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 <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>UNITED STATES </B></FONT></DIV> <DIV ALIGN="center"><FONT
FACE="Times New Roman" SIZE="3"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Washington, D.C. 20549 </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT
FACE="Times New Roman" SIZE="3"><B>FORM 10&#150;Q </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
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<TD VALIGN="top" WIDTH="4%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">[X]</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="94%"> <DIV><FONT FACE="Times New Roman" SIZE="2">QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="94%"> <DIV><FONT FACE="Times New Roman" SIZE="2">SECURITIES EXCHANGE ACT OF 1934</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="94%"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>For the quarterly period ended March 31, 2002</B></FONT></DIV> </TD> </TR>
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<TD HEIGHT="8"> </TD> </TR>
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<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="94%"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">OR</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="4%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">[_]</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="94%"> <DIV><FONT FACE="Times New Roman" SIZE="2">TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="94%"> <DIV><FONT FACE="Times New Roman" SIZE="2">SECURITIES EXCHANGE ACT OF 1934</FONT></DIV> </TD> </TR>
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<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="94%"> <DIV><FONT FACE="Times New Roman" SIZE="2">For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Commission File Number 0&#150;18050 </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1">(Exact name of registrant as specified in its Charter) </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
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<TD VALIGN="bottom" WIDTH="48%" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">MINNESOTA</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">41-1642846</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="50%"> <DIV STYLE="margin-left:10px; text-indent:-10px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1">(State of incorporation)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="50%"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1">(I.R.S. Employer Identification No.)</FONT></DIV> </TD> </TR>
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<TD HEIGHT="16"> </TD> </TR>
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<TD VALIGN="top" COLSPAN="3" ALIGN="center" WIDTH="50%"> <DIV STYLE="margin-left:13px; text-indent:-13px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">222 South Ninth Street, Suite 2880</FONT></DIV> <DIV
STYLE="margin-left:13px; text-indent:-13px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Minneapolis, Minnesota 55402</FONT></DIV> <DIV STYLE="margin-left:10px; text-indent:-10px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1">(Address
of principal executive offices)</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Registrant&#146;s telephone number, including area code: (612) 305-0339 </FONT></DIV>
<DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="text-indent:27px"><FONT FACE="Times New Roman" SIZE="2">Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
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<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" WIDTH="31%"> <DIV ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2">Yes&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;X&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="text-indent:27px"><FONT FACE="Times New Roman" SIZE="2">The number of shares of the registrant&#146;s Common Stock, $.01 par value per
share, outstanding as of May 10, 2002 was 7,029,250. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left">

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<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>
<A NAME="TOC">INDEX </A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
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<TD COLSPAN="3"> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>PAGE NO.</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>PART&nbsp;I.</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>
<A HREF="#TX033_1">FINANCIAL INFORMATION</A></B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM&nbsp;1.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_2">CONDENSED FINANCIAL STATEMENTS </A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_3">Condensed Statements of Operations&#151;Three Months Ended March 31, 2002 and 2001 (Unaudited)</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_4">Condensed Balance Sheets&#151;March 31, 2002 (Unaudited) and December 31, 2001</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_5">Condensed Statements of Cash Flows&#151;Three Months Ended March 31, 2002 and 2001 (Unaudited) </A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_6">Notes to Condensed Financial Statements</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6</FONT></DIV> </TD> </TR>
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<TD HEIGHT="8"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 2.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_7">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">10</FONT></DIV> </TD> </TR>
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<TD HEIGHT="8"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 3.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_8">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16</FONT></DIV> </TD> </TR>
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<TD HEIGHT="16"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>PART II</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>
<A HREF="#TX033_9">OTHER INFORMATION</A></B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 1.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_10">LEGAL PROCEEDINGS</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 2.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_11">CHANGES IN SECURITIES AND USE OF PROCEEDS</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 3.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_12">DEFAULTS UPON SENIOR SECURITIES</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
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<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 4.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_13">SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 5.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_14">OTHER INFORMATION</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="13%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">ITEM 6.</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="79%"> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_15">EXHIBITS AND REPORTS ON FORM 8-K</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">18</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" COLSPAN="3" WIDTH="79%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#TX033_16">SIGNATURES</A></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">19</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">2 </FONT></DIV>


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<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PART I.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_1">FINANCIAL INFORMATION</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>ITEM 1.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_2">CONDENSED FINANCIAL STATEMENTS</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">
<A NAME="TX033_3">Condensed Statements of Operations&#151;Three Months Ended March 31, 2002 and 2001 </A> </FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">(Unaudited) </FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2">(In thousands, except per share amounts) </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Three months ended</B></FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,</B></FONT></DIV> <HR
SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net sales</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">53,104</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">58,045</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cost of goods sold</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">46,842</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">49,319</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Gross profit</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,262</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,726</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Operating expenses:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Selling expenses</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,756</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,618</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">General and administrative expenses</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,096</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,310</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,852</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,928</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Operating (loss) income</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,590</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">798</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Non-operating expenses (income):</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Interest expense</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,005</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,030</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Other income, net</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(325</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(14</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,680</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,016</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Loss before income taxes</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(4,270</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,218</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Income tax benefit</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,635</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(849</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,635</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,369</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Loss per common share:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Basic</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.39</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.17</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Diluted</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.39</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.17</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Weighted average common shares outstanding:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Basic</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,704</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,887</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="81%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Diluted</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,704</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,887</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="text-indent:27px"><FONT FACE="Times New Roman" SIZE="2">The accompanying notes are an integral
part of the unaudited condensed financial statements. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3 </FONT></DIV>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE INC. </B></FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2">
<A NAME="TX033_4">Condensed Balance Sheets&#151;March 31, 2002 and December 31, 2001</A> </FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">(In thousands, except per share amounts) </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV
ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,<BR>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>December&nbsp;31,<BR>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>ASSETS</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;</B></FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Unaudited)</B></FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Current assets:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,613</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">624</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Accounts receivable, net</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,827</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">12,918</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Inventories</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">31,507</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">33,390</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Deferred income taxes</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,033</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,033</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Income taxes receivable</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,749</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,156</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Other</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,139</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,250</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total current assets</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">66,868</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">54,371</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Property and equipment, net</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">65,236</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">67,827</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Other assets</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">14,853</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15,212</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total assets</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">146,957</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">137,410</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="16"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Current liabilities:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Borrowings under revolving credit facility</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">28,328</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">27,996</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Current maturities of long-term debt</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,393</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,595</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Accounts payable</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25,982</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16,145</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Accrued liabilities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,112</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,066</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total current liabilities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">65,815</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">55,802</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Other long-term liabilities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,045</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,625</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Long-term debt, less current maturities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13,933</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,271</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Capital lease obligation, less current maturities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13,149</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Senior subordinated debt</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">29,804</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">29,453</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total liabilities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">124,746</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">113,151</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Commitments and contingencies</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Stockholders&#146; equity:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Series A preferred stock; 7% cumulative dividend; convertible; $2 per share liquidation preference; no par value; 2,000,000 shares
authorized; none issued and outstanding</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Undesignated stock; $.01 par value; 14,490,000 shares authorized; none issued and outstanding</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Stock warrants</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,296</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,887</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Common stock; $.01 par value; 30,000,000 shares authorized; issued and outstanding 6,886,625 and 6,886,625 shares,
respectively</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">69</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">69</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Class B common stock; $.01 par value; 3,500,000 shares authorized; none issued and outstanding</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Additional paid-in capital</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">29,757</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">29,757</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Unearned compensation</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(387</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(434</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Notes receivable from officers and employees on common stock purchases</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,010</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,039</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Accumulated other comprehensive loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(54</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(156</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Accumulated deficit</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(12,460</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(9,825</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total stockholders&#146; equity</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22,211</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,259</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="76%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total liabilities and stockholders&#146; equity</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">146,957</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">137,410</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<TABLE CELLPADDING="0" CELLSPACING="0">
<TR>
<TD WIDTH="000" VALIGN="top" ALIGN="left"><DIV><FONT FACE="Times New Roman" SIZE="2">The</FONT></DIV></TD>
<TD WIDTH="006" VALIGN="top"><DIV>&nbsp;</DIV></TD>
<TD ALIGN="left" VALIGN="top"><DIV><FONT FACE="Times New Roman" SIZE="2">accompanying notes are an integral part of the unaudited condensed financial statements. </FONT></DIV> </TD></TR></TABLE> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4 </FONT></DIV>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2">
<A NAME="TX033_5">Condensed Statements of Cash Flows&#151;Three Months Ended March 31, 2002 and 2001</A> </FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">(Unaudited) </FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2">(In thousands) </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Three months ended<BR>March&nbsp;31,</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cash flows from operating activities:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,635</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,369</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Adjustments to reconcile net income to net cash (used in) provided by operating activities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Gain on sale of fixed assets</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(314</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(3</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Depreciation and amortization</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,258</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,289</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Amortization of debt issue costs, discounts and premiums</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">578</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">453</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Receivable provisions</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,501</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,858</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Issuance of subordinated debt for interest payment</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">170</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">166</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Non-cash compensation</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">64</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(43</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Change in operating assets and liabilities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,073</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(7,671</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net cash used in operating activities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(307</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(8,036</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cash flows from investing activities:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Purchases of property and equipment</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(31</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,474</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Proceeds from sale of property and equipment</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,073</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Payments on notes receivable</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">29</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">107</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net cash provided by (used in) investing activities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,071</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,354</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cash flows from financing activities:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Change in cash overdraft</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,415</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,187</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net borrowings under revolving credit facility</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">332</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,434</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Proceeds from financing lease</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">12,873</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Repayment of long-term debt</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(10,640</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,512</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Repayment of capital lease obligation</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(279</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Payment of debt issuance and financing costs</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(646</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:68px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net cash provided by financing activities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">225</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">10,109</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net change in cash and cash equivalents</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">989</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(281</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents at beginning of period</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">624</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">816</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents at end of period</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,613</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">535</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="text-indent:27px"><FONT FACE="Times New Roman" SIZE="2">The accompanying notes are an integral
part of the unaudited condensed financial statements. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">5 </FONT></DIV>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2">
<A NAME="TX033_6">Notes to Condensed Financial Statements (Unaudited) </A> </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>1.&nbsp;&nbsp;&nbsp;&nbsp;Presentation </B></FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position of PW Eagle, Inc. (the &#147;Company&#148;) at March 31, 2002, and the results of its operations and cash flows for the three month periods ended March 31, 2002 and 2001. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Although the Company&#146;s management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed financial statements be read in conjunction with the
financial statements of the Company included with its Annual Report on Form 10-K for the year ended December 31, 2001. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Certain reclassifications were
made to the prior year financial statements to conform to the March 31, 2002 presentation. Such reclassifications have no effect on net income or stockholders&#146; equity as previously stated. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;New Accounting Pronouncements </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Effective January 1, 2002 the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 142, &#147;Goodwill and Other Intangible Assets.&#148; This standard establishes new guidance on accounting for goodwill and intangible assets after a business combination is completed (i.e.,
post acquisition accounting). The standard discontinues the amortization of goodwill and indefinite lived intangible assets, requiring instead the periodic testing of these assets for impairment. Goodwill, net of accumulated amortization, was $3.7
million as of December 31, 2001 and was recorded in &#147;Other assets&#148; (long-term) on the accompanying balance sheet. The effect of adopting the new standard will reduce goodwill amortization expense by $112,000 annually. The Company plans to
complete its transitional impairment testing during the second quarter of fiscal 2002. Management does not expect any material changes to the carrying value of goodwill as a result of the adoption of SFAS No. 142. The policy for the periodic testing
for impairment will be finalized with the completion of the transitional testing. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Effective January 1, 2002, the Company also adopted SFAS No. 144,
&#147;Accounting for the Impairment or Disposal of Long-Lived Assets.&#148; This standard expands upon the fundamental provisions of SFAS No. 121, &#147;Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of.&#148; It also broadens the presentation of discontinued operations to include disposals of assets below the segment level. The Company is in the process of finalizing the policy for the periodic testing for impairment of long-lived assets.
</FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>3.&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive Income </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman"
SIZE="2">Comprehensive income for the Company includes net income, the transition adjustment for the adoption of FAS 133, changes in fair market value of financial instruments designated as hedges of interest rate exposure and changes in fair market
value of securities held for the non-qualified deferred compensation </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">6 </FONT></DIV>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">plans. Comprehensive income for the three months ended March 31, 2002 and 2001 was as follows (in thousands):
</FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Three months ended<BR>March&nbsp;31,</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="82%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,635</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,369</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="82%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Other comprehensive income:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="82%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Transition adjustment relating to the adoption of FAS 133, net of taxes</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(132</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="82%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Changes in fair market value of financial instrument designated as a hedge of interest rate exposure, net of taxes</FONT></DIV>
</TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">86</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(117</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="82%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Unrealized gain (loss) on securities from non-qualified deferred compensation plans</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(44</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="82%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total comprehensive loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,533</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,662</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>4.&nbsp;&nbsp;&nbsp;&nbsp;Other Financial Statement Data </B></FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The following provides additional information concerning inventory (in thousands): </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,<BR>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>December&nbsp;31,<BR>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="77%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Raw materials</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,717</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,968</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="77%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Finished goods</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23,790</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">25,422</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">31,507</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">33,390</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The following provides supplemental disclosure of significant non-cash operating, investing and financing
activities (in thousands): </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,<BR>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,<BR>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Receivable related to the sale of the Hillsboro facility (included in other current assets and gain on sale of fixed
assets)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">248</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Receivable related to the sale-leaseback transaction (included in other current assets and capital lease obligation)</FONT></DIV>
</TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">500</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Deferred financing costs related to the sale-leaseback transaction (included in other non-current assets and capital lease
obligation)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">564</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Issuance of warrant related to sale-leaseback transaction</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">409</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cancellation of restricted stock</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(102</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Issuance of restricted stock</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">186</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="80%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Issuance of common stock in exchange for notes receivable</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="9%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">112</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>5.&nbsp;&nbsp;&nbsp;&nbsp;Earnings per Common Share </B></FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Basic earnings per common share is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding. Diluted earnings per
common share assumes the exercise of stock options and warrants using the treasury stock method, if dilutive. The following tables reflect the calculation of basic and diluted earnings per share (EPS): </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>Three months ended March 31, 2002 </B></FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">(in thousands, except for per share
amounts) </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Loss</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Shares</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Per&nbsp;Share<BR>Amount</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>Basic EPS</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,635</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,704</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.39</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Effect of dilutive securities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>Diluted EPS</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,635</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,704</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.39</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
 </TABLE> </DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">7 </FONT></DIV>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT FACE="Times New Roman" SIZE="2">Options to purchase 1,102,125 shares of common stock, warrants to purchase 2,060,542 shares of common stock and 182,500 shares of unvested restricted stock were
outstanding at March 31, 2002, but were not included in the computation of diluted EPS because inclusion of these shares would be antidilutive. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>Three
months ended March 31, 2001 </B></FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">(in thousands, except for per share amounts) </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV
ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Loss</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Shares</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Per&nbsp;Share<BR>Amount</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>Basic EPS</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net income</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,369</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,887</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.17</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:40px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Effect of dilutive securities</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2"><B>Diluted EPS</B></FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="74%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net income</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,369</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right" WIDTH="7%"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,887</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.17</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Options to purchase 1,058,751 shares of common stock, warrants to purchase 1,940,542 shares of common
stock and 182,500 shares of unvested restricted stock were outstanding at March 31, 2001, but were not included in the computation of diluted EPS because inclusion of these shares would be antidilutive. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>6.&nbsp;&nbsp;&nbsp;&nbsp;FINANCING ARRANGEMENTS </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">On February 28, 2002, we
entered into revised loan agreements with the lenders of our Senior Credit Facility and holders of the Senior Subordinated Notes and completed a sale-leaseback transaction involving certain of our manufacturing facilities and the Eugene office
building. The revised loan agreements significantly reduced our 2002 and 2003 annual debt payments (including lease payments) from approximately $11 million to $5.6 million and $5.2 million in 2002 and 2003, respectively. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">In connection with these revisions, the lenders of the Senior Credit Facility and holders of the Senior Subordinated Notes waived any event of default arising from the
Company&#146;s past inability to comply with the financial covenants of these agreements. Principal payments under the revised Senior Credit Facility were reduced to $2.9 million annually. Under the revised loan agreements, principal payments on
Term Note A are due in quarterly installments of $0.7 million beginning March 31, 2002. Term Note A bears an interest rate of LIBOR plus 3%. The amended Revolving Credit Facility bears an interest rate of LIBOR plus 2.75%. The Company is required to
pay a fee equal to 0.5% on the unused portion of the Revolving Credit Facility. Additionally, the amount available under the Revolving Credit Facility was reduced from $50 million to $40 million. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2">Proceeds from the sale-leaseback transaction, along with proceeds from the sale of certain assets, were used to reduce Term Note A from $23.8 million to $17.6 million and pay amounts outstanding under Term
Note B totaling $3.8 million in full. The remaining proceeds were used to reduce the balance of the Company&#146;s Revolving Credit Facility by approximately $4 million. A capital lease obligation of approximately $14 million, with quarterly lease
payments of approximately $0.4 million, was recorded for financial reporting purposes. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">In connection with the sale-leaseback transaction, the Company
issued a warrant to purchase 120,000 shares of common stock at $0.01 per share. This warrant is exercisable at any time during the exercise </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">8 </FONT></DIV>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">period, which commenced February 28, 2002 and terminates on February 28, 2022. The warrant was valued at $409,000 and
was reflected as an increase to stockholders&#146; equity and a discount on the capital lease obligation. The discount on the capital lease obligation will be amortized to interest expense over the life of the obligation using the effective interest
method. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Under the revised financing agreements, the Company is required to comply with certain restrictive financial ratios and covenants relating to
minimum net worth, minimum fixed charge coverage, minimum interest coverage, funded debt to EBITDA (earnings before interest, taxes, depreciation and amortization), and maximum capital expenditures, as well as other customary covenants,
representations, warranties and funding conditions. Maintenance of these ratios and covenants is of particular concern given the uncertain economic climate in the United States and price stability of PVC pipe and PVC resin. In response, management
has implemented various cost reduction efforts and continues to focus on reducing costs in order to maintain compliance with its debt covenants. These efforts include the 2001 restructuring of operations, as well as the significant reduction in
fixed and contractual charges associated with the Company&#146;s revised loan agreements and sale-leaseback transaction. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The financial ratios and
covenants were amended for the quarter ended March 31, 2002, substituting a requirement of EBITDA of at least $400,000. The Company met this requirement. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman"
SIZE="2">Scheduled aggregate annual maturities of amounts classified as debt obligations at March 31, 2002, under terms of the revised loan agreements and the sale-leaseback capital lease obligation are (in thousands): </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Senior and<BR>Subordinated&nbsp;Debt<BR>and other notes</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Capital<BR>Leases</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Total</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">2002</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,560</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,238</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,798</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">2003</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,933</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,584</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">2004</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,733</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13,384</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">2005</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,935</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,586</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">2006</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,935</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,586</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Thereafter</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,934</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,354</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">34,288</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total scheduled cash payments</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">47,030</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">32,196</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">79,226</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Less amounts representing interest</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(19,047</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(19,047</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD> <HR NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="62%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Total amounts classified as debt/capital lease obligations at<BR>March 31, 2002</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">47,030</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13,149</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">60,179</FONT></DIV> </TD>
<TD NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE WIDTH="0" ALIGN="left" COLOR="#ffffff"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The fair market value of borrowing under the Senior Credit Facility fixed rate lock agreement and Senior
Subordinated Notes approximate their carrying value at March 31, 2002, as their applicable interest rates approximate current market rates. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman"
SIZE="2"><B>7.&nbsp;&nbsp;&nbsp;&nbsp;Litigation </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We are from time to time a party to various claims and litigation matters incidental to our normal
course of business. We are not a party to any material litigation and are not aware of any threatened litigation that would have a material adverse effect on our business. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">9 </FONT></DIV>


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 <DIV><FONT FACE="Times New Roman" SIZE="2"><B>ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp;MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The following
table sets forth items from our Statement of Operations as a percentage of net sales: </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="4" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Three months ended March&nbsp;31,</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2001</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net sales</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">100.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">%</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">100.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">%</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Cost of goods sold</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">88.2</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">85.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Gross profit</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11.8</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Operating expenses</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">14.8</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13.6</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Operating (loss) income</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(3.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.4</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Non-operating expense</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5.2</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Loss before income taxes</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(8.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(3.8</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Income tax benefit</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(3.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1.4</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="83%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(5.0</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)%</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2.4</FONT></DIV> </TD>
