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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
   (Mark One)

       (X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
                                       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 1-3920


                   NORTH AMERICAN GALVANIZING & COATINGS, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
         --------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                   71-0268502
                      ------------------------------------
                      (I.R.S. Employer Identification No.)

                2250 EAST 73RD STREET, TULSA, OKLAHOMA 74136-6832
                -------------------------------------------------
               (Address of principal executive offices)(Zip Code)

                                 (918) 494-0964
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
          TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
          -------------------------------------------------------------
              Common Stock, $.10 par value American Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.                       Yes [_]  No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.              Yes [_]  No [X]

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 [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).                               Yes [_]  No [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).                                          Yes [_]  No [X]

The aggregate market value of Common Stock held by non-affiliates on June 30,
2005 was approximately $9.0 million. As of February 8, 2006 there were 6,846,948
shares of North American Galvanizing & Coatings, Inc. Common Stock, $.10 par
value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement to be filed not later
than 120 days after the end of the fiscal year covered by this report are
incorporated by reference in Part III.

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<PAGE>
                   NORTH AMERICAN GALVANIZING & COATINGS, INC.

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005




TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----

FORWARD LOOKING STATEMENTS OR INFORMATION ..................................   2

PART I

 Item 1.    Business .......................................................   3
 Item 1A.   Risk Factors ...................................................   6
 Item 1B.   Unresolved Staff Comments ......................................   8
 Item 2.    Properties .....................................................   9
 Item 3.    Legal Proceedings ..............................................   9
 Item 4.    Submission of Matters to a Vote of Security Holders ............  10



PART II

 Item 5.    Market for Registrant's Common Equity, Related Stockholder
              Matters and Issuer Purchases of Equity Securities ............  10
 Item 6.    Selected Financial Data ........................................  11
 Item 7.    Management's Discussion and Analysis of Financial Condition
              and Results of Operation .....................................  11
 Item 7A.   Quantitative and Qualitative Disclosures About Market Risk .....  12
 Item 8.    Financial Statements and Supplementary Data ....................  12
 Item 9.    Changes in Disagreements with Accountants on Accounting
              and Financial Disclosure .....................................  12
 Item 9A.   Controls and Procedures ........................................  12
 Item 9B.   Other Information ..............................................  12



PART III

 Item 10.   Directors and Executive Officers of the Registrant .............  13
 Item 11.   Executive Compensation .........................................  13
 Item 12.   Security Ownership of Certain Beneficial Owners and Management
              and Related Stockholder Matters ..............................  13
 Item 13.   Certain Relationships and Related Transactions .................  13
 Item 14.   Principal Accounting Fees and Services .........................  14



PART IV

 Item 15.   Exhibits, Financial Statement Schedules ........................  14
<PAGE>

FORWARD LOOKING STATEMENTS OR INFORMATION

Certain statements in this Annual Report on Form 10-K, including information set
forth under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," constitute "Forward-Looking Statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are typically punctuated by words or phrases such as "anticipates," "estimate,"
"should," "may," "management believes," and words or phrases of similar import.
The Company cautions investors that such forward-looking statements included in
this Form 10-K, or hereafter included in other publicly available documents
filed with the Securities and Exchange Commission, reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve significant risks, uncertainties, and other factors which could
cause the Company's actual results, performance (financial or operating) or
achievements to differ materially from the future results, performance
(financial or operating) or achievements expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences could include, but are not limited to, changes in demand, prices,
the raw materials cost of zinc and the cost of natural gas; changes in economic
conditions of the various markets the Company serves, as well as the other risks
detailed herein and in the Company's reports filed with the Securities and
Exchange Commission. The Company believes that the important factors set forth
in the Company's cautionary statements in Exhibit 99 to this Form 10-K could
cause such a material difference to occur and investors are referred to Exhibit
99 for such cautionary statements.






















                                       2
<PAGE>

PART I

ITEM 1. BUSINESS

The Company's corporate headquarters are located in Tulsa, Oklahoma. As used in
this report, except where otherwise stated or indicated by the context, North
American Galvanizing (the "Company" and the "Registrant") means North American
Galvanizing & Coatings, Inc. and its consolidated subsidiary. At the Company's
Annual Meeting held May 14, 2003, stockholders approved an amendment of the
Company's certificate of incorporation to change the Company's name from Kinark
Corporation to North American Galvanizing & Coatings, Inc., effective July 1,
2003. The former Kinark Corporation was incorporated under the laws of the State
of Delaware in January 1955.

North American Galvanizing is a manufacturing services holding company currently
conducting business in galvanizing and coatings through its wholly-owned
subsidiary, North American Galvanizing Company and its wholly-owned subsidiaries
("NAG"). Formed in 1996, NAG merged with Rogers Galvanizing Company ("Rogers")
in 1996 and Boyles Galvanizing Company ("Boyles") in 1997, with NAG as the
surviving company. Rogers was acquired by the Company in 1996 and Boyles was
acquired in 1969.

On February 28, 2005, NAGalv-Ohio, Inc., a Delaware corporation and indirect
subsidiary of the Company, purchased the hot-dip galvanizing assets of Gregory
Industries, located in Canton, Ohio. The Company expects to continue operating
the Canton plants' established galvanizing business without interruption.

AVAILABLE INFORMATION

The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, the Statements of Beneficial Ownership of
Securities on Forms 3, 4 and 5 for Directors and Officers of the Company and all
amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, are available free of charge at the
Securities and Exchange Commission ("SEC") website at www.sec.gov. The Company's
website at www.nagalv.com contains a link to the SEC website. The Company has
also posted on the website its (1) Corporate Governance Guidelines; (2) Code of
Business Conduct and Ethics and, (3) the Company's charters for the Audit
Committee, the Compensation Committee, and the Corporate Governance and
Nominating Committee.

GALVANIZING

The Company conducts galvanizing and coating operations through its NAG
subsidiary. NAG is principally engaged in hot dip galvanizing of metal products
and components fabricated by its customers. All of NAG's revenue is generated
from the value-added galvanizing and coating of its customer's products. NAG
galvanizes iron and steel products by immersing them in molten zinc. This
bonding process produces an alloyed metal surface that provides an effective
barrier ("cathodic protection") against oxidation and corrosion from exposure to
the elements, for up to 50 years. Additional coating services provided by NAG
include sandblasting, quenching, metalizing (flame sprayed), centrifuge spinner
galvanizing, Corrocote Classic II painting and INFRASHIELDsm Coating.

PLANTS

NAG operates 11 galvanizing plants in seven states. These strategically located
plants enable NAG to compete effectively by providing galvanizing to
manufacturers representing a broad range of basic industries throughout the mid
and south-central United States, and beyond. Its galvanizing plants are located
in Tulsa, Oklahoma; Kansas City, Missouri; St. Louis, Missouri; Nashville,
Tennessee; Louisville, Kentucky; Denver, Colorado; Canton, Ohio; Hurst, Texas
and Houston, Texas.

Based on the number of its operating plants, NAG is one of the largest merchant
market hot dip galvanizing companies in the United States.

                                       3
<PAGE>

In February 2005, NAG's new indirect subsidiary, NAGalv-Ohio, Inc. purchased the
hot-dip galvanizing assets of the galvanizing facility located in Canton, Ohio,
listed above. The Canton facility operates two hot-dip galvanizing lines
featuring 52-foot and 16-foot kettles to handle a broad range of steel
structures.

In June 2003, NAG wrote-off its investment in the Cunningham galvanizing plant
located in Houston, Texas as a discontinued operation.

In January 2003, NAG expanded services at its Nashville, Tennessee facility with
the installation of a centrifuge spinner line to galvanize small product and
threaded materials.

In the fourth quarter of 2002, NAG began operations at its galvanizing plant in
St. Louis, Missouri. This facility features a 51-foot kettle, providing the
largest galvanizing capacity in the St. Louis region.

In the third quarter of 2002, at certain of its plants, NAG introduced
INFRASHIELDsm coating, a specialty multi-part polymer coating system designed to
be applied over hot dip galvanized material. The resultant superior corrosion
protection offered by combining cathodic protection with a non-conductive
coating is applicable to many environments that have unique corrosion issues.

In 2001, the Company completed a major expansion of its galvanizing operations
with the construction of a new galvanizing plant in Houston, Texas. This
facility includes a 62-foot galvanizing kettle with capabilities to process
extra large poles for the wireless communication and electric transmission
markets. The facility became operational in the first quarter of 2001.

RAW MATERIAL

Zinc, the primary raw material and largest cost component in the Company's
galvanizing process, is a widely available commodity in the open market. At the
beginning of 2004, the London Metal Exchange price of zinc at spot was $.44 per
pound. During 2004 the price of zinc remained fairly stable until the final
quarter when market pressures resulted in a closing price of $.57 per pound at
year end. During 2005, the spot price of zinc quoted on the London Metal
Exchange continued to increase, particularly in the 4th quarter, ending the year
at $.87 per pound. The Company's zinc procurement strategy to minimize the
potential risk associated with zinc price fluctuations primarily includes
entering into forward purchase commitments of up to one year.

CUSTOMERS

NAG's ten largest customers, on a combined basis, accounted for approximately
37% of the Company's consolidated sales in 2005, compared with 39% in 2004. The
backlog of orders at NAG is generally nominal due to the short turn-around time
requirement demanded in the galvanizing industry.

PRINCIPAL MARKETS

The galvanizing process provides effective corrosion protection of fabricated
steel which is used in numerous markets such as petrochemical, highway and
transportation, energy, utilities, communications, irrigation, pulp and paper,
waste water treatment, food processing, recreation and the manufacture of
original equipment. In a typical year, NAG will galvanize in excess of
365,000,000 pounds of steel products for approximately 2,000 customers
nationwide.

The Company maintains a sales and service network coupled with its galvanizing
plants, supplemented by national account business development at the corporate
level.

                                       4
<PAGE>

All of the Company's sales are generated for domestic customers whose end
markets are principally in the United States. The Company markets its
galvanizing and coating services directly to its customers and does not utilize
agents or distributors. Although hot dip galvanizing is considered a mature
service industry, the Company is actively engaged in developing new markets
through participation in industry trade shows, metals trade associations and
presentation of technical seminars by its national marketing service team.

Hot dip galvanizing is highly competitive. NAG competes with other publicly and
privately owned independent galvanizing companies, captive galvanizing
facilities operated by manufacturers, and alternative forms of corrosion
protection such as paint. The type and number of competitors vary throughout the
geographic areas in which NAG does business. Competition is driven primarily by
price, rapid turn-around service time, and the quality of the finished
galvanized product. Management believes that the broad geographic disbursement
of its galvanizing plants and the reliable quality of its service enables NAG to
compete on a favorable basis. The Company continues to develop and implement
operating and market strategies to maintain its competitive position and to
develop new markets, as demonstrated by the purchase of the hot-dip galvanizing
assets of a galvanizing facility in Canton, Ohio (2005), as well as expanded
service capabilities at its existing plants.

Our management does not generally consider our business to be seasonal due to
the breadth and diversity of markets served, although revenues typically are
lower in the first and fourth quarters due to seasonality in certain
construction markets. NAG generated 45% of its revenues during the first
six-months of 2005, compared with 50% in the first six-months of 2004. If the
purchase of the galvanizing facility in Canton, Ohio had taken place on January
1 of 2005, the revenues generated during the first six-months of 2005 would have
been 47%.

ENVIRONMENTAL

The Company's facilities are subject to extensive environmental legislation and
regulation affecting their operations and the discharge of wastes. The cost of
compliance with such regulations was approximately $1,354,000 and $1,053,000 in
2005 and 2004, respectively, for the disposal and recycling of wastes generated
by the galvanizing operations.

EMPLOYEE RELATIONS

NAG's labor agreement with the United Steel Workers Union covering production
workers at its Tulsa galvanizing plants expired March 31, 2003. In October 2003,
the union employees ratified a new three-year labor agreement, effective
November 1, 2003. The new agreement re-defines eligibility for payment of
over-time, requires employee contributions for family coverage under the
Company's group medical insurance program and grandfathers vacation benefits for
certain long-term employees. The United Steel Workers Union represents the labor
force at the galvanizing business purchased in Canton, Ohio in February 2005. At
the time of purchase, NAGalv-Ohio, Inc. did not assume the existing labor
agreement and implemented wage and benefit programs similar to those at the
Company's other galvanizing facilities. The Company is currently in negotiation
with the union on a new contract. There can be no guarantee that the Company
will be successful in securing a new labor agreement.

Nationwide, the Company's total employment was 361 and 296 persons at December
31, 2005 and 2004, respectively. In February 2005, the Company added 45 persons
with the purchase of a galvanizing facility located in Canton, Ohio. The Company
believes its relationship with its employees is satisfactory.

                                       5
<PAGE>

ITEM 1A. RISK FACTORS

In addition to important factors described elsewhere in this report, North
American Galvanizing cautions current and potential investors that the following
risk factors, among others, sometimes have affected, and in the future could
affect, the Company's actual results and could cause such results during fiscal
2006, and beyond, to differ materially from those expressed in any
forward-looking statements made by or on behalf of North American Galvanizing.
If any of the following risks actually occurs, our business, financial condition
or results of operations could be materially adversely affected and you may lose
all of your investment.

GALVANIZING IS A BUSINESS SENSITIVE TO ECONOMIC DOWNTURNS, WHICH COULD CAUSE OUR
REVENUES TO DECREASE. NAG is principally engaged in hot dip galvanizing of metal
products and components fabricated by its customers. All of the Company's
revenue is generated from the value-added galvanizing and coating of its
customer's products. NAG galvanizes iron and steel products by immersing them in
molten zinc. This bonding process produces an alloyed metal surface that
provides an effective barrier ("cathodic protection") against oxidation and
corrosion from exposure to the elements, for up to 50 years. The galvanizing
process provides effective corrosion protection of fabricated steel which is
used in numerous markets such as petrochemical, highway and transportation,
energy, utilities, communications, irrigation, pulp and paper, waste water
treatment, food processing, recreation and the manufacture of original
equipment. The demand for these products and, in turn, for our galvanizing, is
dependent on the general economy, the industries listed, and other factors
affecting domestic goods activity. If there is a reduction in demand, there
could be a material adverse effect on price levels, the quantity of galvanizing
services provided by us and our revenues.

THE VOLATILITY AND AVAILABILITY OF RAW MATERIAL AND NATURAL GAS COSTS COULD
REDUCE THE COMPANY'S PROFITS. Purchased zinc and natural gas, combined,
represent the largest portion of cost of goods sold. NAG's costs in 2005
relating to zinc and natural gas increased dramatically over the prior year. The
price and availability of zinc and natural gas that is used in the galvanizing
process is highly competitive and cyclical. The following factors, most of which
are beyond the Company's control, affect the price of zinc and natural gas:

     o    supply and demand factors;
     o    freight costs and transportation availability;
     o    inventory levels;
     o    trade duties and taxes; and
     o    labor disputes.

The Company seeks to maintain its profit margin by attempting to increase the
price of its services in response to an increase in costs, but may not be
successful in passing these price increases through to its customers.

TERMS OF THE COMPANY'S EXISTING BANK TERM LOAN AND REVOLVING CREDIT FACILITY
RESTRICT CERTAIN ASPECTS OF THE COMPANY'S OPERATIONS. These restrictions include
specified minimum values for the net worth and working capital and a maximum
debt to net worth ratio for the Company, and limitations on incurring additional
debt or capital expenditures or engaging in acquisitions and dispositions by the
Company. Among the foregoing, the most restrictive covenant is the requirement
that the aggregate expenditures for capital expenditures, debt and interest not
exceed the aggregate of earnings before interest, taxes, depreciation and
amortization (EBITDA). While the Company has maintained continuous compliance
with all of the required financial covenants of the credit facility since the
first quarter of 2005, there can be no assurance that the Company will be able
to continue to comply with these restrictions without disrupting its business.

                                       6
<PAGE>

NORTH AMERICAN GALVANIZING & COATINGS, INC. IS INVOLVED IN A LAWSUIT CONCERNING
A FORMER SUBSIDIARY'S OPERATION OF A STORAGE TERMINAL IN VIOLATION OF
ENVIRONMENTAL LAWS. In 2004, attorneys for the Metropolitan Water Reclamation
District of Greater Chicago (the "Water District") filed a complaint in District
Court, naming North American Galvanizing & Coatings, Inc. as an added defendant.
This Complaint seeks enforcement of an August 12, 2004 default judgment in the
amount of $1,810,463.34 against a former subsidiary of the Company, Lake River
Corporation and Lake River Holding Company, Inc. The default judgment is in
connection with the operation of a storage terminal by Lake River Corporation in
violation of environmental laws. The Complaint asserts that prior to the sale of
Lake River Corporation, North American Galvanizing directly operated the Lake
River facility. The Water District seeks to have the Court pierce the corporate
veil of Lake River Corporation and enforce the default judgment order of August
12, 2004 against the Company. In December 2004, the Water District filed another
complaint in the litigation, adding two claims: (1) a common law claim for
nuisance; and (2) a claim under the federal Resource Conservation and Recovery
Act. In this claim, the Water District argues that the Company is responsible
for conditions on the plaintiff's property that present an "imminent and
substantial endangerment to human health and the environment.

