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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 SEPTEMBER 30, 2004


COMMISSION FILE NO. 1-3920




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


DELAWARE 71-0268502
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)


2250 EAST 73RD STREET
TULSA, OKLAHOMA 74136
- --------------------------------------------------------------------------------
(Address of principal executive office and zip code)


Registrant's telephone number: (918) 494-0964




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 [X] NO [_]

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

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of November 10, 2004.

Common Stock $ .10 Par Value........6,797,012

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NORTH AMERICAN GALVANIZING & COATINGS, INC.
AND SUBSIDIARY

INDEX TO QUARTERLY REPORT ON FORM 10-Q





PAGE
----
PART I. FINANCIAL INFORMATION

Forward Looking Statements or Information 2

Item 1. Financial Statements

Report of Independent Registered Public Accounting Firm 3

Condensed Consolidated Balance Sheets as of
September 30, 2004 (unaudited), and December 31, 2003 4

Condensed Consolidated Statements of Operations
and Comprehensive Income for the three and nine-month
periods ended September 30, 2004 and 2003 (unaudited) 5

Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2004 and 2003 (unaudited) 6

Notes to Condensed Consolidated Interim Financial
Statements for the three and nine-month periods ended
September 30, 2004 and 2003 (unaudited) 7-14

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-24

Item 3. Quantitative and Qualitative Disclosure About
Market Risks 25

Item 4. Controls and Procedures 26



PART II. OTHER INFORMATION 27-28

SIGNATURES AND CERTIFICATIONS 29-33




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,
and the raw materials cost of zinc, changes in economic conditions of the
various markets the Company serves, as well as the other risks detailed herein
and in the Company's reports filed with the Securities and Exchange Commission.
The Company believes that the important factors set forth in the Company's
cautionary statements at Exhibit 99 to this Form 10-Q could cause such a
material difference to occur and investors are referred to Exhibit 99 for such
cautionary statements.







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, 2004, and the related condensed consolidated statements of
operations and comprehensive income for the three- and nine-month periods ended
September 30, 2004 and 2003 and cash flows for the nine month periods ended
September 30, 2004 and 2003. These interim financial statements are the
responsibility of the Company's management.

We conducted our reviews in accordance with 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 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 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,
2003, and the related consolidated statements of operations and comprehensive
income, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 26, 2004, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated sheet as of
December 31, 2003 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
November 10, 2004


3

NORTH AMERICAN GALVANIZING & COATINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS



UNAUDITED
SEPTEMBER 30 December 31
(DOLLARS IN THOUSANDS) 2004 2003
- ----------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS
Cash $ 486 $ 56
Investments -- 73
Trade receivables, net 5,412 4,594
Inventories 5,622 5,408
Prepaid expenses and other assets 674 87
Deferred tax asset, net 714 746
------------ ------------
TOTAL CURRENT ASSETS 12,908 10,964
------------ ------------

PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 1,967 1,962
Galvanizing plants and equipment 34,542 34,941
------------ ------------
36,509 36,903
Less: Allowance for depreciation 15,013 14,529
Construction in progress 211 286
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET 21,707 22,660
------------ ------------

GOODWILL, NET OF ACCUMULATED AMORTIZATION 3,389 3,389
OTHER ASSETS 313 354
------------ ------------

TOTAL ASSETS $ 38,317 $ 37,367
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current maturities of long-term obligations $ 1,109 $ 1,408
Current portion of bonds payable 685 656
Trade accounts payable 845 480
Accrued payroll and employee benefits 643 623
Other taxes 439 316
Other accrued liabilities 689 874
------------ ------------
TOTAL CURRENT LIABILITIES 4,410 4,357
------------ ------------

DEFERRED TAX LIABILITY, NET 758 774
LONG-TERM OBLIGATIONS 7,636 6,768
BONDS PAYABLE 6,110 6,626
SUBORDINATED NOTES PAYABLE 970 957
------------ ------------
TOTAL LIABILITIES 19,884 19,842
------------ ------------

COMMITMENTS AND CONTINGENCIES (NOTE 9)

STOCKHOLDERS' EQUITY
Common stock 819 819
Additional paid-in capital 17,267 17,343
Retained earnings 6,041 5,496
Other comprehensive income -- 6
Common shares in treasury at cost (5,694) (5,779)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 18,433 17,885
------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,317 $ 37,367
============ ============



See notes to condensed consolidated interim financial statements.

4

NORTH AMERICAN GALVANIZING & COATINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
UNAUDITED



THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003 2004 2003
- --------------------------------------------------------------- ------------ ------------ ------------

SALES $ 9,348 $ 8,516 $ 27,239 $ 24,954
Cost of sales 6,725 6,122 19,365 17,959
Selling, general & administrative expenses 1,370 1,597 4,387 4,463
Depreciation expense 686 717 2,068 2,188
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 8,781 8,436 25,820 24,610
------------ ------------ ------------ ------------

OPERATING INCOME 567 80 1,419 344
Other income -- -- (25) --
Interest (income) expense, net 198 (109) 565 498
------------ ------------ ------------ ------------

Income (loss) from Continuing Operations
before income taxes 369 189 879 (154)
Income tax expense (benefit) 140 99 334 (31)
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 229 90 545 (123)

Discontinued Operations:
Loss on discontinued operations, net -- -- -- (77)
Loss on write-off of assets of
discontinued operations, net -- -- -- (754)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 229 $ 90 $ 545 $ (954)
------------ ------------ ------------ ------------

OTHER COMPREHENSIVE INCOME
Unrealized holding gain on investment -- -- 12 --
Reclassification adjustment for realized
gain included in net income -- -- (16) --
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE INCOME $ -- $ -- $ (4) $ --
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 229 $ 90 $ 541 $ (954)
------------ ------------ ------------ ------------

NET INCOME (LOSS) PER COMMON SHARE

Continuing Operations:
Basic $ 0.03 $ 0.01 $ 0.08 $ (0.02)
Diluted $ 0.03 $ 0.01 $ 0.07 $ (0.02)

Discontinued Operations:
Basic and Diluted $ -- $ -- $ -- $ (0.12)

Net Income (Loss):
Basic $ 0.03 $ 0.01 $ 0.08 $ (0.14)
Diluted $ 0.03 $ 0.01 $ 0.07 $ (0.14)



See notes to condensed consolidated interim financial statements.