<TD COLSPAN="1" NOWRAP VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">)%</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We posted first quarter net sales in 2002 of $53 million, decreasing 9% from 2001 to 2002. Increased
demand for our products resulted in an increase in pounds of pipe sold of 21% in the first quarter of 2002 as compared to the same period in 2001. As a result of product prices decreasing throughout 2001 due to an industry wide oversupply of
finished goods and reduced raw material costs, product prices in 2002 were 24% below 2001 first quarter prices. These reduced product prices were the major cause of the decrease in net sales. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2">Gross profit, as a percentage of net sales, decreased by 3% in the first quarter of 2002 as compared to the same period in 2001. Our gross profit percentage has remained weak due to the economic conditions
that prevailed in 2001. During 2001, the supply for PVC resin and pipe was greater than demand. These oversupply conditions caused PVC resin and pipe prices to drop throughout the year. The demand for pipe was further reduced by the reluctance of
distributors to purchase pipe for inventory when pipe prices were dropping, and market conditions caused pipe prices to drop at a faster rate than resin prices. As a result, our gross profit percentage decreased throughout 2001. Product prices
continued to decrease during the first half of the current quarter. As demand for our products improved and PVC resin producers implemented price increases in February and March 2002, pipe price increases were implemented near the end of the first
quarter. These pipe price increases did not have a material effect on the first quarter. Accordingly, the gross profit percentage in the first quarter remained weak. We expect the gross profit percentage to improve in the second quarter of 2002 as
the benefits of higher PVC pipe prices are fully realized. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The increase in operating expenses, as a percentage of net sales, from 2001 to 2002 is the
result of decreased sales in combination with relatively stable fixed operating expenses. Actual general and administrative expense decreased by 9% in the first quarter of 2002 as compared to the same period in 2001 from the realized benefits of the
operational restructuring. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The income tax provisions for the quarters ended March 31, 2002 and 2001 were calculated based on management&#146;s
then-current estimates of the annual effective rate for the year. The estimated effective tax rate was approximately 38% for both periods presented. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10 </FONT></DIV>


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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>Liquidity and Capital Resources </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2">On February 22, 2002, we sold our previously closed facility in Hillsboro, along with certain equipment, for $1.3 million. We also entered into revised loan agreements on February 28, 2002 with the lenders of our
Senior Credit Facility and holders of the Senior Subordinated Notes and completed a sale-leaseback transaction of certain of our manufacturing facilities and the Eugene office building. The revised loan agreements significantly reduced our debt
payments (including lease payments) from approximately $11 million to $5.6 million and $5.2 million in 2002 and 2003, respectively, as summarized in the Schedule of Contractual Obligations set forth below. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">In connection with these revisions, the lenders of the Senior Credit Facility and holders of the Senior Subordinated Notes waived any Event of Default arising from our inability
to comply with the financial covenants of these agreements. Principal payments under the revised Senior Credit Facility were reduced from $10.0 million to $2.9 million annually. Under the revised loan agreements, term indebtedness bears an interest
rate of LIBOR plus 3%. The amended Revolving Credit Facility bears an interest rate of LIBOR plus 2.75%. Additionally, the amount available under the Revolving Credit Facility was reduced from $50 million to $40 million. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Proceeds from the sale-leaseback transaction, along with proceeds from the sale of our Hillsboro facility and certain equipment, were used to reduce our Term Note A from $23.8
million to $17.6 million and pay Term Note B in full. The remaining proceeds were used to reduce the balance of our Revolving Credit Facility by approximately $4 million. A capital lease obligation of approximately $14 million, with quarterly lease
payments of approximately $0.4 million, was recorded for financial reporting purposes. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">In connection with the sale-leaseback transaction, the Company
issued a warrant to purchase 120,000 shares of common stock at $0.01 per share. This warrant is exercisable at any time during the exercise period, which commenced February 28, 2002 and terminates on February 28, 2022. The warrant was valued at
$409,000 and was reflected as an increase to stockholders&#146; equity and a discount on the capital lease obligation. The discount on the capital lease obligation will be amortized to interest expense over the life of the obligation using the
effective interest method. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Under the revised loan agreements, we are required to comply with certain restrictive financial ratios and covenants relating
to minimum net worth, minimum fixed charge coverage, minimum interest coverage, funded debt to EBITDA (earnings before interest, taxes, depreciation and amortization) and maximum capital expenditures, as well as other customary covenants,
representations, warranties and funding conditions. Maintenance of these ratios and covenants is of particular concern given the uncertain economic climate in the United States and price stability of PVC pipe and PVC resin. In response, we have
implemented various cost reduction efforts and continue to focus on reducing costs in order to maintain compliance with our debt covenants. These efforts include the 2001 restructuring of operations discussed later in this section, as well as the
significant reduction in fixed and contractual charges associated with our revised loan agreements and the sale-leaseback transaction. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The financial
ratios and covenants were amended for the quarter ended March 31, 2002, substituting a requirement of EBITDA of at least $400,000. The Company met this requirement. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2">A schedule of the Company&#146;s obligations under various long-term debt arrangements, including the sale-leaseback transaction accounted for as a capital lease, operating leases and other arrangements, are
summarized in the following table (excluding payments of $1.0 million made during quarter ended March 31, 2002): </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">11 </FONT></DIV>


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<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE">

<TR>
<TD VALIGN="bottom" WIDTH="34%"> <DIV><FONT FACE="Times New Roman" SIZE="1"><B>Scheduled Contractual Obligations</B></FONT></DIV> <HR SIZE="2" NOSHADE WIDTH="198" ALIGN="left" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Total</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2002</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2003</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2004</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2005</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>2006</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>After 5<BR>Years</B></FONT></DIV> <HR SIZE="2" NOSHADE COLOR="#000000"></TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="34%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Term Note</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17,600</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,932</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,932</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,736</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"> &#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"> &#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"> &#151;</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="34%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Senior Subordinated Notes</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">29,453</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,818</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,818</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,817</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="34%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Capital lease obligation</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">33,017</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,651</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,762</FONT></DIV> </TD> </TR>
<TR>
<TD VALIGN="top" WIDTH="34%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Operating leases</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,542</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">720</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">538</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">548</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">310</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">315</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,111</FONT></DIV> </TD> </TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" WIDTH="34%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Other notes</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">366</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">306</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">60</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR NOSHADE COLOR="#000000"></TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">83,978</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,609</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,181</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13,935</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,779</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,784</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <DIV><FONT FACE="Times New Roman" SIZE="2">$</FONT></DIV> </TD>
<TD VALIGN="bottom"> <DIV ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">35,690</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD> <HR SIZE="4" NOSHADE ALIGN="right" COLOR="#000000"></TD>
<TD> <HR SIZE="4" NOSHADE COLOR="#000000"></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We had working capital of $1.1 million and excess borrowing capacity under our Revolving Credit Facility
of $5.3 million at March 31, 2002. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Cash used in operating activities was $0.3 million in 2002, as compared to $8.0 million in the first quarter of 2001.
The primary use of cash in 2001 was to fund the growth in accounts receivable. In addition, in the first quarter of 2001, performance bonuses and supplemental contributions to employee 401k accounts were paid to employees resulting from the
Company&#146;s year 2000 financial performance. No performance bonuses or supplemental contributions to employee 401k accounts were paid to employees in 2002 due to the Company&#146;s 2001 financial performance. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Investing activities provided $1.1 million in proceeds from the sale of the Hillsboro facility and certain equipment. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<DIV><FONT FACE="Times New Roman" SIZE="2">Financing activities provided $0.2 million in 2002 and provided $10.1 million in 2001. In 2002, we entered into a sale-leaseback transaction, generating $12.9 million in proceeds. We used the proceeds to
reduce term debt by $8.8 million. The remaining sale-leaseback proceeds were applied to the Revolving Credit Facility. Debt issuance and financing costs of $0.6 million were incurred to complete these transactions. These costs will be amortized and
expensed as interest expense over the life of the respective loans. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We had commitments for capital expenditures of $0.2 million at March 31, 2002, which
we intend to fund from operating profits. Additional sources of liquidity, if needed, include our revolving credit line. We believe we have the financial resources needed to meet our current and future business requirements, including working
capital requirements. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We announced a restructuring plan on July 26, 2001 to align our operations with market conditions. The restructuring plan included
an 11% reduction to the Company&#146;s workforce, permanently closing the Hillsboro manufacturing facility, temporarily closing our Phoenix facility and initiating focused cost reduction programs throughout the Company. By March 31, 2002, we paid
out approximately $0.9 million in severance payments and $0.1 million in other costs, with a remaining balance owing of $0.2 million to be paid in contracts extending through April 2004. We believe the restructuring plan will provide the Company
with annual cost savings in excess of $8 million, the majority of which will occur in reduced manufacturing costs. (See &#147;Future Outlook and Risks to Our Business.&#148;) </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2"><B>New Accounting Pronouncements </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Effective January 1, 2002 we adopted Statement of Financial Accounting Standards
(SFAS) No. 142, &#147;Goodwill and Other Intangible Assets.&#148; This standard establishes new guidance on accounting for goodwill and intangible assets after a business combination is completed (i.e., post acquisition accounting). The standard
discontinues the amortization of goodwill and indefinite lived intangible assets, requiring instead the periodic testing of these assets for impairment. Goodwill, net of accumulated </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">12 </FONT></DIV>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#TOC">Table of Contents</a></h5>

 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">amortization, was $3.7 million as of December 31, 2001 and was recorded in &#147;Other assets&#148; (long-term) on the
accompanying balance sheet. The effect of adopting the new standard will reduce goodwill amortization expense by $112,000 annually. We plan to complete its transitional impairment testing during the second quarter of fiscal 2002. Management does not
expect any material changes to the carrying value of goodwill as a result of the adoption of SFAS No. 142. The policy for the periodic testing for impairment will be finalized with the completion of the transitional testing.<B></B> </FONT></DIV>
<DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Effective January 1, 2002, we also adopted SFAS No. 144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets.&#148; This standard expands upon the
fundamental provisions of SFAS No. 121, &#147;Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.&#148; It also broadens the presentation of discontinued operations to include disposals of assets below the
segment level. We are in the process of finalizing the policy for the periodic testing for impairment of long-lived assets. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>Future Outlook and Risks
to Our Business </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">INFORMATION IN THIS OUTLOOK SECTION AND OTHER STATEMENTS IN THIS FORM 10-Q ARE FORWARD LOOKING INFORMATION&#151;ACTUAL RESULTS MAY
DIFFER </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">The statements contained above in Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations that are not
strictly historical and the statements set forth in this Outlook section are forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect our expectations and
beliefs as of May 10, 2002 and are based on information known to us and our assumptions as of that date. These forward-looking statements involve known and unknown business risks and risks that we cannot control. As a result, our statements may not
come true and our operating results may differ materially from our stated expectations and beliefs. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Some of our current beliefs and expectations are
