UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q




xQUARTERLY REPORT
PURSUANT TO SECTION 13 or 15 (d)
 OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the
Quarterly Period Ended September 30, 2009
 
 OR
 
 oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d)
 OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the
transition period from _____ to _____


Commission
File No. 1-3920





NORTH
AMERICAN GALVANIZING & COATINGS, INC.


(Exact
name of the registrant as specified in its charter)





Delaware


(State
      of Incorporation)





71-0268502


(I.R.S.
      Employer Identification No.)





5314
S. Yale Avenue, Suite 1000, Tulsa, Oklahoma 74135


(Address
of principal executive offices)





(918)
      494-0964


(Registrant’s telephone
      number)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 and 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  xNo  o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 Yes 
o    No 
o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
  Large
      accelerated filer  o
                    Accelerated
      filer  xNon-accelerated
      filer  o    (Do
      not check if a smaller reporting company)
                    Smaller
      reporting company  o


Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the exchange
Act). Yes 
o No 
x
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of September 30, 2009:
  Common
Stock $ .10 Par Value . . . . .     16,567,061
 
 
 
 
 
 NORTH
AMERICAN GALVANIZING & COATINGS, INC.
 
 Index
to Quarterly Report on Form 10-Q
 
 PagePart  I.
              Financial
      InformationForward
      Looking Statements or Information
              2Item
      1. Unaudited Financial StatementsReport
      of Independent Registered Public Accounting Firm
              3Condensed
      Consolidated Balance Sheets as ofSeptember
      30, 2009, and December 31, 2008
              4Condensed
      Consolidated Statements of Income for the three- andnine-month
      periods ended September 30, 2009 and 2008
              5Condensed
      Consolidated Statements of Cash Flows for thenine-month
      periods ended September 30, 2009 and 2008
              6Condensed
      Consolidated Statement of Stockholders’ Equity for thenine-month
      period ended September 30, 2009
              7Notes
      to Condensed Consolidated Financial Statements for the
    three-and
      nine-month periods ended September 30, 2009 and 2008
              8-12Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              13-19Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              19Item
      4. Controls and Procedures
              19Part
      II.
              Other
      Information
              20-21Signatures
              21
 
 - 1
-


Forward
Looking Statements or Information





Certain
statements in this Form 10-Q, 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-Q, 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 Form 10-K filed on
February 20, 2009 with the Securities and Exchange Commission.


















- 2
-


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To
the Board of Directors and Stockholders of


North
American Galvanizing & Coatings, Inc.





We have
reviewed the accompanying condensed consolidated balance sheet of North American
Galvanizing & Coatings, Inc. and subsidiary (the “Company”) as of September
30, 2009, and the related condensed consolidated statements of income for the
three- and nine-month periods ended September 30, 2009 and 2008, cash flows for
the nine-month periods ended September 30, 2009 and 2008 and stockholders’
equity for the nine-month period ended September 30, 2009.  These
interim financial statements are the responsibility of the Company’s
management





We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.





Based on
our reviews, we are not aware of any material modifications that should be made
to such condensed consolidated interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.





We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
North American Galvanizing & Coatings, Inc. and subsidiary as of December
31, 2008, and the related consolidated statements of income, stockholders’
equity and cash flows for the year then ended (not presented herein); and in our
report dated February 20, 2009, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2008 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.








/s/Deloitte
& Touche LLP





Tulsa,
Oklahoma


October
28, 2009











- 3
-


NORTH AMERICAN GALVANIZING & COATINGS,
INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (In
thousands, except share amounts)


September
      30,
              
              
              December
      31,ASSETS
              
              2009
              
              
              2008CURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              19,593
              
              
              $
              9,322Trade
      receivables—less allowances of $119 for 2009 and $102 for
    2008
              
              
              11,162
              
              
              
              10,880Raw
      materials inventories
              
              
              7,015
              
              
              
              5,839Deferred
      tax asset—net
              
              
              1,705
              
              
              
              1,048Income
      taxes receivable
              
              
              875
              
              
              
              —Prepaid
      expenses and other assets
              
              
              249
              
              
              
              478Total
      current assets
              
              
              40,599
              
              
              
              27,567PROPERTY,
      PLANT AND EQUIPMENTLand
              
              
              2,167
              
              
              
              2,167Galvanizing
      plants and equipment
              
              
              45,687
              
              
              
              40,13547,854
              
              
              
              42,302Less—accumulated
      depreciation
              
              
              (25,089
              )
              
              
              (22,481
              )Construction
      in progress
              
              
              4,670
              
              
              
              2,379Total
      property, plant and equipment—net
              
              
              27,435
              
              
              
              22,200GOODWILL—Net
              
              
              3,448
              
              
              
              3,448OTHER
      ASSETS
              
              
              981
              
              
              
              1,557TOTAL
      ASSETS
              
              $
              72,463
              
              
              $
              54,772LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Trade
      accounts payable
              
              $
              5,188
              
              
              $
              4,088Accrued
      payroll and employee benefits
              
              
              2,022
              
              
              
              1,853Accrued
      taxes
              
              
              403
              
              
              
              607Customer
      deposits
              
              
              —
              
              
              
              538Other
      accrued liabilities
              
              
              2,231
              
              
              
              2,792Total
      current liabilities
              
              
              9,844
              
              
              
              9,878SUBORDINATED
      NOTES PAYABLE
              
              
              4,270
              
              
              
              —DEFERRED
      TAX LIABILITY—Net
              
              
              1,291
              
              
              
              504Total
      liabilities
              
              
              15,405
              
              
              
              10,382COMMITMENTS
      AND CONTINGENCIES (NOTE 5)STOCKHOLDERS’
      EQUITYCommon
      stock—$.10 par value, 50,000,000  and 18,000,000 shares
      authorizedin 2009 and 2008:Issued—16,567,061
      shares in 2009 and  16,507,813 shares 2008
              
              
              1,657
              
              
              
              1,651Additional
      paid-in capital
              
              
              14,965
              
              
              
              12,281Retained
      earnings
              
              
              40,436
              
              
              
              32,180Common
      shares in treasury at cost— 488,212 in 2008
              
              
              —
              
              
              
              (1,722
              )Total
      stockholders’ equity
              
              
              57,058
              
              
              
              44,390TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              72,463
              
              
              $
              54,772


See notes
to condensed consolidated financial statements.


