Northwest Pipe Company | 17 Earnings per Share Income Taxes Revenue Recognition Goodwill Property and Equipment 1. Summary of Significant Accounting Policies: Notes to Consolidated Financial Statements (Dollar amounts in thousands, except share and per share amounts) The consolidated financial statements include the accounts of Northwest Pipe Company and its wholly owned subsidiaries (the “Company”). All significant inter-company balances have been eliminated. The Company manufactures Water Transmission products in its Portland, Ore- gon; Denver, Colorado; Adelanto and Riverside, California; Parkersburg, West Virginia; and Saginaw, Texas facilities. Tubular Products are manufactured in the Company’s Portland, Oregon; Atchison, Kansas; Houston, Texas; Bossier City, Louisiana; and Monterrey, Mexico facilities. Inventories 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.  Inventories are stated at the lower of cost or market. Finished goods are stated at standard cost, which approximates the first-in, first-out method of accounting. Raw material inventories of steel coil are stated at cost on a specific identification basis or at standard cost. Raw material inventories of coating and lining materials, as well as materials and supplies, are stated on an average cost basis. Property and equipment, including land, buildings and equipment under capital leases, are stated at cost. Maintenance and repairs are expensed as incurred and costs of improvements and renewals, including interest, are capitalized. Depreciation and amortization are deter- mined by the straight-line method based on the estimated useful lives of the related assets. 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 equip- ment under long-term capital leases, which are being amortized on a straight-line basis over estimated useful lives. Estimated useful lives by major classes of property and equipment are as follows: The Company has classified as goodwill the cost in excess of fair value of the net assets of companies acquired in purchase transactions. Net goodwill was $22.0 million and $22.6 million at December 31, 2000 and 1999, respectively. Goodwill is amortized on the straight-line method over 40 years. Amortization charged to operations was $593 and $586 for 2000 and 1999, respectively. At each balance sheet date the Company evaluates the realizability of goodwill based on expectations of non-discounted cash flows and operating income for each sub- sidiary having a material goodwill balance. Based on its most recent analysis, the Company believes that no material impairment of goodwill exists at December 31, 2000. Revenue from construction contracts in the Company’s Water Transmission segment is recognized on the percentage-of-completion method, measured by the percentage of total costs incurred to date to the estimated total costs of each contract. 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. 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 aris- ing from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Revenue from the Company’s Tubular Products segment is recognized when all four of the following criteria have been satisfied: persuasive evidence of an arrangement exists; delivery has occurred; the price is fixed or determinable; and collectibility is reasonably assured. The Company records deferred income tax assets and liabilities based upon the difference between the financial statement and income tax bases of assets and liabilities using enacted income tax rates. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in net deferred income tax assets and liabilities. Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares of common stock and dilutive common equivalent shares outstanding during the period. Incremental shares of 135,738, 159,288 and 192,590 for the years ended December 31, 2000, 1999, 1998, respectively, were used in the calculations of diluted earnings per share. Options to purchase 561,558 shares of common stock at Land and improvements 20 years Buildings 30 years Equipment 5 – 18 years