<SEC-DOCUMENT>0001193125-09-222562.txt : 20110415
<SEC-HEADER>0001193125-09-222562.hdr.sgml : 20110415
<ACCEPTANCE-DATETIME>20091103205934
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001193125-09-222562
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20091103

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NORTHWEST PIPE CO
		CENTRAL INDEX KEY:			0001001385
		STANDARD INDUSTRIAL CLASSIFICATION:	STEEL PIPE & TUBES [3317]
		IRS NUMBER:				930557988
		STATE OF INCORPORATION:			OR
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		5721 SE COLUMBIA WAY
		STREET 2:		SUITE 200
		CITY:			VANCOUVER
		STATE:			WA
		ZIP:			98661
		BUSINESS PHONE:		3603976250

	MAIL ADDRESS:	
		STREET 1:		5721 SE COLUMBIA WAY
		STREET 2:		SUITE 200
		CITY:			VANCOUVER
		STATE:			WA
		ZIP:			98661
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
<HTML><HEAD>
<TITLE>Correspondence Letter</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">NORTHWEST PIPE COMPANY </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5721 SE Columbia Way, Suite 200 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vancouver WA 98661
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">(360) 397-6300 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2">November&nbsp;3, 2009 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">United States Securities and Exchange Commission </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">1 Station Place, N.E. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mail Stop 4631 </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Washington, D.C. 20549-4631 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Attn: Tracey McKoy,
Division of Corporation Finance </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">RE:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Northwest Pipe Company</FONT></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form 10-K for the Fiscal Year Ended December 31, 2008 Filed March 13, 2009</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Definitive Proxy Statement</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Filed April 3,
2009</FONT></P></TD></TR>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">File No. 000-27140</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dear Ms.&nbsp;McKoy: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We are submitting this letter in response to your follow-up correspondence dated September&nbsp;28, 2009. The following sets forth the comments made in your letter and our responses thereto: </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Form 10-K for the Fiscal Year Ended December&nbsp;31, 2008 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Results of Operations, page 22 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. <B>Comment:</B> We appreciate your response to our prior
comment 1. Although sales in the Water Transmission segment is earned under contracts and accounted for using the percentage-of-completion method, it is not clear how this would preclude or significantly limit your ability to provide quantification
of the material effects of significant events. On page 22, you attribute the segment&#146;s 31% decrease in fourth quarter sales over the prior year to three distinct causes: the postponement of a major project, the shut down of your highest volume
production line to install a new spiral weld mill, and weather issues. Quantitative disclosure appears to be necessary in order for an investor to understand the relative impact and significance of these three discrete events. For example, while you
do not know the exact amount of sales that would have been recognized under
</FONT></P>

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the project had it not been postponed, this does not preclude you from providing other quantified information that would be useful to an investor to understand the degree of the impact. Such
information could include the size of the contract, the revenues earned in the prior period related to the customer, etc. We remind you the disclosure cited in our prior comment were examples, not meant to be a comprehensive list, and merely
representative of issues noted throughout your discussion. In MD&amp;A in your Form 10-Q for the period ended June&nbsp;30, 2009, the discussion of results of operations continues to be very general. While sales decreased 33%, from $112 million for
the second quarter of 2008 to $75 million for the second quarter of 2009, you attribute the decrease in the Water Transmission segment to &#147;timing of production in certain of our facilities.&#148; Statements such as &#147;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&#148; are boilerplate and provide very little useful information for investors. Your discussion of the
decrease in sales in the Tubular Products segment does mention the decrease in the volume of the energy pipe product line; however, the discussion of the 58% drop in second quarter sales in this segment is still extremely limited. In future filings
please expand the discussion in MD&amp;A to provide investors with material information that is necessary to an understanding of your performance, as well as your prospects for the future. Your discussion should include analysis explaining the
underlying reasons or implications of trends and events, interrelationships between constituent elements, and the relative significance of those matters. Please refer to SEC Release 33-8350 for extensive guidance on this subject. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Response: </B>We will continue to endeavor to expand the discussion in MD&amp;A to provide investors with material information that is
necessary to an understanding of our performance, as well as our prospects for the future. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. <B>Comment:</B> In response to prior comment 1
you state you will enhance disclosure in future filings to quantify the effects of changes in prices and volumes of products sold whenever that information is material. We note Tubular Products sales during the period ending June&nbsp;30, 2009,
decreased substantially due to reduced volume, as well as reduced selling prices. It appears a quantification of the effects of changes in prices and volumes during this period, including an analysis of trends and the interrelationship of these