At this time, the Company has incurred a significant amount of legal costs to
defend this case and has not determined the amount of any liability that may
result from this matter. Such a liability, if any, could have a material adverse
effect on the Company's financial condition, results of operations, or
liquidity.

THE ADDITION OF HOT-DIP GALVANIZING CAPACITY COULD REDUCE DEMAND FOR GALVANIZING
SERVICES AND ADVERSELY AFFECT REVENUES. Galvanizing is a highly competitive
business with relatively low barriers to entry. NAG competes with other
galvanizing companies, captive galvanizing facilities operated by manufacturers
and alternate forms of corrosion protection such as paint. Excessive capacity in
hot-dip galvanizing could have a material adverse effect on price levels and the
quantity of galvanized services provided by the Company.

THE COMPANY MAY NOT HAVE SUFFICIENT MANAGEMENT RESOURCES IF THERE IS TURNOVER IN
KEY PERSONNEL. Providing a competitive service acceptable in quality and price
requires a management team that is technically skilled in providing galvanizing
services. In past years, the Company has downsized administrative and management
positions as a result of cost-cutting initiatives. Lack of management resources
could impact the Company's ability to operate and compete in the galvanizing
industry.

FAILURE TO RENEW OR REACH ACCEPTABLE NEW COLLECTIVE BARGAINING AGREEMENTS COULD
RESULT IN LABOR DISRUPTIONS WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS,
FINANCIAL CONDITION AND REVENUES. The Company is subject to two collective
bargaining agreements. NAG's labor agreement with the United Steel Workers Union
covering production workers at its Tulsa galvanizing plants expired March 31,
2003. In October 2003, the union employees ratified a new three-year labor
agreement, effective November 1, 2003. The United Steel Workers Union represents
the labor force at the galvanizing business purchased in Canton, Ohio in
February 2005. At the time of purchase, NAGalv-Ohio, Inc. did not assume the
existing labor agreement and implemented wage and benefit programs similar to
those at the Company's other galvanizing facilities. The Company is currently in
negotiation with the union on a new contract. There can be no guarantee that the
Company will be successful in securing a new labor agreement. If a new agreement
is negotiated, there can be no guarantee that the new agreement will be at
satisfactory terms with regard to the efficiency and productivity of the work
force.

Collective bargaining agreements with our employees generally cover wages,
health care benefits and retirement plans, seniority, job classes and work
rules. Failure to renew these agreements upon expiration or to establish new
collective bargaining agreements on terms acceptable to us could result in work
stoppages or other labor disruptions which could adversely impact our customer
relationships, financial condition and results of operations.

                                       7
<PAGE>

VARIOUS GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL RISKS APPLICABLE TO THE
GALVANIZING BUSINESS MAY REQUIRE THE COMPANY TO TAKE ACTIONS WHICH WILL
ADVERSELY AFFECT ITS RESULTS OF OPERATIONS. The Company's business is subject to
numerous federal, state, provincial, local and foreign laws and regulations,
including regulations with respect to air emissions, storm water and the
generation, handling, storage, transportation, treatment and disposal of waste
materials. Although NAG believes it is in substantial compliance with all
applicable laws and regulations, legal requirements are frequently changed and
subject to interpretation, and the presently unpredictable ultimate cost of
compliance with these requirements could affect operations. The Company may be
required to make significant expenditures to comply with governmental laws and
regulations. Existing laws or regulations, as currently interpreted or
reinterpreted in the future, or future laws or regulations, could have a
material adverse effect on the results of operations and financial condition.

THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION COULD BE
IMPACTED BY FUTURE ACQUISITIONS OR BY A LACK OF POTENTIAL ACQUISITION
CANDIDATES. From time to time, the Company evaluates potential acquisition
opportunities to support and strengthen its business. NAG may not be able to
locate suitable acquisition candidates, acquire candidates on acceptable terms
or integrate acquired businesses successfully. In addition, NAG may be required
to incur additional debt and contingent liabilities, or to issue shares of its
common stock in order to consummate future acquisitions. Such issuances might
have a dilutive effect on current equity holders.

DIFFICULTIES IN INTEGRATING POTENTIAL ACQUISITIONS COULD ADVERSELY AFFECT THE
COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION. The process of
integrating acquired businesses effectively involves the following risks:

     o    assimilating operations and products may be unexpectedly difficult;
     o    management's attention may be diverted from other business concerns;
     o    the Company may enter markets in which it has limited or no direct
          experience; and
     o    the Company may lose key employees of an acquired business.

THE COMPANY'S BOARD OF DIRECTORS, WHOSE INTERESTS MAY NOT BE ALIGNED WITH OTHER
SHAREHOLDERS, WILL BE ABLE TO INFLUENCE THE OUTCOME OF SHAREHOLDER VOTES. As of
December 31, 2005, the Company's board of directors collectively owned
approximately 35.2% of the Company's common stock. Accordingly, the directors,
as a group, will be able to significantly influence the outcome of shareholder
votes, including votes concerning the election of directors, the adoption or
amendment of provisions in NAG's certificate of incorporation or bylaws, and the
approval of mergers and other significant corporate transactions, and their
interests may not be aligned with other shareholders. The existence of these
levels of ownership concentrated in a few persons makes it less likely that any
other holder of common stock will be able to affect the Company's management or
direction. These factors may also have the effect of delaying or preventing a
change in management or voting control or the Company's acquisition by a third
party.

ITEM 1B. UNRESOLVED STAFF COMMENTS

No unresolved staff comments were open as of December 31, 2005.

                                       8
<PAGE>

ITEM 2. PROPERTIES

NAG operates hot dip galvanizing plants located in Ohio, Oklahoma, Missouri,
Texas, Colorado, Tennessee and Kentucky. Two of the Company's plants, located in
Kansas City, Missouri and Tulsa, Oklahoma, are leased under terms which give NAG
the option to extend the leases for up to 15 years. NAG's galvanizing plants
average 20,000 square feet in size, with the largest approximately 55,000 square
feet, and it operates zinc kettles ranging in length from 16 to 62 feet. The
Company owns all of its galvanizing plants, except for the two plants noted
above. All of the Company's owned galvanizing plants are mortgaged to a bank
pursuant to a credit agreement scheduled to expire February 28, 2008, under
which the Company is provided an $8,000,000 revolving credit facility and a
$5,001,000 term loan.

The Company's headquarters office is located in Tulsa, Oklahoma, in
approximately 4,100 square feet of office space leased through December, 2005.
The Company plans to move the headquarter offices to another leased facility in
Tulsa, Oklahoma during February 2006. The new lease agreement, continuing
through February 2009, is for approximately 4,600 square feet of office space.

ITEM 3. LEGAL PROCEEDINGS

On August 30, 2004, the Company was informed by counsel for the Metropolitan
Water Reclamation District of Greater Chicago (the "Water District") that the
Water District had, on August 25, 2004 filed a Second Amended Complaint in the
United States District Court, Northern District of Illinois, Eastern Division,
naming North American Galvanizing & Coatings, Inc. (formerly known as Kinark
Corporation) as an added defendant. Counsel for the Water District also gave the
Company notice of the Water District's intent to file (or amend the Complaint to
include) a Citizens Suit under the Resource Compensation and Recovery Act
("RCRA") against North American Galvanizing & Coatings, Inc., pursuant to
Section 7002 of RCRA, 42 U.S.C. Section 6972. This Second Amended Complaint
seeks enforcement of an August 12, 2004 default judgment in the amount of
$1,810,463.34 against Lake River Corporation and Lake River Holding Company,
Inc. in connection with the operation of a storage terminal by Lake River
Corporation in violation of environmental laws. Lake River Corporation conducted
business as a subsidiary of the Company until June 30, 2000, at which time Lake
River Corporation was sold to Lake River Holding Company, Inc. and ceased to be
a subsidiary of the Company. The Second Amended Complaint asserts that prior to
the sale of Lake River Corporation, the Company directly operated the Lake River
facility and, accordingly, seeks to have the Court pierce the corporate veil of
Lake River Corporation and enforce the default judgment order of August 12, 2004
against the Company. The Company denies the assertions set forth in the Water
District's Complaint and on November 13, 2004 filed a partial motion for
dismissal of the Second Amended Complaint.

In December 2004, the Water District filed a Third Amended complaint in the
litigation, adding two claims: (1) a common law claim for nuisance; and (2) a
claim under the federal Resource Conservation and Recovery Act, in which the
Water District argues that the Company is responsible for conditions on the
plaintiff's property that present an "imminent and substantial endangerment to
human health and the environment." In January 2005, the Company filed a partial
motion to dismiss the Third Amended Complaint. On April 12, 2005, the Court
issued an order denying in part and granting in part the Company's partial
motion to dismiss plaintiff's third amended complaint. The Company has filed an
appeal with the Seventh Circuit Court of Appeals requesting dismissal of the
sole CERCLA claim contained in the Third Amended Complaint that was not
dismissed by the United States District Court's April 12, 2005 order. The Water
District has also attempted to appeal those rulings contained in the April 12,
2005 that are adverse to the Water District. Meanwhile, litigation in the United
States District Court continues.

The Company has denied any liability with respect to this claim and intends to
vigorously defend this case. At this time, the Company has not determined the
amount of any liability that may result from this matter or whether such
liability, if any, would have a material adverse effect on the Company's
financial condition, results of operations, or liquidity.

                                       9
<PAGE>

NAG was notified in 1997 by the Illinois Environmental Protection Agency
("IEPA") that it was one of approximately 60 potentially responsible parties
("PRPs") under the Comprehensive Environmental Response, Compensation, and
Liability Information System ("CERCLIS") in connection with cleanup of an
abandoned site formerly owned by Sandoval Zinc Co. A number of the PRPs have
agreed to work together and with IEPA on a voluntary basis. The Company has been
and continues to participate in this volunteer group. The group has retained
consultants and legal representatives familiar with IEPA regulations. This
volunteer group, with its consultants, has cooperated with IEPA in attempting to
better define the environmental issues associated with the Sandoval Zinc site.
To that extent, this voluntary group prepared and submitted to IEPA in August
2000 a work plan. The purpose of this work plan is to attempt to define the
extent of environmental remediation that might be required, assess risks, and
review alternatives to addressing potential remediation. The IEPA has yet to
respond to this proposed work plan or suggest any other course of action, and
there has been no activity in regards to this issue during 2005. Therefore, the
Company has no basis for determining potential exposure and estimated
remediation costs at this time.

The lease term of a galvanizing facility located in Tulsa, Oklahoma, occupied by
Reinforcing Services, Inc. ("RSI"), a subsidiary of North American Galvanizing
Company, expired July 31, 2003 and has not been renewed. RSI has exercised an
option to purchase the facility, and the landlord is contesting the Company's
right to exercise this option. RSI has filed a lawsuit against the landlord
seeking enforcement of the right to exercise the option. Due to the length of
the litigation and uncertainty placed on our customer's business, we cannot
estimate how this litigation could impact us or our customer.

North American Galvanizing & Coatings, Inc. and its subsidiary are parties to a
number of other lawsuits which are not discussed herein. Management of the
Company, based upon their analysis of known facts and circumstances and reports
from legal counsel, does not believe that any such matter will have a material
adverse effect on the results of operations, financial conditions or cash flows
of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of stockholders during the fourth quarter of
2005.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

STOCK INFORMATION

The Company's common stock trades on the American Stock Exchange under the
symbol "NGA". The Company does not expect to pay a dividend on its common stock
and has not done so in the past 30 years. The Company expects to continue that
policy in order to reinvest earnings to support and expand its business
operations. The Company's board of directors may review the dividend policy in
the future, recognizing that dividends may be a desirable form of return on the
investment made by many of its stockholders. Stockholders of record at February
8, 2006 numbered approximately 1,712.

                                       10
<PAGE>

QUARTERLY STOCK PRICES

                              FIRST       SECOND       THIRD        FOURTH
     2004
     High                   $   1.74     $   2.28     $   2.40     $   2.30
     Low                    $   1.35     $   1.60     $   1.95     $   1.84

     2005
     High                   $   3.47     $   2.77     $   2.64     $   2.32
     Low                    $   1.95     $   1.79     $   1.87     $   1.90

ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE><CAPTION>
                                                                           TOTAL       APPROXIMATE
                                                                         NUMBER OF     DOLLAR VALUE
                                                                          SHARES        OF SHARES
                                             TOTAL                       PURCHASED     THAT MAY YET
                                           NUMBER OF        AVERAGE      AS PART OF    BE PURCHASED
     PERIOD                                  SHARES       PRICE PAID      PUBLICLY        UNDER
     (FROM/TO)                             PURCHASED       PER SHARE   ANNOUNCED PLAN    THE PLAN
<S>                                         <C>            <C>            <C>            <C>
     January 1, 2005 - January 31, 2005           14       $   3.10        132,211       $765,957
     March 1, 2005 - March 31, 2005               50           2.19        132,261        765,847
                                            --------       --------       --------       --------
     Total                                        64       $   2.39        132,261       $765,847
                                            ========       ========       ========       ========
</TABLE>

In August 1998, the Board of Directors authorized $1,000,000 for a share
repurchase program for shares to be purchased in private or open market
transactions. Unless terminated earlier by resolution of the Board of Directors,
the program will expire when the Company has purchased shares with an aggregate
purchase price of no more than $1,000,000.

The information required by this item concerning securities authorized for
issuance under equity compensation plans appears under the heading "Equity
Compensation Plan Information in the Company's Proxy Statement (the "2006 Proxy
Statement") for its annual meeting of stockholders to be held on May 18, 2006
and is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data for years 2001 through 2005 are presented on page
FS-34 of this Annual Report on Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The index to Management's Discussion and Analysis of Financial Condition and
Results of Operations is presented on page 18 of this Annual Report on Form
10-K.

                                       11
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management's discussion of quantitative and qualitative disclosures about market
risk is presented on page FS-12.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The index to Financial Statements and Supplementary Data is presented on page 14
of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The certifying officers of the Company are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the Company and have (i) designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including its consolidated subsidiary, is recorded, processed,
summarized and reported within the time frames specified in the SEC's rules and
forms and that such information is made known to them by others within the
Company and such entity to allow for timely decisions regarding required
disclosures; and (ii) along with other members of management, evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of the end of the period covered by this report. Based on this
evaluation, the chief executive officer and the chief financial officer of the
Company have concluded that the Company's disclosure controls and procedures
were effective during the period being reported on in this annual report.

During the year-ended December 31, 2005, the Company purchased the assets of a
galvanizing business located in Canton, Ohio and undertook a review and
evaluation of that operation's internal controls over financial reporting,
including the implementation of a number of controls consistent with its
established galvanizing operations. The Company's certifying officers have
indicated that there were no other significant changes in internal controls over
financial reporting that have occurred during the fiscal quarter ended December
31, 2005 that materially affected, or were reasonably likely to materially
affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

                                       12
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained under the headings "Election of Directors," "Board of
Directors and Committees" and "Company Information Available on Website" in the
2006 Proxy Statement is incorporated herein by reference.

Information about our Executive Officers is following:

RONALD J. EVANS (56)    President of the Company since February 1996 and
                        appointed Chief Executive Officer November 1999 to
                        present. From May 1995 through January 1996, private
                        investor. From 1989-1995, Vice President and General
                        Manager of Deltech Corporation. Mr. Evans' previous
                        experience includes 13 years with Hoechst Celanese
                        Corporation. Director of the Company since 1995.

BETH B. HOOD (42)       Vice President and Treasurer since April 2005 and
                        appointed Chief Financial Officer and Secretary of the
                        Company May 2005 to present. From March 2001 to March
                        2005, Vice President of Finance and Treasurer of Fintube
                        Technologies, Inc, a wholly-owned subsidiary of Lone
                        Star Technologies, Inc. From April 1989 to March 2001,
                        Ms. Hood held a number of senior finance positions at
                        Laufen Ceramic Tile, a subsidiary of Keramik Holding AG
                        Laufen, Switzerland, and ultimate parent, Roca
                        Radiodores, S.A., of Barcelona, Spain. Ms. Hood is both
                        a CPA and CMA.

Pursuant to the bylaws of the Company, the executive officers are appointed
annually by the Board of Directors, and shall hold office until their successors
are chosen.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item appears in the 2006 Proxy Statement under
the headings "Executive Compensation," "Stock Option Grants in Fiscal Year
2005," "Options Exercised in Fiscal Year 2005 and Fiscal Year End Values,"
"Director's Compensation," "Compensation Committee Interlocks and Insider
Participation" and "Compensation Committee Report" and is incorporated herein by
reference. Information regarding the Company's stock option plans appears herein
on page FS-23, Footnotes to Consolidated Financial Statements.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The information required by this item concerning security ownership of certain
beneficial owners and management appears in the 2006 Proxy Statement under the
heading "Security Ownership of Principal Stockholders and Management" and is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item concerning certain relationships and
related party transactions appears in the 2006 Proxy Statement under the heading
"Related Party Transactions" and is incorporated herein by reference.