5

NORTH AMERICAN GALVANIZING & COATINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED



NINE MONTHS ENDED
SEPTEMBER 30
------------------------------
(DOLLARS IN THOUSANDS) 2004 2003
------------------------------------------------------------------------------------

OPERATING ACTIVITIES
Net income (loss) $ 545 $ (954)
Loss from discontinued operations -- 1,197
Loss from disposal of fixed assets 14 5
Depreciation 2,068 2,188
Gain on sale of investment (25) --
Deferred income taxes 16 (579)
Non-cash directors' fees 54 49
Changes in assets and liabilities:
Accounts receivable, net (818) (514)
Inventories and other assets (760) 551
Accounts payable, accrued liabilities and other 323 (58)
------------ ------------
Net cash provided by continuing operations 1,417 1,885
Net cash provided by discontinued operations -- 79
------------ ------------
CASH PROVIDED BY OPERATING ACTIVITIES 1,417 1,964


INVESTING ACTIVITIES
Proceeds from sale of investment 92 --
Capital expenditures (1,129) (733)
------------ ------------
CASH USED IN INVESTING ACTIVITIES (1,037) (733)

FINANCING ACTIVITIES
Purchase of treasury shares (45) --
Proceeds from long-term obligations 13,107 11,049
Payments on long-term obligations (12,525) (11,793)
Payment on bonds (487) (460)
------------ ------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 50 (34)
------------ ------------

INCREASE IN CASH 430 27
CASH AT BEGINNING OF PERIOD 56 3
------------ ------------
CASH AT END OF PERIOD $ 486 $ 30
============ ============


See notes to condensed consolidated interim financial statements.

6

NORTH AMERICAN GALVANIZING & COATINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
UNAUDITED


NOTE 1. BASIS OF PRESENTATION

The condensed consolidated interim 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 interim 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, 2003. 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
years. Actual results will be determined based on the outcome of future events
and could differ from those estimates.

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


NOTE 2. STOCK OPTIONS

The Company accounts for its stock option plans in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees",
under which no compensation cost has been recognized for stock option awards.
Had compensation cost for the Company's stock option plans been determined
according to the methodology of Statement of Financial Accounting Standard
No.123, "Accounting for Stock Based Compensation" ("SFAS No. 123"), the
Company's pro forma net earnings (loss) and basic and diluted earnings (loss)
per share for the three and nine months ended September 30, 2004 and 2003 would
have been as follows:


7

Three Months Ended Sep. 30
--------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003
- --------------------------------------------------------------------------------
Net Income, as reported $ 229 $ 90

Compensation cost, net of tax $ (8) $ (1)
-------- --------

Pro forma net income $ 221 $ 89
-------- --------
Earnings per share:
Basic - as reported $ .03 $ .01
-------- --------
Basic - pro forma $ .03 $ .01
-------- --------

Diluted - as reported $ .03 $ .01
-------- --------
Diluted - pro forma $ .03 $ .01
-------- --------




Nine Months Ended Sep. 30
--------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003
- --------------------------------------------------------------------------------
Net Income (Loss), as reported $ 545 $ (954)

Compensation cost, net of tax $ (6) $ (9)
-------- --------

Pro forma net income (loss) $ 539 $ (963)
-------- --------
Earnings (loss) per share:
Basic - as reported $ .08 $ (.14)
-------- --------
Basic - pro forma $ .08 $ (.14)
-------- --------

Diluted - as reported $ .07 $ (.14)
-------- --------
Diluted - pro forma $ .09 $ (.14)
-------- --------



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 Ended Sep. 30 Nine Months Ended Sep. 30
-------------------- --------------------
2004 2003 2004 2003
-------- -------- -------- --------
Volatility 68% 66% 67% 66%
Discount Rate 6% 5% 6% 5%
Dividend Yield 0% 0% 0% 0%
Fair Value $ 1.03 $ .75 $ .97 $ .75



The Company issued stock options for 50,000 shares at an average price per share
of $1.84 and 80,000 shares at $1.44 per share in the first nine months of 2004
and 2003, respectively.


8

NOTE 3. INCOME (LOSS) PER COMMON SHARE

Basic earnings (loss) per common share for the periods presented are computed
based upon the weighted average number of shares outstanding. Diluted earnings
(loss) per common share for the periods presented are based on the weighted
average shares outstanding, adjusted for the assumed exercise of stock options
and warrants using the treasury stock method. The Company had a net loss for the
nine months ended September 30, 2003 and the effect of including dilutive
securities in the earnings per common share would have been anti-dilutive.
Accordingly, options and warrants to purchase 675,106 common shares were
excluded from the calculation of diluted loss per share for the nine months
ended September 30, 2003.

Three Months Ended Sep. 30 Number of Shares
- -------------------------- -------------------------------
2004 2003
---------- ----------
Basic 6,787,297 6,767,703
Diluted 7,493,574 7,440,214


Nine Months Ended Sep 30 Number of Shares
- ------------------------ -------------------------------
2004 2003
---------- ----------
Basic 6,788,540 6,756,846
Diluted 7,488,701 6,756,846


The numbers of exercisable options excluded from the calculation of diluted
earnings per share, due to the option price being higher than the share market
value, are 296,500 and 319,000 at September 30, 2004 and 2003, respectively.


NOTE 4. INVENTORIES

Inventories consist of raw zinc "pigs," molten zinc in galvanizing kettles and
other chemicals and materials used in the galvanizing process. Inventories are
stated at the lower of cost or market with market value based on estimated
realizable value from the galvanizing process. Zinc cost is determined on a
last-in first-out (LIFO) basis. Other inventories are valued primarily on an
average cost basis.


NOTE 5. GOODWILL

During the second quarter of 2004, the Company completed the annual impairment
test of goodwill for 2004 and concluded goodwill was not impaired. Pursuant to
the provisions of SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Asset" the Company conducts an annual impairment
test of goodwill during the second quarter of each year unless circumstances
arise that require more frequent testing.


NOTE 6. BONDS PAYABLE

In 2000, the Company issued $9,050,000 of Harris County Industrial Development
Corporation Adjustable Rate Industrial Development Bonds, Series 2000 (the
"Bonds") for the purchase of land and construction of a hot dip galvanizing
plant in Harris County, Texas, of which $6,795,000 remained outstanding at
September 30, 2004. The Bonds are senior to other debt of the Company.