discussed below along with risk factors that impact our business and industry. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><I>Forward-Looking Statements </I></FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We believe the demand for PVC pipe will return to normal levels when PVC resin and PVC pipe prices stabilize and/or begin to increase and the economy improves. The Gross
Domestic Product (GDP) directly affects the PVC resin and PVC pipe industries, and we recognize that our business is tied to economic cycles. Gross Domestic Product (GDP) improved significantly in the first quarter of 2002 increasing 5.8% compared
to a 1.7% increase in fourth quarter of 2001. We believe GDP will continue to be strong in 2002 resulting in improved demand for PVC resin and PVC pipe. Because PVC producers and pipe producers began 2002 with low finished goods inventories and GDP
has improved, and in our opinion, will continue to be strong, we believe that the demand for PVC resin and PVC pipe will be greater than the supply of these products during the second and third quarters of this year. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Demand for PVC resin is strong and resin producers have implemented a two-cent per pound price increase for February, March and April. In addition, they have announced a
two-cent per pound price increase for May and a four-cent per pound price increase for June. PW Eagle and the PVC pipe industry have implemented and announced several pipe price increases in response to these resin price increases and we expect
resin and pipe prices to increase further during the remainder of 2002. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We believe that the demand for PVC resin and PVC pipe will be greater than the
supply of these products during the second and third quarter of 2002. Consequently, we would expect our gross margins to </FONT></DIV> <P></P>
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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">improve in these economic conditions. Our shipments of PVC pipe have increased by 21% in the first quarter of 2002 as
compared to the first quarter of 2001. Industry wide demand for PVC pipe is strong due to a strengthening economy and necessary inventory replenishments. <B></B> </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman"
SIZE="2">Over time, we expect the demand for plastic pipe to grow as acceptance of plastic pipe over metal pipe continues and the overall economy continues to grow. Industry growth projections call for sales growth rates for plastic pipe of three
percent or greater per year through 2003. The actual growth rate in each year may be less than or greater than three percent based on short-term economic conditions. We have historically grown, and expect in the future to be able to grow at rates in
excess of the industry averages due to our emphasis on customer satisfaction and product quality. Our strategy has been, and continues to be, to concentrate growth initiatives in higher profit products and geographic regions. </FONT></DIV>
<DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">In response to the reduction in the price and demand for PVC resin and PVC pipe in 2001, we implemented operational and financial restructuring plans. In July 2001,
we announced an operational restructuring plan in response to the existing unfavorable PVC resin and PVC pipe price and poor economic conditions. We permanently closed and sold the Hillsboro, Oregon production facility, and temporarily suspended
operations of the Phoenix, Arizona manufacturing facility until customer demand requires additional capacity. In the first quarter, we decreased our operating expenses, eliminating non-essential costs, and increased our production efficiencies. We
also successfully completed our financial restructuring plan. Elements of the plan included a $13.7 million real estate sale-leaseback financing transaction, the sale of our Hillsboro facility and certain equipment for approximately $1.3 million and
the revision of our lending agreements. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We believe the operational restructuring we completed in 2001 and the financial restructuring we completed in
February 2002 have positioned the Company for continued viability and future success. We believe these restructurings will allow us to meet our fixed charges, even if the unfavorable economic conditions that we faced in 2001 continue. </FONT></DIV>
<DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><I>Risk Factors </I></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>The pipe industry and our business are heavily
dependent on the price and trend of PVC resin, our main raw material. </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Our gross margin percentage is sensitive to PVC and PE raw material resin
prices and the demand for PVC and PE pipe. Historically, when resin prices are rising or stable, our margins and sales volume have been higher. Conversely, when resin prices are falling, our sales volumes and margins have been lower. During 2002,
PVC resin producers have implemented PVC resin price increases of $.02 per pound for February, March and April. In addition, they have announced an increase of $.02 per pound for May and $.04 per pound in June for a total of $.12 per pound for the
first half of 2002. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Our gross margin decreases when the supply of PVC and PVC pipe is greater than demand. Conversely, our gross margins improve when
PVC resin and PVC pipe are in short supply. At the end of 2001, PVC resin producers and PVC pipe producers and distributors had reduced inventories to historically low levels. In April 2001, a major producer of PVC resin filed for bankruptcy and,
during the current quarter, ceased operations at two manufacturing facilities. This has resulted in a reduction of approximately one billion pounds of production capacity, or 5% of the North American industry capacity.<B></B> </FONT></DIV>
<DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>The demand for our products is directly affected by the growth and contraction of the Gross Domestic Product and economic conditions. </B></FONT></DIV> <P></P>
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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Due to the commodity nature of PVC resin and PVC pipe and the dynamic supply and demand factors worldwide, the markets
for both PVC resin and PVC pipe have historically been very cyclical with significant fluctuations in prices and gross margins. Generally, after a period of rising or stable prices, capacity has increased to exceed demand with a resulting decrease
in prices and gross margins. Over the last ten years, there have been consolidations in both markets, particularly with respect to PVC resin manufacturers. During the same period, the capacity of the PVC resin producers has increased from just over
9 billion pounds to almost 17 billion pounds today. Published PVC resin prices have fluctuated from a high of approximately $.44 per pound in 1988 to a low of approximately $.26 per pound in 1992 to a high of approximately $.40 per pound in 1995 to
a low of approximately $.25 per pound in 1999 to a high of approximately $.40 per pound in 2000 to a low of approximately $.25 per pound at the end of 2001 to its current level of approximately $.29 per pound in March 2002. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">While we expect the demand for PVC pipe to continue to increase over the long term, we also expect that the industry will continue to be subject to cyclical fluctuations when
supply will exceed demand, driving prices and gross margins down. These conditions could result from a general economic slowdown, either domestically or elsewhere in the world, or capacity increases in either the PVC resin or PVC pipe markets. As a
result of the size of both the PVC resin and PVC pipe markets and the consolidation that has occurred in these industries, we believe that fluctuations in prices from capacity increases are likely to be less extreme than they have been historically.
General economic conditions both in the United States and abroad will, however, continue to have a significant impact on our prices and gross margins. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman"
SIZE="2"><B>We have a significant amount of outstanding debt and must continue to operate our business to meet our outstanding obligations. </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We have
a significant amount of indebtedness outstanding. As a result, we must allocate a significant portion of cash resources to pay the principal and interest on this debt. During 2002, we implemented a financial restructuring to reduce our annual fixed
charges. However, economic and market conditions could develop that cause us not to meet our fixed charges and default on our credit facilities. In the event of a default, we will be required to either obtain a waiver from our lenders or amend our
lending agreements. There is no assurance that our lenders, note holders and lessors will waive any future default or agree to any future amendments of our credit facilities and leases. If we fail to obtain a waiver or amendment, we would be
required to obtain new financing from alternative financial sources. There is no assurance that we could obtain new financing, and if we did, there is no assurance that we could obtain terms as favorable as our current credit facilities.
</FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>Interest rates affect our ability to finance our indebtedness and may adversely affect the demand for our products when higher rates slow the growth
of the economy. </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We financed the purchase of PWPipe in 1999 using a $100 million Senior Credit Facility and approximately $32 million of Senior
Subordinated Notes. On February 28, 2002, we completed a financial restructuring to reduce our floating interest rate term notes from $27.5 million to $17.6 million. However, even with the reduction of our debt, our ability to service our debt
remains sensitive to an increase in interest rates. A one percent change in interest rates would further challenge our ability to pay the interest expense on our debt and fixed charges. In addition, an increase in interest rates could slow the
growth of the economy and affect the demand for our products. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>Other risk factors </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2">In addition to the risk factors discussed above, our business is also affected by the following: (i) adverse weather conditions that result in a slow down in construction and the demand for our products; (ii)
competition in the PVC resin and pipe industry that puts pressure on the price of PVC resin and demand </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">15 </FONT></DIV>


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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">for PVC pipe; and (iii) net operating loss utilization. For financial reporting purposes, the Company&#146;s cumulative
deferred tax asset recorded in prior years totaling approximately $13.5 million associated with net operating loss carryforwards, has been fully utilized, including approximately $4.0 million in the first half of 2000. We have evaluated
tax-reporting compliance relating to the past and fiscal 2000 utilization of the net operating loss carryforwards, and believe we have complied in all respects. A failure to meet the requirements could result in a loss or limitation of the
utilization of carryforwards, which could have a material adverse effect on our financial position and results of operations in future periods. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>ITEM
3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_8">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We are exposed to certain market risks on outstanding interest rate
long-term debt obligations totaling $32.4 million of our $44.9 million of long-term variable rate debt at March 31, 2002. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. Market risk
is estimated as the potential increase in fair value resulting from a hypothetical one percent increase in interest rates and would result in an annual interest expense increase of approximately $324,000. </FONT></DIV> <DIV><FONT
SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We do not enter into derivatives or other financial instruments for trading or speculative purposes. We only enter into financial instruments to manage and reduce the impact of
changes in interest on our Credit Facility. In November 1999, under covenants of our Senior Credit Facility, we entered into a fixed rate agreement (the &#147;Contract&#148;) for three years with a LIBOR rate of 6.46%. At March 31, 2002 the Contract
has a notional amount of $12.5 million. The notional amount decreases until the Contract terminates in September 2002. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">16 </FONT></DIV>


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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PART II.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_9">OTHER INFORMATION</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>ITEM 1.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_10">LEGAL PROCEEDINGS </A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">We are from time to time a party to various claims and litigation matters incidental to our normal course
of business. We are not a party to any material litigation and are not aware of any threatened litigation that would have a material adverse effect on our business. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2"><B>ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_11">CHANGES IN SECURITIES AND USE OF PROCEEDS </A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">On February 28, 2002, the Company issued a warrant to purchase 120,000 shares of
common stock to Corporate Property Associates 14 Incorporated in connection with the Company&#146;s sale and leaseback financing transaction. The warrant was issued in consideration for the terms and conditions of the lease agreement by and between
the Company and an affiliate of W.P. Carey &amp; Co. LLC. The warrant was issued, pursuant to section 4(2) of the Securities Act of 1933, to a single accredited investor pursuant to a privately negotiated transaction. The warrant is exercisable
immediately at $0.01 per share and expires on February 28, 2022. The warrant provides the holder anti-dilution and registration rights. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>ITEM
3.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_12">DEFAULTS UPON SENIOR SECURITIES </A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">None. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2"><B>ITEM 4.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_13">SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">None. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT
FACE="Times New Roman" SIZE="2"><B>ITEM 5.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_14">OTHER INFORMATION</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">None. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">17 </FONT></DIV>


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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>ITEM 6.&nbsp;&nbsp;&nbsp;&nbsp;
<A NAME="TX033_15">EXHIBITS AND REPORTS ON FORM 8-K</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
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<TR>
<TD WIDTH="027"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="013" VALIGN="top" ALIGN="left"><DIV><FONT FACE="Times New Roman" SIZE="2">(a)</FONT></DIV></TD>
<TD WIDTH="006" VALIGN="top"><DIV>&nbsp;</DIV></TD>
<TD ALIGN="left" VALIGN="top"><DIV><FONT FACE="Times New Roman" SIZE="2">Exhibits </FONT></DIV> </TD></TR></TABLE> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="margin-left:54px"><FONT FACE="Times New Roman" SIZE="2">None. </FONT></DIV>
<DIV><FONT SIZE="1">&nbsp;</FONT></DIV>
<TABLE CELLPADDING="0" CELLSPACING="0">
<TR>
<TD WIDTH="027"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="013" VALIGN="top" ALIGN="left"><DIV><FONT FACE="Times New Roman" SIZE="2">(b)</FONT></DIV></TD>
<TD WIDTH="006" VALIGN="top"><DIV>&nbsp;</DIV></TD>
<TD ALIGN="left" VALIGN="top"><DIV><FONT FACE="Times New Roman" SIZE="2">Reports on Form 8-K </FONT></DIV> </TD></TR></TABLE> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="margin-left:54px"><FONT FACE="Times New Roman" SIZE="2">We filed the
following report on Form 8-K during the first quarter of 2002: </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV STYLE="margin-left:54px"><FONT FACE="Times New Roman" SIZE="2">The Company filed a Form 8-K dated March 1, 2002 reporting the
issuance of press releases announcing the financial results for the three months and year ended December 31, 2001, the completion of a sale-leaseback financing transaction and the sale of the Company&#146;s previously closed facility in Hillsboro,
Oregon. </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">18 </FONT></DIV>


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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="TX033_16">SIGNATURES</A> </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized. </FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2"><B>PW EAGLE, INC. </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV>
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<TR>
<TD HEIGHT="16"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="3%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="91%"> <DIV><FONT FACE="Times New Roman" SIZE="2">/s/ William H. Spell</FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">William H.