                                       13
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this item is incorporated herein by reference from the
2006 Proxy Statement under the captions "Audit Committee Report" and
"Ratification of Appointment of Independent Accountants."

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(1)  FINANCIAL STATEMENTS

     Report of Independent Registered Public Accounting Firm               FS-14

     Consolidated Balance Sheets at December 31, 2005 and 2004             FS-15

     Consolidated Statements of Operations and Comprehensive Income
       for the Years Ended December 31, 2005, 2004 and 2003                FS-16

     Consolidated Statements of Cash Flows for the Years Ended
       December 31, 2005, 2004 and 2003                                    FS-17

     Consolidated Statements of Stockholders' Equity for the Years
       Ended December 31, 2005, 2004 and 2003                              FS-18

     Notes to Consolidated Financial Statements                   FS-19 to FS-32

(2)  FINANCIAL STATEMENT SCHEDULES

     Schedule II - Valuation and Qualifying Accounts                          16

     All schedules omitted are inapplicable or the information required is
     included in either the consolidated financial statements or the related
     notes to the consolidated financial statements.

(3)  EXHIBITS

     The Exhibits filed with or incorporated by reference into this report are
     listed in the following Index to Exhibits.

                                       14
<PAGE>
EXHIBIT INDEX

NO.            DESCRIPTION
---------      -----------
3.1            Restated Certificate of Incorporation of Kinark Corporation, as
               amended on June 6, 1996 (incorporated by reference to Exhibit 3.1
               of the Company's Pre-Effective Amendment No. 1 to Registration
               Statement on Form S-3, Registration No. 333-4937, filed with the
               Commission on June 7, 1996).

3.2            Amended and Restated Bylaws of Kinark Corporation (incorporated
               by reference to Exhibit 3.1 to the Company's Quarterly Report on
               Form 10-Q dated March 31, 1996)

10.1           Credit Agreement, dated September 24, 1999, between Kinark
               Corporation, a Delaware corporation, and Bank One, Oklahoma,
               N.A., National Association, a national banking association.

10.1.1         Amendment One to Credit Agreement, March 30, 2001.

10.1.2*        Amendment Two to Amended and Restated Credit Agreement, November
               26, 2001.

10.1.3         Amendment Three to Amended and Restated Credit Agreement,
               September 26, 2003 (incorporated by reference to the Company's
               Form 10-Q filed with the Commission on November 7, 2003.

10.1.4*        Amendment Four to Amended and Restated Credit Agreement, December
               15, 2004.

10.1.5         Amendment Five to Amended and Restated Credit Agreement, February
               28, 2005 (incorporated by reference to the Company's Form 8-K
               filed with the Commission on March 4, 2005).

10.2**         2004 Incentive Stock Plan (incorporated by reference to the
               Company's Form 8-K filed with the Commission on March 18, 2005).

10.2.1**       Form of Stock Option Agreement (incorporated by reference to the
               Company's Form 8-K filed with the Commission on March 18, 2005).

10.2.2**       Schedule A to Stock Option Agreement (incorporated by reference
               to the Company's Form 8-Kfiled with the Commission on March 18,
               2005).

10.3**         Director Stock Unit Program, as amended (incorporated by
               reference to the Company's Form 8-K filed with the Commission on
               July 25, 2005).

21.*           Subsidiaries of the Registrant.

23.*           Consent of Independent Registered Public Accounting Firm.

24.1*          Power of attorney from Directors: Linwood J. Bundy, Ronald J.
               Evans, T. Stephen Gregory, Gilbert L. Klemann, II, Patrick J.
               Lynch, Frank H. Menaker, Jr., Joseph J. Morrow and John H.
               Sununu.

31.1*          Certification pursuant to Section 302 of the Sarbanes, Oxley Act
               of 2002.

31.2*          Certification pursuant to Section 302 of the Sarbanes, Oxley Act
               of 2002.

32.*           Certifications pursuant to 18 U.S.C. Section 1350, as adopted by
               Section 906 of the Sarbanes-Oxley Act of 2002.

99*            Cautionary Statements by the Company Regarding Forward Looking
               Statements.

*   Filed Herewith.
**  Indicates management contract or compensation plan.

                                       15
<PAGE>
SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003:

                                         ADDITIONS
                          BALANCE AT     CHARGED TO                     BALANCE
                          BEGINNING      COSTS AND                      AT END
DESCRIPTION                OF YEAR       EXPENSES      DEDUCTIONS       OF YEAR
--------------------------------------------------------------------------------
Allowance for doubtful
 receivables (deducted from
 accounts receivable)
---------------------------

2005                     $  257,000     $   29,000     $  162,000     $  124,000

2004                        339,000         50,000        132,000        257,000

2003                        285,000        190,000        136,000        339,000



                                       16
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, as duly authorized.

                                               NORTH AMERICAN GALVANIZING
                                               & COATINGS, INC. (Registrant)


Date: February 10, 2006                        By: /s/ Beth B. Hood
                                                   ---------------------------
                                               Beth B. Hood
                                               Vice President and
                                               Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 10, 2006, by the following persons on behalf
of the Registrant and in the capacities indicated.


/s/Joseph J. Morrow*                           /s/Patrick J. Lynch*
----------------------------                   --------------------------------
Joseph J. Morrow, Non-Executive                Patrick J. Lynch, Director
Chairman the Board


/s/Ronald J. Evans*                            /s/Gilbert L. Klemann, II*
----------------------------                   --------------------------------
Ronald J. Evans, President and                 Gilbert L. Klemann, II, Director
Chief Executive Officer (Principal
Executive Officer), and Director


/s/Beth B. Hood                                /s/Frank H. Menaker, Jr.*
----------------------------                   --------------------------------
Beth B. Hood, Vice President,                  Frank H. Menaker, Jr., Director
Chief Financial Officer (Principal
Financial and Accounting Officer),
and Secretary


/s/Linwood J. Bundy*                           /s/John H. Sununu*
----------------------------                   --------------------------------
Linwood J. Bundy, Director                     John H. Sununu, Director


/s/T. Stephen Gregory*
----------------------------
T. Stephen Gregory, Director


*Beth B. Hood, by signing her name hereto, does hereby sign this Annual Report
on Form 10-K on behalf of each of the directors and officers of the Registrant
after whose typed names asterisks appear pursuant to powers of attorney duly
executed by such directors and officers and filed with the Securities and
Exchange Commission as exhibits to this report.


                                               By:/s/ Beth B. Hood
                                                  ----------------------------
                                               Beth B. Hood, Attorney-in-fact

                                       17
<PAGE>

INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS, CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA


                                                                            PAGE


Management's Discussion and Analysis                               FS-1 to FS-12

Management's Responsibility for Financial Statements                       FS-13

Report of Independent Registered Public Accounting Firm                    FS-14

Consolidated Balance Sheets                                                FS-15

Consolidated Statements of Operations and Comprehensive Income             FS-16

Consolidated Statements of Cash Flows                                      FS-17

Consolidated Statements of Stockholders' Equity                            FS-18

Notes to Consolidated Financial Statements                        FS-19 to FS-32

Quarterly Results                                                          FS-33

Selected Financial Data                                                    FS-34






                                       18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

GENERAL

North American Galvanizing ("NAG") is a leading provider of corrosion protection
for iron and steel components fabricated by its customers. Hot dip galvanizing
is the process of applying a zinc coating to fabricated iron or steel material
by immersing the material in a bath consisting primarily of molten zinc. Based
on the number of its operating plants, the Company is one of the largest
merchant market hot dip galvanizing companies in the United States.

OVERVIEW

The Company's galvanizing plants offer a broad line of services including
centrifuge galvanizing for small threaded products, sandblasting, chromate
quenching, polymeric coatings, and proprietary INFRASHIELDsm Coating Application
Systems for polyurethane protective linings and coatings over galvanized
surfaces. The Company's structural and chemical engineers provide customized
assistance with initial fabrication design, project estimates and steel
chemistry selection.

The Company's galvanizing and coating operations are composed of eleven
facilities located in Colorado, Kentucky, Missouri, Ohio, Oklahoma, Tennessee
and Texas. These facilities operate galvanizing kettles ranging in length from
16 feet to 62 feet, and have lifting capacities ranging from 12,000 pounds to
40,000 pounds.

The Company maintains a sales and service network coupled with its galvanizing
plants, supplemented by national account business development at the corporate
level. In a typical year, the Company will galvanize in excess of 365,000,000
pounds of steel products for approximately 2,000 customers nationwide.

All of the Company's sales are generated for customers whose end markets are
principally in the United States. The Company markets its galvanizing and
coating services directly to its customers and does not utilize agents or
distributors. Although hot dip galvanizing is considered a mature service
industry, the Company is actively engaged in developing new markets through
participation in industry trade shows, metals trade associations and
presentation of technical seminars by its national marketing service team.

Hot dip galvanizing provides metals corrosion protection for many product
applications used in commercial, construction and industrial markets. The
Company's galvanizing can be found in almost every major application and
industry that requires corrosion protection where iron or steel is used,
including the following end user markets:

     o    highway and transportation

     o    power transmission and distribution

     o    wireless and telecommunications

     o    utilities

     o    petrochemical processing

     o    industrial grating

     o    infrastructure - buildings, airports, bridges and power generation

     o    wastewater treatment

                                      FS-1
<PAGE>

     o    fresh water storage and transportation

     o    pulp and paper

     o    pipe and tube

     o    food processing

     o    agricultural (irrigation systems)

     o    recreation (boat trailers, marine docks, stadium scaffolds)

     o    bridge and pedestrian handrail, and

     o    original equipment manufactured products, including general
          fabrication.

As a value-added service provider, the Company's revenues are directly
influenced by the level of economic activity in the various end markets that it
serves. Economic activity in those markets that results in the expansion and/or
upgrading of physical facilities (i.e., construction) may involve a time-lag
factor of several months before translating into a demand for galvanizing
fabricated components. Despite the inherent seasonality associated with large
project construction work, the Company maintains a relatively stable revenue
stream throughout the year by offering fabricators, large and small, reliable
and rapid turn-around service.

The Company records revenues when the galvanizing and customer billing processes
are completed. The Company generates all of its operating cash from such
revenues, and utilizes a line of credit secured by its underlying accounts
receivable and zinc inventory to facilitate working capital needs.

Each of the Company's galvanizing plants operates in a highly competitive
environment underscored by pricing pressures, primarily from other public and
privately-owned galvanizers and alternative forms of corrosion protection, such
as paint. The Company's long-term response to these challenges has been a
sustained strategy focusing on providing a reliable quality of galvanizing to
standard industry technical specifications and rapid turn-around time on every
project, large and small. Key to the success of this strategy is the Company's
continuing commitment and long-term record of reinvesting earnings to upgrade
its galvanizing facilities and provide technical innovations to improve
production efficiencies; and to construct new facilities when market conditions
present opportunities for growth. The Company is addressing long-term
opportunities to expand its galvanizing and coatings business through programs
designed to increase industry awareness of the proven, unique benefits of
galvanizing for metals corrosion protection. Each of the Company's independently
operated galvanizing plants is linked to a centralized system involving sales
order entry, facility maintenance and operating procedures, quality assurance,
purchasing and credit and accounting that enable the plant to focus on providing
galvanizing and coating services in the most cost-effective manner.

The principal raw materials essential to the Company's galvanizing and coating
operations are zinc and various chemicals which are normally available for
purchase in the open market.

KEY INDICATORS

Key industries which historically have provided the Company some indication of
the potential demand for galvanizing in the near-term, (i.e., primarily within a
year) include highway and transportation, power transmission and distribution,
telecommunications and the level of quoting activity for regional metal
fabricators. In general, growth in the commercial/industrial sectors of the
economy generates new construction and capital spending which ultimately impacts
the demand for galvanizing.

                                      FS-2
<PAGE>

Key operating measures utilized by the Company include new orders, zinc
inventory, tons of steel galvanized, revenue, pounds and labor costs per hour,
zinc usage related to tonnage galvanized, and lost-time safety performance.
These measures are reported and analyzed on various cycles, including daily,
weekly and monthly.

The Company utilizes a number of key financial measures to evaluate the
operations at each of its galvanizing plants, to identify trends and variables
impacting operating productivity and current and future business results, which
include: return on capital employed, sales, gross profit, fixed and variable
costs, selling and general administrative expenses, operating cash flows,
capital expenditures, interest expense, and a number of ratios such as profit
from operations and accounts receivable turnover. These measures are reviewed by
the Company's operating and executive management each month, or more frequently,
and compared to prior periods, the current business plan and to standard
performance criteria, as applicable.

KEY DEVELOPMENTS

During the period 2002 through February 2005, the Company reported a number of
developments supporting its strategic program to reposition its galvanizing
business in the national market.

On February 28, 2005, NAGalv-Ohio, Inc., a subsidiary of North American
Galvanizing Company, purchased the hot-dip galvanizing assets of a galvanizing
facility located in Canton, Ohio. The transaction was structured as an asset
purchase, pursuant to an Asset Purchase Agreement dated February 28, 2005 by and
between NAGalv-Ohio, Inc., and the privately owned Gregory Industries, Inc. for
all of the plant, property, and equipment of Gregory Industries'
after-fabrication hot dip galvanizing operation. Sales for the Canton
galvanizing operation for its most recent fiscal year ended May 28, 2004 were
approximately $7 million. Operating results of the purchased galvanizing
business are included in the Company's financial statements commencing from the
date of purchase on February 28, 2005.

This strategic expansion provides NAG an important, established customer base of
major fabricators serving industrial, OEM, and highway markets as well as
residential and commercial markets for lighting poles. Canton's 52 foot long
dipping kettle is designed to handle large steel structures, such as bridge
beams, utility poles and other steel structural components that require
galvanizing for extended-life corrosion protection. The Canton plant also
processes small parts used in construction, such as nuts and anchor rods, in a
dedicated facility with a smaller 16 foot dipping kettle and a spinner
operation.

In January 2003, the Company opened its St. Louis galvanizing plant, replacing a
smaller plant at the same location. This larger facility is providing NAG a
strategic base for extending its geographic area of service. A 51-foot kettle at
this facility provides the largest galvanizing capacity in the St. Louis region.
In 2004, production tonnage at St. Louis more than doubled compared to
production at the plant it replaced.

In January 2003, the Company expanded services at its Nashville galvanizing
plant with the announced installation of a state-of-the-art spinner line to
galvanize small products, including bolts and threaded material.

In June 2003, the Company wrote-off its investment in the formerly idled
Houston-Cunningham galvanizing plant. The write-off resulted in a net loss on
the abandoned assets of $754,000, net of taxes of $443,000 in 2003. The net loss
from operations for the Cunningham plant was $77,000, net of taxes of $45,000,
for the year ended December 31, 2003. The abandoned Cunningham plant has been
classified as a discontinued operation and its expenses are not included in the
results of continuing operations discussed below.

                                      FS-3
<PAGE>

RESULTS OF OPERATIONS

The following table shows the Company's results of operations:

<TABLE><CAPTION>
                                                     (DOLLARS IN THOUSANDS)
                                                     YEAR ENDED DECEMBER 31,
                                 -----------------------------------------------------------------
                                        2005                   2004                   2003
                                 -------------------   --------------------   --------------------
                                              % OF                   % OF                   % OF
                                  Amount     Sales      Amount      Sales      Amount      Sales
<S>                              <C>         <C>       <C>          <C>       <C>          <C>
     Sales                       $ 47,870    100.0 %   $ 35,822     100.0 %   $ 33,200     100.0 %

     Cost of sales                 35,969     75.1 %     25,814      72.1 %     23,833      71.8 %
                                 --------   --------   --------    --------   --------    --------
     Gross profit                  11,901     24.9 %     10,008      27.9 %      9,367      28.2 %

     Selling, general and
       administrative expenses      7,196     15.0 %      5,917      16.5 %      5,992      18.0 %
     Depreciation and
       amortization                 2,532      5.3 %      2,701       7.5 %      2,880       8.7 %
                                 --------   --------   --------    --------   --------    --------
     Operating income               2,173      4.5 %      1,390       3.9 %        495       1.5 %

     Interest expense               1,074      2.2 %        764       2.1 %        654       2.0 %
     Other income                    --         --          (25)       --         --          --
                                 --------   --------   --------    --------   --------    --------
     Income (loss) from
       continuing operations
       before income taxes          1,099      2.3 %        651       1.8 %       (159)       (0.5)%

     Income tax expense               455      1.0 %        248       0.7 %         23        --
                                 --------   --------   --------    --------   --------    --------
     Income (loss) from
       continuing operations          644      1.3 %        403       1.1 %       (182)       (0.5)%

     Loss from discontinued
       operations                    --         --         --          --         (831)      2.5 %
                                 --------   --------   --------    --------   --------    --------

     Net income (loss)           $    644      1.3 %   $    403       1.1 %   $ (1,013)       (3.0)%
                                 ========   ========   ========    ========   ========    ========
</TABLE>

2005 COMPARED TO 2004

SALES---Sales for the year ended December 31, 2005 increased 34% over the prior
year due primarily to contribution from the Canton, Ohio galvanizing facility
that was purchased February 28, 2005. Same plant revenues for the year improved
14% over 2004. North American Galvanizing's same plants started the year with a
period of slow demand in the first two months. A general increase in demand due
to increased commercial spending and higher construction activity led to a
positive trend in same plant revenues continuing throughout the remainder of
2005. Sales volumes at same plants for the fourth quarter of 2005 were 19%
higher than the same period in 2004 and 43% higher in total, including the Ohio
plant. Sales volumes at same plants during 2005 were 11% higher than 2004 and
30% higher in total, including Ohio.

