UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For
The Quarterly Period Ended March 31, 2008





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 is a large accelerated filer, an accelerated filer, or a
non-accelerated filer, as defined in Rule 12b-2 of the Exchange Act (Check
one):





Large
      accelerated filer o
            Accelerated
      filer x
            Non-accelerated
      filer o








Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the exchange Act). Yes oNo x








Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of March 31, 2008:


Common
Stock $ .10 Par Value . . . .
..     12,176,667




















NORTH
AMERICAN GALVANIZING & COATINGS, INC.


AND
SUBSIDIARY





Index
to Quarterly Report on Form 10-Q





PagePart  I.
      Financial InformationForward
      Looking Statements or Information
            2Item
      1. Financial
      StatementsReport
      of Independent Registered Public Accounting Firm
            3Condensed
      Consolidated Balance Sheets as of March 31, 2008 (unaudited), and December
      31, 2007
            4Condensed
      Consolidated Statements of  Income for the three months ended
      March 31, 2008 and 2007 (unaudited)
            5Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2008 and 2007 (unaudited)
            6Notes
      to Condensed Consolidated Financial Statements for the three months ended
      March 31, 2008 and 2007 (unaudited)
            7-13Item
      2. Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            14-19Item
      3. Quantitative
      and Qualitative Disclosures About Market Risk
            19Item
      4. Controls and
      Procedures
            20Part
      II. Other Information
            20-29Signatures
      and Certifications
            30-32





- 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
March 7, 2008 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 March 31,
2008, and the related condensed consolidated statements of income and of cash
flows for the three-month periods ended March 31, 2008 and 2007. 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, 2007, 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 March 7, 2008, 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, 2007 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


April 21,
2008





- 3
-


NORTH
      AMERICAN GALVANIZING & COATINGS, INC.CONDENSED
      CONSOLIDATED BALANCE SHEETS(In
      thousands, except per share amounts)UnauditedMarch
      31,
            
            
            December
      31,ASSETS
            
            2008
            
            
            2007CURRENT
      ASSETS:Cash
            
            $
            4,072
            
            
            $
            2,966Trade
      receivables—less allowances of $96 for 2008 and $154 for
    2007
            
            
            11,000
            
            
            
            10,294Inventories
            
            
            6,199
            
            
            
            6,399Prepaid
      expenses and other assets
            
            
            497
            
            
            
            1,096Deferred
      tax asset—net
            
            
            761
            
            
            
            741Total
      current assets
            
            
            22,529
            
            
            
            21,496PROPERTY,
      PLANT AND EQUIPMENT—AT COST:Land
            
            
            2,167
            
            
            
            2,167Galvanizing
      plants and equipment
            
            
            41,950
            
            
            
            41,33744,117
            
            
            
            43,504Less—allowance
      for depreciation
            
            
            (
      23,269
            )
            
            
            (22,413
            )Construction
      in progress
            
            
            1,110
            
            
            
            1,396Total
      property, plant and equipment—net
            
            
            21,958
            
            
            
            22,487GOODWILL—Net
            
            
            3,448
            
            
            
            3,448OTHER
      ASSETS
            
            
            136
            
            
            
            141TOTAL
      ASSETS
            
            $
            48,071
            
            
            $
            47,572LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Current
      maturities of long-term obligations
            
            $
            —
            
            
            $
            1Trade
      accounts payable
            
            
            4,188
            
            
            
            5,296Accrued
      payroll and employee benefits
            
            
            929
            
            
            
            1,513Accrued
      taxes
            
            
            2,294
            
            
            
            1,112Other
      accrued liabilities
            
            
            1,747
            
            
            
            2,910Total
      current liabilities
            
            
            9,158
            
            
            
            10,832DEFERRED
      TAX LIABILITY—Net
            
            
            699
            
            
            
            697LONG-TERM
      OBLIGATIONS
            
            
            —
            
            
            
            14Total
      liabilities
            
            
            9,857
            
            
            
            11,543COMMITMENTS
      AND CONTINGENCIES (NOTE 6)STOCKHOLDERS’
      EQUITY:Common
      stock—$.10 par value, 18,000,000 shares authorized:Issued—12,381,550
      shares in 2008 and 12,366,754 in 2007
            