Spell</FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Chief Executive Officer</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD HEIGHT="16"> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="3%"> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" WIDTH="91%"> <DIV><FONT FACE="Times New Roman" SIZE="2">/s/ Roger R. Robb</FONT></DIV> <HR NOSHADE COLOR="#000000" ALIGN="left"><DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Roger R.
Robb</FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">Chief Financial Officer</FONT></DIV> <DIV STYLE="margin-left:13px; text-indent:-13px"><FONT FACE="Times New Roman" SIZE="2">(Principal Financial
and Accounting Officer)</FONT></DIV> </TD> </TR>
<TR>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;</FONT></TD>
<TD> <FONT SIZE="1">&nbsp;</FONT></TD> </TR>
 </TABLE> </DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV><FONT FACE="Times New Roman" SIZE="2">Dated: May 10, 2002 </FONT></DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">19 </FONT></DIV>


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 <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT INDEX </B></FONT></DIV> <DIV><FONT SIZE="1">&nbsp;</FONT></DIV> <DIV ALIGN="center">
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<TR>
<TD VALIGN="bottom" ALIGN="center"> <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number</B></FONT></DIV> <HR SIZE="2" NOSHADE WIDTH="44" COLOR="#000000"></TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"> <DIV><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></DIV> <HR SIZE="2" NOSHADE WIDTH="65" ALIGN="left" COLOR="#000000"></TD> </TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="8%"> <DIV STYLE="margin-left:13px; text-indent:-13px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10.1</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"> <DIV><FONT FACE="Times New Roman" SIZE="2">Fourteenth Amendment to Second Amended and Restated Loan and Security Agreement dated March 27, 2002.</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="8%"> <DIV STYLE="margin-left:13px; text-indent:-13px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10.2</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"> <DIV><FONT FACE="Times New Roman" SIZE="2">Amendment No. 4 and waiver to the Securities Purchase Agreement dated as of March 27, 2002.</FONT></DIV> </TD> </TR>
<TR>
<TD HEIGHT="8"> </TD> </TR>
<TR>
<TD VALIGN="top" ALIGN="center" WIDTH="8%"> <DIV STYLE="margin-left:13px; text-indent:-13px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10.3</FONT></DIV> </TD>
<TD VALIGN="bottom" WIDTH="3%"><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" WIDTH="91%"> <DIV><FONT FACE="Times New Roman" SIZE="2">Warrant agreement to purchase 120,000 shares of stock issued to Corporate Property Associates 14 Incorporated dated February 28, 2002.</FONT></DIV> </TD> </TR>
 </TABLE> </DIV> <P></P>
 <DIV ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">20 </FONT></DIV>

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{"company-data": {"conformed-name": "PW EAGLE INC", "cik": "0000852426", "assigned-sic": "3080", "irs-number": "411642846", "state-of-incorporation": "MN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-18050", "film-number": "02652329"}, "business-address": {"street1": "222 SOUTH NINTH STREET", "street2": "SUITE 2880", "city": "MINNEAPOLIS", "state": "MN", "zip": "55402", "phone": "6123050339"}, "mail-address": {"street1": "222 SOUTH NINTH STREET", "street2": "SUITE 2880", "city": "MINNEAPOLIS", "state": "MN", "zip": "55402"}, "former-company": [{"former-conformed-name": "BHH INC", "date-changed": "19891019"}, {"former-conformed-name": "BLACK HAWK HOLDINGS INC /MN/", "date-changed": "19920703"}, {"former-conformed-name": "EAGLE PACIFIC INDUSTRIES INC/MN", "date-changed": "19950726"}]}
Prepared by R.R. Donnelley Financial -- Form 10-Q
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10–Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 0–18050
PW EAGLE, INC.
(Exact name of registrant as specified in its Charter)
MINNESOTA
41-1642846
(State of incorporation)
(I.R.S. Employer Identification No.)
222 South Ninth Street, Suite 2880
Minneapolis, Minnesota 55402
(Address
of principal executive offices)
Registrant's telephone number, including area code: (612) 305-0339
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
No
The number of shares of the registrant's Common Stock, $.01 par value per
share, outstanding as of May 10, 2002 was 7,029,250.
Table of Contents
PW EAGLE, INC.
INDEX
PAGE NO.
PART I.
FINANCIAL INFORMATION
ITEM 1.
CONDENSED FINANCIAL STATEMENTS
Condensed Statements of Operations—Three Months Ended March 31, 2002 and 2001 (Unaudited)
3
Condensed Balance Sheets—March 31, 2002 (Unaudited) and December 31, 2001
4
Condensed Statements of Cash Flows—Three Months Ended March 31, 2002 and 2001 (Unaudited)
5
Notes to Condensed Financial Statements
6
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
16
PART II
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
17
ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS
17
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
17
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
17
ITEM 5.
OTHER INFORMATION
17
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
18
SIGNATURES
19
2
Table of Contents
PART I.
FINANCIAL INFORMATION
ITEM 1.
CONDENSED FINANCIAL STATEMENTS
PW EAGLE, INC.
Condensed Statements of Operations—Three Months Ended March 31, 2002 and 2001
(Unaudited)
(In thousands, except per share amounts)
Three months ended
March 31,
2002
2001
Net sales
$
53,104
$
58,045
Cost of goods sold
46,842
49,319
Gross profit
6,262
8,726
Operating expenses:
Selling expenses
5,756
5,618
General and administrative expenses
2,096
2,310
7,852
7,928
Operating (loss) income
(1,590
)
798
Non-operating expenses (income):
Interest expense
3,005
3,030
Other income, net
(325
)
(14
)
2,680
3,016
Loss before income taxes
(4,270
)
(2,218
)
Income tax benefit
(1,635
)
(849
)
Net loss
$
(2,635
)
$
(1,369
)
Loss per common share:
Basic
$
(0.39
)
$
(0.17
)
Diluted
$
(0.39
)
$
(0.17
)
Weighted average common shares outstanding:
Basic
6,704
7,887
Diluted
6,704
7,887
The accompanying notes are an integral
part of the unaudited condensed financial statements.
3
Table of Contents
PW EAGLE INC.
Condensed Balance Sheets—March 31, 2002 and December 31, 2001
(In thousands, except per share amounts)
March 31,
2002
December 31,
2001
ASSETS
(Unaudited)
Current assets:
Cash and cash equivalents
$
1,613
$
624
Accounts receivable, net
24,827
12,918
Inventories
31,507
33,390
Deferred income taxes
2,033
2,033
Income taxes receivable
5,749
4,156
Other
1,139
1,250
Total current assets
66,868
54,371
Property and equipment, net
65,236
67,827
Other assets
14,853
15,212
Total assets
$
146,957
$
137,410
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under revolving credit facility
$
28,328
$
27,996
Current maturities of long-term debt
3,393
3,595
Accounts payable
25,982
16,145
Accrued liabilities
8,112
8,066
Total current liabilities
65,815
55,802
Other long-term liabilities
2,045
3,625
Long-term debt, less current maturities
13,933
24,271
Capital lease obligation, less current maturities
13,149
—
Senior subordinated debt
29,804
29,453
Total liabilities
124,746
113,151
Commitments and contingencies
Stockholders' equity:
Series A preferred stock; 7% cumulative dividend; convertible; $2 per share liquidation preference; no par value; 2,000,000 shares
authorized; none issued and outstanding
—
—
Undesignated stock; $.01 par value; 14,490,000 shares authorized; none issued and outstanding
—
—
Stock warrants
6,296
5,887
Common stock; $.01 par value; 30,000,000 shares authorized; issued and outstanding 6,886,625 and 6,886,625 shares,
respectively
69
69
Class B common stock; $.01 par value; 3,500,000 shares authorized; none issued and outstanding
—
—
Additional paid-in capital
29,757
29,757
Unearned compensation
(387
)
(434
)
Notes receivable from officers and employees on common stock purchases
(1,010
)
(1,039
)
Accumulated other comprehensive loss
(54
)
(156
)
Accumulated deficit
(12,460
)
(9,825
)
Total stockholders' equity
22,211
24,259
Total liabilities and stockholders' equity
$
146,957
$
137,410
The
accompanying notes are an integral part of the unaudited condensed financial statements.