In 2005, average selling prices for galvanizing and related coating services
increased 2% over 2004. General price increases were communicated to customers
during the third quarter of 2005. Prices during the 4th quarter 2005 were on
average 8% higher than prices during the same period in 2004.

                                      FS-4
<PAGE>

GROSS PROFIT--- The gross profit percentage decreased 3.0% from 2004 to 2005.

Of the 3.0% decrease in gross profit as a percent of sales, 1.7% was due to
increased costs in the Canton, Ohio galvanizing facility compared to same
plants. The primary difference in costs is higher labor costs at the Ohio plant.
As part of the transition program started with the February 28, 2005 purchase,
management is focused on improving labor efficiency, measured by
pounds-per-man-hour and cost-per-man-hour, at this facility.

Higher zinc and natural gas costs in 2005 were responsible for the remainder of
the decrease in gross profit percentage, 1.3%. The impact of higher zinc and
utility costs impacted operating profits negatively by $1.3 million during 2005.
While customer pricing was increased during the third quarter to help offset
this increase in costs, the full impact of the cost increases could not be
absorbed by the market. Increases in average selling prices in 2005 did help
offset the cost increases by $.9 million.

DEPRECIATION EXPENSE--- Depreciation expense for 2005 decreased $169,000 from
2004. Most of the decrease for 2005 relates primarily to assets becoming fully
depreciated, $400,000, offset by increased depreciation expense for the Canton,
Ohio galvanizing plant and equipment of $231,000.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES--- SG&A increased
$1,279,000, or 21.6%, from 2004 to 2005. $469,000 of the increase is due to
selling, general and administrative costs related to the Canton, Ohio
galvanizing facility acquired in early 2005, $246,000 due to audit and tax fees
and professional fees related to compliance with Sarbanes Oxley 404
requirements, $217,000 due to legal fees related to the Lake River lawsuit,
$133,000 related to increased Board of Director fees, $68,000 related to
shareholder services, $62,000 due to increases in compensation for
administrative and office personnel and $87,000 in other expenses.

Selling, general, and administrative expenses, as a % of sales, decreased from
16.5% in 2004 to 15.0% in 2005.

INTEREST EXPENSE--- Interest expense increased to $1,074,000 in 2005 from
$764,000 in 2004, primarily due to higher interest rates on variable-rate debt
and higher debt related to the purchase of the Canton, Ohio galvanizing facility
in the first quarter of 2005.

INCOME TAXES--- The Company's effective income tax rates for 2005 and 2004 were
41.4% and 38.1%, respectively. The effective tax rates differ from the federal
statutory rate primarily due to state income taxes and minor adjustments to
previous tax estimates based on actual tax returns filed.

NET INCOME--- For 2005, the Company reported net income of $644,000 compared to
net income of $403,000 for 2004. The increase in net income is primarily a
result of the increase in sales volume.

2004 COMPARED TO 2003

SALES--Sales for the year ended December 31, 2004 increased 7.9% to $35,822,000
from sales of $33,200,000 for 2003. NAG experienced a modest upturn in demand
for its galvanizing and coatings services in 2004, led by a number of its
traditional large markets. These markets included power distribution,
communications, highway and recreational. Total billable production volume
increased 6.8% in 2004, as compared to 2003 when an extended period of lower
levels of construction activity and industrial capital spending resulted in a
17% decrease in our galvanizing production volume. In 2004, we also achieved an
important marketing objective with a slight improvement in the average selling
price for galvanizing services. NAG continues to compete aggressively and
successfully with a number of galvanizing companies in each of its market areas,
with particular emphasis on quality and reliable turn-around delivery. Strategic
market

                                      FS-5
<PAGE>

development from the corporate level for national account new business
supplements our regional sales teams. As a result of these efforts, in 2004 we
achieved higher production volume, strengthened selling prices and, for the
second consecutive year, added more than 200 new business accounts.

GROSS PROFIT--Gross profit of $10,008,000 for 2004 increased $641,000 or 6.8%
from $9,367,000 for 2003. Although the market price of zinc increased
significantly during 2004, rising approximately 24%, gross profit as a
percentage of sales remained fairly stable at 27.9% compared to 28.2% for 2003.
The Company continues to implement cost containment and safety measures to lower
its production costs. The Company's practice of selective forward commitments
for the procurement of zinc, which minimizes the risk associated with
fluctuations in the price of zinc, is one aspect of these efforts. Despite the
success of these measures, in 2004 the Company incurred an increase of 9.4% in
the cost of natural gas. As a result, cost of sales as a percentage of sales was
72.1% in 2004 compared to 71.8% in 2003.

DEPRECIATION EXPENSE--Depreciation expense for 2004 decreased $179,000, or 6.2%,
to $2,701,000 compared to $2,880,000 for 2003. The decrease for 2004 primarily
relates to assets becoming fully depreciated.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES--SG&A decreased $75,000, or
1.3%, in 2004 to $5,917,000 compared to $5,992,000 in 2003. The Company's
continuing emphasis on controlling costs extends to its administrative support
functions. During 2004, while the Company incurred increases in outside services
for legal ($96,000), audit and tax ($12,000) and stockholder services ($84,000),
all of these increases were offset by reductions in other functions including
administrative labor, liability insurance, travel and telecommunication. SG&A as
a percentage of sales was 16.5% in 2004 and 18.0% in 2003.

INTEREST EXPENSE--Interest expense increased to $764,000 in 2004 from $654,000
in 2003, primarily due to higher interest rates on variable-rate debt and lower
interest rebates on the Company's industrial revenue bonds in 2004, partially
offset by the effect of lower average borrowings during 2004 as compared to
2003. For the two years ended December 31, 2004, the interest rate on the
company's variable rate debt increased from 4.25% to 5.50% as a result of
changes in the prime rate. The Company's average outstanding borrowings for 2004
were $15,199,000 compared to $17,622,000 for 2003. Excess interest in the
industrial revenue bonds Trustee's Interest Account, which is recognized as a
reduction of interest expense, was approximately $152,000 in 2004 compared to
approximately $354,000 in 2003. The Company's interest expense for 2004 was not
impacted by inflation.

INCOME FROM CONTINUING OPERATIONS--In 2004, income from continuing operations
before income taxes was $651,000 compared to a loss of $159,000 in 2003. The
improvement in income for 2004 reflects higher sales resulting from increases in
tonnage shipments and average selling prices, lower depreciation and SG&A,
selling, partially offset by higher interest expense.

INCOME TAXES--The Company's effective income tax rates, including taxes related
to discontinued operations in 2003, for 2004 and 2003 were 38.1% and 31.5%
respectively. The rate for 2004 differed from the federal statutory rate
primarily due to state income taxes. The rate for 2003 differed from the federal
statutory rate primary due to state income taxes and adjustments to estimate the
deferred tax asset accounts.

NET INCOME (LOSS)--For 2004, the Company reported net income of $403,000, or
$.05 per share fully diluted, compared to a net loss of $(1,013,000), or $(.15)
per share fully diluted, for 2003. The net loss for 2003 included a loss from
discontinued operations of $831,000 resulting from the write-off of the assets
of an abandoned galvanizing operation and its related operating loss.

                                      FS-6
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flow from operations and borrowings under credit facilities
have consistently been adequate to fund its current facilities working capital
and capital spending requirements. During 2005 and 2004, operating cash flow and
borrowings under credit facilities have been the primary sources of liquidity.
The Company monitors working capital and planned capital spending to assess
liquidity and minimize cyclical cash flow.

Cash flow from operating activities for 2005 and 2004 was $6,640,000 and
$2,581,000 respectively. The increase of $4,059,000 in 2005 cash flow from
operations was due primarily to improved working capital management and cash
refunds from utilization of tax net operating loss carrybacks.

Cash of $5,175,000 used in 2005 investing activities consisted of $4,188,000 to
acquire certain assets of Gregory Industries' Inc. and capital expenditures of
$1,016,000 for equipment to maintain galvanizing facilities. Capital
expenditures for equipment and upgrade of existing galvanizing facilities
totaled $1,230,000 in 2004. The Company expects base capital expenditures for
2006 to approximate $1,450,000.

Total debt (current and long-term obligations) decreased $832,000 to $14,721,000
in 2005. Financing activities for 2005 included proceeds from the sale of
treasury stock of $100,000, payments of $693,000 to a bond sinking fund,
proceeds of $22,313,000 from a bank line of credit and term loan, and payments
of $22,452,000 on the bank line of credit and term loans.

In February 2005, the Company amended the three-year bank credit agreement that
was scheduled to expire in December 2007 and extended its maturity to February
28, 2008. Subject to borrowing base limitations, the amended agreement provided
(i) an $8,000,000 maximum revolving credit facility for working capital and
general corporate purposes and (ii) a $5,001,000 term loan that combined the
outstanding principal balance of the existing term loan with additional
financing for the purchase of assets of a galvanizing facility (Note 2).

Term loan payments are based on a seven-year amortization schedule with equal
monthly payments of principal and interest, and a final balloon payment in
February 2008. The term loan may be prepaid without penalty. The revolving line
of credit may be paid down without penalty, or additional funds may be borrowed
up to the maximum line of credit. At December 31, 2005, the Company had
additional borrowing capacity of $4,296,000, net of outstanding irrevocable
letters of credit, under the bank revolving line of credit based on the
borrowing base calculated under the agreement. At December 31, 2005, the Company
had outstanding irrevocable letters of credit totaling $400,000 for future
potential workers' compensation claims.

Substantially all of the Company's accounts receivable, inventories, fixed
assets and the common stock of its subsidiary are pledged as collateral under
the agreement, and the credit agreement is secured by a full and unconditional
guaranty from NAG. Amounts borrowed under the agreement bear interest at the
prime rate of JPMorgan Chase Bank or the LIBOR rate, at the option of the
Company, subject to a rate margin adjustment determined by the Company's
consolidated debt service ratio. The interest rate on these borrowings was 7.50%
at December 31, 2005. In the event the Company fails to maintain a consolidated
debt service coverage ratio for any fiscal quarter of at least 1.25 to 1.00, the
Applicable LIBOR Rate Margin will be increased from 3.0% to 5.75% and the
Applicable Prime Rate Margin will be increased from .25% to 3.00%. Thereafter,
the increased rate margin will remain in effect until such time as the Company
has maintained a consolidated debt service coverage ratio greater than or equal
to 1.25 to 1.00 for a subsequent fiscal quarter.

In the event the Company fails to maintain a consolidated EBITDA to capital
expenditures ratio for any fiscal quarter of at least 1.00 to 1.00, the increase
in the Applicable LIBOR Rate Margin ranges from 3.75% to 5.75%, and the increase
in the Applicable Prime Rate Margin ranges from 1.00% to 3.00%.

                                      FS-7
<PAGE>

Amounts borrowed under the bank credit facilities bore interest ranging from
4.2% to 7.5% during the three years ended December 31, 2005 and an effective
rate of 7.5% at December 31, 2005 and 5.5% at December 31, 2004.

The bank credit agreement requires the Company to maintain compliance with
covenant limits for current ratio, debt to tangible net worth ratio, debt
service coverage ratio and a capital expenditures ratio. At December 31, 2005
the Company was in compliance with all of the covenant limits and the actual
financial ratios compared to the required ratios, were as follows: Current Ratio
- Actual 1.83 versus minimum required of 1.0; Debt to Tangible Net Worth Ratio -
Actual 1.37 versus maximum permitted of 2.50; Debt Service Coverage Ratio -
Actual 2.10 versus minimum permitted of 1.25; Capital Expenditures Coverage
Ratio - Actual 1.47 versus minimum required of 1.0.

The Company has various commitments primarily related to long-term debt,
industrial revenue bonds, operating lease commitments, zinc purchase commitments
and vehicle operating leases. The Company's off-balance sheet contractual
obligations at December 31, 2005, consist of $1,585,000 for long-term operating
leases for three galvanizing facilities and galvanizing equipment, $662,000 of
vehicle and equipment operating leases and $3,424,000 for zinc purchase
commitments. The various leases for galvanizing facilities, including option
renewals, expire from 2015 to 2017. A lease for galvanizing equipment expires in
2007. The vehicle leases expire annually on various schedules through 2010. NAG
periodically enters into fixed price purchase commitments with domestic and
foreign zinc producers to purchase a portion of its requirements for its hot dip
galvanizing operations; commitments for the future delivery of zinc can be for
up to one year.

The Company expects to fund these commitments with cash generated from
operations and continuation of existing bank credit agreements as they mature.
The Company's contractual obligations and commercial commitments as of December
31, 2005 are as follows (in thousands):

<TABLE><CAPTION>
                                                                                More
                                             Less than     1-3        3-5       than
                                    Total     One Year    Years      Years     5 Years
                                   --------   --------   --------   --------   --------
<S>                                <C>        <C>        <C>        <C>        <C>
     Industrial revenue bonds      $  5,934   $    731   $  2,425   $  2,778   $   --
     Long-term debt                   7,787        715      7,058         14       --
     Subordinated notes               1,000      1,000       --         --         --
     Facilities operating leases      1,585        519        745        144        177
     Vehicle and equipment
       operating leases                 662        221        376         64          1
     Zinc purchases                   3,424      3,424       --         --         --
                                   --------   --------   --------   --------   --------
     Total contractual cash
       obligations                 $ 20,392   $  6,610   $ 10,604   $  3,000   $    178
                                   ========   ========   ========   ========   ========
     Other contingent
       commitment:
       Letters of credit*          $    400   $    400       --         --         --
</TABLE>

     *The Company has outstanding letters of credit totaling approximately
     $6,823,000, which includes $6,423,000 related to the Company's industrial
     revenue bonds shown in the table of contractual obligations above.

                                      FS-8
<PAGE>

SHARE REPURCHASE PROGRAM

In August 1998, the Board of Directors authorized the Company to repurchase up
to $1,000,000 of its common stock in private or open market transactions. In
2005, the Company repurchased 64 shares at an average price per share of $2.39
totaling $153, bringing the total number of shares repurchased through December
31, 2005 to 132,261 at an average price of $1.77 per share totaling $234,153.

ENVIRONMENTAL MATTERS

The Company's facilities are subject to extensive environmental legislation and
regulations affecting their operations and the discharge of wastes. The cost of
compliance with such regulations was approximately $1,354,000, $1,053,000, and
$1,061,000 in 2005, 2004 and 2003, respectively, for the disposal and recycling
of wastes generated by the galvanizing operations.

On August 30, 2004, the Company was informed by counsel for the Metropolitan
Water Reclamation District of Greater Chicago (the "Water District") that the
Water District had, on August 25, 2004 filed a Second Amended Complaint in the
United States District Court, Northern District of Illinois, Eastern Division,
naming North American Galvanizing & Coatings, Inc. (formerly known as Kinark
Corporation) as an added defendant. Counsel for the Water District also gave the
Company notice of the Water District's intent to file (or amend the Complaint to
include) a Citizens Suit under the Resource Compensation and Recovery Act
("RCRA") against North American Galvanizing & Coatings, Inc., pursuant to
Section 7002 of RCRA, 42 U.S.C. Section 6972. This Second Amended Complaint
seeks enforcement of an August 12, 2004 default judgment in the amount of
$1,810,463.34 against Lake River Corporation and Lake River Holding Company,
Inc. in connection with the operation of a storage terminal by Lake River
Corporation in violation of environmental laws. Lake River Corporation conducted
business as a subsidiary of the Company until June 30, 2000, at which time Lake
River Corporation was sold to Lake River Holding Company, Inc. and ceased to be
a subsidiary of the Company. The Second Amended Complaint asserts that prior to
the sale of Lake River Corporation, the Company directly operated the Lake River
facility and, accordingly, seeks to have the Court pierce the corporate veil of
Lake River Corporation and enforce the default judgment order of August 12, 2004
against the Company. The Company denies the assertions set forth in the Water
District's Complaint and on November 13, 2004 filed a partial motion for
dismissal of the Second Amended Complaint.