- 4
-


NORTH AMERICAN GALVANIZING & COATINGS,
INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 (In
thousands, except per share amounts)


For
      the Three Months
            
            
            For
      the Nine MonthsEnded
            
            
            EndedSeptember
      30
            
            
            September
      302009
            
            
            2008
            
            
            2009
            
            
            2008SALES
            
            $
            20,051
            
            
            $
            21,845
            
            
            $
            58,803
            
            
            $
            64,525COST
      AND EXPENSES:Cost
      of sales excluding depreciation and amortization
            
            
            12,944
            
            
            
            13,879
            
            
            
            36,311
            
            
            
            39,656Selling,
      general and administrative expenses
            
            
            2,182
            
            
            
            2,699
            
            
            
            7,351
            
            
            
            7,548Depreciation
      and amortization
            
            
            972
            
            
            
            847
            
            
            
            2,743
            
            
            
            2,556Total
      costs and expenses
            
            
            16,098
            
            
            
            17,425
            
            
            
            46,405
            
            
            
            49,760OPERATING
      INCOME
            
            
            3,953
            
            
            
            4,420
            
            
            
            12,398
            
            
            
            14,765Interest
      expense
            
            
            (128
            )
            
            
            —
            
            
            
            (128
            )
            
            
            —Interest
      income and other
            
            
            5
            
            
            
            70
            
            
            
            24
            
            
            
            217INCOME
      BEFORE INCOME TAXES
            
            
            3,830
            
            
            
            4,490
            
            
            
            12,294
            
            
            
            14,982INCOME
      TAX EXPENSE
            
            
            1,255
            
            
            
            1,453
            
            
            
            4,038
            
            
            
            5,447NET
      INCOME
            
            $
            2,575
            
            
            $
            3,037
            
            
            $
            8,256
            
            
            $
            9,535NET
      INCOME PER COMMON SHARE:Basic
            
            $
            0.16
            
            
            $
            0.19
            
            
            $
            0.51
            
            
            $
            0.58Diluted
            
            $
            0.16
            
            
            $
            0.18
            
            
            $
            0.50
            
            
            $
            0.56





See notes
to condensed consolidated financial statements.




- 5
-


NORTH AMERICAN GALVANIZING & COATINGS,
INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 NINE
MONTHS ENDED September 30, 2009 AND 2008
 (In
thousands)


2009
              
              
              2008OPERATING
      ACTIVITIES:Net
      income
              
              $
              8,256
              
              
              $
              9,535Loss
      on disposal of assets
              
              
              80
              
              
              
              95Depreciation
      and amortization
              
              
              2,743
              
              
              
              2,556Amortization
      of subordinated debt discount
              
              
              33
              
              
              
              —Deferred
      income taxes
              
              
              130
              
              
              
              (304
              )Non-cash
      share-based compensation
              
              
              822
              
              
              
              487Non-cash
      directors’ fees
              
              
              322
              
              
              
              306Changes
      in operating assets and liabilities:Accounts
      receivable—net
              
              
              (282
              )
              
              
              (2,165
              )Inventories
      and other assets
              
              
              (568
              )
              
              
              703Accounts
      payable, accrued liabilities and other
              
              
              (403
              )
              
              
              (30
              )Cash
      provided by operating activities
              
              
              11,133
              
              
              
              11,183INVESTING
      ACTIVITIES:Capital
      expenditures
              
              
              (8,004
              )
              
              
              (2,137
              )Proceeds
      from sale of assets
              
              
              7
              
              
              
              22Cash
      used in investing activities
              
              
              (7,997
              )
              
              
              (2,115
              )FINANCING
      ACTIVITIES:Proceeds
      from subordinated debt
              
              
              4,237
              
              
              
              —Proceeds
      from stock warrants
              
              
              3,063
              
              
              
              —Proceeds
      from exercise of stock options
              
              
              295
              
              
              
              343Subordinated
      debt issuance costs
              
              
              (370
              )
              
              
              —Purchase
      of common stock for the treasury
              
              
              (166
              )
              
              
              (3,417
              )Tax
      benefits realized from stock options exercised
              
              
              76
              
              
              
              62Payments
      on long-term obligations
              
              
              —
              
              
              
              (15
              )Cash
      paid for fractional shares pursuant to stock split effected by stock
      dividend
              
              
              —
              
              
              
              (7
              )Cash
      provided by (used in) financing activities
              
              
              7,135
              
              
              
              (3,034
              )INCREASE
      IN CASH AND CASH EQUIVALENTS
              
              
              10,271
              
              
              
              6,034CASH
      AND CASH EQUIVALENTS:Beginning
      of period
              
              
              9,322
              
              
              
              2,966End
      of period
              
              $
              19,593
              
              
              $
              9,000CASH
      PAID DURING THE PERIOD FOR:Income
      taxes
              
              $
              5,018
              
              
              $
              5,166NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Acquisitions
      of fixed assets included in payables at period end
              
              $
              61
              
              
              $
              161





See notes
to condensed consolidated financial statements.




