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Summary Of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2011
Summary Of Significant Accounting Policies [Abstract] |
Summary Of Significant Accounting Policies |
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company operates in two business segments, Water Transmission and Tubular Products. We have water transmission manufacturing facilities in Portland, Oregon; Denver, Colorado; Adelanto, California; Pleasant Grove, Utah; Parkersburg, West Virginia; Saginaw, Texas and Monterrey, Mexico. Tubular products manufacturing facilities are located in Atchison, Kansas; Houston, Texas; and Bossier City, Louisiana. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances at that time. On an on-going basis, the Company evaluates all of its estimates, including those related to revenue recognition, allowance for doubtful accounts, goodwill, long-lived assets, including depreciation and amortization, inventories, income taxes, and litigation and other contingencies. Actual results could differ from those estimates under different assumptions or conditions. Basis of Consolidation and Presentation The consolidated financial statements include the accounts of Northwest Pipe Company and its subsidiaries over which the Company exercises control as of the financial statement date. Intercompany accounts and transactions have been eliminated. Northwest Pipe Asia Pte. Ltd. ("NWPA"), was previously accounted for under the equity method of accounting and was sold to the controlling owners of the business for $0.8 million on April 1, 2011. The Company previously exercised significant influence but did not control NWPA. During the year ended December 31, 2011 and 2010, the Company recorded purchases of property and equipment of $0.2 million and $1.7 million, respectively, net of eliminations, and rental income of $0.2 million during the year end December 31, 2010, from NWPA. No rental income from NWPA was recorded during the year ended December 31, 2011. At December 31, 2010, intercompany balances with NWPA included a receivable of $0.5 million for rental income and a dividend receivable. All proceeds from the sale have been received by the Company and no intercompany balances remain at December 31, 2011. Lucid Energy LLC ("Lucid Energy"), over which the Company exercises significant influence but no control, is accounted for under the equity method of accounting. Lucid Energy is a clean energy company based in Portland, Oregon. At December 31, 2011, we have convertible notes receivable from Lucid Energy, but the carrying value of our notes receivable and investment is zero. On June 1, 2011, the Company sold all assets of the traffic systems product line of the Tubular Products facility in Houston, Texas. Assets sold as part of this sale included the (i) raw materials, work-in-process, finished goods and related fuel and supplies inventories, (ii) tangible personal property located at the Houston facilities or used by the Company in connection with the traffic business, including machinery, equipment, tooling, operating and maintenance manuals, parts and all other tangible assets used in or related to the traffic business, (iii) receivables, and (iv) other assets. Total consideration of $13.7 million was received, resulting in a gain of $2.9 million recognized in other expense during the second quarter of 2011. The calculation of the gain on sale included a write-off of $1.0 million of goodwill. Cash and Cash Equivalents Cash and cash equivalents consist of cash and short term highly liquid investments with remaining maturities of three months or less when purchased. Escrow Account The escrow account, to be used for qualifying project costs under the financing arrangement for the Bossier City facility, is included in other assets. Funds are released from escrow upon the Company's payment of qualifying project costs. Restricted cash held in the escrow account totaled $0.9 million and $2.7 million at December 31, 2011 and 2010, respectively. Allowance for Doubtful Accounts The Company maintains allowances for estimated losses resulting from the inability of its customers to make required payments or from contract disputes. The amounts of such allowances are based on Company history and management's judgment. At least monthly, the Company reviews past due balances to identify the reasons for non-payment. The Company will write off a receivable account once the account is deemed uncollectible. The Company believes the reported allowances at December 31, 2011 and 2010 are adequate. If the customers' financial conditions were to deteriorate resulting in their inability to make payments, or if contract disputes were to escalate, additional allowances may need to be recorded which would result in additional expenses being recorded for the period in which such determination was made. Inventories Inventories are stated at the lower of cost or market. Raw material inventories of steel are stated at cost, either on a specific identification basis or on an average cost basis. All other raw material inventories, as well as supplies, are stated on an average cost basis. Finished goods are stated at cost using the first-in, first-out method of accounting. Property and Equipment Property and equipment is stated at cost. Maintenance and repairs are expensed as incurred, and costs of major maintenance, improvements, and renewals, including interest where applicable, are capitalized. Depreciation and amortization are determined by the units of production method for most equipment and by the straight-line method for the remaining assets based on the estimated useful lives of the related assets. Depreciation expense calculated under the units of production method may be less than, equal to, or greater than depreciation expense calculated under the straight-line method due