9

The Bonds bear interest at a variable rate (3.5% at September 30, 2004) that can
be converted to a fixed rate upon certain conditions outlined in the bond
agreement. Under the amended Reimbursement Agreement with the bank trustee, the
Company is permitted to withdraw excess interest from the trustee's Interest
Account on or about March 31, June 30, September 30 and December 31 of each
year. In the first quarter of 2004, the Company withdrew excess interest of
$72,000 from the Interest Account and applied the proceeds to pay-down the
outstanding balance on its bank revolving credit facility. The Company
determined that the trustee's Interest Account included excess interest of
approximately $39,000 and $120,000 for the third quarter and nine-month periods
of 2004, which was recognized as a reduction of interest expense by the Company
during those periods.

The Bonds are subject to sinking fund redemption, which was $630,000 for the
twelve months ended September 30, 2004 and increases annually thereafter to a
maximum redemption of $960,000 on June 15, 2012. The Company makes monthly
principal and interest payments of approximately $74,000 into a sinking fund.
The final maturity date of the Bonds is June 15, 2013. The Company has the
option of early redemption of the Bonds at par unless the Bonds are converted to
a fixed interest rate, in which case they are redeemable at a premium during a
period specified in the bond agreement. The Company's obligation under the bond
agreement is secured through a letter of credit with a bank which must remain in
effect as long as any Bonds are outstanding. The letter of credit is
collateralized by substantially all the assets of the Company.


NOTE 7. SUBORDINATED NOTES PAYABLE

In 2001, the Company completed a $1,000,000 private placement of unsecured
subordinated debt. The Company utilized the proceeds to partially fund
construction of a new galvanizing facility in St. Louis, Missouri in 2002. The
amount outstanding on these notes, net of discount, was $970,000 and $957,000 at
September 30, 2004 and December 31, 2003, respectively. The notes, which mature
February 17, 2006 and bear interest at 10% payable annually, were issued with
warrants to purchase 666,666 shares of common stock of the Company. Terms of the
warrants, which expire February 17, 2008, permit the holder to purchase shares
of the Company's common stock at any time prior to the expiration date. The
exercise price of $.856 per share reflects the fair value of the Company's
common stock at the time the warrants were issued, as determined by an
independent financial advisor. As of September 30, 2004, no warrants had been
exercised.


NOTE 8. LONG-TERM OBLIGATIONS

September 30 December 31
(Dollars in Thousands) 2004 2003
---------------------- ------------ ------------
Revolving line of credit $ 5,478 $ 3,867
Term loan 775 1,567
Construction Loan 2,472 2,722
9.5% note due 2015 20 20
------------ ------------

$ 8,745 $ 8,176
Less current portion (1,109) (1,408)
------------ ------------
$ 7,636 $ 6,768
------------ ------------





10

The Company's bank credit agreement has been amended to expire on October 1,
2005. Subject to borrowing base limitations, the amended bank credit agreement
provided (i) a $7,000,000 maximum revolving line of credit for working capital
and general corporate purposes, (ii) a $1,911,924 term loan and (iii) a
$2,833,332 construction loan.

Term loan payments are based on a three-year amortization schedule with equal
monthly payments of principal and interest, and the loan may be prepaid without
penalty. The revolving line of credit may be paid down without penalty, or
additional funds may be borrowed up to the maximum line of credit. At September
30, 2004, the Company had available borrowing capacity of $918,000 under the
line of credit, based on the underlying borrowing base of accounts receivable
and inventory. Payments on the construction loan are based on a 108-month
amortization schedule, plus interest, that commenced March 1, 2003, and the loan
may be prepaid without penalty.

At September 30, 2004, $8,725,000 was outstanding under the bank credit
agreement, and $400,000 was reserved for outstanding irrevocable 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 bank credit agreement, and the bank credit agreement is secured by a full
and unconditional guaranty from NAG. Amounts borrowed under the agreement bear
interest at the prime rate of Bank One, Oklahoma or the LIBOR rate, at the
option of the Company, subject to a rate margin adjustment determined by the
Company's consolidated debt service coverage ratio. In the event the Company
fails to maintain a consolidated debt service coverage ratio for any fiscal
quarter of at least 1.25 to 1.00, the Applicable LIBOR Rate Margin will be
increased to 5.75% and the Applicable Prime Rate Margin will be increased to
3.00%. Thereafter, the increased rate margin will remain in effect until such
time as the Company has maintained a consolidated debt service coverage ratio
greater than or equal to 1.25 to 1.0 for a subsequent fiscal quarter.

In the event the Company fails to maintain a consolidated EBITDA to capital
expenditures plus current maturity of long-term debt ratio for any fiscal
quarter of not less than 1.00 to 1.00, the increase in the Applicable LIBOR Rate
Margin ranges from 3.75% to 5.75%, and the increase in the Applicable Prime Rate
Margin ranges from 1.00% to 3.00%.

The bank credit agreement requires the Company to maintain compliance with
covenant limits for current ratio, debt to tangible net worth ratio, debt
service coverage ratio and a capital expenditures ratio. At September 30, 2004,
the Company was in compliance with all of the covenant limits and the actual
financial ratios compared to the required ratios, were as follows: Current Ratio
- - Actual 1.30 to 1.0 vs minimum required of 1.0 to 1.0; Debt to Tangible Net
Worth - Actual 1.32 to 1.0 vs maximum permitted of 2.50 to 1.0; Debt Service
Coverage - Actual 1.61 to 1.0 vs minimum permitted of 1.25 to 1.0; Capital
Expenditures - Actual 1.07 to 1.0 vs minimum required of 1.0 to 1.0.


NOTE 9. COMMITMENTS AND CONTINGENCIES

The Company regularly makes 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, 2004 the aggregate
commitments for the procurement of zinc at fixed prices were approximately $6.2
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 un-priced commitments for the purchase of approximately 1.3
million pounds of zinc at September 30, 2004.

11

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, 2004 or December 31, 2003, and did not utilize derivatives in the
nine months ended September 30, 2004 or the year ended December 31, 2003, except
for those forward purchase agreements which are accounted for as normal
purchases.