- 6
-


NORTH AMERICAN GALVANIZING & COATINGS,
INC.
 CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
 NINE
MONTHS ENDED September 30, 2009
 (In
thousands, except share amounts)


Common
      Stock
              
              
              Additional$.10
      Par Value
              
              
              Paid-in
              
              
              Retained
              
              
              Treasury
      StockShares
              
              
              Amount
              
              
              Capital
              
              
              Earnings
              
              
              Shares
              
              
              Amount
              
              
              TotalBALANCE—January
      1, 2009
              
              
              16,507,813
              
              
              $
              1,651
              
              
              $
              12,281
              
              
              $
              32,180
              
              
              
              488,212
              
              
              $
              (1,722
              )
              
              $
              44,390Net
      income
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              8,256
              
              
              
              —
              
              
              
              —
              
              
              
              8,256Purchase
      of common stock for the treasury
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              42,166
              
              
              
              (166
              )
              
              
              (166
              )Issuance
      of treasury shares for nonvested stock awards
              
              
              —
              
              
              
              —
              
              
              
              (827
              )
              
              
              —
              
              
              
              (232,166
              )
              
              
              827
              
              
              
              —Issuance
      of common stock
              
              
              59,248
              
              
              
              6
              
              
              
              (6
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Incentive
      Stock Plan Compensation
              
              
              —
              
              
              
              —
              
              
              
              822
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              822Stock
      units for Director Stock Unit Program
              
              
              —
              
              
              
              —
              
              
              
              322
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              322Issuance
      of treasury shares for stock option transactions, net of
      shares tendered for payment and including tax
    benefit
              
              
              —
              
              
              
              —
              
              
              
              (392
              )
              
              
              —
              
              
              
              (214,191
              )
              
              
              763
              
              
              
              371Issuance
      of treasury shares for Director Stock Unit Program
      transactions
              
              
              
              
              
              
              
              
              
              
              (298
              )
              
              
              —
              
              
              
              (84,021
              )
              
              
              298
              
              
              
              —Warrants
      to purchase common stock
              
              
              —
              
              
              
              —
              
              
              
              3,063
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              3,063BALANCE—September
      30, 2009
              
              
              16,567,061
              
              
              $
              1,657
              
              
              $
              14,965
              
              
              $
              40,436
              
              
              
              —
              
              
              $
              —
              
              
              $
              57,058


See notes
to condensed consolidated financial statements.




- 7
-











NORTH
AMERICAN GALVANIZING & COATINGS, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2009 and 2008


UNAUDITED





Note
      1.
            Basis
      of Presentation





The
condensed consolidated financial statements included in this report have been
prepared by North American Galvanizing & Coatings, Inc. (the “Company”)
pursuant to its understanding of the rules and regulations of the Securities and
Exchange Commission for interim reporting and include all normal and recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation. The condensed consolidated financial statements include the
accounts of the Company and its subsidiary.





Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations for interim reporting.  The Company believes that the
disclosures are adequate to make the information presented not
misleading.  However, these interim financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company’s
Annual Report on Form


10-K for
the year ended December 31, 2008.  The financial data for the interim
periods presented may not necessarily reflect the results to be anticipated for
the complete year.





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
periods.  Actual results will be determined based on the outcome of
future events and could differ from the estimates. The Company’s sole business
is hot dip galvanizing and coatings which is conducted through its wholly owned
subsidiary, North American Galvanizing Company (“NAGC”).





Note
      2.
            Share-based
      Compensation





On July
29, 2009, the shareholders approved the 2009 Incentive Stock Plan (the “Plan”),
which includes the Director Stock Unit Program. The Plan permits the grant of
share options and shares to its employees and directors for up to 2,500,000
shares of common stock.  Director Stock Unit Program shares are issued
under the plan.  The Company believes that such awards better align
the interests of its employees and directors with those of its
shareholders.  The Plan combines two former share-based compensation
plans, the 2004 Incentive Stock Plan and the Director Stock Unit
Program.




Share-based
compensation cost, exclusive of the Director Stock Unit Program, was $280,000
and $217,000 for the three-months ended September 30, 2009 and 2008,
respectively, and $822,000 and $487,000 for the nine-months ended September 30,
2009 and 2008, respectively.





Non-vested
Shares.During January 2009, the Compensation Committee
recommended and the Board of Directors approved a grant totaling 153,168
non-vested shares for management employees and 79,998 non-vested shares for
non-management directors.  The weighted-average grant price of
restricted stock granted in 2009 was $3.67.  During February and March
2008, the Compensation Committee recommended and the Board of Directors approved
a grant totaling 126,667 non-vested shares for management employees and 66,667
non-vested shares for non-management directors.  During July 2008, the
Compensation Committee recommended and the Board of Directors approved a grant
totaling 80,000 non-vested shares for non-management directors.  The
weighted-




- 8
-


average
grant price of non-vested shares in 2008 was $4.70.  Non-vested shares
granted to management employees, including management directors, vest and become
nonforfeitable on the date that is four years after the date of grant; or if the
participant is a non-employee director of the Company at the time of the grant,
the date that is two years after the date of the grant. The Company is
recognizing this compensation expense over the two year or four year vesting
period, as applicable, on a ratable basis.  Non-vested shares are
valued at market value on the grant date.  The Company recognized
$200,000 and $127,000 in amortization expense related to non-vested shares in
the three-months ended September 30, 2009 and 2008, respectively, and $575,000
and $218,000 for the nine-months ended September 30, 2009 and 2008,
respectively.