            
            1,238
            
            
            
            1,237Additional
      paid-in capital
            
            
            14,748
            
            
            
            14,549Retained
      earnings
            
            
            23,385
            
            
            
            20,310Common
      shares in treasury at cost— 204,883 in 2008 and 12,590 in
    2007
            
            
            (1,157
            )
            
            
            (67
            )Total
      stockholders’ equity
            
            
            38,214
            
            
            
            36,029TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            48,071
            
            
            $
            47,572See
      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 EndedMarch
      312008
            
            
            2007SALES
            
            $
            20,702
            
            
            $
            23,499COSTS
      AND EXPENSES:Cost
      of sales
            
            
            12,820
            
            
            
            16,212Selling,
      general and administrative expenses
            
            
            2,142
            
            
            
            2,364Depreciation
      and amortization
            
            
            857
            
            
            
            838Total
      costs and expenses
            
            
            15,819
            
            
            
            19,414OPERATING
      INCOME
            
            
            4,883
            
            
            
            4,085Interest
      expense
            
            
            —
            
            
            
            187Interest
      income
            
            
            (11
            )
            
            
            (18
            )INCOME  BEFORE
      INCOME TAXES
            
            
            4,894
            
            
            
            3,916INCOME
      TAX EXPENSE
            
            
            1,819
            
            
            
            1,570NET
      INCOME
            
            $
            3,075
            
            
            $
            2,346NET
      INCOME PER COMMON SHARE:Basic
            
            $
            0.25
            
            
            $
            0.19Diluted
            
            $
            0.24
            
            
            $
            0.19See
      notes to condensed consolidated financial statements.





- 5
-


NORTH
      AMERICAN GALVANIZING & COATINGS, INC.CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)THREE
      MONTHS ENDED MARCH 31, 2008 AND 2007(In
      thousands)2008
            
            
            2007OPERATING
      ACTIVITIES:Net
      income
            
            $
            3,075
            
            
            $
            2,346Gain
      on disposal of assets
            
            
            7
            
            
            
            —Depreciation
      and amortization
            
            
            857
            
            
            
            838Deferred
      income taxes
            
            
            (18
            )
            
            
            (
      87
            )Non-cash
      share-based compensation
            
            
            108
            
            
            
            83Non-cash
      directors’ fees
            
            
            92
            
            
            
            107Changes
      in operating assets and liabilities:Accounts
      receivable—net
            
            
            (706
            )
            
            
            (1,872
            )Inventories
      and other assets
            
            
            804
            
            
            
            650Accounts
      payable, accrued liabilities and other
            
            
            (1,753
            )
            
            
            (2,233
            )Cash
      provided by/(used in) operating activities
            
            
            2,466
            
            
            
            (168
            )INVESTING
      ACTIVITIES:Capital
      expenditures
            
            
            (255
            )
            
            
            (525
            )Cash
      used in investing activities
            
            
            (255
            )
            
            
            (525
            )FINANCING
      ACTIVITIES:Purchase
      of common stock for the treasury
            
            
            (1,090
            )
            
            
            —Payments
      on long-term obligations
            
            
            (15
            )
            
            
            (420
            )Proceeds
      from long-term obligations
            
            
            —
            
            
            
            223Payment
      on subordinated notes payable
            
            
            —
            
            
            
            (188
            )Proceeds
      from exercise of stock options
            
            
            —
            
            
            
            75Cash
      used in financing activities
            
            
            (1,105
            )
            
            
            (310
            )INCREASE/(DECREASE)
      IN CASH AND CASH EQUIVALENTS
            
            
            1,106
            
            
            
            (1,003
            )CASH
      AND CASH EQUIVALENTS:Beginning
      of period
            
            
            2,966
            
            
            
            1,979End
      of period
            
            $
            4,072
            
            
            $
            976CASH
      PAID DURING THE PERIOD FOR:Interest
            
            $
            —
            
            
            $
            129Income
      taxes
            
            $
            43
            
            
            $
            667NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Acquisitions
      of fixed assets under capital lease obligations
            
            $
            —
            
            
            $
            39Acquisitions
      of fixed assets included in accounts payable at period end
            
            $
            79
            
            
            $
            —See
      notes to condensed consolidated financial statements.




