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 the following six manufacturing facilities strategically located across the United States and Mexico: 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 have been 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 76% of net sales in the first six 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, which has not operated for the past few years. We are currently in the final stages of installing new manufacturing equipment at this location, and the start up of this facility will be dependent upon market conditions. 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 24% of net sales in the first six 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.

Goodwill

In order to determine if an interim goodwill impairment test was necessary in the second quarter of 2009, we evaluated events and economic factors that have occurred since the last goodwill impairment test performed in December 2008. We determined that, based on our expectation that pricing and demand in our Tubular Products segment, over time, will return to pre-recessionary levels, an interim goodwill impairment test was not required as of June 30, 2009.

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 June 30,             Six months ended June 30,
                                         2009                  2008               2009                2008
Net sales
Water Transmission                           79.2 %                66.8 %            75.6 %              67.3 %
Tubular Products                             20.8                  33.2              24.4                32.7

Total net sales                             100.0                 100.0             100.0               100.0
Cost of sales                                86.3                  78.0              85.3                79.4

Gross profit                                 13.7                  22.0              14.7                20.6
Selling, general and
administrative expense                        7.7                   8.3               8.3                 8.4

Operating income                              6.0                  13.7               6.4                12.2
Interest expense, net                         1.4                   1.2               1.4                 1.5

Income before income taxes                    4.6                  12.5               5.0                10.7
Provision for income taxes                    1.4                   5.0               1.8                 4.2

Net income                                    3.2 %                 7.5 %             3.2 %               6.5 %


Gross profit (loss) as a
percentage of segment net sales:
Water Transmission                           21.6 %                19.7 %            20.4 %              21.1 %

Three Months and Six Months Ended June 30, 2009 Compared to Three Months and Six Months Ended June 30, 2008

Net Sales. Net sales decreased 33.2% to $74.9 million for the second quarter of 2009 compared to $112.1 million for the second quarter of 2008, and decreased 24.2% to $156.3 million in the first six months of 2009 from $206.1 million in the first six months of 2008.

Water Transmission sales decreased 20.8% to $59.3 million in the second quarter of 2009 from $74.9 million in the second quarter of 2008 and decreased 14.8% to $118.2 million in the first half of 2009 from $138.7 million in the first half of 2008. Net sales for the three months and the six months ended June 30, 2009 decreased from the same periods in the prior year primarily as a result of timing of production in certain of our facilities. 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 decreased 58.1% to $15.6 million in the second quarter of 2009 from $37.2 million in the second quarter of 2008 and decreased 43.4% from $67.4 million in the first half of 2008 to $38.1 million in the first half of 2009. Sales decreased over the same periods last year due primarily to reduced volume, as well as to reduced selling prices. The recession continues to have a significant effect on our Tubular Products business, and demand for energy pipe, our highest margin product line, was weaker than expected. Volume in the energy pipe product line decreased by more than 70% in the six months ended June 2009 compared to the same period in the prior year.

During the three and six months ended June 30, 2009, no single customer accounted for 10% or more of net sales. During the three months ended June 30, 2008, one customer accounted for 11.4% of net sales. During the six months ended June 30, 2008, no single customer accounted for 10% or more of net sales.

Gross Profit. Gross profit decreased 58.3% to $10.3 million (13.7% of total net sales) in the second quarter of 2009 from $24.6 million (22.0% of total net sales) in the second quarter of 2008 and decreased 45.7% from $42.4 million (20.6% of total net sales) in the first half of 2008 to $23.0 million (14.7% of total net sales) in the first half of 2009.

Water Transmission gross profit decreased $1.9 million, or 13.2%, to $12.8 million (21.6% of segment net sales) in the second quarter of 2009 from $14.8 million (19.7% of segment net sales) in the second quarter of 2008 and decreased $5.1 million, or 17.5%, from $29.2 million (21.1% of segment net sales) in the first half of 2008 to $24.1 million (20.4% of segment net sales) in the first half of 2009. Water Transmission gross profit as a percentage of segment net sales fluctuated slightly from the same periods last year due to the variations in the gross profit of the projects in production in the current periods. Gross profit of projects awarded and produced

can vary due to several factors, including the level of competition in the bidding process, production schedules, and, to a lesser extent, volatility in steel prices. We are generally able to lock in our steel costs at the time contracts are awarded, which helps to minimize the impact of the volatility in steel prices on our Water Transmission gross profit.