Stock
Options.Option awards are granted with an exercise
price equal to the market price of the Company’s stock at the date of grant;
those option awards usually vest based on 4 years of continuous service and have
10-year contractual terms.  No stock options have been issued since
February 2007.  The Company recognized $80,000 and $90,000 in the
three-months ended September 30, 2009 and 2008, respectively, and $248,000 and
$270,000 for the nine-months ended September 30, 2009 and 2008, respectively for
amortization expense related to stock options.


Director Stock Unit
Program.  At the Company’s Annual Meeting held July 29, 2009,
stockholders approved the 2009 Incentive Stock Plan (the “Plan”), which includes
the Director Stock Unit Program (the “Program”).  Following the
shareholder meeting at which the Plan was approved, the Board of Director’s
Compensation Committee approved an amendment to the 2009 Incentive Stock Plan.
The amendment to the 2009 Incentive Stock Plan changes the percentage that each
director is required to defer in fees each calendar year from a
minimum of 50% to a minimum of 100%.  The deferred fees will be
converted into stock unit grants at the average of the fair market value for a
share of stock for the 10 trading days before the date the director fees
otherwise would have been payable in cash.  The Company makes a
matching Stock Unit contribution equal to 75% of the amount deferred by the
directors as of the same quarterly payments dates.





The
Compensation Committee also recommended to the Board of Directors an
increase in the annual fee for outside directors from $35,000 to
$50,000.  The last time the fee was increased was in
2006.  The Board of Directors approved the recommended
increase.





The
management director is required to participate in the deferral program and the
amendment described above applies to his participation as well.  The
President and CEO, as a management director, receives no additional cash
compensation for his service as a director.  The Company reduces the
CEOs annual salary by the amount deferred under the Director Stock Unit
Program.  The Company matches deferrals by the management director
with Stock Units at the same rate as it matches deferrals for non-management
directors.





Stock
under this program is eligible for delivery five calendar years following the
year for which the deferral is made subject to acceleration upon the resignation
or retirement of the director or a change in control.





All of
the Company’s non-management directors agreed to defer 100% of the annual board
fee for both 2009 and 2008, and the Company’s chief executive officer agreed to
defer a corresponding amount of his salary in 2009 and 2008.  During
the first nine months of 2009, fees, salary and Company matching deferred by the
directors represented a total of 84,021 stock unit grants valued at $3.83 per
stock unit.  During the first nine months of 2008, fees, salary and
Company matching deferred by the directors represented a total of 62,353 stock
unit grants valued at $4.91 per stock unit.  Company matching
contributions under this plan were $138,000 and $131,000 in the first nine
months of 2009 and 2008 respectively.




- 9
-





Note
      3.
            Earnings
      Per Common Share





Basic
earnings per common share for the periods presented are computed based upon the
weighted average number of shares outstanding.  Diluted earnings per
common share for the periods presented are based on the weighted average shares
outstanding, adjusted for the assumed exercise of stock options, for non-vested
shares and warrants issued for the subordinated debt using the treasury stock
method.




Three Months Ended September
    30
            
            Number
      of Shares2009
            
            
            2008Basic
            
            
            15,957,053
            
            
            
            16,325,579Diluted
            
            
            16,593,091
            
            
            
            17,034,747Nine Months Ended September
    30
            
            Number
      of Shares2009
            
            
            
            2008Basic
            
            
            15,848,121
            
            
            
            16,356,193Diluted
            
            
            16,455,848
            
            
            
            17,023,924




There
were no options priced higher than the share market value at September 30,
2009.





Note
      4.
            Credit
      Agreement





On July
17, 2009, the Company entered into a new credit agreement between the Company
and its subsidiary North American Galvanizing Company as borrowers and Wells
Fargo Bank, N.A. as administrative agent, swing line lender and letter of credit
issuer.  The existing credit agreement with Bank of America, N.A. was
canceled.




The new
credit agreement provides for a revolving credit facility in the aggregate
principal amount of $25 million with future increases of up to an aggregate
principal amount of $15 million.  The purpose of the new facility is
to refinance a former credit agreement, provide for issuance of standby letters
of credit, provide funding for acquisitions, and for other general corporate
purposes.  As of September 30, 2009, the Company has not borrowed
under the new credit agreement, which has a maturity date of July 17,
2012.





Substantially
all of the Company’s accounts receivable, inventories, fixed assets and the
common stock of its subsidiary are pledged as collateral under the new
agreement, and the credit agreement is secured by full and unconditional
guaranties from North American Galvanizing Company’s
subsidiaries.  The credit agreement provides for an applicable margin
ranging from 1.50% to 2.50% over LIBOR and a commitment fee of
..25%.  The applicable margin was 1.50% at September 30,
2009.




The
credit agreement requires the Company to maintain compliance with certain
covenants.  At September 30, 2009 the Company was in compliance with
the covenants of the new credit agreement.  The required covenants of
the new agreement are as follows:  Funded Debt to EBITDA ratio –
maximum allowed of 3.25; Fixed Charge Coverage Ratio – minimum allowed of 1.1
and Asset Coverage Ratio – minimum required of 1.50.  The credit
agreement also has other restrictions.





At
September 30, 2009, the Company had unused borrowing capacity of $25.0 million,
based on no borrowings outstanding under the revolving credit
facility.