to variances in production levels. Upon disposal, costs and related accumulated depreciation of the assets are removed from the accounts and resulting gains or losses are reflected in operations. The Company leases certain equipment under long-term capital leases, which are being amortized on a straight-line basis over the shorter of its useful life or the lease term. The Company assesses impairment of property and equipment whenever changes in circumstances indicate that the carrying values of the assets may not be recoverable. The recoverable value of long-lived assets is determined by estimating future undiscounted cash flows using assumptions about the expected future operating performance of the Company. The estimates of undiscounted cash flows may differ from actual cash flow due to, among other things, technological changes, economic conditions, or changes to business operations. If the carrying value of the property and equipment is not estimated to be recoverable, an impairment loss is calculated and recorded. Estimated useful lives by major classes of property and equipment are as follows:
Land improvements |  |  | 15 – 30 years |  |  |
Buildings |  |  | 20 – 40 years |  |  |
Machinery and equipment |  |  | 3 – 30 years |  |  |
Goodwill Goodwill related to the Company's Tubular Products Group, one of the Company's operating segments and reporting units, of $20.5 million and $21.5 million, respectively, at December 31, 2011 and 2010 represents the excess of purchase price over the assigned value of the net assets in connection with the segment's acquisitions. The change in the carrying amount of goodwill for the year ended December 31, 2011 was due to the sale of all assets of the traffic systems product line of the Tubular Products facility in Houston, Texas.
Goodwill balance, January 1, 2011 |  |  | $21,451 |
Goodwill written off related to sale of business |  |  | (973 | )
Goodwill balance, December 31, 2011 |  |  | $20,478 |
Goodwill is reviewed for impairment annually or whenever events occur or circumstances change that would more likely than not reduce the fair value of the Tubular Products Group below its carrying amount. A qualitative approach which takes into account industry and market conditions, cost factors, overall financial performance, and other relevant entity specific events and changes can be utilized under Accounting Standards Update ("ASU") 2011-08 prior to the performance of the two-step goodwill impairment test. For reporting units where this review concludes it is more likely than not the fair value of the reporting unit is less than the carrying value of the reporting unit, step one of the two-step goodwill impairment test is performed. Step one in the evaluation of goodwill impairment involves comparing the estimated fair value of the reporting unit to its carrying value, including goodwill. Fair value of the reporting unit is determined with consideration of the income, market, and cost approaches as applicable. The income approach is based upon projected future after-tax cash flows (less capital expenditures) discounted to present value using factors that consider the timing and risk associated with the future after-tax cash flows. The key assumptions in the discounted cash flow analysis are the long-term growth rate, the discount rate, and the annual free cash flow. The market approach is based upon historical and forward-looking measures using multiples of revenue and a price-to-book ratio. The forward-looking measures are more heavily weighted than the historical measures. The Company conducts its annual impairment testing as of December 31. Upon adoption of ASU 2011-08, we elected to use a qualitative approach in our assessment of whether goodwill related to the Company's Tubular Products group was impaired. The Company determined it was not more likely than not that the fair value of the Tubular Products Group is less than its carrying amount, and the performance of the first and second steps of the goodwill impairment test was not necessary. The operations of the Tubular Products Group is cyclical, and its sales and profitability may fluctuate from year to year. If the Company's assumptions about goodwill change as a result of events or circumstances, and management believes the assets may have declined in value, then impairment charges may be recorded, resulting in lower profits. In the evaluation of the Company's operating segment, the Company looks at the long-term prospects for the reporting unit and recognizes that current performance may not be the best indicator of future prospects or value, which requires management judgment. Workers Compensation Insurance The Company is self-insured, or maintains high deductible policies, for losses and liabilities associated with workers compensation claims. Losses are accrued based upon the Company's estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions followed in the insurance industry. Pension Benefits The Company has two defined benefit pension plans that have been frozen since 2001. The Company funds these plans to cover current plan costs plus amortization of the unfunded plan liabilities. To record these obligations, management uses estimates relating to investment returns, mortality, and discount rates. Management reviews all of these assumptions on an annual basis. Derivative Instruments The Company conducts business in foreign countries, and, from time to time, settles transactions in foreign currencies. The Company has established a program that utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures, typically arising from sales contracts denominated in Canadian currency. Foreign currency forward contracts are consistent with the Company's strategy for financial risk management. The Company utilizes cash flow hedge accounting treatment for qualifying foreign currency forward