- 6
-


NORTH
AMERICAN GALVANIZING & COATINGS, INC.AND SUBSIDIARY


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2008 and 2007


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,
2007.  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





At March
31, 2008 the Company has two share-based compensation plans, which are
shareholder-approved, the 2004 Incentive Stock Plan and the Director Stock Unit
Program (Note 7).  The Company’s 2004 Incentive Stock Plan (the Plan)
permits the grant of share options and shares to its employees and directors for
up to 1,875,000 shares of common stock.  The Company believes that
such awards better align the interests of its employees and directors with those
of its shareholders.  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.





During
March 2008, the Compensation Committee recommended and the Board of Directors
approved a grant totaling 95,000 non-vested shares for management employees and
50,000 non-vested shares for directors.  Non-vested shares granted to
management employees and non-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.




The
compensation cost for the Plan was $108,000 and $83,000 for the three-months
ended March 31, 2008 and 2007, respectively.  No tax benefit was
recognized in income tax expense for the 2007 incentive stock plan compensation
cost.  There was no share-based compensation cost capitalized during
2007 or 2008.





In the
first three months of 2007, the Company issued stock options for 502,500 shares
at $3.47 per share.  No stock options were issued in the first three
months of 2008.





- 7
-


Non-vested
shares are valued at market value on the grant date.  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:





Three
      Months EndedMarch
      31Dollars
      in Thousands, Except per Share Amounts
            
            2008
            
            
            2007Volatility
            
            
            —
            
            
            
            66%Discount
      Rate
            
            
            —
            
            
            
            4.6%Dividend
      Yield
            
            
            —
            
            
            
            —Fair
      Value, adjusted for three-for-two stock split
            
            
            —
            
            
            $
            3.54




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 and for
non-vested shares using the treasury stock method.





Three Months Ended
      March 31
            
            Number of Shares2008
            
            
            2007Basic
            
            
            12,323,890
            
            
            
            12,215,621Diluted
            
            
            12,824,138
            
            
            
            12,505,736








Options
to purchase 335,000 shares of common stock were excluded from the computation of
diluted earnings per share for the quarter ended March 31, 2007 because the
options’ exercise price was greater than the average market price of the common
shares.  No options were excluded from the computation of diluted
earnings per share for the quarter ended March 31, 2008.





Note
4.   Credit Agreement





The
Company’s 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 $10 million at the discretion of the
lender.  The credit facility matures on May 16, 2012, with no
principal payments required before the maturity date and no prepayment
penalty.  The ongoing purpose of the facility is to provide for
issuance of standby letters of credit, acquisitions, and for other general
corporate purposes.





At March
31, 2008, the Company had unused borrowing capacity of  $24.8 million,
based on  no borrowings outstanding under the revolving credit
facility, and $0.2 million of letters of credit to secure payment of current and
future 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
NAGC.  The credit agreement provides for an applicable margin ranging
from 0.75% to 2.00% over LIBOR and commitment fees ranging from 0.10% to 0.25%
depending on the Company’s Funded Debt to EBITDA Ratio (as defined). If the
Company had borrowings outstanding under the revolving credit facility




- 8
-


at March
31, 2008, the applicable margin would have been 0.75% and the variable interest
rate including the applicable margin would have been 3.45%.





The
credit agreement requires the Company to maintain compliance with covenant
limits for leverage ratio, asset coverage ratio, and a basic fixed charge
coverage ratio.  At March 31, 2008, the Company was in compliance with
the covenants.  The actual financial ratios compared to the required
ratios, were as follows:  Leverage Ratio – actual 0.0 versus maximum
allowed of 3.25; Asset Coverage Ratio – actual 43,200 vs. minimum required of
1.5; Basic Fixed Charge Coverage Ratio – actual 16.09 versus minimum required of
1.0.





Note
5.   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 were senior to other debt of the
Company.