4
Table of Contents
PW EAGLE, INC.
Condensed Statements of Cash Flows—Three Months Ended March 31, 2002 and 2001
(Unaudited)
(In thousands)
Three months ended
March 31,
2002
2001
Cash flows from operating activities:
Net loss
$
(2,635
)
$
(1,369
)
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Gain on sale of fixed assets
(314
)
(3
)
Depreciation and amortization
2,258
2,289
Amortization of debt issue costs, discounts and premiums
578
453
Receivable provisions
(1,501
)
(1,858
)
Issuance of subordinated debt for interest payment
170
166
Non-cash compensation
64
(43
)
Change in operating assets and liabilities
1,073
(7,671
)
Net cash used in operating activities
(307
)
(8,036
)
Cash flows from investing activities:
Purchases of property and equipment
(31
)
(2,474
)
Proceeds from sale of property and equipment
1,073
13
Payments on notes receivable
29
107
Net cash provided by (used in) investing activities
1,071
(2,354
)
Cash flows from financing activities:
Change in cash overdraft
(1,415
)
1,187
Net borrowings under revolving credit facility
332
11,434
Proceeds from financing lease
12,873
—
Repayment of long-term debt
(10,640
)
(2,512
)
Repayment of capital lease obligation
(279
)
—
Payment of debt issuance and financing costs
(646
)
—
Net cash provided by financing activities
225
10,109
Net change in cash and cash equivalents
989
(281
)
Cash and cash equivalents at beginning of period
624
816
Cash and cash equivalents at end of period
$
1,613
$
535
The accompanying notes are an integral
part of the unaudited condensed financial statements.
5
Table of Contents
PW EAGLE, INC.
Notes to Condensed Financial Statements (Unaudited)
1.    Presentation
In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position of PW Eagle, Inc. (the "Company") at March 31, 2002, and the results of its operations and cash flows for the three month periods ended March 31, 2002 and 2001. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Although the Company's management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed financial statements be read in conjunction with the
financial statements of the Company included with its Annual Report on Form 10-K for the year ended December 31, 2001.
Certain reclassifications were
made to the prior year financial statements to conform to the March 31, 2002 presentation. Such reclassifications have no effect on net income or stockholders' equity as previously stated.
2.    New Accounting Pronouncements
Effective January 1, 2002 the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." This standard establishes new guidance on accounting for goodwill and intangible assets after a business combination is completed (i.e.,
post acquisition accounting). The standard discontinues the amortization of goodwill and indefinite lived intangible assets, requiring instead the periodic testing of these assets for impairment. Goodwill, net of accumulated amortization, was $3.7
million as of December 31, 2001 and was recorded in "Other assets" (long-term) on the accompanying balance sheet. The effect of adopting the new standard will reduce goodwill amortization expense by $112,000 annually. The Company plans to
complete its transitional impairment testing during the second quarter of fiscal 2002. Management does not expect any material changes to the carrying value of goodwill as a result of the adoption of SFAS No. 142. The policy for the periodic testing
for impairment will be finalized with the completion of the transitional testing.
Effective January 1, 2002, the Company also adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This standard expands upon the fundamental provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." It also broadens the presentation of discontinued operations to include disposals of assets below the segment level. The Company is in the process of finalizing the policy for the periodic testing for impairment of long-lived assets.
3.    Comprehensive Income
Comprehensive income for the Company includes net income, the transition adjustment for the adoption of FAS 133, changes in fair market value of financial instruments designated as hedges of interest rate exposure and changes in fair market
value of securities held for the non-qualified deferred compensation
6
Table of Contents
plans. Comprehensive income for the three months ended March 31, 2002 and 2001 was as follows (in thousands):
Three months ended
March 31,
2002
2001
Net loss
$
(2,635
)
$
(1,369
)
Other comprehensive income:
Transition adjustment relating to the adoption of FAS 133, net of taxes
—
(132
)
Changes in fair market value of financial instrument designated as a hedge of interest rate exposure, net of taxes
86
(117
)
Unrealized gain (loss) on securities from non-qualified deferred compensation plans
16
(44
)
Total comprehensive loss
$
(2,533
)
$
(1,662
)
4.    Other Financial Statement Data
The following provides additional information concerning inventory (in thousands):
March 31,
2002
December 31,
2001
Raw materials
$
7,717
$
7,968
Finished goods
23,790
25,422
$
31,507
$
33,390
The following provides supplemental disclosure of significant non-cash operating, investing and financing
activities (in thousands):
March 31,
2002
March 31,
2001
Receivable related to the sale of the Hillsboro facility (included in other current assets and gain on sale of fixed
assets)
248
—
Receivable related to the sale-leaseback transaction (included in other current assets and capital lease obligation)
500
—
Deferred financing costs related to the sale-leaseback transaction (included in other non-current assets and capital lease
obligation)
564
—
Issuance of warrant related to sale-leaseback transaction
409
—
Cancellation of restricted stock
—
(102
)
Issuance of restricted stock
—
186
Issuance of common stock in exchange for notes receivable
—
112
5.    Earnings per Common Share
Basic earnings per common share is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding. Diluted earnings per
common share assumes the exercise of stock options and warrants using the treasury stock method, if dilutive. The following tables reflect the calculation of basic and diluted earnings per share (EPS):
Three months ended March 31, 2002
(in thousands, except for per share
amounts)
Loss
Shares
Per Share
Amount
Basic EPS
Net loss
$
(2,635
)
6,704
$
(0.39
)
Effect of dilutive securities
—
—
—
Diluted EPS
Net loss
$
(2,635
)
6,704
$
(0.39
)
7
Table of Contents
Options to purchase 1,102,125 shares of common stock, warrants to purchase 2,060,542 shares of common stock and 182,500 shares of unvested restricted stock were
outstanding at March 31, 2002, but were not included in the computation of diluted EPS because inclusion of these shares would be antidilutive.
Three
months ended March 31, 2001
(in thousands, except for per share amounts)
Loss
Shares
Per Share
Amount
Basic EPS
Net income
$
(1,369
)
7,887
$
(0.17
)
Effect of dilutive securities
—
—
—
Diluted EPS
Net income
$
(1,369
)
7,887
$
(0.17
)
Options to purchase 1,058,751 shares of common stock, warrants to purchase 1,940,542 shares of common
stock and 182,500 shares of unvested restricted stock were outstanding at March 31, 2001, but were not included in the computation of diluted EPS because inclusion of these shares would be antidilutive.
6.    FINANCING ARRANGEMENTS
On February 28, 2002, we
entered into revised loan agreements with the lenders of our Senior Credit Facility and holders of the Senior Subordinated Notes and completed a sale-leaseback transaction involving certain of our manufacturing facilities and the Eugene office
building. The revised loan agreements significantly reduced our 2002 and 2003 annual debt payments (including lease payments) from approximately $11 million to $5.6 million and $5.2 million in 2002 and 2003, respectively.
In connection with these revisions, the lenders of the Senior Credit Facility and holders of the Senior Subordinated Notes waived any event of default arising from the
Company's past inability to comply with the financial covenants of these agreements. Principal payments under the revised Senior Credit Facility were reduced to $2.9 million annually. Under the revised loan agreements, principal payments on
Term Note A are due in quarterly installments of $0.7 million beginning March 31, 2002. Term Note A bears an interest rate of LIBOR plus 3%. The amended Revolving Credit Facility bears an interest rate of LIBOR plus 2.75%. The Company is required to
pay a fee equal to 0.5% on the unused portion of the Revolving Credit Facility. Additionally, the amount available under the Revolving Credit Facility was reduced from $50 million to $40 million.
Proceeds from the sale-leaseback transaction, along with proceeds from the sale of certain assets, were used to reduce Term Note A from $23.8 million to $17.6 million and pay amounts outstanding under Term
Note B totaling $3.8 million in full. The remaining proceeds were used to reduce the balance of the Company's Revolving Credit Facility by approximately $4 million. A capital lease obligation of approximately $14 million, with quarterly lease
payments of approximately $0.4 million, was recorded for financial reporting purposes.
In connection with the sale-leaseback transaction, the Company
issued a warrant to purchase 120,000 shares of common stock at $0.01 per share. This warrant is exercisable at any time during the exercise
8
Table of Contents
period, which commenced February 28, 2002 and terminates on February 28, 2022. The warrant was valued at $409,000 and
was reflected as an increase to stockholders' equity and a discount on the capital lease obligation. The discount on the capital lease obligation will be amortized to interest expense over the life of the obligation using the effective interest
method.
Under the revised financing agreements, the Company is required to comply with certain restrictive financial ratios and covenants relating to
minimum net worth, minimum fixed charge coverage, minimum interest coverage, funded debt to EBITDA (earnings before interest, taxes, depreciation and amortization), and maximum capital expenditures, as well as other customary covenants,
representations, warranties and funding conditions. Maintenance of these ratios and covenants is of particular concern given the uncertain economic climate in the United States and price stability of PVC pipe and PVC resin. In response, management
has implemented various cost reduction efforts and continues to focus on reducing costs in order to maintain compliance with its debt covenants. These efforts include the 2001 restructuring of operations, as well as the significant reduction in
fixed and contractual charges associated with the Company's revised loan agreements and sale-leaseback transaction.
The financial ratios and
covenants were amended for the quarter ended March 31, 2002, substituting a requirement of EBITDA of at least $400,000. The Company met this requirement.
Scheduled aggregate annual maturities of amounts classified as debt obligations at March 31, 2002, under terms of the revised loan agreements and the sale-leaseback capital lease obligation are (in thousands):
Senior and
Subordinated Debt
and other notes
Capital
Leases
Total
2002
$
2,560
$
1,238
$
3,798
2003
2,933
1,651
4,584
2004
11,733
1,651
13,384
2005
9,935
1,651
11,586
2006
9,935
1,651
11,586
Thereafter
9,934
24,354
34,288
Total scheduled cash payments
47,030
32,196
79,226
Less amounts representing interest
—
(19,047
)
(19,047
)
Total amounts classified as debt/capital lease obligations at
March 31, 2002
$
47,030
$
13,149
$
60,179
The fair market value of borrowing under the Senior Credit Facility fixed rate lock agreement and Senior
Subordinated Notes approximate their carrying value at March 31, 2002, as their applicable interest rates approximate current market rates.