In December 2004, the Water District filed a Third Amended complaint in the
litigation, adding two claims: (1) a common law claim for nuisance; and (2) a
claim under the federal Resource Conservation and Recovery Act, in which the
Water District argues that the Company is responsible for conditions on the
plaintiff's property that present an "imminent and substantial endangerment to
human health and the environment." In January 2005, the Company filed a partial
motion to dismiss the Third Amended Complaint. On April 12, 2005, the Court
issued an order denying in part and granting in part the Company's partial
motion to dismiss plaintiff's third amended complaint. The Company has filed an
appeal with the Seventh Circuit Court of Appeals requesting dismissal of the
sole CERCLA claim contained in the Third Amended Complaint that was not
dismissed by the United States District Court's April 12, 2005 order. The Water
District has also attempted to appeal those rulings contained in the April 12,
2005 that are adverse to the Water District. Meanwhile, litigation in the United
States District Court continues.

The Company has denied any liability with respect to this claim and intends to
vigorously defend this case. At this time, the Company has not determined the
amount of any liability that may result from this matter or whether such
liability, if any, would have a material adverse effect on the Company's
financial condition, results of operations, or liquidity.

NAG was notified in 1997 by the Illinois Environmental Protection Agency
("IEPA") that it was one of approximately 60 potentially responsible parties
("PRPs") under the Comprehensive Environmental Response, Compensation, and
Liability Information System ("CERCLIS") in connection with cleanup of an

                                      FS-9
<PAGE>

abandoned site formerly owned by Sandoval Zinc Co. A number of the PRPs have
agreed to work together and with IEPA on a voluntary basis. The Company has been
and continues to participate in this volunteer group. The group has retained
consultants and legal representatives familiar with IEPA regulations. This
volunteer group, with its consultants, has cooperated with IEPA in attempting to
better define the environmental issues associated with the Sandoval Zinc site.
To that extent, this voluntary group prepared and submitted to IEPA in August
2000 a work plan. The purpose of this work plan is to attempt to define the
extent of environmental remediation that might be required, assess risks, and
review alternatives to addressing potential remediation. The IEPA has yet to
respond to this proposed work plan or suggest any other course of action, and
there has been no activity in regards to this issue during 2005. Therefore, the
Company has no basis for determining potential exposure and estimated
remediation costs at this time.

The Company is committed to complying with all federal, state and local
environmental laws and regulations and using its best management practices to
anticipate and satisfy future requirements. As is typical in the galvanizing
business, the Company will have additional environmental compliance costs
associated with past, present, and future operations. Management is committed to
discovering and eliminating environmental issues as they arise. Because of the
frequent changes in environmental technology, laws and regulations management
cannot reasonably quantify the Company's potential future costs in this area.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires that management
apply accounting policies and make estimates and assumptions that affect results
of operations and the reported amounts of assets and liabilities. The following
areas are those that management believes are important to the financial
statements because they require significant judgment and estimation.

REVENUE RECOGNITION--The Company generates revenue by providing galvanizing and
other coating services to customers' products. Revenue is recognized when the
galvanizing and coating processes are completed. Freight billed to customers is
recorded as revenue.

INVENTORIES--Inventories are stated at the lower of cost (LIFO basis) or market.
Since substantially all of the Company's inventory is raw zinc used in the
galvanizing of customers' products, market value is based on an estimate of the
value added to the cost of raw zinc as a result of the galvanizing service.

SELF-INSURANCE RESERVES--The reserves for the self-insured portion of workers
compensation and health insurance coverage is based on historical data and
current trends. Estimates for claims incurred and incurred but not reported
claims are included in the reserves. These estimates may be subject to
adjustment if the Company's actual claims are significantly different than its
historical experience. The Company has obtained insurance coverage for medical
claims exceeding $75,000 and workers' compensation claims exceeding $150,000 per
occurrence, respectively, and has implemented safety training and other programs
to reduce workplace accidents.

IMPAIRMENT OF LONG-LIVED ASSETS--The Company reviews long-lived assets for
impairment using forecasts of future cash flows to be generated by those assets.
These cash flow forecasts are based upon expected tonnage to be galvanized and
the margin to be earned by providing that service to customers. These
assumptions are susceptible to the actions of competitors and changes in
economic conditions in the industries and geographic markets the Company serves.

ENVIRONMENTAL--The Company expenses or capitalizes, where appropriate,
environmental expenditures that relate to current operations as they are
incurred. Such expenditures are expensed when they are attributable to past
operations and are not expected to contribute to current or future revenue
generation. The Company

                                     FS-10
<PAGE>

records liabilities when remediation or other environmental assessment or
clean-up efforts are probable and the cost can be reasonably estimated.

GOODWILL--Pursuant to the provisions of SFAS No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets," which requires
management to estimate the fair value of the Company's reporting units, the
Company conducts an annual impairment test of goodwill during the second quarter
of each year unless circumstances arise that require more frequent testing. The
determination of fair value is dependent upon many factors including, but not
limited to, management's estimate of future cash flows of the reporting units
and discount rates. Any one of a number of future events could cause management
to conclude that impairment indicators exist and that the carrying value of
these assets will not be recovered. During the second quarter of 2005, the
Company completed the annual impairment test of goodwill for 2005 and concluded
goodwill was not impaired.

NEW ACCOUNTING STANDARDS--In March, 2005, the FASB issued FIN 47, ACCOUNTING FOR
CONDITIONAL ASSET RETIREMENT OBLIGATIONS, AN INTERPRETATION OF FASB STATEMENT
NO. 143. This Interpretation clarifies that the term CONDITIONAL ASSET
RETIREMENT OBLIGATION as used in FASB Statement No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS, refers to a legal obligation to perform an asset
retirement activity in which the timing and (or) method of settlement are
conditional on a future event that may or may not be within the control of the
entity. The obligation to perform the asset retirement activity is unconditional
even though uncertainty exists about the timing and (or) method of settlement.
Thus, the timing and (or) method of settlement may be conditional on a future
event. Accordingly, an entity is required to recognize a liability for the fair
value of a conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated. The Company has evaluated the guidance in
FIN 47 and determined that it has no impact on the consolidated results of
operations and financial condition of the Company.

In November 2004, the FASB issued SFAS No. 151, INVENTORY COSTS-AN AMENDMENT OF
ARB NO. 43, CHAPTER 4 ("SFAS 151"). SFAS 151 amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of
idle facility expense, freight, handling costs, and wasted material (spoilage).
Among other provisions, the new rule requires that items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs be recognized
as current-period charges regardless of whether they meet the criterion of "so
abnormal" as stated in ARB No. 43. Additionally, SFAS 151 requires that the
allocation of fixed production overhead to the costs of conversion be based on
the normal capacity of the production facilities. . SFAS 151 is effective for
fiscal years beginning after June 15, 2005 and is required to be adopted by NAG
on January 1, 2006. The Company is currently evaluating the effect that the
adoption of SFAS 151 will have on its consolidated results of operations and
financial condition but does not expect it to have a material impact.

In December 2004, the FASB issued SFAS No. 123(R), which is a revision of SFAS
No. 123. This revised statement establishes accounting standards for all
transactions in which an entity exchanges its equity instruments for goods and
services focusing primarily on accounting for transactions with employees and
carrying forward prior guidance for share-based payments for transactions with
non-employees.

SFAS No. 123(R) eliminates the intrinsic value measurement method of accounting
in APB Opinion 25 and generally requires measuring the cost of the employee
services received in exchange for an award of equity instruments based on the
fair value of the award on the date of the grant. The standard requires grant
date fair value to be estimated using either an option-pricing model which is
consistent with the terms of the award or a market observed price, if such a
price exists. Such costs must be recognized over the period during which an
employee is required to provide service in exchange for the award. The standard
also requires estimating the number of instruments that will ultimately be
issued, rather than accounting for forfeitures as they occur.

                                     FS-11
<PAGE>

The effective date of SFAS No. 123(R) was originally to be the first reporting
period beginning after June 15, 2005, however in April 2005, the Securities and
Exchange Commission adopted a new rule amending the effective date to January 1,
2006. The Company has adopted SFAS No. 123(R) effective January 1, 2006. SFAS
No. 123(R) permits companies to adopt its requirements using either a "modified
prospective" method, or a "modified retrospective" method. Under the "modified
prospective" method, compensation cost is recognized in the financial statements
beginning with the effective date, based on the requirements of SFAS No. 123(R)
for all share-based payments granted after that date, and based on the
requirements of SFAS No. 123 for all unvested awards granted prior to the
effective date of SFAS No. 123(R). Under the "modified retrospective" method,
the requirements are the same as under the "modified prospective" method, but
also permits entities to restate financial statements of previous periods based
on pro forma disclosures made in accordance with SFAS No. 123. The Company has
adopted SFAS No. 123(R) under the modified prospective method on January 1, 2006
and currently estimates the adoption to have a similar effect on the
consolidated financial statements of the Company as reflected in the tabular
information in Footnote 1 to the Consolidated Financial Statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company's operations include managing market risks related to changes in
interest rates and zinc commodity prices.

INTEREST RATE RISK--The Company is exposed to financial market risk related to
changes in interest rates. Changing interest rates will affect interest paid on
the Company's variable rate debt. Variable rate debt aggregating $7,767,000 and
$7,932,000 was outstanding under the credit agreement at December 31, 2005 and
2004, respectively, with effective rates of 7.5% and 5.5%, respectively. Amounts
of variable rate debt outstanding under the industrial revenue bond agreement
were $5,933,750 and $6,626,250 at December 31, 2005 and 2004, respectively, with
an effective rate of 3.5% (see Note 6 to Consolidated Financial Statements). In
addition, the Company's fixed rate debt consisting of $1,000,000 of 10%
subordinated promissory notes was outstanding at December 31, 2005. The
borrowings under all of the Company's debt obligations at December 31, 2005 are
due as follows: $2,447,000 in 2006; $1,484,000 in 2007; $7,148,000 in 2008,
$852,000 in 2009, $897,000 in 2010 and $1,893,000 in years 2011 through 2015.
Each increase of 10 basis points in the effective interest rate would result in
an annual increase in interest charges on variable rate debt of approximately
$13,700 based on December 31, 2005 outstanding borrowings. The actual effect of
changes in interest rates is dependent on actual amounts outstanding under the
various loan agreements. The Company monitors interest rates and has sufficient
flexibility to renegotiate the loan agreement, without penalty, in the event
market conditions and interest rates change.

ZINC PRICE RISK--NAG periodically enters into fixed price purchase commitments
with domestic and foreign zinc producers to purchase a portion of its zinc
requirements for its hot dip galvanizing operations. Commitments for the future
delivery of zinc, typically up to one year, reflect rates quoted on the London
Metals Exchange. At December 31, 2005 and 2004, the aggregate fixed price
commitments for the procurement of zinc were approximately $3,424,000 and
$4,017,000, respectively. With respect to the zinc fixed price purchase
commitments, a hypothetical decrease of 10% in the market price of zinc from the
December, 2005 and 2004 levels would represent potential lost gross margin
opportunities of approximately $342,000 and $402,000, respectively.

The Company's financial strategy includes evaluating the selective use of
derivative financial instruments to manage zinc and interest costs. As part of
its inventory management strategy, the Company expects to continue evaluating
hedging instruments to minimize the impact of zinc price fluctuations. The
Company's current zinc forward purchase commitments (see Note 8) are considered
derivatives, but the Company has elected to account for these purchase
commitments as normal purchases.

                                     FS-12
<PAGE>

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of North American Galvanizing & Coatings, Inc. is responsible for
the integrity and accuracy of the accompanying consolidated financial
statements. Management believes that the consolidated financial statements for
the three years ended December 31, 2005 have been prepared in conformity with
accounting principles, appropriate in the circumstances, generally accepted in
the United States. In preparing the consolidated financial statements,
management makes informed judgments and estimates where necessary to reflect the
expected effects of events and transactions that have not been completed. The
Company's disclosure controls, including operating procedures and guidelines,
ensure that material information required to be disclosed is appropriately and
timely recorded and communicated to management.

Management relies on a system of internal operating procedures and accounting
controls that allows it to meet its responsibility for the reliability of the
consolidated financial statements. This system provides reasonable assurance
that the Company's physical and intellectual assets are safeguarded and
transactions are recorded and processed in accordance with management's
authorization that permits the preparation of consolidated financial statements
in accordance with accounting principles generally accepted in the United
States. Management believes that the Company's system of internal operating
procedures and accounting controls provide reasonable assurance that errors that
could be material to the consolidated financial statements are prevented or
would be detected within a timely period.

The Audit Committee of the Board of Directors, composed of four Independent
Directors, is responsible for overseeing the Company's financial reporting
process. The Audit Committee regularly meets with executive and financial
management to review financial reports and monitor matters that could be
material to the consolidated financial statements. The Audit Committee also
meets several times a year with the independent auditors who have free access to
the Audit Committee and the Board of Directors to discuss the quality and
acceptability of the Company's financial reporting, internal controls and
matters related to corporate governance.

The independent auditors are engaged to express an opinion on the Company's
consolidated financial statements in accordance with auditing standards of the
Public Company Accounting Oversight Board (United States). Their report is
included herein on page FS-14.


      /s/ Ronald J. Evans                      /s/ Beth B. Hood
      -----------------------------            -----------------------------
      Ronald J. Evans                          Beth B. Hood
      President and                            Vice President and
      Chief Executive Officer                  Chief Financial Officer


                                     FS-13
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
NORTH AMERICAN GALVANIZING & COATINGS, INC.

We have audited the accompanying consolidated balance sheets of North American
Galvanizing & Coatings, Inc. and subsidiary (the "Company") as of December 31,
2005 and 2004, and the related consolidated statements of operations and
comprehensive income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 2005. Our audits also included the
financial statement schedule listed in the Index at Item 15. These financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of North American Galvanizing &
Coatings, Inc. and subsidiary at December 31, 2005 and 2004, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2005 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.


Deloitte & Touche LLP


Tulsa, Oklahoma
February 10, 2006

                                     FS-14
<PAGE>
NORTH AMERICAN GALVANIZING & COATINGS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
(In thousands, except per share amounts)
<TABLE><CAPTION>
===========================================================================================================
ASSETS                                                                             2005            2004
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
CURRENT ASSETS:
  Cash                                                                         $      1,367    $        634
  Trade receivables--less allowances of $124 for 2005 and $257 for 2004               6,808           4,654
  Inventories                                                                         6,077           5,693
  Prepaid expenses and other assets                                                     966             521
  Deferred tax asset--net                                                               243             723
                                                                               ------------    ------------
           Total current assets                                                      15,461          12,225

PROPERTY, PLANT AND EQUIPMENT--AT COSTS:
  Land                                                                                2,167           1,967
  Galvanizing plants and equipment                                                   35,330          32,805
                                                                               ------------    ------------
                                                                                     37,497          34,772
  Less--allowance for depreciation                                                  (15,954)        (13,861)
  Construction in progress                                                              325             220
                                                                               ------------    ------------
           Total property, plant and equipment--net                                  21,868          21,131

GOODWILL--Net                                                                         3,448           3,389

OTHER ASSETS                                                                            278             369
                                                                               ------------    ------------

TOTAL ASSETS                                                                   $     41,055    $     37,114
                                                                               ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current maturities of long-term obligations                                  $        715    $        604
  Current portion of bonds payable                                                      731             692
  Subordinated notes payable                                                          1,000              --
  Trade accounts payable                                                              1,838             582
  Accrued payroll and employee benefits                                               1,222             717
  Accrued taxes                                                                         591             405
  Other accrued liabilities                                                           2,338             604
                                                                               ------------    ------------
           Total current liabilities                                                  8,435           3,604
                                                                               ------------    ------------

DEFERRED TAX LIABILITY--Net                                                           1,047             944

LONG-TERM OBLIGATIONS                                                                 7,072           7,347

BONDS PAYABLE                                                                         5,203           5,934

SUBORDINATED NOTES PAYABLE                                                               --             976
                                                                               ------------    ------------

           Total liabilities                                                         21,757          18,805
                                                                               ------------    ------------
COMMITMENTS AND CONTINGENCIES (NOTES 8 AND 9)

STOCKHOLDERS' EQUITY:
  Common stock--$.10 par value:
     Issued--8,209,925 shares in 2005 and 2004                                          821             819
     Additional paid-in capital                                                      17,391          17,252
     Retained earnings                                                                6,543           5,899
  Common shares in treasury at cost--1,362,977 in 2005 and 1,412,913 in 2004         (5,457)         (5,661)
                                                                               ------------    ------------
           Total stockholders' equity                                                19,298          18,309
                                                                               ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $     41,055    $     37,114
                                                                               ============    ============
</TABLE>
See notes to consolidated financial statements.