The
Internal Revenue Service reviewed the Harris County Industrial Development
Corporation Adjustable Rate Industrial Development Bonds and compliance with the
Internal Revenue Code section (IRC) 144(a)(4)(ii)’s dollar limitation on capital
expenditures within a relevant period.  As a result of the review,
during 2006 the Company recorded an estimated liability of $145,000 and in
March, 2007, the Company entered into a settlement agreement (the “Closing
Agreement”) with the Harris County Industrial Development Corporation and the
Commissioner of the Internal Revenue Service (“IRS”) and subsequently redeemed
the bonds on July 2, 2007.  The Company used proceeds from the new
five-year credit facility to redeem the bonds, as specifically contemplated in
the agreement.




Note
6.   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 March 31, 2008 the aggregate
commitments for the procurement of zinc at fixed prices were approximately $1.3
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 March 31, 2008.





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 March 31, 2008 or December 31, 2007, and did not
utilize derivatives in the three-month period ended March 31, 2008 or the year
ended December 31, 2007, 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 March 31, 2008,
consist of approximately $1.2 million for long-term operating leases for
vehicles, office space, office equipment, galvanizing facilities and galvanizing
equipment and approximately $1.3 million for zinc purchase
commitments.  The various leases for galvanizing facilities, including
option renewals, expire from 2008 to 2017.





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




- 9
-


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 March 31, 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 denied 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
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.  On January 17, 2007, the Seventh Circuit affirmed the judgment
of the United States District Court, stating that the Water District has a right
of action under CERCLA.





On April
11, 2007, the Company entered into an Agreement in Principle establishing terms
for a conditional settlement. Under the terms of the Agreement in Principle, the
Company has agreed to fund 50% of the cost, up to $350,000, to enroll the site
in the Illinois Voluntary Site Remediation Program.  These funds will
be used to prepare environmental reports for approval by the Illinois
Environmental Protection Agency.  The parties’ shared objective is to
obtain a “no further remediation determination” from the Illinois EPA based on a
commercial / industrial cleanup standard.  If the cost to prepare
these reports equals or exceeds $700,000, additional costs above $700,000
($350,000 per party) will be borne 100% by the Water District.





If a
remediation plan is required based on the site assessment, the Company has also
agreed to fund 50% of the cost to implement the remediation plan, up to a
maximum of $1 million.  If the cost to implement the plan is projected
to exceed $2 million, then the Water District will have the option to terminate
the agreement and resume the litigation.  The Water District will have
to choose whether to accept or reject the $1 million funding commitment from the
Company before accepting any payments from the Company for implementation of the
remediation plan.  The Company does not believe that it can determine
whether any cleanup is required or if any final cleanup cost is likely to exceed
$2 million until additional data has been collected and analyzed in connection
with the environmental reports.  If the Water District elects to
accept the maximum funding commitment, the Company has also agreed to remove
certain piping and other equipment from one of the parcels.  The cost
to remove the piping is estimated to be between $35,000 and
$60,000.





Although
the boards of both the Water District and the Company have approved the
Agreement in Principle, the agreement of the parties must be embodied in a
formal settlement agreement.  The parties have been working diligently
since April 11, 2007 but have not yet reached a final agreement.





The
Company has recorded a liability for $350,000 related to the Water District
claim in recognition of its currently known and estimable funding commitment
under the Agreement in Principle.  In the event that the Water
District rejects the funding commitment described above, the potential claim
could exceed the amount of the previous default judgment.  As neither
a site evaluation nor a remediation plan has been developed, the
Company


is unable
to make a reasonable estimate of the amount or range of further loss, if any,
that could result.  Such a liability, if any, could have a material
adverse effect on the Company’s financial condition, results of operations, or
liquidity.





- 10
-


NAGC 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., an entity unrelated to NAGC.  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 PRPs 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 PRPs 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.





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 other such matter will have a material adverse effect on the results of
operations, financial conditions or cash flows of the Company.