- 10
-




Note
      5.
            Commitments
      and Contingencies




The
Company has commitments with domestic and foreign zinc producers and brokers 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 or are based on such quoted
prices at the time of delivery.  At September 30, 2009 the aggregate
commitments for the procurement of zinc at fixed prices were approximately $0.1
million.  The Company reviews these fixed price contracts for losses
using the same methodology employed to estimate the market value of its zinc
inventory.  The Company had no unpriced commitments for zinc purchases
at September 30, 2009.





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 had no derivative instruments required to
be reported at fair value at September 30, 2009 or December 31, 2008, and did
not utilize derivatives in the nine-month period ended September 30, 2009 or the
year ended December 31, 2008, except for the forward purchase agreements
described above, which are accounted for as normal purchases.





The
Company’s total off-balance sheet contractual obligations at September 30, 2009,
consist of approximately


$1.4
million for long-term operating leases for vehicles, office space, office
equipment, galvanizing facilities and galvanizing equipment and approximately
$0.1 million for zinc purchase commitments.  The various leases for
galvanizing facilities, including option renewals, expire from 2009 to
2023.  At September 30, 2009 the Company has approximately $1.0
million in outstanding purchase commitments for various machinery, equipment and
building improvements and $1.3 million in outstanding commitments for other
operating obligations.





NAGC was
notified in 1997 by the Illinois Environmental Protection Agency (“IEPA”) that
it was one of approximately 60 potentially responsible parties 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., an entity unrelated to NAGC.  The IEPA
notice includes NACG as one of the organizations which arranged for the
treatment and disposal of hazardous substances at Sandoval.  The
estimated timeframe for resolution of the IEPA contingency is
unknown.  The IEPA has yet to respond to a proposed work plan
submitted in August 2000 by a group of the potentially responsible parties or
suggest any other course of action, and there has been no activity in regards to
this issue since 2001. Until the work plan is approved and completed, the range
of potential loss or remediation, if any, is unknown, and in addition, the
allocation of potential loss between the 60 potentially responsible parties is
unknown and not reasonably estimable.  Therefore, the Company has no
basis for determining potential exposure and estimated remediation costs at this
time and no liability has been accrued.




In
September 2008, the United States Environmental Protection Agency (the “EPA”)
notified the Company of a claim against the Company as a
potentially responsible party related to a Superfund site in Texas City,
Texas.  This matter pertains to galvanizing facilities of a
Company subsidiary and its disposal of waste, which was handled
by their supplier in the early 1980’s.  The EPA offered the Company a
special de minimis
party settlement to resolve potential liability that the Company and its
subsidiaries may have under CERCLA at this Site.  The Company accrued the
$112,145 de minimis
settlement amount during the third quarter of 2008 and accepted the EPA’s offer
before the deadline of December 30, 2008.




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.




- 11
-


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 condition or cash flows of the Company.




Note
      6.
            Stockholders’
      Equity




During
the second quarter 2009, the holders of a majority of the outstanding shares of
common stock of North American Galvanizing & Coatings, Inc. (the “Company”)
provided written consent approving an amendment to the Company’s Restated
Certificate of Incorporation, as amended, pursuant to the Company’s consent
solicitation authorized by the Company’s Board of Directors.  Through
the written consent, the holders of a majority of the outstanding shares of the
Company’s common stock approved an increase in the number of authorized shares
of the Company’s common stock from 18,000,000 shares to 25,000,000
shares.





The
Company filed a Certificate of Amendment of the Restated Certificate of
Incorporation, as amended, with the Secretary of State of Delaware on April 2,
2009, which provides that the aggregate number of shares of the Company’s common
stock which the Company shall have authority to issue is 25,000,000
shares.




’





Note
      7.
            Subordinated
      Debt


On August
18, 2009, the Company accepted subscription agreements for $7.3 million in
subordinated debt with stock warrants to purchase 1,095,000 shares of common
stock of the Company.  The private placement transaction was completed
August 21, 2009.  $3.1 million of the proceeds has been allocated to
the stock warrants and the resulting discount on subordinated debt is being
amortized to interest expense using the effective interest
method.  The purpose of this additional financing is to facilitate the
Company’s growth strategy.  The private placement was offered to a
group of current large shareholders and a limited number of other accredited
investors who had expressed an interest in investing in the Company. The 10%
subordinated notes have a five year maturity and the warrants are immediately
exercisable, for a period of up to seven years. Terms of the warrants permit the
holder to purchase shares of the Company’s common stock at any time prior to the
expiration date, for cash at an Exercise Price of $5.20 per share (market value
of common stock at date subscription was accepted).  As of September
30, 2009 no warrants had been exercised.





















- 12
-


North
American Galvanizing & Coatings, Inc.





Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations





GENERAL





North
American Galvanizing 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.





During
the nine-month period ended September 30, 2009, there were no significant
changes to the Company’s critical accounting policies previously disclosed in
Form 10-K for the year ended December 31, 2008.





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 mechanical 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, Texas and
West Virginia.  The West Virginia facility began operating in the
second quarter, 2009.  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 2008, the Company galvanized steel products for approximately 1,800
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:





·
            highway
      and transportation


·
            power
      transmission and distribution


·
            wireless
      and telecommunications


·
            utilities


·
            petrochemical
      processing


·
            industrial
      grating


·
            infrastructure
      including buildings, airports, bridges and power
  generation


·
            wastewater
      treatment


·
            fresh
      water storage and transportation




- 13
-


·
            pulp
      and paper


·
            pipe
      and tube


·
            food
      processing


·
            agricultural
      (irrigation systems)


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


·
            bridge
      and pedestrian handrail


·
            commercial
      and residential lighting poles


·
            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 processes and inspection utilizing
industry-specified standards are completed.  The Company generates all
of its operating cash from such revenues, and utilizes a line of credit secured
by the underlying accounts receivable and zinc inventory to facilitate working
capital needs.





