Water Transmission gross profit increased 12.6% to $32.3 million (23.5% of segment net sales) in 1999 from $28.7 million (23.0% of segment net sales) in 1998. Water Transmission gross profit increased as a result of improved market conditions and stronger bidding activity in the first half of 1999, and the acquisition of the Parkersburg facility in June 1998 and Saginaw in June 1999. Water Trans- mission gross profit in the second half of 1999 was negatively impacted by lower production volume, which resulted from delays in projects the Company had already been awarded, and postponements in bidding activity and awarding of new projects.  Gross profit from Tubular Products increased 27.9% to $16.6 million (16.1% of segment net sales) in 1999 from $12.9 million (15.3% of segment net sales) in 1998. Tubular Products gross profit increased in 1999 as a result of a lessening in pricing pressure from imported products in certain product lines, a favorable product mix and generally improved market conditions in the second half of 1999. The Company also raised prices in certain product lines beginning in the fourth quarter of 1999 to offset increases in the price of steel pur- chased by the Company.  Selling, general and administrative expenses increased 18.5% to $18.8 million (7.8% of total net sales) in 1999 from $15.9 million (7.6% of total net sales) in 1998. The increase was primarily the result of increased operating expenses related to the acquisitions completed in March and June 1998 and June 1999 and the general growth of the Company’s business. Interest expense increased to $8.1 million in 1999 from $4.8 million in 1998. The increase in interest expense resulted from increased borrowings used to finance acquisitions and capital expenditures and to support higher production and sales levels. The Company’s effective tax rate was approximately 39.8% in 1999, compared to approximately 40% in 1998.  The Company financed operations with internally generated funds and available borrowings. At fiscal year end December 31, 2000, the Company had cash and cash equivalents of $353,000.  Net cash used for operating activities in 2000 was $11.5 million. This was primarily the result of $10.7 million of net income, non- cash adjustments for depreciation and amortization of $7.3 million, increase in accounts payable of $10.5 million; offset by an increase in cost and estimated earnings in excess of billings on uncompleted contracts, inventories and net trade receivables of $24.9, $15.7 and $5.1 million, respectively. The increase in cost and estimated earnings in excess of billings on uncompleted contracts, inventories and net trade receivables was primarily attributable to the long cash cycle and increased production in the Water Transmission segment. Net cash used in investing activities in 2000 was $11.2 million, which primarily resulted from expenditures related to additions of property and equipment. Capital expenditures are expected to be between $8 and $9 million in 2001. Net cash provided by financing activities in 2000 was $22.0 million, which primarily resulted from the sale-leaseback of certain man- ufacturing equipment for $14.4 million and $8.2 million in net borrowings under the Company’s line of credit agreement, offset by payments of long-term debt. Additionally, capital lease obligations of $2.0 million related to the new company-wide enterprise resource planning computer software system were incurred in 2000. The Company had the following significant components of debt at December 31, 2000: a $65 million credit agreement under which $48.2 million was outstanding; $7.1 million of Series A Senior Notes, without collateral, which bear interest at 6.63%; $30.0 million of Series B Senior Notes, without collateral, which bear interest at 6.91%; $35.0 million of Senior Notes, without collateral, which bear inter- est at 6.87%; an Industrial Development Bond of $2.5 million with variable interest rate (5.0% at December 31, 2000); and capital lease obligations of $3.7 million which bears interest at an aggregate rate of 8.27%.  The credit agreement expires on September 30, 2002, and is without collateral. It bears interest at rates related to IBOR or LIBOR plus 0.65% to 2.25% (8.74% at December 31, 2000), or at prime less 0.5% (9.0% at December 31, 2000). At December 31, 2000, the Company had $44.0 million outstanding under the line of credit bearing interest at a weighted average IBOR interest rate of 8.97%, $4.2 million bearing interest at 9.0% and additional borrowing capacity under the line of credit of $16.8 million. On October 5, 2000, the Com- pany amended its line of credit agreement to eliminate the $10.0 million bridge loan commitment and increase the total commitment of the line of credit agreement to $65.0 million. The amendment also revised the maximum funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio to 3.65:1.0 on September 30, 2000 and December 31, 2000, to 3.50:1.0 on March 31, 2001, and to 3.25:1.0 until September 20, 2002. The line of credit agreement contains the following covenants: minimum debt service ratio, maximum funded debt to EBITDA, minimum tangible net worth and maximum funded debt to selected balance sheet items ratio.  At December 31, 2000, the Company was in compliance with all covenants specified in its debt agreements. The Company’s working capital requirements have increased due to an increase in Tubular Product sales and an increase in the Com- pany’s Water Transmission business, which is characterized by lengthy production periods and extended payment cycles. The Company Northwest Pipe Company | 11 Selling, general and administrative expenses  Interest expense  Income taxes  Liquidity and Capital Resources