Note
7.   Director Stock Unit Program




At the
Company’s Annual Meeting held July 21, 2004, stockholders approved a Director
Stock Unit Program (“Program”).  Under the Program, effective January
1, 2005, each non-management director is required to defer at least 50%
($17,500) of his or her annual fee, and may elect to defer 75% ($26,250) or 100%
($35,000) of the annual fee.  The director must make the annual
deferral decision before the start of the year. Amounts deferred under the
Program are converted into a deferred Stock Unit grant under the Company’s 2004
Incentive Stock Plan at the average of the closing prices for a share of the
Company’s Common Stock for the 10 trading days before the quarterly director fee
payment dates.





To
encourage deferral of fees by non-management directors, the Company makes a
matching Stock Unit grant ranging from 25% to 75% of the amount deferred by the
director as of the same quarterly payment dates.


Under the
Program, the Company automatically defers from the management director’s salary
a dollar amount equal to 50% ($17,500) of the director fees for outside
directors.  The management director may elect to defer an amount equal
to 75% ($26,250) or 100% ($35,000) of the director fees for non-management
directors from his or her compensation, and the Company matches deferrals by the
management director with Stock Units at the same rate as it matches deferrals
for non-management directors.





Deliveries
of the granted stock are made 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 Outside Directors elected to defer 100% of the annual board fee
for both 2008 and 2007, and the Company’s chief executive officer and Inside
Director elected to defer a corresponding amount of his salary in 2008 and
2007.  During the first three months of 2008, fees and salary deferred
by the Directors represented a total of 14,796 stock unit grants valued at $6.21
per stock unit.  During the first three months of 2007, fees and
salary deferred by the Directors represented a total of 30,576 stock unit grants
valued at $3.51 per stock unit, adjusted for the three-for-two stock
split.




- 11
-


Note
8.   Certain Relationships and Related Transactions





T.
Stephen Gregory, a director of North American Galvanizing & Coatings, Inc.
from June, 2005 to December, 2007, is the chairman of the board and a
shareholder of Gregory Industries, Inc., a customer of the
Company.  Total sales to Gregory Industries, Inc. for the three-month
period ended March 31, 2007 were approximately $385,000.  The amount
due from Gregory Industries, Inc. included in trade receivables at March 31,
2007 was approximately $199,000.




- 12
-


North
American Galvanizing & Coatings, Inc. and Subsidiary





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 three-month period ended March 31, 2008, there were no significant changes
to the Company’s critical accounting policies previously disclosed in Form 10-K
for the year ended December 31, 2007.





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 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 2007, the Company galvanized steel products for approximately 1,700
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


·
            pulp
      and paper


·
            pipe
      and tube




- 13
-


·
            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, which
include:  return on capital employed, sales, gross profit, fixed and
variable costs, selling and general




- 14
-


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.





RESULTS
OF OPERATIONS




The
following table shows the Company’s results of operations for the three-month
periods ended March 31, 2008 and 2007:




(Dollars
      in thousands)Three
      Months Ended March 31,2008
            
            
            2007%
      of
            
            
            
            
            
            %
      ofAmount
            
            
            Sales
            
            
            Amount
            
            
            SalesSales
            
            $
            20,702
            
            
            
            100.0
            %
            
            $
            23,499
            
            
            
            100.0
            %Cost
      of sales
            
            
            12,820
            
            
            
            61.9
            %
            
            
            16,212
            
            
            
            69.0
            %Selling,
      general andadministrative
      expenses
            
            
            2,142
            
            
            
            10.3
            %
            
            
            2,364
            
            
            
            10.1
            %Depreciation
      andamortization
            
            
            857
            
            
            
            4.1
            %
            
            
            838
            
            
            
            3.6
            %Operating
      income
            
            
            4,883
            
            
            
            23.6
            %
            
            
            4,085
            
            
            
            17.4
            %Interest
      expense
            
            
            —
            
            
            
            0.0
            %
            
            
            187
            
            
            
            0.8
            %Interest
      income
            
            
            (11
            )
            
            
            (0.1
            %)
            
            
            (18
            )
            
            
            (0.1
            %)Income
      from operations before income taxes
            
            
            4,894
            
            
            
            23.6
            %
            
            
            3,916
            
            
            
            16.7
            %Income
      tax expense
            
            
            1,819
            
            
            
            8.8
            %
            
            
            1,570
            
            
            
            6.7
            %Net
      income
            
            $
            3,075
            
            
            
            14.9
            %
            
            $
            2,346
            
            
            
            10.0
            %





2008
COMPARED TO 2007





Sales.Sales for
the first quarter ended March 31, 2008 decreased 12% over the prior
year.  Sales prices have decreased in the quarter related to decreases
in zinc costs.  In the three-months ended March 31, 2008, average
selling prices for galvanizing and related coating services were 5.2% lower than
the prior year first quarter and 1.3% lower than the fourth quarter of
2007.  The market price of zinc, as quoted by the London Metal
Exchange, declined 30% and 8% for the comparable periods.