                                      FS-15
<PAGE>
NORTH AMERICAN GALVANIZING & COATINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands, except per share amounts)
<TABLE><CAPTION>
===========================================================================================================


                                                                   2005            2004            2003
                                                               ------------    ------------    ------------
<S>                                                            <C>             <C>             <C>
SALES                                                          $     47,870    $     35,822    $     33,200

COSTS AND EXPENSES:
  Cost of sales                                                      35,969          25,814          23,833
  Selling, general and administrative expenses                        7,196           5,917           5,992
  Depreciation and amortization                                       2,532           2,701           2,880
                                                               ------------    ------------    ------------
           Total costs and expenses                                  45,697          34,432          32,705
                                                               ------------    ------------    ------------

OPERATING INCOME                                                      2,173           1,390             495

INTEREST EXPENSE                                                      1,074             764             654

OTHER INCOME                                                             --             (25)             --
                                                               ------------    ------------    ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES          1,099             651            (159)

INCOME TAX EXPENSE                                                      455             248              23
                                                               ------------    ------------    ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS                                644             403            (182)

LOSS FROM DISCONTINUED OPERATIONS--Net                                   --              --             (77)

LOSS ON WRITE-OFF OF ASSETS OF DISCONTINUED OPERATIONS--Net              --              --            (754)
                                                               ------------    ------------    ------------

NET INCOME (LOSS)                                                       644             403          (1,013)

OTHER COMPREHENSIVE INCOME (LOSS):
  Unrealized holding gain on investment                                  --              12               6
  Reclassification adjustment for realized gain included in
    net income                                                           --             (18)             --
                                                               ------------    ------------    ------------
           Total other comprehensive income (loss)                       --              (6)              6
                                                               ------------    ------------    ------------

COMPREHENSIVE INCOME (LOSS)                                    $        644    $        397    $     (1,007)
                                                               ============    ============    ============


NET INCOME (LOSS) PER COMMON SHARE:
  Continuing operations:
     Basic                                                     $       0.09    $       0.06    $      (0.03)
     Diluted                                                   $       0.08    $       0.05    $      (0.03)
  Discontinued operations:
     Basic                                                               --              --    $      (0.12)
     Diluted                                                             --              --    $      (0.12)
  Net income (loss)
     Basic                                                     $       0.09    $       0.06    $      (0.15)
     Diluted                                                   $       0.08    $       0.05    $      (0.15)
</TABLE>

See notes to consolidated financial statements.


                                      FS-16
<PAGE>
NORTH AMERICAN GALVANIZING & COATINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands, except per share amounts)
<TABLE><CAPTION>
===========================================================================================================


                                                                   2005            2004            2003
                                                               ------------    ------------    ------------
<S>                                                            <C>             <C>             <C>
OPERATING ACTIVITIES:
  Net income (loss)                                            $        644    $        403    $     (1,013)
  Loss from discontinued operations                                      --              --           1,197
  (Loss)/Gain on disposal of assets                                      (2)             15               7
  Depreciation and amortization                                       2,532           2,701           2,880
  Gain on sale of investment securities                                  --             (25)             --
  Deferred income taxes                                                 583             193            (715)
  Non-cash directors' fees                                              245              73              64
  Changes in assets and liabilities, net of purchase of
  assets from Gregory Industries, Inc. (Note 2):
     Accounts receivable--net                                        (1,207)            (60)            (65)
     Inventories and other assets                                       164            (734)          1,299
     Accounts payable, accrued liabilities and other                  3,681              15            (523)
                                                               ------------    ------------    ------------
Net cash provided by continuing operations                            6,640           2,581           3,131

Net cash provided by discontinued operations                             --              --              96
                                                               ------------    ------------    ------------
           Cash provided by operating activities                      6,640           2,581           3,227

INVESTING ACTIVITIES:
  Payment for purchase of Gregory Industries' galvanizing
    operation                                                        (4,188)             --              --
  Proceeds from sale of fixed assets                                     29              43              --
  Investment proceeds (purchases)                                        --              92             (68)
  Capital expenditures                                               (1,016)         (1,230)           (901)
                                                               ------------    ------------    ------------
           Cash used in investing activities                         (5,175)         (1,095)           (969)

FINANCING ACTIVITIES:
  Proceeds from long-term obligations                                22,313          18,541          14,360
  Payments on long-term obligations                                 (22,452)        (18,747)        (15,947)
  Payment on bonds                                                     (693)           (656)           (618)
  Purchase of treasury stock                                             --             (46)             --
  Proceeds from sale of treasury stock                                  100              --              --
                                                               ------------    ------------    ------------
           Cash used in financing activities                           (732)           (908)         (2,205)

INCREASE IN CASH AND CASH EQUIVALENTS                                   733             578              53

CASH AND CASH EQUIVALENTS:
  Beginning of year                                                     634              56               3
                                                               ------------    ------------    ------------

  End of year                                                  $      1,367    $        634    $         56
                                                               ============    ============    ============

CASH PAID DURING THE YEAR FOR:
  Interest                                                     $      1,014    $        789    $        556
                                                               ============    ============    ============

  Income taxes (net of refunds of $432 in 2005)                $       (390)   $        250    $         87
                                                               ============    ============    ============
</TABLE>

See notes to consolidated financial statements.


                                      FS-17
<PAGE>
NORTH AMERICAN GALVANIZING & COATINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2005
(In thousands, except per share amounts)
<TABLE><CAPTION>
==================================================================================================================================

                                                    COMMON
                                                     STOCK      ADDITIONAL                    OTHER
                                      SHARES       ($.10 PAR      PAID-IN      RETAINED    COMPREHENSIVE   TREASURY
                                    OUTSTANDING      VALUE)       CAPITAL      EARNINGS       INCOME         STOCK         TOTAL
                                    ----------    ----------    ----------    ----------    ----------    ----------    ----------
<S>                                 <C>           <C>           <C>           <C>           <C>           <C>           <C>
BALANCE--January 1, 2003             6,736,919    $      819    $   17,464    $    6,509    $       --    $   (5,964)   $   18,828

  Net loss                                  --            --            --        (1,013)           --            --        (1,013)

  Other comprehensive income                --            --            --            --             6            --             6

  Treasury stock issued                 46,218            --          (121)           --            --           185            64
                                    ----------    ----------    ----------    ----------    ----------    ----------    ----------

BALANCE--January 1, 2004             6,783,137           819        17,343         5,496             6        (5,779)       17,885

  Net income                                --            --            --           403            --            --           403

  Other comprehensive income                --            --            --            --            (6)           --            (6)

  Treasury stock purchased             (26,876)           --            --            --            --           (46)          (46)

  Treasury stock issued                 40,751            --           (91)           --            --           164            73
                                    ----------    ----------    ----------    ----------    ----------    ----------    ----------

BALANCE--January 1, 2005             6,797,012           819        17,252         5,899            --        (5,661)       18,309

  Net income                                --            --            --           644            --            --           644

  Other                                     --             2            (2)           --            --            --            --

  Deferred compensation under the
   Director's stock unit program            --            --           245            --            --            --           245

  Treasury stock purchased                 (64)           --            --            --            --            --            --

  Treasury stock issued                 50,000            --          (104)           --            --           204           100
                                    ----------    ----------    ----------    ----------    ----------    ----------    ----------

BALANCE--December 31, 2005           6,846,948    $      821    $   17,391    $    6,543    $       --    $   (5,457)   $   19,298
                                    ==========    ==========    ==========    ==========    ==========    ==========    ==========
</TABLE>



See notes to consolidated financial statements.


                                      FS-18
<PAGE>
NORTH AMERICAN GALVANIZING AND COATINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

DESCRIPTION OF BUSINESS

North American Galvanizing & Coatings, Inc. ("North American Galvanizing" or the
"Company") is engaged in hot dip galvanizing and coatings for corrosion
protection of fabricated steel products through its wholly owned subsidiary,
North American Galvanizing Company ("NAG"). NAG provides metals corrosion
protection with 11 regionally located galvanizing plants. The Company grants
unsecured credit to its customers on terms standard for this industry, typically
net 30 to 45 days.


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All inter-company
transactions are eliminated in consolidation.

ESTIMATES--The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet dates and the reported amounts of revenues and expenses for
each of the years. Actual results will be determined based on the outcome of
future events and could differ significantly from the estimates.

CASH AND CASH EQUIVALENTS--Cash and cash equivalents include interest bearing
deposits with original maturities of three months or less.

INVESTMENTS--The Company classifies its investments as available-for-sale and
records unrealized holding gains (losses) on investments as a separate component
of Stockholders' Equity as other comprehensive income. If the Company believes
that a decline in the fair value of a security is other than temporary, the cost
basis of such security is written down and the loss is reflected as a charge to
income. Investment income is recognized on the accrual method. Cost is
determined on the specific identification basis in computing realized gains and
losses on sales of investments.


The Company held no investments at December 31, 2005. The Company's investments
at January 1, 2004 consisted of equity securities. The amortized cost,
unrealized holding gains and losses, and fair values of the Company's
available-for-sale equity securities at January 1, 2004 were as follows:

                                             GROSS        GROSS
                                           UNREALIZED   UNREALIZED
                                             HOLDING      HOLDING     FAIR
                                  COST        GAINS       LOSSES      VALUE

     Equity Securities          $ 67,841     $ 5,575       $ --      $ 73,416
                                ========     =======       =====     ========

In the first quarter of 2004, the Company liquidated its investment in
securities and recorded a gain of $25,000.

INVENTORIES--Inventories consist of raw zinc "pigs," molten zinc in galvanizing
kettles and other chemicals and materials used in the galvanizing process.
Inventories are stated at the lower of cost or market with

                                      FS-19
<PAGE>

market value based on estimated realizable value from the galvanizing process.
Zinc cost is determined on a last-in first-out ("LIFO") basis. Other inventories
are valued primarily on an average cost basis. Inventories consist of the
following:

                                (DOLLARS IN THOUSANDS)
                                  2005           2004

     Zinc                       $ 5,684        $ 5,435
     Other                          393            258
                                -------        -------
                                $ 6,077        $ 5,693
                                =======        =======

Had the Company used first-in-first-out ("FIFO") basis for valuing its zinc
inventories, at December 31, 2005 and 2004 inventories would have been lower by
approximately $258,000 and $513,000, respectively. The Company's LIFO
inventories represented approximately 94% of total inventories at December 31,
2005 and 95% of total inventories at December 31, 2004. Raw zinc replacement
cost based on year-end market prices was $8,602,000 and $5,640,000 at December
31, 2005 and 2004, respectively. In 2005, inventory quantities were reduced,
resulting in liquidation of LIFO inventory layers which increased the Company's
net income by $39,000. In 2003, inventory quantities were reduced, resulting in
liquidation of LIFO inventory layers which increased the Company's net loss by
$71,000.

In November 2004, the FASB issued SFAS No. 151, INVENTORY COSTS-AN AMENDMENT OF
ARB NO. 43, CHAPTER 4 ("SFAS No. 151"). SFAS 151 amends the guidance in ARB No.
43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage). Among other provisions, the new rule requires that items such as
idle facility expense, excessive spoilage, double freight, and rehandling costs
be recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS 151
requires that the allocation of fixed production overhead to the costs of
conversion be based on the normal capacity of the production facilities. SFAS
151 is effective for fiscal years beginning after June 15, 2005 and is required
to be adopted by NAG on January 1, 2006. The Company is currently evaluating the
effect that the adoption of SFAS 151 will have on its consolidated results of
operations and financial condition but does not expect it to have a material
impact.

GOODWILL--Goodwill represents the excess of purchase price over the fair value
of net assets acquired in business combinations. Goodwill and intangible assets
with an indefinite life are no longer amortized but instead are reviewed, at
least annually, for impairment. Management selected May 31 as the date of its
annual goodwill impairment test. Based upon the impairment test performed at May
31, 2005, management determined that goodwill was not impaired.

DEPRECIATION AND AMORTIZATION--Plant and equipment, including assets under
capital leases, are depreciated on the straight-line basis over their estimated
useful lives, generally at rates of 2% to 6% for buildings and 10% to 20% for
equipment, furnishings, and fixtures. In 2001 the Company adopted the units of
production method of depreciation, based on projected total tonnage to be
processed over the estimated life of the respective equipment, for new
galvanizing plants or for significant expansions of existing plants. During 2005
and 2004, the Company removed fully depreciated assets totaling $385,740 and
$1,419,000, respectively, from the accounting records.


ENVIRONMENTAL EXPENDITURES--The Company expenses or capitalizes, where
appropriate, environmental expenditures that relate to current operations as
they are incurred. Such expenditures are expensed when they are attributable to
past operations and are not expected to contribute to current or future revenue
generation.

                                      FS-20
<PAGE>

The Company records liabilities when remediation or other environmental
assessment or clean-up efforts are probable and the cost can be reasonably
estimated.

LONG-LIVED ASSETS--Long-lived assets and certain intangibles to be held and used
or disposed of are reviewed for impairment on an annual basis or when events or
circumstances indicate that such impairment may have occurred. The Company has
determined that no impairment loss need be recognized for the years ended
December 31, 2005, 2004 or 2003.

SELF-INSURANCE--The Company is self-insured for workers' compensation and
certain health care claims for its active employees. The Company carries excess
insurance providing coverage for medical claims exceeding $75,000 and workers'
compensation claims exceeding $150,000 per occurrence, respectively. The
reserves for workers' compensation benefits and health care claims represent
estimates for reported claims and for claims incurred but not reported using
loss development factors. Such estimates are generally based on historical
trends and risk assessment methodologies; however, the actual results may vary
from these estimates since the evaluation of losses is inherently subjective and
susceptible to significant changing factors.

CONDITIONAL ASSET RETIREMENT OBLIGATIONS-- In March, 2005, the FASB issued FIN
47, ACCOUNTING FOR CONDITIONAL ASSET RETIREMENT OBLIGATIONS, AN INTERPRETATION
OF FASB STATEMENT NO. 143. This Interpretation clarifies that the term
CONDITIONAL ASSET RETIREMENT OBLIGATION as used in FASB Statement No. 143,
ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, refers to a legal obligation to
perform an asset retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not be within the
control of the entity. The obligation to perform the asset retirement activity
is unconditional even though uncertainty exists about the timing and (or) method
of settlement. Thus, the timing and (or) method of settlement may be conditional
on a future event. Accordingly, an entity is required to recognize a liability
for the fair value of a conditional asset retirement obligation if the fair
value of the liability can be reasonably estimated. The Company has evaluated
the guidance in FIN 47 and determined that it has no impact on the consolidated
results of operations and financial condition of the Company.

REVENUE RECOGNITION-- The Company generated revenues by providing galvanizing
and other coating services to customers' products. Revenue is recognized when
the galvanizing and coating processes are completed. Freight billed to customers
is recorded as revenue.

DERIVATIVE FINANCIAL INSTRUMENTS--The Company has previously utilized commodity
collar contracts as derivative instruments which are intended to offset the
impact of potential fluctuations in the market price of zinc. The Company had no
derivative instruments that were required to be reported at fair value
outstanding at December 31, 2005 and 2004, and did not utilize derivatives
during the years ended December 31, 2005, 2004 or 2003, except for the zinc
forward purchase commitments, which are accounted for as normal purchases (see
Note 8).

STOCK OPTIONS--The Company accounts for its stock option plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", under which no compensation cost has been recognized for stock
option awards.

                                      FS-21
<PAGE>

Had compensation cost for the Company's stock option plans been determined
according to the methodology of Statement of Financial Accounting Standard
No.123, ACCOUNTING FOR STOCK BASED COMPENSATION ("SFAS No. 123"), the Company's
pro forma net earnings (loss) and basic and diluted earnings (loss) per share
for 2005, 2004 and 2003, would have been as follows:

                                                   (DOLLARS IN THOUSANDS,
                                                  EXCEPT PER SHARE AMOUNTS)
                                                   YEAR ENDED DECEMBER 31
                                               ------------------------------
                                                 2005       2004       2003

     Net income (loss)--as reported            $   644    $   403    $(1,013)
     Deduct--total stock-based employee
       compensation expense determined under
       fair value based methods--net of tax        (63)       (45)       (20)
     Pro forma net income (loss)                   581        358     (1,033)
     Earnings per share:
       Basic--as reported                      $  0.09    $  0.06    $ (0.15)
       Basic--pro forma                        $  0.08    $  0.05    $ (0.15)
       Diluted--as reported                    $  0.08    $  0.05    $ (0.15)
       Diluted--pro forma                      $  0.08    $  0.05    $ (0.15)

The fair value of options granted under the Company's stock option plans was
estimated using the Black-Scholes option-pricing model with the following
assumptions used:

                                                   YEAR ENDED DECEMBER 31
                                               ------------------------------
                                                 2005       2004       2003

     Volatility                                  47 %        66 %       66 %
     Discount rate                               4.2%        6.5%        4 %
     Dividend yield                               0 %         0 %        0 %
     Fair value                                $ 1.48      $ 1.46     $ 0.86

In December 2004, the FASB issued SFAS No. 123(R), which is a revision of SFAS
No. 123. This revised statement establishes accounting standards for all
transactions in which an entity exchanges its equity instruments for goods and
services focusing primarily on accounting for transactions with employees and
carrying forward prior guidance for share-based payments for transactions with
non-employees.