The Company's total off-balance sheet contractual obligations at September 30,
2004, consist of $1,732,000 for long-term operating leases for two galvanizing
facilities and galvanizing equipment, $396,000 for leased vehicles and
$6,118,000 for zinc purchase commitments. The various leases for galvanizing
facilities, including option renewals, expire from 2015 to 2017. A lease for
galvanizing equipment expires in 2007. The vehicle leases expire on various
dates from 2005 to 2010

NAG was notified in 1997 by the Illinois Environmental Protection Agency
("IEPA") that it was one of more than 50 potentially responsible parties
("PRPs") for cleanup of an abandoned site formerly owned by Sandoval Zinc
Company. Since then approximately 30 additional PRPs have been identified by the
IEPA. A number of the PRPs (approximately 12 to 15) have agreed to work together
and with IEPA on a voluntary basis. The Company has been and continues to
participate in this volunteer group. The group has retained consultants and
legal representatives familiar with IEPA regulations. This volunteer group, with
its consultants, has cooperated with IEPA in attempting to better define the
environmental issues associated with the Sandoval Zinc site. To that extent,
this voluntary group prepared and submitted to IEPA in August 2000 a work plan.
The purpose of this work plan is to attempt to define the extent of
environmental remediation that might be required, assess risks, and review
alternatives to addressing potential remediation. The IEPA has yet to respond to
this proposed work plan or suggest any other course of action, and there has
been no activity in regards to this issue during 2004. Therefore, the Company
has no basis for determining potential exposure and estimated remediation costs
at this time.

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 the August 12, 2004 default judgment in the amount of
$1,810,463.34 against Lake River Corporation and Lake River Holding Company,
Inc. in connection with the operation of a storage terminal by Lake River
Corporation in violation of environmental laws. Lake River Corporation conducted
business as a subsidiary of the Company until June 30, 2000, at which time Lake
River Corporation was sold to Lake River Holding Company, Inc. and ceased to be
a subsidiary of the Company. The Second Amended Complaint asserts that prior to
the sale of Lake River Corporation, the Company directly operated the Lake River
facility and, accordingly, seeks to have the Court pierce the corporate veil of
Lake River Corporation and enforce the default judgment order of August 12, 2004
against the Company (North American Galvanizing & Coatings, Inc.). The Company
denies the assertions set forth in the Water District's Complaint and will seek
to have the Second Amended Complaint dismissed.

The Company will continue to have additional environmental compliance costs
associated with operations in the galvanizing business. The Company is committed
to complying with the environmental legislation and regulations affecting its
operations. Due to the uncertainties associated with future environmental
technologies, regulatory interpretations, and prospective legislative activity,
management cannot reasonably quantify the Company's potential future costs in
this area.

12

The Company expenses or capitalizes, where appropriate, environmental
expenditures that relate to current operations as they are incurred. Such
expenditures are expensed when they are attributable to past operations and are
not expected to contribute to current or future revenue generation. The Company
records liabilities when remediation or other environmental assessment or
clean-up efforts are probable and the cost can be reasonably estimated.

As reported previously, the lease term of a galvanizing facility occupied by
Reinforcing Services, Inc. ("RSI"), one of NAG's subsidiaries, expired July 31,
2003 and has not been renewed. RSI has exercised an option to purchase the
facility, and the landlord is contesting the Company's right to exercise this
option. RSI has filed a lawsuit against the landlord seeing enforcement of the
right to exercise the option. The litigation is in the discovery stage and
management expects there will be no disruption to its galvanizing business being
conducted at the facility.

Various litigation arising in the ordinary course of business is pending against
the Company. Management believes that resolution of the Company's litigation and
environmental matters should not materially affect the Company's consolidated
financial position or liquidity. Should future developments cause the Company to
record an additional liability for environmental matters, litigation or customer
claims, the recording of such a liability could have a material impact on the
results of operations for the period involved.


NOTE 10. TREASURY STOCK

In the first nine months of 2004, the Company issued 32,129 shares of its common
stock from Treasury to outside Directors of the Company as payment for their
quarterly board fee in lieu of cash payments, and added 26,576 shares to the
Treasury from private transaction purchases. Shares issued in lieu of board fees
were valued at the average closing price of the Company's common stock for a
prior 30-day period, as reported by the American Stock Exchange. Such shares
were issued pursuant to the Directors' prior election and notice to the Company
to receive up to all of their 2004 quarterly board fees in the Company's stock
in lieu of cash. During the first nine months of 2003, the Company issued 32,789
shares for such purpose. Shares acquired in private transactions were purchased
at the then closing price of the Company's common stock, as reported by the
American Stock Exchange.


NOTE 11. DISCONTINUED OPERATIONS

In the second quarter ended June 30, 2003, the Company recorded a net loss from
a discontinued operation of $77,000, net of taxes of $45,000, and wrote-off its
investment in the formerly idled Houston-Cunningham galvanizing plant as a
discontinued operation.

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

13

NOTE 12. PROPOSALS APPROVED BY THE COMPANY'S STOCKHOLDERS

The following proposals were approved by the Company's stockholders at its
annual meeting held on July 21, 2004: (a) the 2004 Incentive Stock Plan, to
replace a prior stock option plan; (b) The Director Stock Unit Program, a new
deferred compensation program to tie a percentage of each director's
compensation to the long-term value of the Company's common stock and (c)
amendments to the Company's Restated Certificate of Incorporation to provide for
a reverse split followed by a forward split of the Company's common stock, at
the discretion of the Board of Directors. No date for the Reverse/Forward Split
has been set. If the Board determines to implement the Reverse/Forward Split,
the Company will publicly announce its decision in a press release at that time.





























14

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. 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. 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.

During the nine months ended September 30 , 2004, there were no significant
changes to the Company's critical accounting policies previously disclosed in
the Company's annual report on Form 10-K for the year ended December 31, 2003.
The Company generates revenue by providing galvanizing and other coating
services to customers' products. Revenue is recognized when the galvanizing and
customer billing processes are completed. For the majority of our business, our
customers directly arrange for and are responsible for material transportation
and transportation expenses. In those circumstances where the Company incurs
freight and handling expenses, they are recorded in cost of goods sold.