Volumes
for the first quarter of 2008 were 4% higher than the fourth quarter of
2007.  First quarter 2008 volumes were 7% lower than the record
volumes set in the first quarter of 2007.  Volumes for the quarter
were impacted by an unusually high number of snow days which affected production
in the northern plants located in Colorado, Kansas City, St. Louis and Canton,
Ohio.





Cost of
Sales.   The decrease in cost of sales from 2007 to 2008
resulted mainly from a decrease in zinc costs. Other items impacting cost of
sales include increased direct labor costs of $.2 million due to average wage
increases and increased utility costs of $.2 million due to higher natural gas
costs.





- 15
-


Selling, General and Administrative
(SG&A) Expenses.SG&A decreased $.2 million, or 10.1%,
from the prior year first quarter.  The decrease is due to the
amortization of deferred bond and loan origination costs related to the IRB Bond
agreement in 2007.





Operating
Income.Operating income increased $.8 million from the first
three months of 2007 to the first three months of 2008.  Operating
income as a percent of sales increased 6.2% for the first quarter of 2008 versus
the first quarter of 2007.  Increases in operating income result from
the factors explained above.





Income Taxes.The Company’s
effective income tax rates for the first quarter of 2008 and 2007 were 37.4% and
40.1%, respectively.   The first quarter 2007 rate differed from
the federal statutory rate primarily due to the recording of additional income
taxes due to the IRS examination of years 2003 through 2005.





Net Income.For the first
quarter of 2008, the Company reported net income of $3.1 million compared to net
income of $2.3 million for the first quarter of 2007.  The increase in
net income is primarily due to the decrease in cost of goods sold, selling,
general, and administrative costs and interest expense from the first three
months of 2007 to the first three months of 2008.





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
base capital spending requirements.  During 2008 and 2007, 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 the first three months of 2008 and 2007 was $2.5
million and ($.2) million, respectively. The increase of $2.6 million in 2008
cash flow from operations was due to increased net income, offset by increased
working capital needs, primarily a decrease in accounts payable and accrued
liabilities due to reduction in amounts due to zinc suppliers.





Cash of
$.3 million used in 2008 investing activities through March 31 consisted of
capital expenditures for equipment and upgrade of existing galvanizing
facilities.   Investing activities in the first quarter of 2007
included $.5 million in capital expenditures. The Company expects base capital
expenditures for 2008 to approximate $4 million.





During
the first three months of 2008, total debt (current and long-term obligations
and bonds payable) outstanding at December 31, 2007 of $15,000 was
repaid.  The Company has no outstanding debt as of March 31,
2008.  Other financing activity during the first quarter of 2008
consisted of purchases of common stock for the treasury totaling $1.1
million.  During the first three months of 2007, total debt (current
and long-term obligations and bonds payable) decreased $.3 million to $9
million.  Other financing activity during the first quarter of 2007
consisted of proceeds from stock option exercises of $.1 million.





The
Company’s 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 $10 million at the discretion of the
lender.  The credit facility matures on May 16, 2012, with no
principal payments required before the maturity date and no prepayment
penalty.  The ongoing purpose of the facility is to provide for
issuance of standby letters of credit, acquisitions, and for other general
corporate purposes.





At March
31, 2008, the Company had unused borrowing capacity of  $24.8 million,
based on no borrowings outstanding under the revolving credit facility, and $0.2
million of letters of credit to secure payment of current and future workers’
compensation claims.