effects, would be useful and material to an understanding of the company through the eyes of management. Please provide this disclosure in future filings. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Response:</B> We will provide a quantification of the effects of changes in prices and volumes in future filings. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Critical Accounting Policies, page 19 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Goodwill, page 20 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">3. <B>Comment:</B> We note your response to prior comment 4 and
appreciate the expanded disclosure you propose to include in future filings regarding the goodwill assigned to the Tubular Products reporting unit. In future filings, disclose whether the fair value of this reporting unit is substantially in excess
of carrying value. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Response: </B>As applicable, we will disclose whether the fair value of the Tubular Products reporting
unit is substantially in excess of carrying value in future filings. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Form 10-Q for the Fiscal Quarter Ended March&nbsp;31, 2009
</U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations, page 9 </U></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">4. <B>Comment:</B> Your response to prior comment 7 suggests you will limit discussion of inventory to incidents of &#147;material changes in (your) results
of operations&#148;, and your discussion of outlook to &#147;when it is reasonably likely to have a material effect on (your) business.&#148; Based on your discussion of the judgments you have applied in your consideration of the accounting for the
recoverability of inventory, it appears your judgments and estimates in this area already have a significant impact on your operations and meet the definition of critical accounting estimates, as described in Section&nbsp;501.14 of the Codification
of FRRs and SEC Release 338350. Please refer to this guidance and provide appropriate discussion of the critical accounting policies and estimates related to your evaluation of inventory for impairment. This discussion should include a description
of testing mechanics, methods and assumptions, including assumptions relating to future sales, and to the return of steel prices to a higher level over a specific timeframe. Include a clear analysis of the uncertainty associated with the key
assumptions, any potential events and circumstances that could have a negative effect, and the potential impact to future operations from other reasonably likely scenarios. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Response: </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In future filings, we intend to expand the discussion of the critical accounting
policy and estimates related to our evaluation of inventory for impairment. Below is the proposed modified disclosure (italicized text is new disclosure): </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Inventories are stated at the lower of cost or market<I>, which we evaluate by looking at inventory in its entirety. Determining market value of inventories involves judgments and assumptions made
by management, including projecting selling prices and costs of sales. To project market value, management reviews recent sales and gross profit history, existing customer orders, current contract prices, industry analysis of supply and demand,
seasonal factors, general economic trends and other information, as applicable</I>. Raw material inventories of steel are stated at cost&#133;&#148; </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Supplementally, we advise the Staff that our gross margin, the primary indicator we use as a measure of
market value over cost, was 14% at June&nbsp;30, 2009, down from the prior quarter due to lower selling prices as discussed, but still well above break even. As we looked ahead, we continued to expect positive gross margins, due to our expectations
of an improvement in pricing and of operational costs at a consistent level. We also expected our raw material costs to increase, but not at a level that would negatively impact our margins. Consequently, we did not believe the utility of our
inventory in total was below our cost. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Definitive Proxy Statement Filed April&nbsp;3, 2009 </U></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Executive Compensation, page 10 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman"
SIZE="2"><U>Compensation Discussion and Analysis, page 10 </U></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">5. <B>Comment: </B>We note your responses to comments eight and nine in our
letter dated July&nbsp;23, 2009. We are still unclear as to the role your compensation consultant played in the compensation decisions for your named executive officers. Please clarify whether the compensation consultant provided you with
compensation data for other companies and, if it did, please tell us how you used this data. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Response:</B> The compensation
consultant provided to the Compensation Committee information about long-term incentive award programs used by certain peer companies identified by the compensation consultant. The information provided to the Compensation Committee included, for
each peer company, the type of long-term incentive award program it uses (i.e. stock options, performance plans, or restricted stock) and an identification of the nature of performance measures used by the peer company in connection with these
long-term incentive awards (i.e. growth measures, earnings per share measures, net income measures, etc.). The compensation consultant did not provide the Committee with data on the levels or amounts of incentive awards made by the peer companies,
nor on the specifics of the performance measurements used by the peer companies. The compensation consultant also provided to the Compensation Committee information as to long-term incentive compensation levels, as a percentage of salary, based on
the consultant&#146;s database of publicly traded durable goods manufacturing companies of less than $1 billion in revenue. As discussed in our previous response, this information from the compensation consultant was used by the Compensation
