WWW.EXFILE.COM, INC. -- 888-775-4789 -- NORTH AMERICAN GALVANIZING AND COATINGS, INC. -- FORM 10-Q
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, 2008
Commission
File No. 1-3920
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
(Exact
name of the registrant as specified in its charter)
(I.R.S.
Employer Identification No.)
5314
S. Yale Avenue, Suite 1000, Tulsa, Oklahoma 74135
(Address
of principal executive offices)
(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 x No___
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 |
Smaller Reporting
Company o |
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the exchange Act).
Yes o No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of September 30, 2008:
Common
Stock $ .10 Par Value . . . .
.. 16,215,111
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
Index
to Quarterly Report on Form 10-Q
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Page
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| Part I. |
Financial
Information |
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Forward
Looking Statements or Information
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2
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Item
1. |
Financial
Statements
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Report
of Independent Registered Public Accounting Firm
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3
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Condensed
Consolidated Balance Sheets as of September 30, 2008
|
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(unaudited),
and December 31, 2007
|
4
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| |
|
Condensed
Consolidated Statements of Income for the three- and
|
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| |
|
nine-month
periods ended September 30, 2008 and 2007 (unaudited)
|
5
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Condensed
Consolidated Statements of Cash Flows for the
|
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|
nine-month
periods ended September 30, 2008 and 2007 (unaudited)
|
6
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Condensed
Consolidated Statement of Stockholders’ Equity for the
|
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|
nine-month
period ended September 30, 2008 (unaudited)
|
7
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Notes
to Condensed Consolidated Financial Statements for the three-
and
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|
nine-month
periods ended September 30, 2008 and 2007 (unaudited)
|
8-13
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Item
2. |
Management’s
Discussion and Analysis of Financial Condition and
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Results
of Operations
|
14-20
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Item
3. |
Quantitative
and Qualitative Disclosures About Market Risk
|
20-21
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Item
4. |
Controls
and Procedures
|
21
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| Part
II. |
Other
Information |
21-23
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Signatures |
24
|
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.
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, 2008, and the related condensed consolidated statements of income for the
three- and nine-month periods ended September
30, 2008 and 2007, cash flows for the nine-month periods ended September 30,
2008 and 2007 and stockholders’ equity for the nine-month period ended September
30, 2008. 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
October
20, 2008
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except share amounts)
|
|
|
Unaudited
|
|
|
|
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
ASSETS
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
9,000 |
|
|
$ |
2,966 |
|
|
Trade
receivables—less allowances of $174 for 2008 and $112 for
2007
|
|
|
12,459 |
|
|
|
10,294 |
|
|
Inventories
|
|
|
5,885 |
|
|
|
6,399 |
|
|
Prepaid
expenses and other assets
|
|
|
254 |
|
|
|
1,096 |
|
|
Deferred
tax asset—net
|
|
|
943 |
|
|
|
741 |
|
|
Total
current assets
|
|
|
28,541 |
|
|
|
21,496 |
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY,
PLANT AND EQUIPMENT—AT COST:
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,167 |
|
|
|
2,167 |
|
|
Galvanizing
plants and equipment
|
|
|
39,489 |
|
|
|
41,337 |
|
|
|
|
|
41,656 |
|
|
|
43,504 |
|
|
Less—allowance
for depreciation
|
|
|
(
21,670 |
) |
|
|
(22,413 |
) |
|
Construction
in progress
|
|
|
2,126 |
|
|
|
1,396 |
|
|
Total
property, plant and equipment—net
|
|
|
22,112 |
|
|
|
22,487 |
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL—Net
|
|
|
3,448 |
|
|
|
3,448 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
794 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
54,895 |
|
|
$ |
47,572 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Current
maturities of long-term obligations
|
|
$ |
– |
|
|
$ |
1 |
|
|
Trade
accounts payable
|
|
|
4,600 |
|
|
|
5,296 |
|
|
Accrued
payroll and employee benefits
|
|
|
1,787 |
|
|
|
1,513 |
|
|
Accrued
taxes
|
|
|
1,142 |
|
|
|
1,112 |
|
|
Customer
deposits
|
|
|
1,222 |
|
|
|
– |
|
|
Other
accrued liabilities
|
|
|
2,211 |
|
|
|
2,910 |
|
|
Total
current liabilities
|
|
|
10,962 |
|
|
|
10,832 |
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED
TAX LIABILITY—Net
|
|
|
595 |
|
|
|
697 |
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
OBLIGATIONS
|
|
|
– |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
11,557 |
|
|
|
11,543 |
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (NOTE 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY(all shares for all periods adjusted for four-for-three stock
split on September 14, 2008)
|
|
|
|
|
|
|
|
|
|
Common
stock—$.10 par value, 18,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
|
Issued—16,507,813
shares in 2008 and 16,489,005 in 2007
|
|
|
1,651 |
|
|
|
1,237 |
|
|
Additional
paid-in capital
|
|
|
13,664 |
|
|
|
14,549 |
|
|
Retained
earnings
|
|
|
29,845 |
|
|
|
20,310 |
|
|
Common
shares in treasury at cost— 292,702 in 2008 and 16,787 in
2007
|
|
|
(1,822 |
) |
|
|
(67 |
) |
|
Total
stockholders’ equity
|
|
|
43,338 |
|
|
|
36,029 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$ |
54,895 |
|
|
$ |
47,572 |
|
See notes
to condensed consolidated financial statements.