- 16
-


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
NAGC.  The credit agreement provides for an applicable margin ranging
from 0.75% to 2.00% over LIBOR and commitment fees ranging from 0.10% to 0.25%
depending on the Company’s Funded Debt to EBITDA Ratio (as defined). If the
Company had borrowings outstanding under the revolving credit facility at March
31, 2008, the applicable margin would have been 0.75% and the variable interest
rate including the applicable margin would have been 3.45%.





The
credit agreement requires the Company to maintain compliance with covenant
limits for leverage ratio, asset coverage ratio, and a basic fixed charge
coverage ratio.  At March 31, 2008, the Company was in compliance with
the covenants.  The actual financial ratios compared to the required
ratios, were as follows:  Leverage Ratio – actual 0.0 versus maximum
allowed of 3.25; Asset Coverage Ratio – actual 43,200 vs. minimum required of
1.5; Basic Fixed Charge Coverage Ratio – actual 16.09 versus minimum required of
1.00.





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 March 31, 2008,
consist of $.3 million for vehicle and equipment operating leases, $1.3 million
for zinc purchase commitments, and $.9 million for long-term operating leases
for galvanizing and office facilities.  The various leases for
galvanizing facilities, including option renewals, expire from 2008 to 2017. 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
three months of 2008 and 2007 was approximately $.3 million and $.8 million,
respectively, for the disposal and recycling of wastes generated by the
galvanizing operations. First quarter 2007 costs include a one-time charge of
$.3 million related to Lake River environmental site assessment
costs.





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 March 31, 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 denied 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.




- 17
-


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
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.  On January 17, 2007, the Seventh Circuit affirmed the judgment
of the United States District Court, stating that the Water District has a right
of action under CERCLA.





On April
11, 2007, the Company entered into an Agreement in Principle establishing terms
for a conditional settlement. Under the terms of the Agreement in Principle, the
Company has agreed to fund 50% of the cost, up to $350,000, to enroll the site
in the Illinois Voluntary Site Remediation Program.  These funds will
be used to prepare environmental reports for approval by the Illinois
Environmental Protection Agency.  The parties’ shared objective is to
obtain a “no further remediation determination” from the Illinois EPA based on a
commercial / industrial cleanup standard.  If the cost to prepare
these reports equals or exceeds $700,000, additional costs above $700,000
($350,000 per party) will be borne 100% by the Water District.





If a
remediation plan is required based on the site assessment, the Company has also
agreed to fund 50% of the cost to implement the remediation plan, up to a
maximum of $1 million.  If the cost to implement the plan is projected
to exceed $2 million, then the Water District will have the option to terminate
the agreement and resume the litigation.  The Water District will have
to choose whether to accept or reject the $1 million funding commitment from the
Company before accepting any payments from the Company for implementation of the
remediation plan.  The Company does not believe that it can determine
whether any cleanup is required or if any final cleanup cost is likely to exceed
$2 million until additional data has been collected and analyzed in connection
with the environmental reports.  If the Water District elects to
accept the maximum funding commitment, the Company has also agreed to remove
certain piping and other equipment from one of the parcels.  The cost
to remove the piping is estimated to be between $35,000 and
$60,000.





Although
the boards of both the Water District and the Company have approved the
Agreement in Principle, the agreement of the parties must be embodied in a
formal settlement agreement.  The parties have been working diligently
since April 11, 2007 but have not yet reached a final agreement.





The
Company has recorded a liability for $350,000 related to the Water District
claim in recognition of its currently known and estimable funding commitment
under the Agreement in Principle.  In the event that the Water
District rejects the funding commitment described above, the potential claim
could exceed the amount of the previous default judgment.  As neither
a site evaluation nor a remediation plan has been developed, the
Company


is unable
to make a reasonable estimate of the amount or range of further loss, if any,
that could result.  Such a liability, if any, could have a material
adverse effect on the Company’s financial condition, results of operations, or
liquidity.





NAGC 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., an entity unrelated to NAGC.  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 PRPs 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,





- 18
-


is
unknown, and in addition, the allocation of potential loss between the 60 PRPs
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





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 March 31, 2008, the Company had no outstanding
debt.  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.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 March 31, 2008, the aggregate fixed price commitments
for the procurement of zinc were approximately $1.3 million (Note
6).  With respect to these zinc fixed price purchase commitments, a
hypothetical decrease of 10% in the market price of zinc from the March 31, 2008
level represented a potential lost gross margin opportunity of approximately
$130,000.