Committee to serve as a broad &#147;market check&#148;, but was not used for the purpose of determining the award amounts or the performance targets for the Company&#146;s long-term incentive plan. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Performance-Based Incentive Compensation, page 11 </U></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">6. <B>Comment:</B> We note your response to comment ten in our letter dated July&nbsp;23, 2009. Please note that in future filings you must disclose the
performance targets. Specifically, you should quantify the targets (i.e., disclose the dollar amounts of the earnings, revenue and budget targets). You should also disclose the extent to which your compensation committee subsequently adjusted
performance awards tied to the achievement of the performance targets. The process by which the final incentive awards received by your named executive officers were determined should be transparent to investors. Finally, as previously requested,
please tell us what the performance targets were for fiscal year 2008. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Response: </B>We will disclose the specific
performance targets in future filings and, if applicable, the extent to which our Compensation Committee subsequently adjusted performance awards tied to the achievement of the performance targets. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Separately, we&#146;ve presented below the performance targets for 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Levels established by consideration of 2007 results ($ in millions): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="61%"></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008&nbsp;&#147;Threshold&#148;<BR>Performance&nbsp;Level</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008&nbsp;&#147;Target&#148;<BR>Performance&nbsp;Level</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008&nbsp;&#147;Maximum&#148;<BR>Performance&nbsp;Level</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">31</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Water Transmission controllable operating profit</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">47</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">70</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tubular Products controllable operating profit</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">2</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Revenues</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">306</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">383</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">574</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Water Transmission Revenues</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">230</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">288</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">432</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tubular Products Revenues</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">2</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">76</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">95</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">143</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="3"></TD>
<TD HEIGHT="16" COLSPAN="3"></TD>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Levels established by consideration of the 2008 plan ($ in millions):</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="3"></TD>
<TD HEIGHT="16" COLSPAN="3"></TD>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008&nbsp;&#147;Threshold&#148;<BR>Performance&nbsp;Level</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008&nbsp;&#147;Target&#148;<BR>Performance&nbsp;Level</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2008&nbsp;&#147;Maximum&#148;<BR>Performance&nbsp;Level</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Net income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">44</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Water Transmission controllable operating profit</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">42</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">60</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">90</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tubular Products controllable operating profit</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">2</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">1</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">This performance target was used for Mr.&nbsp;Stokes in lieu of the Company level performance target </FONT></P></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">2</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">This performance target was used for Mr.&nbsp;Mahoney in lieu of the Company level performance target </FONT></P></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">7. <B>Comment:</B> We note your response to comment eleven in our letter dated July&nbsp;23, 2009. Your
response does not provide sufficient detail about the factors considered by the compensation committee. Please provide us with a materially complete description of the factors that went into the decision to pay the discretionary bonuses. For
example, what were the most important individual factors that the committee considered for each named executive officer? What aspects of company performance factored into the decision? Please be specific in your response. </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Response: </B>We advise the Staff that the discretionary bonuses included in the &#147;Bonus&#148; column of our summary compensation
table are one and the same as the Performance Based Incentive Compensation and the performance targets relevant to the Performance Based Incentive Compensation are set forth in our response to comment 6. No subsequent adjustment was made to the
performance awards in 2008.<B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">* * * * </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If you have any questions or require additional information, please call me at (360)&nbsp;397-6250 or fax me at (360)&nbsp;397-6257. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Respectfully yours, </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="100%"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Stephanie J. Welty</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stephanie J. Welty</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Senior Vice President, Chief Financial Officer</FONT></TD></TR>
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