Each of
the Company’s galvanizing plants operate 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 to increase industry awareness of the proven, unique
benefits of galvanizing for metals corrosion protection.  Each of the
Company’s 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.





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,




- 14
-


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.

































- 15
-


RESULTS
OF OPERATIONS




The
following table shows the Company’s results of operations for the three- and
nine-month periods ended September 30, 2009 and 2008:




(Dollars
      in thousands)Three
      Months Ended September 30,2009
              
              
              2008%
      of
              
              
              
              
              
              %
      ofAmount
              
              
              Sales
              
              
              Amount
              
              
              SalesSales
              
              $
              20,051
              
              
              
              100.0
              %
              
              $
              21,845
              
              
              
              100.0
              %Cost
      of sales excluding depreciation and amortization
              
              
              12,944
              
              
              
              64.6
              %
              
              
              13,879
              
              
              
              63.5
              %Selling,
      general and administrative expenses
              
              
              2,182
              
              
              
              10.9
              %
              
              
              2,699
              
              
              
              12.4
              %Depreciation
      and amortization
              
              
              972
              
              
              
              4.8
              %
              
              
              847
              
              
              
              3.9
              %Operating
      income
              
              
              3,953
              
              
              
              19.7
              %
              
              
              4,420
              
              
              
              20.2
              %Interest
      expense
              
              
              (128
              )
              
              
              -0.6
              %
              
              
              —
              
              
              
              0.0
              %Interest
      income
              
              
              5
              
              
              
              0.0
              %
              
              
              70
              
              
              
              0.4
              %Income
      before income taxes
              
              
              3,830
              
              
              
              19.1
              %
              
              
              4,490
              
              
              
              20.6
              %Income
      tax expense
              
              
              1,255
              
              
              
              6.3
              %
              
              
              1,453
              
              
              
              6.7
              %Net
      income
              
              $
              2,575
              
              
              
              12.8
              %
              
              $
              3,037
              
              
              
              13.9
              %
  (Dollars
      in thousands)Nine
      Months Ended September 30,2009
              
              
              2008%
      of
              
              
              
              
              
              %
      ofAmount
              
              
              Sales
              
              
              Amount
              
              
              SalesSales
              
              $
              58,803
              
              
              
              100.0
              %
              
              $
              64,525
              
              
              
              100.0
              %Cost
      of sales excluding depreciation and amortization
              
              
              36,311
              
              
              
              61.8
              %
              
              
              39,656
              
              
              
              61.4
              %Selling,
      general and administrative expenses
              
              
              7,351
              
              
              
              12.5
              %
              
              
              7,548
              
              
              
              11.7
              %Depreciation
      and amortization
              
              
              2,743
              
              
              
              4.7
              %
              
              
              2,556
              
              
              
              4.0
              %Operating
      income
              
              
              12,398
              
              
              
              21.0
              %
              
              
              14,765
              
              
              
              22.9
              %Interest
      expense
              
              
              (128
              )
              
              
              -0.1
              %
              
              
              —
              
              
              
              0.0
              %Interest
      income
              
              
              24
              
              
              
              0.0
              %
              
              
              217
              
              
              
              0.3
              %Income
      before income taxes
              
              
              12,294
              
              
              
              20.9
              %
              
              
              14,982
              
              
              
              23.2
              %Income
      tax expense
              
              
              4,038
              
              
              
              6.9
              %
              
              
              5,447
              
              
              
              8.4
              %Net
      income
              
              $
              8,256
              
              
              
              14.0
              %
              
              $
              9,535
              
              
              
              14.8
              %





- 16
-


2009
COMPARED TO 2008





Sales.Third
quarter 2009 volumes were 2.7% higher than volumes in the third quarter of
2008.  First nine months’ 2009 volumes were 5.6% higher than volumes
in the first nine months of 2008.  Third quarter 2008 volume was
negatively impacted by the nine day shutdown of the Company’s Houston, Texas
plant due to Hurricane Ike.





Sales for
the three-months and nine-months ended September 30, 2009 decreased 8.2% and
8.9%, respectively, over the prior year.  The decrease in third
quarter and first nine month revenues was due primarily to a lower average sales
price compared to the same periods in 2008.  Due to the economic
downturn and anticipated drop in overall demand for hot-dip galvanizing, the
Company focused on gaining larger volume work which resulted in lower priced
project work in recent months.  For 2009, average selling prices for
galvanizing and related coating services were 10.7% lower than the prior year
third quarter and 13.7% lower than the first nine months of 2008.





Cost of Goods
Sold.  Cost of goods sold for the three-months ended September
30, 2009 decreased $1.0 million over the same prior year period due to a
decrease in zinc and utility costs.  For the first nine months of
2009, cost of goods sold decreased $3.4 million over the same period in 2008 due
primarily to decreases in zinc and utility costs, offset by increases in repairs
and maintenance spending of $0.4 million.





Selling, General and Administrative
(SG&A) Expenses.SG&A decreased $0.5 million in the
third quarter of 2009 compared to the same prior year period due to decreases in
legal fees.  SG&A expenses for the first nine months of 2009
decreased $0.2 million over the same prior year period.





Interest
Expense.  Interest expense of $0.1 million was recorded in the
third quarter of 2009 due to the issuance of $7.3 million in subordinated
notes.





Operating Income.
For the quarter ended September 30, 2009, operating income was $4.0 million
compared to $4.4 million for the third quarter of 2008. The operating income for
the nine-months ended September 30, 2009 was $12.4 million compared to $14.8
million for the same 2008 period. The decrease in operating income is primarily
due to a decrease in average selling prices.