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In
thousands, except per share amounts)
|
|
|
For
the Three Months
Ended
|
|
|
For
the Nine Months
Ended
|
|
|
|
|
September
30
|
|
|
September
30
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
$ |
21,845 |
|
|
$ |
21,541 |
|
|
$ |
64,525 |
|
|
$ |
68,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
13,879 |
|
|
|
14,535 |
|
|
|
39,656 |
|
|
|
46,899 |
|
|
Selling,
general and administrative expenses
|
|
|
2,699 |
|
|
|
2,193 |
|
|
|
7,548 |
|
|
|
6,998 |
|
|
Depreciation
and amortization
|
|
|
847 |
|
|
|
876 |
|
|
|
2,556 |
|
|
|
2,612 |
|
|
Total
costs and expenses
|
|
|
17,425 |
|
|
|
17,604 |
|
|
|
49,760 |
|
|
|
56,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
4,420 |
|
|
|
3,937 |
|
|
|
14,765 |
|
|
|
11,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
– |
|
|
|
(275 |
) |
|
|
– |
|
|
|
(527 |
) |
|
Interest
income and other
|
|
|
70 |
|
|
|
15 |
|
|
|
217 |
|
|
|
69 |
|
|
INCOME BEFORE
INCOME TAXES
|
|
|
4,490 |
|
|
|
3,677 |
|
|
|
14,982 |
|
|
|
11,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAX EXPENSE
|
|
|
1,453 |
|
|
|
1,164 |
|
|
|
5,447 |
|
|
|
4,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$ |
3,037 |
|
|
$ |
2,513 |
|
|
$ |
9,535 |
|
|
$ |
7,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME PER COMMON SHARE, all periods adjusted for four-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for-three
stock split on September 14, 2008 (Note 1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.19 |
|
|
$ |
0.15 |
|
|
$ |
0.58 |
|
|
$ |
0.43 |
|
|
Diluted
|
|
$ |
0.18 |
|
|
$ |
0.15 |
|
|
$ |
0.56 |
|
|
$ |
0.42 |
|
See notes
to condensed consolidated financial statements.
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE
MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
|
|
|
2008
|
|
|
2007
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
9,535 |
|
|
$ |
7,065 |
|
|
Loss
on disposal of assets
|
|
|
95 |
|
|
|
– |
|
|
Depreciation
and amortization
|
|
|
2,556 |
|
|
|
2,612 |
|
|
Deferred
income taxes
|
|
|
(304 |
) |
|
|
(42 |
) |
|
Non-cash
share-based compensation
|
|
|
487 |
|
|
|
441 |
|
|
Non-cash
directors’ fees
|
|
|
306 |
|
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable – net
|
|
|
(2,165 |
) |
|
|
(120 |
) |
|
Inventories
and other assets
|
|
|
703 |
|
|
|
831 |
|
|
Accounts
payable, accrued liabilities and other
|
|
|
(30 |
) |
|
|
(3,354 |
) |
|
Cash
provided by operating activities
|
|
|
11,183 |
|
|
|
7,754 |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(2,137 |
) |
|
|
(3,321 |
) |
|
Proceeds
from sale of assets
|
|
|
22 |
|
|
|
– |
|
|
Cash
used in investing activities
|
|
|
(2,115 |
) |
|
|
(3,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase
of common stock for the treasury
|
|
|
(3,417 |
) |
|
|
(152 |
) |
|
Proceeds
from exercise of stock options
|
|
|
343 |
|
|
|
194 |
|
|
Tax
benefits realized from stock options exercised
|
|
|
62 |
|
|
|
232 |
|
|
Payments
on long-term obligations
|
|
|
(15 |
) |
|
|
(12,388 |
) |
|
Cash
paid for fractional shares pursuant to stock split effected by stock
dividend
|
|
|
(7 |
) |
|
|
(3 |
) |
|
Proceeds
from long-term obligations
|
|
|
– |
|
|
|
11,035 |
|
|
Payments
on bonds
|
|
|
– |
|
|
|
(5,265 |
) |
|
Cash
used in financing activities
|
|
|
(3,034 |
) |
|
|
(6,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
6,034 |
|
|
|
(1,914 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
2,966 |
|
|
|
1,979 |
|
|
|
|
|
|
|
|
|
|
|
|
End
of period
|
|
$ |
9,000 |
|
|
$ |
65 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID DURING THE YEAR FOR:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
– |
|
|
$ |
444 |
|
|
Income
Taxes
|
|
$ |
5,166 |
|
|
$ |
4,214 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Acquisitions
of fixed assets under capital lease obligations
|
|
$ |
– |
|
|
$ |
137 |
|
|
Acquisitions
of fixed assets included in payables at period end
|
|
$ |
161 |
|
|
$ |
411 |
|
See notes
to condensed consolidated financial statements.