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

The Company's galvanizing and coating operations are managed through two regions
with ten facilities located in Colorado, Kentucky, Missouri, Oklahoma, Tennessee
and Texas. These facilities operate galvanizing kettles ranging in length from
30 feet to 62 feet, and have lifting capacities ranging from 12,000 pounds to
40,000 pounds.

The Company maintains a sales and service network coupled with its galvanizing
plants, supplemented by national account business development at the corporate
level. In a typical year, the Company will galvanize in excess of 300,000,000
pounds of steel products for approximately 1,800 customers nationwide. Due to
the lower demand for galvanizing throughout 2003, the Company experienced a
decline of 17% in pounds of steel products galvanized at its facilities in 2003.
During the first nine months of 2004, the Company has experienced a steady, but
modest, increase in order volume compared to 2003, but sustained demand from
fabricators has been erratic and larger project work has not developed as
anticipated. In the first nine months of 2004, the surge in steel prices and
some limitation on the availability of steel experienced by our customers has
affected the timing of many projects.

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

Pricing of the Company's galvanizing services is primarily driven by competitive
market conditions and the price of zinc used in the galvanizing process. The
galvanizing services business is a mature industry and these pricing factors are
well known within the industry. As a value added service provider, the Company
offers its

15

after-fabrication galvanizing services to large and small fabricators, competing
against numerous independent and captive galvanizers, as well as alternative
forms of corrosion protection, such as paint. Flexibility in pricing to meet
both competition and the short-term turn-around time requirements of fabricators
is essential to the Company's pricing strategies.

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

o highway and transportation,
o power transmission and distribution,
o wireless and telecommunications,
o utilities,
o petrochemical processing,
o infrastructure including buildings, airports, bridges and power generation
o industrial grating,
o wastewater treatment; fresh water storage and transportation
o pulp and paper,
o pipe and tube,
o food processing,
o agricultural (irrigation systems)
o recreation (boat trailers, marine docks, stadium scaffolds)
o 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
process is 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
industry ASTM 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 independently operated galvanizing
plants is linked to a centralized control 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.

16

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: 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 monthly, or more frequently, and compared to prior periods,
the current business plan and to standard performance criteria, as applicable.




















17

RESULTS OF OPERATIONS

This table shows the Company's results of operations for the three and nine
months ended September 30, 2004, 2003 and 2002:


THREE MONTHS ENDED SEPTEMBER 30
------------------------------------------------------------
2004 2003
--------------------------- ---------------------------
(DOLLARS IN THOUSANDS) AMOUNT % OF SALES AMOUNT % OF SALES
- ------------------------------------------ ------------ ------------ ------------ ------------

Sales $ 9,348 100.0% $ 8,516 100.0%
Cost of sales 6,725 71.9% 6,122 71.9%
------------ ------------ ------------ ------------

Gross profit 2,623 28.1% 2,394 28.1%
Selling, general & administrative expenses 1,370 14.7% 1,597 18.8%
Depreciation and amortization 686 7.3% 717 8.4%
------------ ------------ ------------ ------------

Operating income 567 6.1% 80 0.9%
Interest (income) expense, net 198 2.2% (109) 1.2%
------------ ------------ ------------ ------------

Income from continuing operations before
income taxes 369 3.9% 189 2.2%
Income tax expense 140 1.5% 99 1.1%
------------ ------------ ------------ ------------

Net Income $ 229 2.4% $ 90 1.1%
============ ============ ============ ============









18




NINE MONTHS ENDED SEPTEMBER 30
------------------------------------------------------------
2004 2003
--------------------------- ---------------------------
(DOLLARS IN THOUSANDS) AMOUNT % OF SALES AMOUNT % OF SALES
- ------------------------------------------ ------------ ------------ ------------ ------------

Sales $ 27,239 100.0% $ 24,954 100.0%
Cost of sales 19,365 71.1% 17,959 72.0%
------------ ------------ ------------ ------------

Gross profit 7,874 28.9% 6,995 28.0%
Selling, general & administrative expenses 4,387 16.1% 4,463 17.8%
Depreciation and amortization 2,068 7.6% 2,188 8.8%
------------ ------------ ------------ ------------
Operating income 1,419 5.2% 344 1.4%
Interest expense, net 565 2.1% 498 2.0%
Other (income), net (25) (0.1)% -- --
------------ ------------ ------------ ------------

Income (loss) from continuing operations
before income taxes 879 3.2% (154) (0.6)%
Income tax expense (benefit) 334 1.2% (31) (0.1)%
------------ ------------ ------------ ------------

Income (loss) from continuing operations
before effect of discontinued operations 545 2.0% (123) (0.5)%
Loss from discontinued operations -- -- (831) (3.3)%
------------ ------------ ------------ ------------

Net Income (Loss) $ 545 2.0% $ (954) (3.8)%
============ ============ ============ ============














19

KEY DEVELOPMENTS. During 2003 and 2004, the Company reported a number of
developments supporting its strategic program to reposition its galvanizing
business in the national market.

The Company's new St. Louis galvanizing plant, commissioned in 2003 to replace a
smaller plant at the same location, continues to post increased volume with a
40% increase in tonnage for the nine months ended September 30, 2004 over the
comparable period of 2003. This larger, new facility is providing NAG a
strategic base for extending its geographic area of service. A 51-foot kettle at
this new facility provides the largest galvanizing capacity in the St. Louis
region.

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

As reported previously, the Company wrote-off its investment in the formerly
idled Houston-Cunningham galvanizing plant in the second quarter ended June 30,
2003. The write-off resulted in a net loss on the abandoned assets of $754,000,
net of taxes of $443,000 in 2003. The net loss from operations for the
Cunningham plant was $77,000 and $205,000, net of taxes of $45,000 and $133,000,
for the years ended December 31, 2003 and 2002, respectively. The abandoned
Cunningham plant has been classified as a discontinued operation and its
expenses are not included in the results of continuing operations discussed
below.

2004 COMPARED TO 2003

SALES. North American Galvanizing's sales for the third quarter ended September
30, 2004 were $9,348,000, an increase of 9.8% over sales of $8,516,000 for the
same period in 2003. Total production volume in the third quarter of 2004
increased 10.1% over the third quarter of 2003, reflecting mixed results among
our diversely located galvanizing facilities. At our Texas facilities, higher
production volume for the third quarter of 2004 versus last year reflects an
increased demand from the power transmission and distribution sector, and also a
gradual improvement from industrial construction. In other markets, demand from
the highway and transportation sectors has shown a slight improvement over last
year, while demand from the capital goods sector continues to reflect weaknesses
in the economy. The Company continues to counter pressures from competitive
pricing on the basis of reliable quality and timely service.