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.




- 19
-


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 March 31, 2008 that materially affected, or were
reasonably likely to materially affect, internal controls over financial
reporting.





Part
II   Other Information





Item
1.   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 March 31, 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 denied 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
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.  On January 17, 2007, the Seventh Circuit affirmed the judgment
of the United States District Court, stating that the Water District has a right
of action under CERCLA.





On April
11, 2007, the Company entered into an Agreement in Principle establishing terms
for a conditional settlement. Under the terms of the Agreement in Principle, the
Company has agreed to fund 50% of the cost, up to $350,000, to enroll the site
in the Illinois Voluntary Site Remediation Program.  These funds will
be used to prepare environmental reports for approval by the Illinois
Environmental Protection Agency.  The parties’ shared objective is to
obtain a “no further remediation determination” from the Illinois EPA based on a
commercial /




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industrial
cleanup standard.  If the cost to prepare these reports equals or
exceeds $700,000, additional costs above $700,000 ($350,000 per party) will be
borne 100% by the Water District.





If a
remediation plan is required based on the site assessment, the Company has also
agreed to fund 50% of the cost to implement the remediation plan, up to a
maximum of $1 million.  If the cost to implement the plan is projected
to exceed $2 million, then the Water District will have the option to terminate
the agreement and resume the litigation.  The Water District will have
to choose whether to accept or reject the $1 million funding commitment from the
Company before accepting any payments from the Company for implementation of the
remediation plan.  The Company does not believe that it can determine
whether any cleanup is required or if any final cleanup cost is likely to exceed
$2 million until additional data has been collected and analyzed in connection
with the environmental reports.  If the Water District elects to
accept the maximum funding commitment, the Company has also agreed to remove
certain piping and other equipment from one of the parcels.  The cost
to remove the piping is estimated to be between $35,000 and
$60,000.





Although
the boards of both the Water District and the Company have approved the
Agreement in Principle, the agreement of the parties must be embodied in a
formal settlement agreement.  The parties have been working diligently
since April 11, 2007 but have not yet reached a final agreement.





The
Company has recorded a liability for $350,000 related to the Water District
claim in recognition of its currently known and estimable funding commitment
under the Agreement in Principle.  In the event that the Water
District rejects the funding commitment described above, the potential claim
could exceed the amount of the previous default judgment.  As neither
a site evaluation nor a remediation plan has been developed, the
Company


is unable
to make a reasonable estimate of the amount or range of further loss, if any,
that could result.  Such a liability, if any, could have a material
adverse effect on the Company’s financial condition, results of operations, or
liquidity.





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 filed on March 7, 2008.





Item
2.    Unregistered Sales of Equity Securities and Use of
Proceeds.





Issuer
Purchases of Equity Securities




Total
              ApproximateNumber
      of
              Dollar
      ValueShares
              of
      SharesTotal
              
              Purchased
              that
      May YetNumber
      of
              Average
              as
      Part of
              be
      PurchasedPeriod
              Shares
              Price
      Paid
              Publicly
              Under(from/to)
              Purchased
              per
      Share
              Announced
      Plan
              the
      PlanMarch
      1, 2008 - March 31, 2008
              192,293
              $
      5.67
              420,362
              $
      1,518,708




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.  In March 2008, the Board of Directors authorized the
company to buy back an additional $2,000,000 of its common stock, subject to
market conditions. 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 $3,000,000.





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Item
3.   Defaults Upon Senior Securities – Not applicable.





Item
4.   Submission of Matters to a Vote of Security Holders – Not
applicable.





Item
5.   Other Information.





Item
6.   Exhibits




No.
            Description3.1
            The
      Company’s Restated Certificate of Incorporation (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 March 31,
      1996).





10.1
              Form
      of Restricted Stock Award





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)Date:  April
      21, 2008
              By:
              /s/ Beth
      B. HoodVice
      President and
                Chief
      Financial Officer
                (Principal
      Financial Officer)





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