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
NINE
MONTHS ENDED SEPTEMBER 30, 2008
(In
thousands, except share amounts)
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$.10
Par Value
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Shares
|
|
|
Amount
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE—December
31, 2007
|
|
|
12,366,754 |
|
|
$ |
1,237 |
|
|
$ |
14,549 |
|
|
$ |
20,310 |
|
|
|
12,590 |
|
|
$ |
(67 |
) |
|
$ |
36,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
9,535 |
|
|
|
– |
|
|
|
– |
|
|
|
9,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
split effected by a four for three stock dividend, including cash
paid for fractional shares
|
|
|
4,126,263 |
|
|
|
413 |
|
|
|
(420 |
) |
|
|
– |
|
|
|
53,500 |
|
|
|
– |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of treasury shares for stock option transactions, net of
shares tendered for payment and including tax
benefit
|
|
|
– |
|
|
|
– |
|
|
|
(1,064 |
) |
|
|
– |
|
|
|
(233,712 |
) |
|
|
1,469 |
|
|
|
405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
Stock Plan Compensation
|
|
|
– |
|
|
|
– |
|
|
|
487 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
units for Director Stock Unit Program
|
|
|
– |
|
|
|
– |
|
|
|
306 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for Director Stock Unit Program
transactions
|
|
|
14,796 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of treasury shares for Director Stock Unit Program
transactions
|
|
|
– |
|
|
|
– |
|
|
|
(193 |
) |
|
|
– |
|
|
|
(31,969 |
) |
|
|
193 |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of common stock for the treasury
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
492,293 |
|
|
|
(3,417 |
) |
|
|
(3,417 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE—September
30, 2008
|
|
|
16,507,813 |
|
|
$ |
1,651 |
|
|
$ |
13,664 |
|
|
$ |
29,845 |
|
|
|
292,702 |
|
|
$ |
(1,822 |
) |
|
$ |
43,338 |
|
NORTH
AMERICAN GALVANIZING & COATINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 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”).
The board
of directors declared a four-for-three stock split effected by a stock dividend
for all shareholders of record on August 31, 2008, payable on September 14,
2008. All share and per share data (except par value) have been adjusted to
reflect the effect of the stock split for all periods presented. In addition,
the number of shares of common stock issuable upon the exercise of outstanding
stock options and the vesting of other stock awards, as well as the number of
shares of common stock reserved for issuance under our share-based compensation
plans, were proportionately increased, and the pricing of options and other
stock awards was proportionately adjusted, in accordance with the terms of those
respective agreements and plans.
Note
2. Share-based Compensation
At
September 30, 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 2,500,000 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.
The
compensation cost for the Plan, exclusive of the Director Stock Unit Program
(Note 7), was $217,000 and $161,000 for the three-months ended September 30,
2008 and 2007, respectively, and $487,000 and $441,000 for the nine-months ended
September 30, 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.
Non-vested
Shares. During March 2008, the Compensation Committee
recommended and the Board of Directors approved a grant totaling 126,667
non-vested shares for management employees and 66,667 non-vested shares for
directors. During July 2008, the Compensation Committee recommended
and the Board of Directors approved a grant totaling 80,000 non-vested shares
for directors. Non-vested shares granted to management employees and
management directors vest and become nonforfeitable on the date that is four
years after the date of grant; or if the participant is a non-employee director
of the Company at the time of the grant, the date that is two years after the
date of the grant. The Company is recognizing this compensation expense over the
two year or four year vesting period, as applicable, on a ratable
basis. Non-vested shares are valued at market value on the grant
date.
Stock Options. In
the first nine months of 2007, the Company issued stock options for 670,000
shares at $2.60 per share. No stock options were issued in the first
nine months of 2008.