Sales for the nine-months ended September 30, 2004 rose 9.2% to $27,239,000
compared to sales of $24,954,000 in the first nine months of 2003. The increase
in sales was due primarily to higher production volume as galvanizing tonnage
for the first nine-months of 2004 was up 8.7% compared to the same period of
2003. Slightly higher average selling prices for the nine-months of 2004 also
made a modest contribution to increased sales compared to the year earlier
period.

GROSS PROFIT. The gross profit margin on sales was 28.1% for the third quarters
of both 2004 and 2003. However, primarily due to this year's higher level of
sales, gross profit for the third quarter of 2004 increased 9.6% to $2,623,000,
compared to $2,394,000 in the third quarter of 2003. This year the Company has
countered expected increases in zinc and energy prices and the resulting upward
pressure on operating costs with gains in galvanizing labor efficiency, an
emphasis on controlling operating costs and higher average selling prices. As a
result, for the nine months ended September 30, 2004, our gross profit margin on
sales improved to 28.9% from 28.0% for the same period of 2003. Gross profit for
the nine months ended September 30, 2004 was $7,874,000 compared to $6,995,000
for the nine months ended September 30, 2003. The Company expects gross profit
margins will remain reasonably stable for the remainder of the current year.

DEPRECIATION EXPENSE. Depreciation expense for the third quarter of 2004 was
$686,000, compared to $717,000 for the same period a year ago. Depreciation
expense was $2,068,000 and $2,188,000 for the nine months ended September 30,
2004 and 2003, respectively. The lower depreciation expense for 2004 reflects
the difference between fixed assets becoming fully depreciated and a lower level
of replacement expenditures.

20

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES. The Company's SG&A expenses
include the combined operating expenses of its centralized corporate functions,
as well as the sales and administrative functions at the operating facilities.
In the third quarter of 2004, SG&A decreased $227,000, or 14.2%, to $1,370,000
from $1,597,000 in 2003. Expense reductions totaling $338,000 were achieved
primarily in the areas of workers compensation ($69,000), bad debt reserves,
reflecting improved collections ($131,000), insurance premiums ($83,000) and
professional services ($21,000). Significant offsetting increases were recorded
for group medical insurance ($28,000), ad valorem taxes ($17,000), and
stockholder services ($53,000).

For the nine months ended September 30, 2004, SG&A decreased $76,000, or 1.7%,
to $4,387,000 from $4,463,000 for the year-ago same period. Primary expense
reductions year-to-date 2004 included insurance premiums ($217,000) and general
administrative expenses ($57,000), which were partially offset by increases for
ad valorem taxes ($72,000), professional and legal services ($68,000) and
stockholder services ($41,000).

The Company's reserve for doubtful accounts is based on the level of trade
receivables outstanding over 90 days and, accordingly, is subject to quarterly
increases or decreases reflecting the turnover of accounts. The Company
anticipates its 2004 insurance costs will continue to compare favorably with
2003 due to a restructuring of its insurance program. In addition to sales and
service support teams assigned to each of its regional galvanizing plants, the
Company is continuing corporate-level marketing to expand and develop new
national account business. The Company believes its SG&A should continue at
approximately the present level for the remainder of 2004. The Company's
administrative support staff has been maintained at a constant level and further
benefits have been realized from long-term programs to streamline the Company's
telecommunications and technology networks, while providing improved service
company-wide.

INTEREST EXPENSE. Interest expense for the third quarter of 2004 was $198,000,
in line with the annual budget. This compared to interest expense of $202,000
for the third quarter of 2003, before the inclusion of a one-time interest
income item of $311,000 for the recovery of accumulated excess interest paid to
a bond sinking fund. Accordingly, the Company reported net interest income of
$109,000 for the third quarter of 2003. For the nine months ended September 30,
2004, net interest expense was $565,000 compared to $498,000 for the comparable
period of 2003. During 2004 the interest rate on the Company's variable rate
debt, reflecting changes in the large bank prime rate, has increased from 4.25%
to 5.0%, compared to a range of 4.25% to 4.5% during 2003. In 2004, increases in
interest expense due to rate increases and higher average borrowings on a bank
line of credit have been offset by reductions in term loan balances, lower fees
for letters of credit and lower interest on industrial revenue bonds. In
September 2003, the Company amended the bond agreement to more nearly reflect
the interest rate earned by the bondholders. The amendment provides that the
bond trustee will evaluate the interest account at the end of each calendar
quarter and refund the excess amount determined, if any, and rebate such excess
to the Company. The Company has elected to apply any such rebates to offset the
cost of a letter of credit related to the industrial revenue bonds. In the third
quarter of 2004, the Company recognized as a reduction of interest expense
excess bond interest of $39,000. There was no comparable recognition of excess
bond interest in the third quarter of 2003. The Company's interest expense for
the third quarter of 2004 was not impacted by inflation.

OTHER INCOME. In the first quarter of 2004, the Company liquidated its total
investment in equity securities and realized a pre-tax gain of $25,000.

INCOME TAXES. The Company's effective income tax rates on income from continuing
operations for the third quarters of 2004 and 2003 were 37.9% and 52.4%,
respectively. For the nine months ended September 30, 2004 and 2003, the
effective tax rates were 38.0% and 20.1%, respectively. The rates for 2003
differed from the federal statutory rate primarily due to state income taxes and
adjustments to the estimate of the deferred tax asset accounts. The rates for
2004 differed from the federal statutory rate primarily due to state income
taxes.

21

DISCONTINUED OPERATIONS. In the quarter ended June 30, 2003, the Company
recorded a net loss from a discontinued operation of an idled galvanizing plant
of $77,000, net of taxes of $45,000. The Company also wrote off its investment
in the idled galvanizing plant in the second quarter of 2003, and recorded a net
loss of $754,000, net of taxes of $443,000. See Note 11, Discontinued
Operations, Notes to Condensed Consolidated Interim Financial Statements.


LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flow from operations and borrowings under credit facilities
have consistently been adequate to fund its current facilities working capital
and capital spending requirements. During the nine month periods ended September
30, 2004, operating cash flow and borrowings under credit facilities have been
the primary source of liquidity. The Company monitors working capital and
planned capital spending to assess liquidity and minimize cyclical cash flow.

The Company employs a system of cash management, encompassing all of its
operations, which concentrates cash in a central bank account for maximum
utilization and control. By employing a daily sweep of cash balances and
just-in-time disbursement funding, the Company endeavors to minimize its
outstanding borrowings from the revolver and also reduce the related interest
expense incurred.

Cash flow from operating activities for the first nine months of 2004 and 2003
was $1,417,000 and $1,964,000, respectively. The reduction of $547,000 in 2004
cash flow from operations was due primarily to increases in working capital to
support increased sales, partially offset by increases in net income and
deferred tax accounts.

The Company anticipates that it will be able to satisfy cash requirements for
its ongoing business operations for the foreseeable future with cash generated
by operations and borrowings under its existing credit facilities.

Cash of $1,037,000 used in 2004 investing activities through September 30
consisted of capital expenditures of $1,129,000 for material handling and
process equipment to maintain galvanizing facilities, offset by proceeds of
$92,000 from the sale of investment securities. Capital expenditures of $733,000
for the comparable nine-month period of 2003 included budgeted capital programs
to upgrade existing galvanizing facilities and for the completion of a new
galvanizing plant in St. Louis, Missouri. Capital expenditures for the third
quarter of 2004 were $100,000; for the remainder of 2004, expected capital
expenditures of approximately $200,000 are budgeted for maintenance of the
Company's existing galvanizing facilities.

Total debt (current and long-term obligations) increased $95,000 to $16,510,000
in the nine months ended September 30, 2004. Financing activities for this
period of 2004 included payments of $487,000 to a bond sinking fund, payments of
$1,038,000 on bank term loans and other obligations and proceeds of $1,620,000
from a bank line of credit. Also during this period, the Company had a net
reduction of 5,553 shares held in its Treasury account, resulting from the
purchase of 26,576 shares in private transactions, which were offset by the
issuance of 32,129 shares in lieu of cash for payment of quarterly board fees to
its directors. At September 30, 2004 and 2003, the Company held 1,421,235 and
1,440,217 shares, respectively, in its Treasury account.

In September 2003, the Company amended a three-year bank credit agreement that
was scheduled to expire in June 2004 and extended its maturity to January 1,
2005. During 2004, the bank has extended maturities under the credit agreement
to October 1, 2005. Subject to borrowing base limitations, the amended agreement
provided (i) a $7,000,000 maximum revolving credit facility for working capital
and general corporate purposes, (ii) a $1,911,924 term note and (iii) a
$2,833,332 construction note.

22

At September 30, 2004, $8,725,000 was outstanding under the bank credit
agreement, and $400,000 was reserved for outstanding irrevocable letters of
credit for workers' compensation insurance coverage. The Company's commitment to
repay the remaining balance of the $9,050,000 of tax-exempt adjustable rate
industrial revenue bonds issued in 2000 is fully secured by an irrevocable
letter of credit issued by Bank One Oklahoma, N.A., in favor of Bank One Trust
Company (See Note 6 to Condensed Consolidated Financial Statements). At
September 30, 2004, the Company had $918,000 available borrowing capacity, net
of outstanding letters of credit, under its revolving line of credit based on
the borrowing base calculated under the agreement. During October 2004, the
available borrowing capacity under the revolving line of credit improved to
approximately $1,326,000, primarily reflecting an improvement in turnover of
trade accounts receivable. The Company believes that its ability to continue to
generate cash from operations and its bank credit facilities will provide
adequate capital resources and liquidity to support operations and capital
expenditures plans for 2004.

The Company has various commitments primarily related to long-term debt,
industrial revenue bonds, operating lease commitments, zinc purchase commitments
and vehicle operating leases. The Company's off-balance sheet contractual
obligations at September 30, 2004, consist of $1,732,000 for long-term operating
leases for two galvanizing facilities and galvanizing equipment, $396,000 for
vehicle operating leases and $6,118,000 for zinc purchase commitments. The
various leases for galvanizing facilities, including option renewals, expire
from 2015 to 2017. A lease for galvanizing equipment expires in 2007. The
vehicle leases expire annually on various dates through 2010. NAG periodically
enters into fixed price purchase commitments with domestic and foreign zinc
producers to purchase a portion of its requirements for its hot dip galvanizing
operations; commitments for the future delivery of zinc are typically up to one
year.

The Company expects to fund these commitments with cash generated from
operations and continuation of existing bank credit agreements as they mature.
The Company had the following contractual obligations and commercial commitments
as of September 30, 2004 (in thousands):


PAYMENT DUE OR COMMITMENT EXPIRATION BY PERIOD
--------------------------------------------------------------------------------------
TOTAL 2004 2005 2006 2007 2008 5 YEARS
-------- -------- -------- -------- -------- -------- --------

Industrial revenue bonds $ 6,795 $ 169 $ 693 $ 731 $ 767 $ 806 $ 3,629

Long-term debt 8,745 353 8,374 1 1 1 15

Subordinated notes 1,000 -- -- 1,000 -- -- --

Facilities operating leases 1,732 124 491 411 379 36 291

Vehicle operating leases 396 30 116 88 73 54 35

Zinc purchase commitments 6,118 2,101 4,017 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total contractual cash
obligations $ 24,786 $ 2,777 $ 13,691 $ 2,231 $ 1,220 $ 897 $ 3,970
======== ======== ======== ======== ======== ======== ========

Other contingent commitments:
Letters of credit* $ 7,195 $ 569 $ 693 $ 731 $ 767 $ 806 $ 3,629


* Amount includes letter of credit relating to debt outstanding under the
industrial revenue bond agreement (See Note 6 to Condensed Consolidated
Interim Financial Statements).

23

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 through the third quarter of 2004 and 2003 were
approximately $703,000 and $824,000, respectively, for the disposal and
recycling of wastes generated by the galvanizing operations.

The status of the Sandoval matter is unchanged from June 30, 2004, when the
Company reported the following: NAG was notified in 1997 by the Illinois
Environmental Protection Agency ("IEPA") that it was one of more than 50
potentially responsible parties ("PRPs") for cleanup of an abandoned site
formerly owned by Sandoval Zinc Company. Since then approximately 30 additional
PRPs have been identified by the IEPA.