7.    Litigation
We are from time to time a party to various claims and litigation matters incidental to our normal
course of business. We are not a party to any material litigation and are not aware of any threatened litigation that would have a material adverse effect on our business.
9
Table of Contents
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PW EAGLE, INC.
The following
table sets forth items from our Statement of Operations as a percentage of net sales:
Three months ended March 31,
2002
2001
Net sales
100.0
%
100.0
%
Cost of goods sold
88.2
85.0
Gross profit
11.8
15.0
Operating expenses
14.8
13.6
Operating (loss) income
(3.0
)
1.4
Non-operating expense
5.0
5.2
Loss before income taxes
(8.0
)
(3.8
)
Income tax benefit
(3.0
)
(1.4
)
Net loss
(5.0
)%
(2.4
)%
We posted first quarter net sales in 2002 of $53 million, decreasing 9% from 2001 to 2002. Increased
demand for our products resulted in an increase in pounds of pipe sold of 21% in the first quarter of 2002 as compared to the same period in 2001. As a result of product prices decreasing throughout 2001 due to an industry wide oversupply of
finished goods and reduced raw material costs, product prices in 2002 were 24% below 2001 first quarter prices. These reduced product prices were the major cause of the decrease in net sales.
Gross profit, as a percentage of net sales, decreased by 3% in the first quarter of 2002 as compared to the same period in 2001. Our gross profit percentage has remained weak due to the economic conditions
that prevailed in 2001. During 2001, the supply for PVC resin and pipe was greater than demand. These oversupply conditions caused PVC resin and pipe prices to drop throughout the year. The demand for pipe was further reduced by the reluctance of
distributors to purchase pipe for inventory when pipe prices were dropping, and market conditions caused pipe prices to drop at a faster rate than resin prices. As a result, our gross profit percentage decreased throughout 2001. Product prices
continued to decrease during the first half of the current quarter. As demand for our products improved and PVC resin producers implemented price increases in February and March 2002, pipe price increases were implemented near the end of the first
quarter. These pipe price increases did not have a material effect on the first quarter. Accordingly, the gross profit percentage in the first quarter remained weak. We expect the gross profit percentage to improve in the second quarter of 2002 as
the benefits of higher PVC pipe prices are fully realized.
The increase in operating expenses, as a percentage of net sales, from 2001 to 2002 is the
result of decreased sales in combination with relatively stable fixed operating expenses. Actual general and administrative expense decreased by 9% in the first quarter of 2002 as compared to the same period in 2001 from the realized benefits of the
operational restructuring.
The income tax provisions for the quarters ended March 31, 2002 and 2001 were calculated based on management's
then-current estimates of the annual effective rate for the year. The estimated effective tax rate was approximately 38% for both periods presented.
10
Table of Contents
Liquidity and Capital Resources
On February 22, 2002, we sold our previously closed facility in Hillsboro, along with certain equipment, for $1.3 million. We also entered into revised loan agreements on February 28, 2002 with the lenders of our
Senior Credit Facility and holders of the Senior Subordinated Notes and completed a sale-leaseback transaction of certain of our manufacturing facilities and the Eugene office building. The revised loan agreements significantly reduced our debt
payments (including lease payments) from approximately $11 million to $5.6 million and $5.2 million in 2002 and 2003, respectively, as summarized in the Schedule of Contractual Obligations set forth below.
In connection with these revisions, the lenders of the Senior Credit Facility and holders of the Senior Subordinated Notes waived any Event of Default arising from our inability
to comply with the financial covenants of these agreements. Principal payments under the revised Senior Credit Facility were reduced from $10.0 million to $2.9 million annually. Under the revised loan agreements, term indebtedness bears an interest
rate of LIBOR plus 3%. The amended Revolving Credit Facility bears an interest rate of LIBOR plus 2.75%. Additionally, the amount available under the Revolving Credit Facility was reduced from $50 million to $40 million.
Proceeds from the sale-leaseback transaction, along with proceeds from the sale of our Hillsboro facility and certain equipment, were used to reduce our Term Note A from $23.8
million to $17.6 million and pay Term Note B in full. The remaining proceeds were used to reduce the balance of our Revolving Credit Facility by approximately $4 million. A capital lease obligation of approximately $14 million, with quarterly lease
payments of approximately $0.4 million, was recorded for financial reporting purposes.
In connection with the sale-leaseback transaction, the Company
issued a warrant to purchase 120,000 shares of common stock at $0.01 per share. This warrant is exercisable at any time during the exercise period, which commenced February 28, 2002 and terminates on February 28, 2022. The warrant was valued at
$409,000 and was reflected as an increase to stockholders' equity and a discount on the capital lease obligation. The discount on the capital lease obligation will be amortized to interest expense over the life of the obligation using the
effective interest method.
Under the revised loan agreements, we are required to comply with certain restrictive financial ratios and covenants relating
to minimum net worth, minimum fixed charge coverage, minimum interest coverage, funded debt to EBITDA (earnings before interest, taxes, depreciation and amortization) and maximum capital expenditures, as well as other customary covenants,
representations, warranties and funding conditions. Maintenance of these ratios and covenants is of particular concern given the uncertain economic climate in the United States and price stability of PVC pipe and PVC resin. In response, we have
implemented various cost reduction efforts and continue to focus on reducing costs in order to maintain compliance with our debt covenants. These efforts include the 2001 restructuring of operations discussed later in this section, as well as the
significant reduction in fixed and contractual charges associated with our revised loan agreements and the sale-leaseback transaction.
The financial
ratios and covenants were amended for the quarter ended March 31, 2002, substituting a requirement of EBITDA of at least $400,000. The Company met this requirement.
A schedule of the Company's obligations under various long-term debt arrangements, including the sale-leaseback transaction accounted for as a capital lease, operating leases and other arrangements, are
summarized in the following table (excluding payments of $1.0 million made during quarter ended March 31, 2002):
11
Table of Contents
Scheduled Contractual Obligations
Total
2002
2003
2004
2005
2006
After 5
Years
Term Note
$
17,600
$
2,932
$
2,932
$
11,736
$
—
$
—
$
—
Senior Subordinated Notes
29,453
—
—
—
9,818
9,818
9,817
Capital lease obligation
33,017
1,651
1,651
1,651
1,651
1,651
24,762
Operating leases
3,542
720
538
548
310
315
1,111
Other notes
366
306
60
—
—
—
—
$
83,978
$
5,609
$
5,181
$
13,935
$
11,779
$
11,784
$
35,690
We had working capital of $1.1 million and excess borrowing capacity under our Revolving Credit Facility
of $5.3 million at March 31, 2002.
Cash used in operating activities was $0.3 million in 2002, as compared to $8.0 million in the first quarter of 2001.
The primary use of cash in 2001 was to fund the growth in accounts receivable. In addition, in the first quarter of 2001, performance bonuses and supplemental contributions to employee 401k accounts were paid to employees resulting from the
Company's year 2000 financial performance. No performance bonuses or supplemental contributions to employee 401k accounts were paid to employees in 2002 due to the Company's 2001 financial performance.
Investing activities provided $1.1 million in proceeds from the sale of the Hillsboro facility and certain equipment.
Financing activities provided $0.2 million in 2002 and provided $10.1 million in 2001. In 2002, we entered into a sale-leaseback transaction, generating $12.9 million in proceeds. We used the proceeds to
reduce term debt by $8.8 million. The remaining sale-leaseback proceeds were applied to the Revolving Credit Facility. Debt issuance and financing costs of $0.6 million were incurred to complete these transactions. These costs will be amortized and
expensed as interest expense over the life of the respective loans.
We had commitments for capital expenditures of $0.2 million at March 31, 2002, which
we intend to fund from operating profits. Additional sources of liquidity, if needed, include our revolving credit line. We believe we have the financial resources needed to meet our current and future business requirements, including working
capital requirements.
We announced a restructuring plan on July 26, 2001 to align our operations with market conditions. The restructuring plan included
an 11% reduction to the Company's workforce, permanently closing the Hillsboro manufacturing facility, temporarily closing our Phoenix facility and initiating focused cost reduction programs throughout the Company. By March 31, 2002, we paid
out approximately $0.9 million in severance payments and $0.1 million in other costs, with a remaining balance owing of $0.2 million to be paid in contracts extending through April 2004. We believe the restructuring plan will provide the Company
with annual cost savings in excess of $8 million, the majority of which will occur in reduced manufacturing costs. (See "Future Outlook and Risks to Our Business.")
New Accounting Pronouncements
Effective January 1, 2002 we adopted Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets." This standard establishes new guidance on accounting for goodwill and intangible assets after a business combination is completed (i.e., post acquisition accounting). The standard
discontinues the amortization of goodwill and indefinite lived intangible assets, requiring instead the periodic testing of these assets for impairment. Goodwill, net of accumulated
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amortization, was $3.7 million as of December 31, 2001 and was recorded in "Other assets" (long-term) on the
accompanying balance sheet. The effect of adopting the new standard will reduce goodwill amortization expense by $112,000 annually. We plan to complete its transitional impairment testing during the second quarter of fiscal 2002. Management does not
expect any material changes to the carrying value of goodwill as a result of the adoption of SFAS No. 142. The policy for the periodic testing for impairment will be finalized with the completion of the transitional testing.
Effective January 1, 2002, we also adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This standard expands upon the
fundamental provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." It also broadens the presentation of discontinued operations to include disposals of assets below the
segment level. We are in the process of finalizing the policy for the periodic testing for impairment of long-lived assets.
Future Outlook and Risks
to Our Business
INFORMATION IN THIS OUTLOOK SECTION AND OTHER STATEMENTS IN THIS FORM 10-Q ARE FORWARD LOOKING INFORMATION—ACTUAL RESULTS MAY
DIFFER
The statements contained above in Management's Discussion and Analysis of Financial Condition and Results of Operations that are not
strictly historical and the statements set forth in this Outlook section are forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect our expectations and
beliefs as of May 10, 2002 and are based on information known to us and our assumptions as of that date. These forward-looking statements involve known and unknown business risks and risks that we cannot control. As a result, our statements may not
come true and our operating results may differ materially from our stated expectations and beliefs.
Some of our current beliefs and expectations are
discussed below along with risk factors that impact our business and industry.