contracts. Instruments that do not qualify for cash flow hedge accounting treatment are remeasured at fair value at each balance sheet date and resulting gains and losses are recognized in net income (loss). Foreign Currency Transactions Assets and liabilities subject to foreign currency fluctuations are translated into United States dollars at the period-end exchange rate, and revenue and expenses are translated at exchange rates representing an average for the period. Translation adjustments from designated hedges are included in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. Gains or losses on all other foreign currency transactions are recognized in the statement of operations. The functional currency of our Mexican operations is the U.S. dollar. Revenue Recognition Revenue from construction contracts in the Company's Water Transmission Group is recognized on the percentage-of-completion method, measured by the costs incurred to date as a percentage of the estimated total costs of each contract (cost-to-cost method). Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation. Selling, general and administrative costs are charged to expense as incurred. The cost of steel is recognized as a project cost when the steel is introduced into the manufacturing process. Estimated total costs of each contract are reviewed on a monthly basis by project management and operations personnel for substantially all projects that are 50% or more complete except that major projects, usually over $5.0 million, are reviewed earlier if sufficient production has been completed to provide enough information to revise the original estimated total cost of the project. All cost revisions that result in the gross profit as a percent of sales increasing or decreasing by more than two percent are reviewed by senior management personnel. The Company begins recognizing revenue on a project when persuasive evidence of an arrangement exists, recoverability is reasonably assured, and project costs are incurred. Costs may be incurred before the Company has persuasive evidence of an arrangement. In those cases, if recoverability from that arrangement is probable, the project costs are deferred and revenue recognition is delayed. Provisions for losses on uncompleted contracts are made in the period such losses are known. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, foreign currency exchange rate movements, changes in raw materials costs, and final contract settlements may result in revisions to revenue, costs and income and are recognized in the period in which the revisions are determined. Revenue from the Company's Tubular Products Group is recognized when all four of the following criteria have been satisfied: persuasive evidence of an arrangement exists, the price is fixed or determinable, delivery has occurred, and collectability is reasonably assured. Other Expense/Income The Company reports gains and losses from non-operating activities as a component of other expense/income. On June 1, 2011, the Company sold all assets of the traffic systems product line of the Tubular Products facility in Houston, Texas. Total consideration of $13.7 million was received, resulting in a gain of $2.9 million recognized in other expense/income during 2011. The Company recorded an allowance of $4.1 million on notes receivable in 2011. Income Taxes Income taxes are recorded using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. The determination of the provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state and, to a lesser extent, foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate. The Company records tax reserves for federal, state, local and international exposures relating to periods subject to audit. The development of reserves for these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective estimate. The Company assesses tax positions and records tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information has been recorded. For those tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) includes unrealized gains and losses on derivative instruments related to the effective portion of cash flow hedges and changes in the funded status of the defined benefit pension plans, both net of the related income tax effect. Accumulated other comprehensive income (loss) consists of the following:
|  | December 31, |
|  | 2011 |  |  | 2010 |
|  | (in thousands) |
Pension liability adjustment, net of tax benefit of $1,294 and $885 |  | $ | (2,326 | ) |  | $ | (1,659 | )
Net deferred gain (loss) on cash flow derivatives, net of tax expense of $44 and benefit of $86 |  |  | 14 |  |  |  | (197 | )
Total |  | $ | (2,312 | ) |  | $ | (1,856 | )
Earnings (Loss) per Share Earnings (loss) per basic and diluted weighted average common shares outstanding was calculated as follows for the years ended December 31:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Net income (loss) (in thousands) |  | $ | 12,660 |  |  | $ | (5,440 | ) |  | $ | (11,075 | )
Basic weighted-average common shares outstanding |  |  | 9,332,909 |  |  |  | 9,277,605 |  |  |  | 9,235,183 |
Effect of potentially dilutive common shares (1) |  |  | 50,635 |  |  |  | — |  |  |  | — |
Diluted weighted-average common shares outstanding |  |  | 9,383,544 |  |  |  | 9,277,605 |  |  |  | 9,235,183 |
Earnings (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |
Earnings (loss) per basic common share |  | $ | 1.36 |  |  | $ | (0.59 | ) |  | $ | (1.20 | )
Earnings (loss) per diluted common share |  |  | 1.35 |  |  |  | (0.59 | ) |  |  | (1.20 | )
Antidilutive shares not included in net income per diluted common share calculation |  |  | 58,261 |  |  |  | 47,483 |  |  |  | 130,970 |
(1) | Represents the effect of the assumed exercise of stock options and the vesting of restricted stock units and performance stock awards, based on the treasury stock method.
Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables, derivative contracts and the escrow account. Trade receivables generally represent a large number of customers, including municipalities, manufacturers, distributors and contractors, dispersed across a wide geographic base. At December 31, 2011, one customer had a balance in excess of 10% of total accounts receivable which totaled 13% of total accounts receivable. At December 31, 2010, two customers had balances in excess of 10% of total accounts receivable and totaled 25% of total accounts receivable. Derivative contracts are with a financial institution rated A-2 (negative) by S&P. The escrow account, which is included in other assets, is held in a money market mutual fund. The Company's deferred compensation plan assets, also included in other assets, are invested in a diversified portfolio of stock and bond mutual funds. Share-based Compensation The Company recognizes the compensation cost of employee and director services received in exchange for awards of equity instruments based on the grant date estimated fair value of the awards. Share-based compensation cost is recognized over the period during which the employee or director is required to provide service in exchange for the award, and as forfeitures occur, the associated compensation cost recognized to date is reversed. Share-based compensation cost related to awards with a performance-based condition is recognized based on the probable outcome of the performance conditions, which requires judgment. The Company estimates the fair value of stock options using the Black-Scholes-Merton option pricing model to estimate fair value. The Black-Scholes-Merton option pricing model requires the Company to estimate key assumptions such as expected term, volatility, risk-free interest rates and dividend yield to determine the fair value of stock options, based on both historical information and management judgment regarding market factors and trends. The Company estimates the fair value of restricted stock units and performance stock awards using the value of the Company's stock on the date of grant, with the exception of market-based performance awards, for which a Monte Carlo simulation model is used. The Monte Carlo simulation model calculates many potential outcomes for an award and estimates fair value based on the most likely outcome. See Note 11, "Share-based Compensation Plans" for further discussion of the Company's share-based compensation. Recent Accounting and Reporting Developments Accounting Changes In January 2010, the FASB issued ASU 2010-06 which requires new disclosures and clarifies existing disclosure requirements for fair value measurements. Specifically, the changes require disclosure of transfers into and out of "Level 1" and "Level 2" (as defined in the accounting guidance) fair value measurements, and also require more detailed disclosure about the activity within "Level 3" (as defined) fair value measurements. The Company adopted this guidance on January 1, 2010 as required, with the exception of the disclosures about purchases, sales, issuances and settlements of Level 3 assets and liabilities, which was adopted on January 1, 2011 as required. As this guidance only requires expanded disclosures, the adoption did not impact the Company's consolidated financial position, results of operations or cash flows. In September 2011, the FASB issued ASU 2011-08, which simplified the goodwill impairment test by giving companies the option to perform a qualitative assessment to determine whether the performance of the two step impairment testing is necessary. This guidance is effective for interim and annual periods beginning on or after December 15, 2011 and early adoption is allowed. The Company has adopted this guidance for the performance of the annual goodwill impairment review during the fourth quarter of 2011, and there was no impact on the consolidated financial statements. Recent Accounting Standards In May 2011, the Financial Accounting Standards Board ("FASB") issued ASU 2011-04, which amends the wording used to describe the requirements for measuring fair value and expands fair value disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this guidance as of January 1, 2012 is not expected to have a significant impact on the Company's consolidated financial position, results of operations or cash flows as the new requirements are primarily disclosure related. In June 2011, the FASB issued ASU 2011-05, which eliminates the option to present components of other comprehensive income as part of the Statement of Stockholders Equity. All changes in components of stockholders' equity must be presented in (1) a single continuous statement of comprehensive income, which presents the total of comprehensive income, the components of net income, and the components of comprehensive income, or (2) two separate but consecutive statements. Under either presentation method, reclassification adjustments between other comprehensive income and net income are required to be presented on the face of the financial statements. In October 2011, the FASB decided to delay the effective date of the requirement to present reclassifications of other comprehensive income on the face of the income statement. All other guidance in ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011 and will be applied retrospectively. The adoption of this guidance as of January 1, 2012 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income and thus will only have an impact on the presentation of comprehensive income (loss) in the consolidated financial statements. In December, 2011, the FASB issued ASU 2011-11 which requires companies to disclose information regarding offsetting and other arrangements for derivatives and other financial instruments. This guidance is effective for interim and annual periods beginning on or after January 1, 2013. The adoption of this guidance is not expected to have a significant impact on the Company's consolidated financial position as the new requirements are primarily disclosure related.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 + Details
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