Income Taxes.The Company’s
effective income tax rates for the third quarter of 2009 and 2008 were 32.8% and
32.4%, respectively.   For the nine months ended September 30,
2009 and 2008, the effective tax rates were 32.8% and 36.4%,
respectively.  The effective tax rates differ from the federal
statutory rate primarily due to state income taxes and minor adjustments to
previous tax estimates.





Net Income.For the third
quarter of 2009, the Company reported net income of $2.6 million compared to net
income of $3.0 million for the third quarter of 2008.  For the nine
months ended September 30, 2009, the net income was $8.3 million compared to
$9.5 million for the nine months ended September 30, 2008.  The
decrease in net income is primarily due to a decrease in average selling
prices.





LIQUIDITY
AND CAPITAL RESOURCES





The
Company’s cash flow from operations and borrowings under credit facilities have
been adequate to fund its current facilities’ working capital and capital
spending requirements and is expected to be sufficient to fund the recurring
level of operations for the next twelve months.  During 2009 and 2008,
operating cash flow has been the primary source of liquidity.  The
Company monitors working capital and planned capital spending to assess
liquidity and minimize cyclical cash flow.





- 17
-


On June
25, 2009, the Company announced that its Board of Directors had approved a new
capital and fundingstructure designed to
facilitate the Company’s growth strategy.  The Company’s new capital
and fundingstructure consists of a
combination of an expanded bank facility (see Note 4) and a capital raise
through a private placement offering of subordinated notes and warrants (see
Note 7).  The private placement transaction for $7.3 million was
completed August 21, 2009.





Cash from
operations decreased $0.1 million in the first nine months of 2009 versus the
first nine months of 2008.  The lower net income in 2008 and the increase
in inventory were offset by the positive effect from receivables, deferred
income taxes and share based compensation.





Capital
expenditures for the first nine months of 2009 were $8.0
million.  Expenditures in the first nine months of 2009 include the
construction of the new facility in Benwood, West Virginia ($3.5 million) and
upgrading facilities at the Hurst, Texas plant ($3.6 million).  In the
first nine months of 2008, the Company spent $2.1 million for capital
expenditures.


During
the first nine months of 2009 and 2008, the company repurchased common stock for
the treasury totaling $0.2 million and $3.4 million,
respectively.  The Company has no outstanding bank debt as of
September 30, 2009.





The
Company has various commitments primarily related to vehicle and equipment
operating leases, facilities operating leases, and zinc purchase
commitments.  The Company’s off-balance sheet contractual obligations
at September 30, 2009, consist of $1.4 million for long-term operating leases
for vehicles, office space, office equipment, galvanizing facilities and
galvanizing equipment and approximately  and approximately $0.1
million for zinc purchase commitments.  In addition, at September 30,
2009 the Company has approximately $1.0 million in outstanding purchase
commitments for various machinery, equipment and building improvements and $1.3
million in outstanding commitments for other operating
obligations.  The various leases for galvanizing facilities, including
option renewals, expire from 2009 to 2023.  The vehicle leases expire
annually on various schedules through 2012.  NAGC 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.





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 in the first
nine months of 2009 and 2008 was approximately $1.4 million and $1.3 million,
respectively, for the disposal and recycling of wastes generated by the
galvanizing operations.





NAGC was
notified in 1997 by the Illinois Environmental Protection Agency (“IEPA”) that
it was one of approximately 60 potentially responsible parties 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., an entity unrelated to NAGC.  The IEPA
notice includes NACG as one of the organizations which arranged for the
treatment and disposal of hazardous substances at Sandoval.  The
estimated timeframe for resolution of the IEPA contingency is
unknown.  The IEPA has yet to respond to a proposed work plan
submitted in August 2000 by a group of the potentially responsible parties or
suggest any other course of action, and there has been no activity in regards to
this issue since 2001.  Until the work plan is approved and completed,
the range of potential loss or remediation, if any, is unknown, and in addition,
the allocation of potential loss between the 60 potentially responsible parties
is unknown and not reasonably estimable.  Therefore, the Company has
no basis for determining potential exposure and estimated remediation costs at
this time and no liability has been accrued.




In
September 2008, the United States Environmental Protection Agency (the “EPA”)
notified the Company of a claim against the Company as a
potentially responsible party related to a Superfund site in Texas City,
Texas.




- 18
-


This matter pertains
to galvanizing facilities of a Company subsidiary and its disposal
of waste, which was handled by their supplier in the early
1980’s.  The EPA offered the Company a special de minimis party settlement
to resolve potential liability that the Company and its subsidiaries may have
under CERCLA at this Site.  The Company accrued the $112,145 de minimis settlement amount
during the third quarter of 2008 and accepted the EPA’s offer before the
deadline of December 30, 2008.




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.




Item
3. Quantitative and Qualitative Disclosures About Market Risk





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 to the extent the company has borrowing
outstanding.  At September 30, 2009, the Company had no outstanding
debt.


Zinc Price
Risk.NAGC 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, which can be
for up to one (1) year, reflect rates quoted on the London Metals
Exchange.  At September 30, 2009, the aggregate fixed price
commitments for the procurement of zinc were approximately $0.1 million (note
5).  With respect to these zinc fixed price purchase commitments, a
hypothetical decrease of 10% in the market price of zinc from the September 30,
2009 level represented a potential lost gross margin opportunity of
approximately $10,000.


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 recognizes that hedging
instruments may be effective in minimizing the impact of zinc price
fluctuations.  The Company’s current zinc forward purchase commitments
are considered derivatives, but the Company has elected to account for these
purchase commitments as normal purchases.