Gross profit (loss) from Tubular Products decreased 126.0% to a loss of $2.6 million (-16.4% of segment net sales) in the second quarter of 2009 from $9.8 million (26.4% of segment net sales) in the second quarter of 2008 and decreased 108.4% to a loss of $1.1 million (-2.9% of segment net sales) in the first half of 2009 from $13.2 million (19.5% of segment net sales) in the first half of 2008. Despite the fact that raw material costs decreased, margins turned negative as selling prices dropped significantly and demand declined.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $5.8 million (7.7% of total net sales) in the second quarter of 2009 from $9.3 million (8.3% of total net sales) in the second quarter of 2008 and decreased to $13.0 million (8.3% of total net sales) in the first six months of 2009 from $17.2 million (8.4% of total net sales) in the first six months of 2008. The decrease from the same periods last year was attributable to reductions in variable compensation costs, sales commissions, travel and entertainment expenses, outside services and professional fees, as well as the effect of numerous other cost containment measures.

Interest Expense, net. Interest expense, net decreased to $1.0 million in the second quarter of 2009 from $1.3 million in the second quarter of 2008 and decreased to $2.3 million in the first six months of 2009 from $3.1 million in the first six months of 2008. The decrease in the expense compared to the same periods last year was a result of lower average borrowings at a lower average interest rate, combined with an increase in interest income.

Income Taxes. The provision for income taxes was $1.1 million in the second quarter of 2009, based on an effective tax rate of approximately 30.6%, compared to $5.6 million for the same period last year, based on an expected tax rate of approximately 40.0%. The provision for income taxes was $2.7 million for the first six months of 2009, based on an effective tax rate of approximately 34.8%, compared to $8.6 million for the same period last year, based on an effective tax rate of approximately 38.9%. The decrease in our effective tax rate is due to increased international activity, which is generally taxed at rates lower than our federal statutory rate.

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 six months ended June 30, 2009 is presented in our condensed consolidated statements of cash flows contained in this Form 10-Q, and is further discussed below.

As of June 30, 2009, our working capital (current assets minus current liabilities) was $180.4 million as compared to $223.2 million as of December 31, 2008.

Net cash provided by operating activities in the first six months of 2009 was $52.2 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 typically have a relatively large investment in working capital, as we are generally 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, although the effect of this difference in the cycles may vary from period to period.

Net cash used in investing activities in the first six months of 2009 was $13.3 million for capital expenditures. The two most significant capital projects incurring costs in the six month period were the installation of a new mill in our California facility and the preparation and installation of manufacturing equipment in the facility in Bossier City, Louisiana. Capital expenditures are expected to be approximately $5 to $8 million in the remainder of 2009.

Net cash used in financing activities in the first six months of 2009 was $38.9 million, which resulted primarily from net payments under the notes payable to financial institutions and the long term debt of $40.4 million and $4.3 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 June 30, 2009: a $150.0 million credit agreement, under which $41.7 million was outstanding; $10.7 million of Series A Term Note, $7.5 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 stand-by letters of credit that total approximately $6.5 million as of June 30, 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 June 30, 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 June 30, 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 June 30, 2009 we had $41.7 million outstanding under the credit facility bearing interest at a weighted average rate of 2.8%.

We had $9.6 million of capital leases outstanding at June 30, 2009, under which certain equipment used in the manufacturing process is leased. The average interest rate on the capital leases is 5.8%.

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 June 30, 2009, we were not in violation of any of the covenants in our debt agreements, nor do we believe that it is reasonably likely that we will be in violation of our debt covenants in the near-term.

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.