the first quarter of 2009 from $17.8 million (18.9% of total net sales) in the first quarter of 2008.

Water Transmission gross profit decreased $3.2 million, or 21.9%, to $11.3 million (19.2% of segment net sales) in the first quarter of 2009 from $14.5 million (22.6% of segment net sales) in the first quarter of 2008. Water Transmission gross profit as a percentage of segment net sales decreased for the three months ended March 31, 2009 over the same period last year due primarily to the downtime in our production facilities.

Gross profit from Tubular Products decreased 56.6% to $1.4 million (6.4% of segment net sales) in the first quarter of 2009 from $3.3 million (11.1% of segment net sales) in the first quarter of 2008. The decrease in gross profit is a result of sales of higher priced inventory into a market characterized by falling sales prices.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $7.2 million (8.9% of total net sales) in the first quarter of 2009 from $8.0 million (8.5% of total net sales) in the first quarter of 2008. The decrease from the same period last year was primarily attributable to decreased salary and wage expense, including sales commissions, decreased outside service charges, and the effects of our cost containment measures on other expenses.

Interest Expense, net. Interest expense, net decreased to $1.2 million in the first quarter of 2009 from $1.8 million in the first quarter of 2008. The decrease in the expense compared to the same period last year was a result of lower average interest rates, combined with lower average debt.

Income Taxes. Our effective tax rate was approximately 38.3% for the first quarter of 2009 compared to 37.1% for the first quarter of 2008. The increase in our effective tax rate was mainly due to the loss in 2009 of certain deductions under the Internal Revenue Code.

Liquidity and Capital Resources

Sources and Uses of Cash

Our principal sources of liquidity generally include operating cash flow and our bank credit agreement. Our principal uses of liquidity generally include capital expenditures, working capital and debt service. Information regarding our cash flows for the three months ended March 31, 2009 is presented in our condensed consolidated statements of cash flows contained in this Form 10-Q, and is further discussed below.

As of March 31, 2009, our working capital (current assets minus current liabilities) was $197.8 million as compared to $223.2 million as of December 31, 2008.

Net cash provided by operating activities in the first three months of 2009 was $30.6 million. This was primarily the result of fluctuations in our working capital accounts, which result from timing differences between production, shipment and invoicing of our products, as well as changes in levels of production and costs of materials. We are typically obligated to pay for goods and services early in the project while cash is not received until after the project has been completed. 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 than our collection cycle.

Net cash used in investing activities in the first three months of 2009 was $4.5 million for capital expenditures. The two most significant capital projects incurring costs in the quarter were the installation of a new mill in our California facility and the preparation of the facility in Bossier City, Louisiana to manufacture oil country tubular goods. Capital expenditures are expected to be approximately $10 to $12 million in 2009, excluding the costs associated with the start up of the facility in Bossier City.

Net cash used in financing activities in the first three months of 2009 was $26.0 million, which resulted primarily from net payments under the notes payable to financial institutions and the long term debt of $23.2 million and $2.8 million, respectively, which was generally provided for by operating 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 2009. To the extent necessary, we may also satisfy capital requirements through additional bank borrowings, senior notes, term notes, capital and operating leases, convertible notes and equity offerings, 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, other forms of debt or an equity offering.

Debt

We had the following significant components of debt at March 31, 2009: a $150.0 million credit agreement, under which $58.9 million was outstanding; $10.7 million of Series A Term Note, $9.0 million of Series B Term Notes, $8.5 million of Series C Term Notes and $3.9 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, 2008. 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 $7.5 million as of March 31, 2009. 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 March 31, 2009, the credit agreement provided for a revolving loan, swing line loan and letters of credit in the aggregate amount of up to $150 million, with an option for the Company to increase that amount to $200 million, subject to lender approval. Borrowings under the credit agreement were secured by substantially all of the Company's personal property.

The credit agreement expires on May 31, 2012. The balance outstanding under the credit agreement at March 31, 2009 bears interest at rates related to LIBOR plus 1.25% to 2.25%, or the lending institution's prime rate, plus 0.00% to 0.75%. At March 31, 2009 we had $58.9 million outstanding under the credit facility bearing interest at a weighted average rate of 2.7%.

We had $3.8 million of capital leases outstanding at March 31, 2009, under which certain equipment used in the manufacturing process is leased. The average interest rate on the capital leases is 5.6%.

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, maximum consolidated senior debt to EBITDA, 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 March 31, 2009, we were not in violation of any of the covenants in our debt agreements.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial position, results of operations or cash flows.