Item
4.  Controls and Procedures





As of the
end of the period covered by this report, management, including our chief
executive officer and chief financial officer, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures. Based upon,
and as of the date of, the evaluation, our chief executive officer and chief
financial officer concluded that the disclosure controls and procedures were
effective, in all material respects, to ensure that information required to be
disclosed in the reports we file and submit under the Exchange Act is recorded,
processed, summarized and reported as and when required.





The
Company’s certifying officers have indicated that there were no significant
changes in internal controls over financial reporting that have occurred during
the fiscal quarter ended September 30, 2009 that materially affected, or were
reasonably likely to materially affect, internal controls over financial
reporting.





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Part
II Other
Information





Item
1.  Legal Proceedings.





NAGC was
notified in 1997 by the Illinois Environmental Protection Agency (“IEPA”) that
it was one of approximately 60 potentially responsible parties 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., an entity unrelated to NAGC.  The IEPA
notice includes NACG as one of the organizations which arranged for the
treatment and disposal of hazardous substances at Sandoval.  The
estimated timeframe for resolution of the IEPA contingency is
unknown.  The IEPA has yet to respond to a proposed work plan
submitted in August 2000 by a group of the potentially responsible parties or
suggest any other course of action, and there has been no activity in regards to
this issue since 2001.  Until the work plan is approved and completed,
the range of potential loss or remediation, if any, is unknown, and in addition,
the allocation of potential loss between the 60 potentially responsible parties
is unknown and not reasonably estimable.  Therefore, the Company has
no basis for determining potential exposure and estimated remediation costs at
this time and no liability has been accrued.




In
September 2008, the United States Environmental Protection Agency (the “EPA”)
notified the Company of a claim against the Company as a
potentially responsible party related to a Superfund site in Texas City,
Texas.  This matter pertains to galvanizing facilities of a
Company subsidiary and its disposal of waste, which was handled
by their supplier in the early 1980’s.  The EPA offered the Company a
special de minimis
party settlement to resolve potential liability that the Company and its
subsidiaries may have under CERCLA at this Site.  The Company accrued the
$112,145 de minimis
settlement amount during the third quarter of 2008 and accepted the EPA’s offer
before the deadline of December 30, 2008.




Item
1A. Risk Factors.





There are
no material changes from risk factors as previously disclosed in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2009.





Item
2.  Unregistered Sales of Equity Securities and Use of Proceeds – Not
applicable.





Item
3.  Defaults Upon Senior Securities – Not applicable.





Item
4.  Submission of Matters to a Vote of Security Holders





During
the second quarter 2009, the holders of a majority of the outstanding shares of
common stock of North American Galvanizing & Coatings, Inc. (the “Company”)
provided written consent approving an amendment to the Company’s Restated
Certificate of Incorporation, as amended, pursuant to the Company’s consent
solicitation authorized by the Company’s Board of Directors.  Through
the written consent, the holders of a majority of the outstanding shares of the
Company’s common stock approved an increase in the number of authorized shares
of the Company’s common stock from 18,000,000 shares to 25,000,000
shares.





The
Company filed a Certificate of Amendment of the Restated Certificate of
Incorporation, as amended, with the Secretary of State of Delaware on April 2,
2009, which provides that the aggregate number of shares of the Company’s common
stock which the Company shall have authority to issue is 25,000,000
shares.





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Shareholders
at the Company’s Annual Meeting on July 29, 2009 reelected seven incumbent
directors, Linwood J. Bundy, Ronald J. Evans, Janice K. Henry, Gilbert L.
Klemann, II, Patrick J. Lynch, Joseph J. Morrow, and John H. Sununu. Of the
14,686,139 shares represented at the meeting, 14,462,850 shares
(98.5%) were voted for Mr. Bundy, 14,497,148 (98.7%) were voted for
Mr. Evans, 14,497,905 (98.7%) were voted for Ms. Henry, 14,499,244 (98.7%)
were voted for Mr. Klemann, 14,453,822 (98.4%) were voted for Mr. Lynch,
14,439,701 (98.3%) were voted for Mr. Morrow, and 14,461,728 (98.5%) were voted
for Gov. Sununu.  A proposal to ratify the appointment of Deloitte
& Touche LLP as the independent registered public accounting firm of the
Company for 2009 was adopted, with 14,619,725 votes cast for, 31,923 votes cast
against and 34,491 votes abstained.  A proposal to increase the
number of authorized shares of the Company’s common stock from 25,000,000 shares
to 50,000,000 shares was approved with 13,122,478 votes cast for, 1,510,959
votes cast against and 52,702 votes abstained.  In addition, a
proposal to adopt the 2009 Incentive Stock Plan was approved with 7,558,382
votes cast for, 3,215,434 votes cast against and 121,561 votes
abstained.  The terms of the Incentive Stock Plan were set forth in
the Company’s proxy statement filed with the Securities and Exchange Commission
on June 16, 2009.





Item
5.  Other Information – Not applicable.





Item
6.  Exhibits





No.
            Description





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





3.2
              The
      Company’s Amended and Restated Bylaws (incorporated by reference to
      Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q dated June 30,
      1996).





15
            Awareness
      Letter of Deloitte & Touche
LLP.





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.





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 thereunto duly authorized:







NORTH AMERICAN
      GALVANIZING & COATINGS, INC.
              (Registrant)  By: /s/ Beth
      B. Hood
                Vice
      President and
                Chief
      Financial Officer
                (Principal
      Financial Officer)




Date:  October
28, 2009







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