SFAS No. 123(R) eliminates the intrinsic value measurement method of accounting
in APB Opinion 25 and generally requires measuring the cost of the employee
services received in exchange for an award of equity instruments based on the
fair value of the award on the date of the grant. The standard requires grant
date fair value to be estimated using either an option-pricing model which is
consistent with the terms of the award or a market observed price, if such a
price exists. Such costs must be recognized over the period during which an
employee is required to provide service in exchange for the award. The standard
also requires estimating the number of instruments that will ultimately be
issued, rather than accounting for forfeitures as they occur.


The effective date of SFAS No. 123(R) was originally to be the first reporting
period beginning after June 15, 2005, however in April 2005, the Securities and
Exchange Commission adopted a new rule amending the effective date to January 1,
2006. The Company has adopted SFAS No. 123(R) effective January 1, 2006. SFAS
No. 123(R) permits companies to adopt its requirements using either a "modified
prospective" method, or a "modified retrospective" method. Under the "modified
prospective" method, compensation cost is recognized in the financial statements
beginning with the effective date, based on the requirements of SFAS No. 123(R)
for all share-based payments granted after that date, and based on the
requirements of SFAS No. 123 for all unvested awards granted prior to the
effective date of SFAS No. 123(R). Under the "modified

                                      FS-22
<PAGE>

retrospective" method, the requirements are the same as under the "modified
prospective" method, but also permits entities to restate financial statements
of previous periods based on pro forma disclosures made in accordance with SFAS
No. 123. The Company has adopted SFAS No. 123(R) under the modified prospective
method on January 1, 2006 and currently estimates the adoption to have a similar
effect on the consolidated financial statements of the Company as reflected in
the above tabular information.

INCOME TAXES--Net deferred income tax assets and liabilities on the consolidated
balance sheet reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes and the benefit of net operating loss
and other tax credit carry-forwards. Valuation allowances are established
against deferred tax assets to the extent management believes it is more likely
than not that the assets will not be realized. No valuation allowance was
considered necessary at December 31, 2005 and 2004.


(2) BUSINESS EXPANSION - PURCHASE OF ASSETS

On February 28, 2005, NAGalv-Ohio, Inc., a subsidiary of North American
Galvanizing Company, purchased certain galvanizing assets of Gregory Industries,
Inc., located in Canton, Ohio, for a cash purchase price of $3.7 million plus
approximately $0.5 million in purchase related expenses. The purchase expands
the service area of North American Galvanizing into the northeast region of the
United States. The results of the operations of NAGalv-Ohio, Inc. have been
included in the consolidated financial statements since February 28, 2005.
Goodwill of less than $0.1 million was recognized in the purchase. The net
purchase price was allocated as follows:

     Current assets                        $1.8 million
     Net property, plant & equipment        2.3
     Goodwill                               0.1
                                           ----
        Purchase price                     $4.2 million
                                           ====

Pro-forma unaudited results of operations of the Company for the years ended
December 31, 2005, 2004 and 2003, prepared as if the purchase had taken place at
the beginning of each period, would have been as follows:

                                                   (DOLLARS IN THOUSANDS,
                                                  EXCEPT PER SHARE AMOUNTS)
                                                   YEAR ENDED DECEMBER 31
                                               ------------------------------
                                                 2005       2004       2003

     Sales                                     $48,974    $41,937    $40,244
     Net Income/(Loss)                            $467       $755      ($486)

     Earnings/(Loss) per share:
       Basic                                   $  0.07    $  0.11     ($0.07)
       Diluted                                 $  0.06    $  0.10     ($0.07)


(3) STOCK COMPENSATION PLANS

In 2004, stockholders approved the 2004 Incentive Stock Plan. The Plan provides
for the grant of stock options, stock grants, stock units and stock appreciation
rights to certain eligible employees and to outside directors. At December 31,
2005 and 2004, there were 1,250,000 shares of stock reserved for issuance under
the 2004 Incentive Stock Plan, which includes 489,667 authorized but unissued
shares under the Company's 1996 Stock Option Plan. At December 31, 2003,
1,042,000 shares of the Company's common stock were

                                      FS-23
<PAGE>

reserved for issuance under the terms of the Company's 1996 and 1988 Stock
Option Plans for key employees and directors. The plans generally provide
options to purchase Company stock at fair value as of the date the option is
granted. Options generally become exercisable in installments specified by the
applicable plan and must be exercised within ten years of the grant date.

                                                            WEIGHTED-
                                                             AVERAGE
                                               NUMBER        EXERCISE
     UNDER OPTION                             OF SHARES       PRICE

     Balance at January 1, 2003                452,333      $   2.24
     Granted                                    80,000          1.44
                                              --------      --------
     Balance at December 31, 2003              532,333          2.12
     Expired                                    (7,500)        (4.50)
     Granted                                    50,000          1.84
                                              --------      --------
     Balance at December 31, 2004              574,833          2.06
     Expired                                    (1,500)        (3.00)
     Granted                                   140,000          2.33
                                              --------      --------
     Balance at December 31, 2005              713,333      $   2.11
                                              ========      ========

At December 31, 2005, 2004 and 2003, options for 518,333, 464,833, and 407,333
shares, respectively, were exercisable.

Information about stock options as of December 31, 2005:

                           OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                   -----------------------------------    ---------------------
                                             WEIGHTED-
                               WEIGHTED-     AVERAGE                   WEIGHTED-
                               AVERAGE      REMAINING                  AVERAGE
RANGE OF           NUMBER OF   EXERCISE    CONTRACTUAL    NUMBER OF    EXERCISE
EXERCISE PRICES     SHARES      PRICE      LIFE (YEARS)    SHARES       PRICE

$1.00 to $1.39     163,333     $ 1.19          6.1         152,083     $ 1.20

$1.50               50,000       1.50          7.2         25,000        1.50

$1.70 to $2.00     100,000       1.91          8.1         46,250        1.95

$2.41 to $3.00     338,000       2.49          3.0         233,000       2.50

$3.06 to $3.50      62,000       3.30          1.2         62,000        3.30
                   -------     ------        -----         --------    ------
                   713,333     $ 2.11          4.6         518,333     $ 2.12
                   =======     ======        =====         =========   ======

                                      FS-24
<PAGE>

(4) EARNINGS PER SHARE RECONCILIATION


     FOR THE YEAR                    INCOME (LOSS)       SHARES        PER SHARE
     ENDED DECEMBER 31                (NUMERATOR)     (DENOMINATOR)      AMOUNT

     2003
     Net loss                        $ (1,013,000)            --        $  --
     Basic and diluted EPS                    --        6,762,587         (0.15)
                                     ------------       ---------       -------
     Diluted EPS                     $ (1,013,000)      6,762,587       $ (0.15)
                                     ============       =========       =======

     2004
     Net income                      $    403,000             --        $   --
     Basic EPS                                --        6,790,351          0.06
     Effect of dilutive stock
       options and warrants                   --          700,844         (0.01)
                                     ------------       ---------       -------
     Diluted EPS                     $    403,000       7,491,195       $  0.05
                                     ============       =========       =======

     2005
     Net income                      $    644,000             --        $   --
     Basic EPS                                --        6,883,315          0.09
     Effect of dilutive stock
       options and warrants                   --          724,969         (0.01)
                                     ------------       ---------       -------
     Diluted EPS                     $    644,000       7,608,284       $  0.08
                                     ============       =========       =======

The Company had a net loss for the year ended December 31, 2003 and the effect
of including dilutive securities in the earnings per common share would have
been anti-dilutive. Accordingly, all options to purchase common shares were
excluded from the calculation of diluted loss per share for the year ended
December 31, 2003. The number of options excluded from the calculation of
diluted earnings per share due to the option price exceeding the share market
price are 295,000 and 311,500, at December 31, 2005 and 2004, respectively.


(5) LONG-TERM OBLIGATIONS

                                                      (DOLLARS IN THOUSANDS)
                                                            DECEMBER 31
                                                      ----------------------
                                                        2005           2004

     Revolving line of credit                         $ 3,304        $ 4,919
     Term loan                                          4,465          3,013
     9.5% note due 2015                                    18             19
                                                      -------        -------
                                                        7,787          7,951

     Less current portion                                (715)          (604)
                                                      -------        -------
                                                      $ 7,072        $ 7,347
                                                      =======        =======

                                      FS-25
<PAGE>

LONG TERM DEBT--In February 2005, the Company amended the three-year bank credit
agreement that was scheduled to expire in December 2007 and extended its
maturity to February 28, 2008. Subject to borrowing base limitations, the
amended agreement provided (i) an $8,000,000 maximum revolving credit facility
for working capital and general corporate purposes and (ii) a $5,001,000 term
loan that combined the outstanding principal balance of the existing term loan
with additional financing for the purchase of assets of a galvanizing facility
(Note 2).

Term loan payments are based on a seven-year amortization schedule with equal
monthly payments of principal and interest, and a final balloon payment in
February 2008. The term loan may be prepaid without penalty. The revolving line
of credit may be paid down without penalty, or additional funds may be borrowed
up to the maximum line of credit. At December 31, 2005, the Company had
additional borrowing capacity of $4,296,000, net of outstanding irrevocable
letters of credit, under the bank revolving line of credit based on the
borrowing base calculated under the agreement. At December 31, 2005, the Company
had outstanding irrevocable letters of credit totaling $400,000 for future
potential workers' compensation claims.

Substantially all of the Company's accounts receivable, inventories, fixed
assets and the common stock of its subsidiary are pledged as collateral under
the agreement, and the credit agreement is secured by a full and unconditional
guaranty from NAG. Amounts borrowed under the agreement bear interest at the
prime rate of JPMorgan Chase Bank or the LIBOR rate, at the option of the
Company, subject to a rate margin adjustment determined by the Company's
consolidated debt service ratio. The interest rate on these borrowings was 7.50%
at December 31, 2005. In the event the Company fails to maintain a consolidated
debt service coverage ratio for any fiscal quarter of at least 1.25 to 1.00, the
Applicable LIBOR Rate Margin will be increased from 3.0% to 5.75% and the
Applicable Prime Rate Margin will be increased from .25% to 3.00%. Thereafter,
the increased rate margin will remain in effect until such time as the Company
has maintained a consolidated debt service coverage ratio greater than or equal
to 1.25 to 1.00 for a subsequent fiscal quarter.

In the event the Company fails to maintain a consolidated EBITDA to capital
expenditures ratio for any fiscal quarter of at least 1.00 to 1.00, the increase
in the Applicable LIBOR Rate Margin ranges from 3.75% to 5.75%, and the increase
in the Applicable Prime Rate Margin ranges from 1.00% to 3.00%.

Amounts borrowed under the bank credit facilities bore interest ranging from
4.2% to 7.5% during the three years ended December 31, 2005 and an effective
rate of 7.5% at December 31, 2005 and 5.5% at December 31, 2004.

The bank credit agreement requires the Company to maintain compliance with
covenant limits for current ratio, debt to tangible net worth ratio, debt
service coverage ratio and a capital expenditures ratio. At December 31, 2005
the Company was in compliance with all of the covenant limits and the actual
financial ratios compare to the required ratios, were as follows: Current Ratio
- Actual 1.83 versus minimum required of 1.0; Debt to Tangible Net Worth Ratio -
Actual 1.37 versus maximum permitted of 2.50; Debt Service Coverage Ratio -
Actual 2.10 versus minimum permitted of 1.25; Capital Expenditures Coverage
Ratio - Actual 1.47 versus minimum required of 1.0.

Aggregate maturities of long-term debt of $7,787,000, exclusive of subordinated
notes and bonds are payable as follows: $715,000 (2006), $715,000 (2007),
$6,342,000 (2008), $1,000 (2009), $1,000 (2010) and $13,000 (thereafter).


(6) BONDS PAYABLE

During the first quarter of 2000, the Company issued $9,050,000 of Harris County
Industrial Development Corporation Adjustable Rate Industrial Development Bonds,
Series 2000 (the "Bonds"). The Bonds are senior to other debt of the Company.
All of the bond proceeds, which were held in trust by Bank One Trust Company,
N.A. ("Trustee"), were used by NAG for the purchase of land and construction of
a hot dip

                                      FS-26
<PAGE>

galvanizing plant in Harris County, Texas. The galvanizing plant was completed
and began operation in the first quarter of 2001. The principal amount
outstanding on these bonds was $5,933,750 at December 31, 2005. In accordance
with the bond agreement, the Company is obligated to make principal payments to
a sinking fund on the following schedule: $731,000 (2006), $768,000 (2007),
$806,000 (2008), $851,000 (2009), $896,000 (2010) and $1,881,750 (thereafter).

The Bonds bear interest at a variable rate that can be converted to a fixed rate
upon certain conditions outlined in the bond agreement. In September 2003, the
Reimbursement Agreement with the bank trustee was amended (a) to adjust the
variable interest rate on the Company's interest deposits from 5.25% to 3.5% on
the principal amount of Bonds until such time as the trustee determines that a
subsequent adjustment is warranted and (b) to permit the Company to withdraw
excess interest from the trustee's Interest Account on or about March 31, June
30, September 30 and December 31 of each year, commencing September 30, 2003. In
2005 and 2004 the Company withdrew excess interest of $106,000 and $72,000,
respectively, from the Interest Account and applied the proceeds to pay-down the
balance due under the bank letter of credit securing the bonds. At December 31,
2005, the Company determined, in accordance with the amended Reimbursement
Agreement, that the trustee's interest account held excess interest in the
amount of $70,000, which the Company recorded as a reduction of interest
expense.

The Bonds are subject to annual sinking fund redemption payments, which were
$675,000 in 2005 and increase annually thereafter to a maximum redemption of
$960,000 on June 15, 2012. The Company makes monthly payments of principal and
interest of approximately $76,000 into the sinking fund. The final maturity date
of the Bonds is June 15, 2013. The Company has the option of early redemption of
the Bonds at par unless the bonds are converted to a fixed interest rate, in
which case they are redeemable at a premium during a period specified in the
bond agreement. The Company's obligation under the bond agreement is secured
through a letter of credit with a bank which must remain in effect as long as
any Bonds are outstanding. The letter of credit is collateralized by
substantially all the assets of the Company.


(7) SUBORDINATED DEBT

In February 2001, the Company completed a $1,000,000 private placement of
unsecured subordinated debt. The Company utilized the proceeds to partially fund
construction of a galvanizing facility in St. Louis, Missouri. Participation in
the private placement was offered to accredited investors, which included
certain of the Company's directors and eligible stockholders holding a minimum
of 100,000 shares of common stock. The amount outstanding on these notes, net of
discount, was $1,000,000 and $976,000 at December 31, 2005 and 2004,
respectively. The notes, which mature February 17, 2006 and bear interest at 10%
payable annually, were issued with warrants to purchase 666,666 shares of common
stock of the Company. Terms of the warrants, which expire February 17, 2008,
permit the holder to purchase shares of the Company's common stock at any time
prior to the expiration date. The exercise price of $.856 per share reflects the
fair value of the Company's common stock at the time the warrants were issued,
as determined by an independent financial advisor. The Company is considering a
request for approval from the noteholders of an extension of the maturity of the
notes for another year.


(8) COMMITMENTS

The Company leases its headquarters office, and certain manufacturing buildings
and equipment under non-cancelable operating leases. The Company also leases
certain facilities to third parties under non-cancelable operating leases. These
operating leases generally provide for renewal options and periodic rate
increases and

                                      FS-27
<PAGE>

are typically renewed in the normal course of business. Lease expense was
$1,006,000 in 2005, $716,000 in 2004, and $673,000 in 2003. Minimum annual
rental commitments at December 31, 2005 are payable as follows:

                                                    (DOLLARS IN THOUSANDS)
                                                       OPERATING LEASES

     2006                                                   $   739
     2007                                                       654
     2008                                                       274
     2009                                                       223
     2010                                                       117
     Thereafter                                                 239
                                                            -------
                                                            $ 2,246
                                                            =======

On January 25, 2006, the Company entered into a new lease agreement for office
space in Tulsa, Oklahoma commencing March 1, 2006. The aggregate minimum rental
commitment under the new lease is $191,360, payable as follows: $52,188 in 2006,
$63,593 in 2007, $64,754 in 2008, and $10,825 in 2009.

The Company has commitments with domestic and foreign zinc producers to purchase
zinc used in its hot dip galvanizing operations. Commitments for the future
delivery of zinc reflect rates then quoted on the London Metals Exchange and are
not subject to price adjustment. These zinc purchase commitments are considered
to be derivatives and are accounted for as normal purchases. At December 31,
2005, the aggregate commitments for the procurement of zinc at fixed prices were
$3,424,000. The Company reviews these fixed price contracts for losses using the
same methodology employed to estimate the market value of its zinc inventory.


