2003 WAS OUR most difficult year since Northwest Pipe  Company became a public  company in 1995. The Tubular Products Group continued to fight through adverse  market conditions, as the effects of the U.S. recession  lingered. The Water Transmission Group also saw a down market in 2003—the second con secutive year that bidding activity was well below our expectations. In spite of these negative  conditions, Northwest Pipe has emerged from 2003 with a sense of optimism, albeit  balanced with a degree of caution.  As we start 2004, we see improving conditions in our mar kets, improved cost structures within each business group, and improved financial stability for the  Company as a whole. Tempering our enthusiasm, somewhat, is the cost of steel, which is currently reaching  unprecedented heights. Our ability to manage the increased cost of our raw materials will be a key factor in  how 2004 develops. We faced a down market for water transmission systems in 2003. The mar ket improved in the second  half, but still did not meet our expectations. Delayed bidding and  alternativ e material preferences  limited our opportunities in the eastern half of the country. Market activit y and results were stronger  in the western United States, where we exceeded sales and margin targets f or the year. Sales in the Water Transmission Group were $146.3 million for 2003, compared to $174.5  million for 2002. Gross profit  as a percent of sales held steady at 22% of the segment’s sales. In spite of t he difficult market conditions, we were able to gain market share as we worked to keep our facilities busy  during the year. Water Transmission The entrance of a new steel pipe competitor in the water  transmission market supports our continued belief that there is  TO OUR SHAREHOLDERS opportunity in the segment. The presence of this and other  competitors also strengthens our resolve to maintain leadership in  the market by leveraging our experience and technical expertise to achieve our objectives. We remain the only nationwide supplier of  large-diameter , high-pressure  steel pipe. While we continue to refine our approach, our strategy is sound. Our national network of  facilities provides us with a freight advantage over regional competitors,  flexibility in deciding which  projects to produce at each plant, and increased purchasing power for raw  materials and supplies.  The Tubular Products Group recorded sales of $98.7 million in 2003  compared to $91.6 million  in 2002, and gross profit of 1.1% compared to 6.1% last year. The second half of the year was  much better than the first half. In the second half of 2003, the Tubular Pr oducts Group’s volume  increased 17% from the same period in 2002. Our ongoing productivity  improvement initiatives  yielded positive results, as we met the increased demand while lowering  manufacturing costs.  These positive strides could not fully offset the combination of lower mar ket prices and  higher cost steel in our production cycle. The Tubular Products Group r eported gross profit  as a percent of sales of 3.1% in the second half of the year. Tubular Products