A number of the PRPs (approximately 12 to 15) have agreed to work together and
with IEPA on a voluntary basis. The Company has been and continues to
participate in this volunteer group. The group has retained consultants and
legal representatives familiar with IEPA regulations. This volunteer group, with
its consultants, has cooperated with IEPA in attempting to better define the
environmental issues associated with the Sandoval Zinc site. To that extent,
this voluntary group prepared and submitted to IEPA in August 2000 a work plan.
The purpose of this work plan is to attempt to define the extent of
environmental remediation that might be required, assess risks, and review
alternatives to addressing potential remediation. The IEPA has yet to respond to
this proposed work plan or suggest any other course of action. Therefore, the
Company has no basis for determining potential exposure and estimated
remediation costs at this time.

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 recently filed a Second Amended Complaint in the United
States District Court, Northern District of Illinois, Eastern Division, Case No.
03 C 0754, 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 the 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. Lake River Corporation conducted business as
a subsidiary of the Company until June 30, 2000, at which time Lake River
Corporation was sold to Lake River Holding Company, Inc. and ceased to be a
subsidiary of the Company. The Second Amended Complaint asserts that prior to
the sale of Lake River Corporation, the Company directly operated the Lake River
facility and, accordingly, seeks to have the Court pierce the corporate veil of
Lake River Corporation and enforce the default judgment order of August 12, 2004
against the Company (North American Galvanizing & Coatings, Inc.). The Company
is in the process of reviewing this matter. However, the Company denies the
assertions set forth in the Water District's Complaint and will seek to have the
Second Amended Complaint dismissed.

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

24

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. Changing interest rates will affect interest paid on
the Company's variable rate debt. At September 30, 2004, the Company's
outstanding debt of $16,049,000, net of a $30,000 discount related to
subordinated debt, consisted of the following: Variable rate debt aggregating
$8,264,000 under the bank credit agreement, with an effective rate of 4.89%;
$6,795,000 under the industrial revenue bond agreement, with an effective rate
of 3.5%; and fixed rate debt consisting of $1,000,000 of 10% subordinated
promissory notes and a 9.5% term note of $20,000. The borrowings under all of
the Company's debt obligations at September 30, 2004 are due as follows:
$522,000 in 2004; $8,606,000 in 2005; $1,732,000 in 2006 and $5,219,000 in years
2007 through 2013. Each increase of 10 basis points in the effective interest
rate would result in an annual increase in interest charges on variable rate
debt of approximately $15,000 based on September 30, 2004 outstanding
borrowings. The actual effect of changes in interest rates is dependent on
actual amounts outstanding under the various loan agreements. The Company
monitors interest rates and has sufficient flexibility to renegotiate the loan
agreement, without penalty, in the event market conditions and interest rates
change.

ZINC PRICE RISK. NAG periodically enters into fixed price purchase commitments
with domestic and foreign zinc producers to purchase a portion of its zinc
requirements for its hot dip galvanizing operations. Commitments for the future
delivery of zinc, typically up to one year, reflect rates quoted on the London
Metals Exchange. At September 30, 2004, the aggregate fixed price commitments
for the procurement of zinc were $6,118,000. With respect to these zinc fixed
price purchase commitments, a hypothetical decrease of 10% in the market price
of zinc from the June 30, 2004 level represented a potential lost gross margin
opportunity of approximately $612,000; however, lower zinc prices potentially
could benefit future earnings for the zinc purchases that are made at the lower
market price.

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 (See Note
9) are considered derivatives, but the Company has elected to account for these
purchase commitments as normal purchases.


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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.

There have been no significant changes in our internal controls over financial
reporting that occurred during our last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting. There were no significant deficiencies or material
weaknesses identified in the evaluation, and therefore, no corrective actions
were taken.














26

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 the August 12, 2004 default
judgment in the amount of $1,810,463.34 against Lake River Corporation and Lake
River Holding Company, Inc. in connection with the operation of a storage
terminal by Lake River Corporation in violation of environmental laws. Lake
River Corporation conducted business as a subsidiary of the Company until June
30, 2000, at which time Lake River Corporation was sold to Lake River Holding
Company, Inc. and ceased to be a subsidiary of the Company. The Second Amended
Complaint asserts that prior to the sale of Lake River Corporation, the Company
directly operated the Lake River facility and, accordingly, seeks to have the
Court pierce the corporate veil of Lake River Corporation and enforce the
default judgment order of August 12, 2004 against the Company (North American
Galvanizing & Coatings, Inc.). The Company denies the assertions set forth in
the Water District's Complaint and will seek to have the Second Amended
Complaint dismissed.

Various other litigation arising in the ordinary course of business is pending
against the Company. Management believes that resolution of this litigation
should not materially affect the Company's consolidated financial position or
liquidity.


Item 2. Changes in Securities, Use of Proceeds and Issuer Purchase of Equity
Securities

The following table contains information about our purchases of our equity
securities during the third quarter of 2004.

Issuer Purchases of Equity Securities

Average Total Number of Approximate Dollar
Total Number Price Shares Purchased as Value That May
of Shares Paid per Part of a Publicly Yet Be Purchased
Period Purchased Share Announced Plan (1) Under the Plan (1)
------ ---------- ----- ------------------ ------------------
July 1-31, 2004 120 $2.06 120 $736,568


(1) In July 1998, the Board of Directors authorized a share repurchase plan.
Shares of common stock may be purchased in private or open market
transactions, with an aggregate purchase price limit of no more than $1
million. As of September 30, 2004, the number of shares purchased and held
in Treasury under this plan was 142,772. Unless terminated earlier by
resolution of our Board, the plan will expire when we have repurchased all
shares authorized for repurchase under the plan.


Item 3. Defaults Upon Senior Securities - Not applicable.


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

27


Item 5. Other Information - Not applicable.


Item 6. Exhibits

3.1 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) file on June 7, 1996).

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

31 Certifications pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

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

99 Cautionary Statements by the Company Related to
Forward-Looking Statements.




















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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:




NORTH AMERICAN GALVANIZING & COATINGS, INC.
-------------------------------------------
(Registrant)




/s/ Paul R. Chastain
-------------------------------------------
Vice President and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)



Date: November 10, 2004



















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