(9) CONTINGENCIES

On August 30, 2004, the Company was informed by counsel for the Metropolitan
Water Reclamation District of Greater Chicago (the "Water District") that the
Water District had, on August 25, 2004 filed a Second Amended Complaint in the
United States District Court, Northern District of Illinois, Eastern Division,
naming North American Galvanizing & Coatings, Inc. (formerly known as Kinark
Corporation) as an added defendant. Counsel for the Water District also gave the
Company notice of the Water District's intent to file (or amend the Complaint to
include) a Citizens Suit under the Resource Compensation and Recovery Act
("RCRA") against North American Galvanizing & Coatings, Inc., pursuant to
Section 7002 of RCRA, 42 U.S.C. Section 6972. This Second Amended Complaint
seeks enforcement of an August 12, 2004 default judgment in the amount of
$1,810,463.34 against Lake River Corporation and Lake River Holding Company,
Inc. in connection with the operation of a storage terminal by Lake River
Corporation in violation of environmental laws. Lake River Corporation conducted
business as a subsidiary of the Company until June 30, 2000, at which time Lake
River Corporation was sold to Lake River Holding Company, Inc. and ceased to be
a subsidiary of the Company. The Second Amended Complaint asserts that prior to
the sale of Lake River Corporation, the Company directly operated the Lake River
facility and, accordingly, seeks to have the Court pierce the corporate veil of
Lake River Corporation and enforce the default judgment order of August 12, 2004
against the Company. The Company denies the assertions set forth in the Water
District's Complaint and on November 13, 2004 filed a partial motion for
dismissal of the Second Amended Complaint.

In December 2004, the Water District filed a Third Amended complaint in the
litigation, adding two claims: (1) a common law claim for nuisance; and (2) a
claim under the federal Resource Conservation and Recovery Act, in which the
Water District argues that the Company is responsible for conditions on the
plaintiff's property that present an "imminent and substantial endangerment to
human health and the environment." In January 2005, the Company filed a partial
motion to dismiss the Third Amended Complaint. On April 12,

                                      FS-28
<PAGE>

2005, the Court issued an order denying in part and granting in part the
Company's partial motion to dismiss plaintiff's third amended complaint. The
Company has filed an appeal with the Seventh Circuit Court of Appeals requesting
dismissal of the sole CERCLA claim contained in the Third Amended Complaint that
was not dismissed by the United States District Court's April 12, 2005 order.
The Water District has also attempted to appeal those rulings contained in the
April 12, 2005 that are adverse to the Water District. Meanwhile, litigation in
the United States District Court continues.

The Company has denied any liability with respect to this claim and intends to
vigorously defend this case. At this time, the Company has not determined the
amount of any liability that may result from this matter or whether such
liability, if any, would have a material adverse effect on the Company's
financial condition, results of operations, or liquidity.

NAG was notified in 1997 by the Illinois Environmental Protection Agency
("IEPA") that it was one of approximately 60 potentially responsible parties
("PRPs") under the Comprehensive Environmental Response, Compensation, and
Liability Information System ("CERCLIS") in connection with cleanup of an
abandoned site formerly owned by Sandoval Zinc Co. A number of the PRPs have
agreed to work together and with IEPA on a voluntary basis. The Company has been
and continues to participate in this volunteer group. The group has retained
consultants and legal representatives familiar with IEPA regulations. This
volunteer group, with its consultants, has cooperated with IEPA in attempting to
better define the environmental issues associated with the Sandoval Zinc site.
To that extent, this voluntary group prepared and submitted to IEPA in August
2000 a work plan. The purpose of this work plan is to attempt to define the
extent of environmental remediation that might be required, assess risks, and
review alternatives to addressing potential remediation. The IEPA has yet to
respond to this proposed work plan or suggest any other course of action, and
there has been no activity in regards to this issue during 2005. Therefore, the
Company has no basis for determining potential exposure and estimated
remediation costs at this time.

The Company is committed to complying with all federal, state and local
environmental laws and regulations and using its best management practices to
anticipate and satisfy future requirements. As is typical in the galvanizing
business, the Company will have additional environmental compliance costs
associated with past, present and future operations. Management is committed to
discovering and eliminating environmental issues as they arise. Because of
frequent changes in environmental technology, laws and regulations management
cannot reasonably quantify the Company's potential future costs in this area.

North American Galvanizing & Coatings, Inc. and its subsidiary are parties to a
number of other lawsuits and environmental matters which are not discussed
herein. Management of the Company, based upon their analysis of known facts and
circumstances and reports from legal counsel, does not believe that any such
matter will have a material adverse effect on the results of operations,
financial conditions or cash flows of the Company


(10) TREASURY STOCK

The Company issued 50,000 shares from Treasury during 2005. In the first quarter
of 2005, a program whereby Outside Directors received shares of Company stock
issued from Treasury as payment for their quarterly board fee was replaced with
a Director Stock Unit Program (Note 11). In 2004 and 2003, Directors of the
Company could elect to receive shares of the Company's common stock for up to
their entire fee for board service. Under this program, the Company issued
40,751 and 46,218 shares from Treasury Stock in 2004 and 2003, respectively, in
lieu of cash payments of $73,000 and $64,000 respectively. Those shares were
valued at the average closing price of North American Galvanizing & Coatings,
Inc. common stock for a prior 30-day period, as reported by the American Stock
Exchange. Such shares were issued pursuant to the Directors' prior election and
notice to the Company to receive up to all of their 2004 and 2003 quarterly
board fees in the Company's stock in lieu of cash.

                                      FS-29
<PAGE>

In August 1998, the Board of Directors authorized the Company to repurchase up
to $1,000,000 of its common stock in private or open market transactions. In
2005, the Company repurchased 64 shares at an average price per share of $2.39
totaling $153, bringing the total number of shares repurchased through December
31, 2005 to 132,261 at an average price of $1.77 per share totaling $234,153.


(11) DIRECTOR STOCK UNIT PROGRAM

On January 1, 2005, the Company implemented the Director Stock Unit Program
(approved by the stockholders at the Annual Meeting held July 21, 2004) under
which a Director is required to defer 50% of his or her board fee and may elect
to defer up to 100% of his or her board fee, plus a matching contribution by the
Company that varies from 25% to 75% depending on the level of deferral. Such
deferrals are converted into a stock unit grant, payable to the Director five
years following the year of deferral. All of the Company's Outside Directors
elected to defer 100% of the annual board fee for 2005, and the Company's chief
executive officer and Inside Director elected to defer a corresponding amount of
his salary in 2005. Outside Directors currently receive an annual fee of
$20,000, which includes attendance at board meetings and service on committees
of the board. During 2005, fees and salary deferred by the Directors represented
a total of 112,847 stock unit grants valued at $2.17 per stock unit. The value
of a stock unit grant is the average of the closing prices for a share of the
Company's stock for the 10 trading days before the date the director fees
otherwise would have been payable in cash.


(12) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A subsidiary of North American Galvanizing Company (NAGalv-Ohio, Inc.) purchased
the after-fabrication hot dip galvanizing assets of Gregory Industries, Inc.
located in Canton, Ohio on February 28, 2005. Gregory Industries, Inc. is a
manufacturer of products for the highway industry. T. Stephen Gregory, appointed
a director of North American Galvanizing & Coatings, Inc. on June 22, 2005 is
the chief executive officer, chairman of the board, and a shareholder of Gregory
Industries, Inc. Total sales to Gregory Industries, Inc. for the year ended
December 31, 2005 were approximately $1,486,000. The amount due from Gregory
Industries, Inc. included in trade receivables at December 31, 2005 was
$254,000. Sales to Gregory Industries, Inc. include revenues associated with
activities performed for Gregory Industries on an interim basis that are
expected to be assumed by Gregory Industries, Inc. on January 1, 2006.


(13) INCOME TAXES

The provision for income taxes consists of the following:

                                                   (DOLLARS IN THOUSANDS)
                                                   YEAR ENDED DECEMBER 31
                                               ------------------------------
                                                2005        2004        2003

     Current                                   $ 254       $  55       $ 250
     Deferred                                    201         193        (715)
                                               -----       -----       -----
     Income tax expense (benefit)              $ 455       $ 248       $(465)
                                               =====       =====       =====

The 2003 income tax benefit of $465,000 includes $488,000 related to
discontinued operations net of $23,000 income tax expense in continuing
operations.

                                      FS-30
<PAGE>

The reconciliation of income taxes at the federal statutory rate to the
Company's effective tax rate is as follows:

                                                   (DOLLARS IN THOUSANDS)
                                                   YEAR ENDED DECEMBER 31
                                               ------------------------------
                                                2005        2004        2003

Taxes at statutory rate                        $ 374       $ 221       $(502)
State tax net of federal benefit                  32          27         (59)
Adjustment to the estimate of
  the deferred tax asset                         --          --           70
Other                                             49         --           26
                                               -----       -----       -----
Taxes at effective tax rate                    $ 455       $ 248       $(465)
                                               =====       =====       =====

The tax effects of significant items comprising the Company's net deferred tax
asset (liability) consist of the following:

                                                  (DOLLARS IN THOUSANDS)
                                                       DECEMBER 31
                                                   -------------------
                                                    2005         2004
Deferred tax assets:
  Reserves not currently deductible                $  243       $  398
  Net operating loss carryback                        --           325
  Alternative minimum tax                             --           224
                                                   ------       ------
                                                      243          947
                                                   ------       ------
Deferred tax liabilities:
  Differences between book and tax
    basis of property                               1,047        1,168
                                                   ------       ------
                                                   $ (804)      $ (221)
                                                   ======       ======
As reported in the balance sheet:
  Deferred tax assets                              $  243       $  723
  Deferred tax liabilities                          1,047          944
                                                   ------       ------
                                                   $ (804)      $ (221)
                                                   ======       ======


(14) EMPLOYEE BENEFIT PLAN

The Company offers one of two 401(k) defined contribution plans to its eligible
employees. In 2005, a newly-created defined contribution plan was offered to
NAGalv-Ohio, Inc. employees, formerly covered by a bargaining contract with
Gregory Industries, Inc. All other employees not covered by a bargaining
contract become eligible to enroll in the existing benefit plan after one year
of service with the Company. Aggregate Company contributions under these benefit
plans were $261,000 in 2005, $220,000 in 2004, and $204,000 in 2003. Assets of
the defined contribution plan consisted of short-term investments, intermediate
bonds, long-term bonds and listed stocks.


(15) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of financial instruments included in current assets and
liabilities approximates fair value. The fair value of the Company's long-term
debt is estimated to approximate carrying value based on the borrowing rates
currently available to the Company for loans with similar terms and average
maturities.

                                      FS-31
<PAGE>

(16) UNION CONTRACTS

NAG's labor agreement with the United Steel Workers Union covering production
workers at its Tulsa galvanizing plants expired March 31, 2003. In October 2003,
the union employees ratified a new three-year labor agreement, effective
November 1, 2003. The new agreement re-defines eligibility for payment of
over-time, requires employee contributions for family coverage under the
Company's group medical insurance program and grandfathers vacation benefits for
certain long-term employees. The United Steel Workers Union represents the labor
force at the galvanizing business purchased in Canton, Ohio in February 2005. At
the time of purchase, NAGalv-Ohio, Inc. did not assume the existing labor
agreement and implemented wage and benefit programs similar to those at the
Company's other galvanizing facilities. The Company is currently in negotiation
with the union on a new contract. There can be no guarantee that the Company
will be successful in securing a new labor agreement.


(17) SEGMENT DISCLOSURES

The Company's sole business is hot dip galvanizing and coatings, which is
conducted through its wholly owned subsidiary, North American Galvanizing
Company.


(18) DISCONTINUED OPERATIONS

The Company wrote-off its investment in the formerly idled Houston-Cunningham
galvanizing plant in the quarter ended June 30, 2003 as a discontinued
operation. In 2002, the Board of Directors authorized the Company to pursue
alternative uses for the Houston-Cunningham plant, which was temporarily idled
in late 2001. Management believed the carrying value of the plant and the
related galvanizing assets would be realized through future operations of the
plant. Accordingly, no write-down was recognized in 2002. However, in late April
2003, new events, combined with a further contraction of the galvanizing
business in the Houston market, resulted in the likely inability to maintain the
plant as part of the Company's continuing operations. The write-off resulted in
a net loss on the abandoned assets of $754,000, net of taxes of $443,000. In
2003, the net loss from operations for the Cunningham plant was $77,000, net of
taxes of $45,000.













                                      FS-32
<PAGE>
QUARTERLY RESULTS (UNAUDITED)


Quarterly results of operations for the years ended December 31, 2005 and 2004
were as follows:

<TABLE><CAPTION>
                                              (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                   2005
                                    ------------------------------------------------------------------
                                      Mar 31        Jun 30        Sep 30        Dec 31        Total
                                    ----------    ----------    ----------    ----------    ----------
<S>                                 <C>           <C>           <C>           <C>           <C>
Sales                               $    9,280    $   12,801    $   12,687    $   13,102    $   47,870

Gross Profit                             2,438         3,110         2,966         3,387        11,901

Net Income                          $       97    $      114    $      179    $      254    $      644
                                    ==========    ==========    ==========    ==========    ==========

Income Per Common Share
  Basic*                            $     0.01    $     0.02    $     0.03    $     0.04    $     0.09
                                    ==========    ==========    ==========    ==========    ==========
  Diluted                           $     0.01    $     0.02    $     0.02    $     0.03    $     0.08
                                    ==========    ==========    ==========    ==========    ==========
</TABLE>

* Individual quarterly amounts do not add to the total due to rounding.



<TABLE><CAPTION>
                                              (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                   2004
                                    ------------------------------------------------------------------
                                      Mar 31        Jun 30        Sep 30        Dec 31        Total
                                    ----------    ----------    ----------    ----------    ----------
<S>                                 <C>           <C>           <C>           <C>           <C>
Sales                               $    8,558    $    9,333    $    9,348    $    8,583    $   35,822

Gross Profit                             2,553         2,698         2,623         2,134        10,008

Net Income (Loss)                   $      210    $      106    $      229    $     (142)   $      403
                                    ==========    ==========    ==========    ==========    ==========

Income (Loss) Per Common Share
  Basic                             $     0.03    $     0.02    $     0.03    $    (0.02)   $     0.06
                                    ==========    ==========    ==========    ==========    ==========
  Diluted                           $     0.03    $     0.01    $     0.03    $    (0.02)   $     0.05
                                    ==========    ==========    ==========    ==========    ==========
</TABLE>


The Company typically experiences increased galvanizing activity and sales in
the second and third quarters due to increased construction activity in those
periods. Changes in gross profit and gross profit margin reflect sales volume,
as well as the impact of fixed costs in the Company's cost structure and also
product mix.







                                      FS-33
<PAGE>
SELECTED FINANCIAL DATA


The following is a summary of selected financial data of the Company:


<TABLE><CAPTION>
                                                          (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

For the Years Ended December 31,               2005            2004            2003*           2002**          2001
                                           ------------    ------------    ------------    ------------    ------------
<S>                                        <C>             <C>             <C>             <C>             <C>
Sales                                      $     47,870    $     35,822    $     33,200    $     38,178    $     35,039

Operating Income                           $      2,173    $      1,390    $        495    $      3,038    $      1,990
  Percent of sales                                4.5 %           3.9 %           1.5 %           8.0 %           5.7 %

Net Income (Loss)                          $        644    $        403    $     (1,013)   $      1,110    $        289

Basic Earnings (Loss) per common share     $       0.09    $       0.06    $      (0.15)   $       0.17    $       0.04
Diluted Earnings (Loss) per common share   $       0.08    $       0.05    $      (0.15)   $       0.15    $       0.04

Capital Expenditures                       $      1,016    $      1,230    $        901    $      5,880    $      3,297

Depreciation and Amortization              $      2,532    $      2,701    $      2,880    $      3,027    $      3,181

Weighted Average Shares Outstanding ***       7,608,284       7,491,195       7,437,789       7,389,084       7,365,638





AT DECEMBER 31,                                2005            2004            2003            2002            2001
                                           ------------    ------------    ------------    ------------    ------------
Working Capital                            $      7,026    $      8,621    $      6,607    $      7,032    $      7,606

Total Assets                               $     41,055    $     37,114    $     37,367    $     41,431    $     39,092

Long-Term Obligations                      $     12,275    $     14,257    $     14,351    $     16,700    $     16,178

Stockholders' Equity                       $     19,298    $     18,309    $     17,885    $     18,828    $     17,653

Book Value Per Share                       $       2.82    $       2.69    $       2.64    $       2.79    $       2.64

Common Shares Outstanding                     6,846,948       6,797,012       6,783,137       6,736,919       6,680,825
</TABLE>


*    All amounts for all years presented prior to 2003 have been restated to
     reflect discontinued operations.

**   On January 1, 2002, the Company adopted SFAS 142 "Goodwill and Other
     Intangible Assets" and ceased amortizing goodwill. In the year ended
     December 31, 2001, the Company recorded goodwill amortization of
     approximately $188,000.

***  Weighted average shares outstanding include the dilutive effect of stock
     options and warrants, if applicable.




                                      FS-34