Forward-Looking Statements
We believe the demand for PVC pipe will return to normal levels when PVC resin and PVC pipe prices stabilize and/or begin to increase and the economy improves. The Gross
Domestic Product (GDP) directly affects the PVC resin and PVC pipe industries, and we recognize that our business is tied to economic cycles. Gross Domestic Product (GDP) improved significantly in the first quarter of 2002 increasing 5.8% compared
to a 1.7% increase in fourth quarter of 2001. We believe GDP will continue to be strong in 2002 resulting in improved demand for PVC resin and PVC pipe. Because PVC producers and pipe producers began 2002 with low finished goods inventories and GDP
has improved, and in our opinion, will continue to be strong, we believe that the demand for PVC resin and PVC pipe will be greater than the supply of these products during the second and third quarters of this year.
Demand for PVC resin is strong and resin producers have implemented a two-cent per pound price increase for February, March and April. In addition, they have announced a
two-cent per pound price increase for May and a four-cent per pound price increase for June. PW Eagle and the PVC pipe industry have implemented and announced several pipe price increases in response to these resin price increases and we expect
resin and pipe prices to increase further during the remainder of 2002.
We believe that the demand for PVC resin and PVC pipe will be greater than the
supply of these products during the second and third quarter of 2002. Consequently, we would expect our gross margins to
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improve in these economic conditions. Our shipments of PVC pipe have increased by 21% in the first quarter of 2002 as
compared to the first quarter of 2001. Industry wide demand for PVC pipe is strong due to a strengthening economy and necessary inventory replenishments.
Over time, we expect the demand for plastic pipe to grow as acceptance of plastic pipe over metal pipe continues and the overall economy continues to grow. Industry growth projections call for sales growth rates for plastic pipe of three
percent or greater per year through 2003. The actual growth rate in each year may be less than or greater than three percent based on short-term economic conditions. We have historically grown, and expect in the future to be able to grow at rates in
excess of the industry averages due to our emphasis on customer satisfaction and product quality. Our strategy has been, and continues to be, to concentrate growth initiatives in higher profit products and geographic regions.
In response to the reduction in the price and demand for PVC resin and PVC pipe in 2001, we implemented operational and financial restructuring plans. In July 2001,
we announced an operational restructuring plan in response to the existing unfavorable PVC resin and PVC pipe price and poor economic conditions. We permanently closed and sold the Hillsboro, Oregon production facility, and temporarily suspended
operations of the Phoenix, Arizona manufacturing facility until customer demand requires additional capacity. In the first quarter, we decreased our operating expenses, eliminating non-essential costs, and increased our production efficiencies. We
also successfully completed our financial restructuring plan. Elements of the plan included a $13.7 million real estate sale-leaseback financing transaction, the sale of our Hillsboro facility and certain equipment for approximately $1.3 million and
the revision of our lending agreements.
We believe the operational restructuring we completed in 2001 and the financial restructuring we completed in
February 2002 have positioned the Company for continued viability and future success. We believe these restructurings will allow us to meet our fixed charges, even if the unfavorable economic conditions that we faced in 2001 continue.
Risk Factors
The pipe industry and our business are heavily
dependent on the price and trend of PVC resin, our main raw material.
Our gross margin percentage is sensitive to PVC and PE raw material resin
prices and the demand for PVC and PE pipe. Historically, when resin prices are rising or stable, our margins and sales volume have been higher. Conversely, when resin prices are falling, our sales volumes and margins have been lower. During 2002,
PVC resin producers have implemented PVC resin price increases of $.02 per pound for February, March and April. In addition, they have announced an increase of $.02 per pound for May and $.04 per pound in June for a total of $.12 per pound for the
first half of 2002.
Our gross margin decreases when the supply of PVC and PVC pipe is greater than demand. Conversely, our gross margins improve when
PVC resin and PVC pipe are in short supply. At the end of 2001, PVC resin producers and PVC pipe producers and distributors had reduced inventories to historically low levels. In April 2001, a major producer of PVC resin filed for bankruptcy and,
during the current quarter, ceased operations at two manufacturing facilities. This has resulted in a reduction of approximately one billion pounds of production capacity, or 5% of the North American industry capacity.
The demand for our products is directly affected by the growth and contraction of the Gross Domestic Product and economic conditions.
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Due to the commodity nature of PVC resin and PVC pipe and the dynamic supply and demand factors worldwide, the markets
for both PVC resin and PVC pipe have historically been very cyclical with significant fluctuations in prices and gross margins. Generally, after a period of rising or stable prices, capacity has increased to exceed demand with a resulting decrease
in prices and gross margins. Over the last ten years, there have been consolidations in both markets, particularly with respect to PVC resin manufacturers. During the same period, the capacity of the PVC resin producers has increased from just over
9 billion pounds to almost 17 billion pounds today. Published PVC resin prices have fluctuated from a high of approximately $.44 per pound in 1988 to a low of approximately $.26 per pound in 1992 to a high of approximately $.40 per pound in 1995 to
a low of approximately $.25 per pound in 1999 to a high of approximately $.40 per pound in 2000 to a low of approximately $.25 per pound at the end of 2001 to its current level of approximately $.29 per pound in March 2002.
While we expect the demand for PVC pipe to continue to increase over the long term, we also expect that the industry will continue to be subject to cyclical fluctuations when
supply will exceed demand, driving prices and gross margins down. These conditions could result from a general economic slowdown, either domestically or elsewhere in the world, or capacity increases in either the PVC resin or PVC pipe markets. As a
result of the size of both the PVC resin and PVC pipe markets and the consolidation that has occurred in these industries, we believe that fluctuations in prices from capacity increases are likely to be less extreme than they have been historically.
General economic conditions both in the United States and abroad will, however, continue to have a significant impact on our prices and gross margins.
We have a significant amount of outstanding debt and must continue to operate our business to meet our outstanding obligations.
We have
a significant amount of indebtedness outstanding. As a result, we must allocate a significant portion of cash resources to pay the principal and interest on this debt. During 2002, we implemented a financial restructuring to reduce our annual fixed
charges. However, economic and market conditions could develop that cause us not to meet our fixed charges and default on our credit facilities. In the event of a default, we will be required to either obtain a waiver from our lenders or amend our
lending agreements. There is no assurance that our lenders, note holders and lessors will waive any future default or agree to any future amendments of our credit facilities and leases. If we fail to obtain a waiver or amendment, we would be
required to obtain new financing from alternative financial sources. There is no assurance that we could obtain new financing, and if we did, there is no assurance that we could obtain terms as favorable as our current credit facilities.
Interest rates affect our ability to finance our indebtedness and may adversely affect the demand for our products when higher rates slow the growth
of the economy.
We financed the purchase of PWPipe in 1999 using a $100 million Senior Credit Facility and approximately $32 million of Senior
Subordinated Notes. On February 28, 2002, we completed a financial restructuring to reduce our floating interest rate term notes from $27.5 million to $17.6 million. However, even with the reduction of our debt, our ability to service our debt
remains sensitive to an increase in interest rates. A one percent change in interest rates would further challenge our ability to pay the interest expense on our debt and fixed charges. In addition, an increase in interest rates could slow the
growth of the economy and affect the demand for our products.
Other risk factors
In addition to the risk factors discussed above, our business is also affected by the following: (i) adverse weather conditions that result in a slow down in construction and the demand for our products; (ii)
competition in the PVC resin and pipe industry that puts pressure on the price of PVC resin and demand
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for PVC pipe; and (iii) net operating loss utilization. For financial reporting purposes, the Company's cumulative
deferred tax asset recorded in prior years totaling approximately $13.5 million associated with net operating loss carryforwards, has been fully utilized, including approximately $4.0 million in the first half of 2000. We have evaluated
tax-reporting compliance relating to the past and fiscal 2000 utilization of the net operating loss carryforwards, and believe we have complied in all respects. A failure to meet the requirements could result in a loss or limitation of the
utilization of carryforwards, which could have a material adverse effect on our financial position and results of operations in future periods.
ITEM
3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks on outstanding interest rate
long-term debt obligations totaling $32.4 million of our $44.9 million of long-term variable rate debt at March 31, 2002. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. Market risk
is estimated as the potential increase in fair value resulting from a hypothetical one percent increase in interest rates and would result in an annual interest expense increase of approximately $324,000.
We do not enter into derivatives or other financial instruments for trading or speculative purposes. We only enter into financial instruments to manage and reduce the impact of
changes in interest on our Credit Facility. In November 1999, under covenants of our Senior Credit Facility, we entered into a fixed rate agreement (the "Contract") for three years with a LIBOR rate of 6.46%. At March 31, 2002 the Contract
has a notional amount of $12.5 million. The notional amount decreases until the Contract terminates in September 2002.
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PART II.
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We are from time to time a party to various claims and litigation matters incidental to our normal course
of business. We are not a party to any material litigation and are not aware of any threatened litigation that would have a material adverse effect on our business.
ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 28, 2002, the Company issued a warrant to purchase 120,000 shares of
common stock to Corporate Property Associates 14 Incorporated in connection with the Company's sale and leaseback financing transaction. The warrant was issued in consideration for the terms and conditions of the lease agreement by and between
the Company and an affiliate of W.P. Carey & Co. LLC. The warrant was issued, pursuant to section 4(2) of the Securities Act of 1933, to a single accredited investor pursuant to a privately negotiated transaction. The warrant is exercisable
immediately at $0.01 per share and expires on February 28, 2022. The warrant provides the holder anti-dilution and registration rights.
ITEM
3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
OTHER INFORMATION
None.
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ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits
None.
(b)
Reports on Form 8-K
We filed the
following report on Form 8-K during the first quarter of 2002:
The Company filed a Form 8-K dated March 1, 2002 reporting the
issuance of press releases announcing the financial results for the three months and year ended December 31, 2001, the completion of a sale-leaseback financing transaction and the sale of the Company's previously closed facility in Hillsboro,
Oregon.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
PW EAGLE, INC.
By:
/s/ William H. Spell
William H.
Spell
Chief Executive Officer
By:
/s/ Roger R. Robb
Roger R.
Robb
Chief Financial Officer
(Principal Financial
and Accounting Officer)
Dated: May 10, 2002
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EXHIBIT INDEX
Number
Description
10.1
Fourteenth Amendment to Second Amended and Restated Loan and Security Agreement dated March 27, 2002.
10.2
Amendment No. 4 and waiver to the Securities Purchase Agreement dated as of March 27, 2002.
10.3
Warrant agreement to purchase 120,000 shares of stock issued to Corporate Property Associates 14 Incorporated dated February 28, 2002.
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