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
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30
|
|
|
September
30
|
|
|
Dollars
in Thousands, Except per Share Amounts
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Volatility
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
66%
|
|
|
Discount
Rate
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
4.6%
|
|
|
Dividend
Yield
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Fair
Value, adjusted for four-for three stock split
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
$1.77
|
|
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. The shares and
earnings per share for all periods have been adjusted to reflect the Company’s
four-for-three stock split effected in the form of a stock dividend on September
14, 2008.
|
Three Months Ended
September 30
|
|
Number of Shares
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,325,579 |
|
|
|
16,467,023 |
|
|
Diluted
|
|
|
17,034,747 |
|
|
|
17,148,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30
|
|
Number of Shares
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,356,193 |
|
|
|
16,389,691 |
|
|
Diluted
|
|
|
17,023,924 |
|
|
|
16,976,313 |
|
There
were no options priced higher than the share market value at September 30, 2008
or September 30, 2007.
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
September 30, 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 at
September 30, 2008, the applicable margin would have been 0.75% and the variable
interest rate including the applicable margin would have been 4.68%.
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 September 30, 2008 the aggregate
commitments for the procurement of zinc at fixed prices were approximately $5.7
million. The Company reviews these fixed price contracts for losses
using the same methodology employed to estimate the market value of its zinc
inventory. The Company had no unpriced commitments for zinc purchases
at September 30, 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 September 30, 2008 or December 31, 2007, and did
not utilize derivatives in the nine-month period ended September 30, 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 September 30, 2008,
consist of approximately $1.0
million for long-term operating leases for vehicles, office space, office
equipment, galvanizing facilities and galvanizing equipment and
approximately $5.7 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 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 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.
In
September 2008, the United States Environmental Protection Agency (EPA) notified
the Company of a claim against the Company as a
potentially responsible party related to a Superfund site in Texas City,
Texas. This matter pertains to galvanizing facilities of the
Company’s subsidiary and their disposal of waste handled by their
supplier in the early 1980’s. The EPA offered the Company a special de minimis party settlement
to resolve potential liability that the Company and its subsidiaries may have
under CERCLA at this Site. The Company has accrued the $112,145 de minimis settlement amount
during the third quarter of 2008 and anticipates that the EPA’s offer will be
accepted on or before the deadline of December 30, 2008.
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 nine months of 2008, fees and salary deferred
by the Directors represented a total of 62,353 stock unit grants valued at $4.91
per stock unit. During the first nine months of 2007, fees and salary
deferred by the Directors represented a total of 95,265 stock unit grants valued
at $3.38 per stock unit.
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 nine-month
period ended September 30, 2007 were approximately $1.0 million. The
amount due from Gregory Industries, Inc. included in trade receivables at
September 30, 2007 was approximately $.2 million.
North
American Galvanizing & Coatings, Inc.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
North
American Galvanizing is a leading provider of corrosion protection for iron and
steel components fabricated by its customers. Hot dip galvanizing is the process
of applying a zinc coating to fabricated iron or steel material by immersing the
material in a bath consisting primarily of molten zinc. Based on the
number of its operating plants, the Company is one of the largest merchant
market hot dip galvanizing companies in the United States.
During
the nine-month period ended September 30, 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
|
|
·
|
petrochemical
processing
|
|
·
|
infrastructure
including buildings, airports, bridges and power
generation
|
|
·
|
fresh
water storage and transportation
|
|
·
|
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 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- and
nine-month periods ended September 30, 2008 and 2007:
|
|
|
(Dollars
in thousands)
|
|
|
|
Three
Months Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
21,845 |
|
|
|
100.0% |
|
|
$ |
21,541 |
|
|
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
13,879 |
|
|
|
63.4% |
|
|
|
14,535 |
|
|
|
67.5% |
|
|
Selling,
general and administrative expenses
|
|
|
2,699 |
|
|
|
12.4% |
|
|
|
2,193 |
|
|
|
10.2% |
|
|
Depreciation
and Amortization
|
|
|
847 |
|
|
|
3.9% |
|
|
|
876 |
|
|
|
4.1% |
|
|
Operating
income
|
|
|
4,420 |
|
|
|
20.3% |
|
|
|
3,937 |
|
|
|
18.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
– |
|
|
|
0.0% |
|
|
|
(275 |
) |
|
|
(1.3% |
) |
|
Interest
income and other
|
|
|
70 |
|
|
|
0.3% |
|
|
|
15 |
|
|
|
0.1% |
|
|
Income
from operations before income taxes
|
|
|
4,490 |
|
|
|
20.6% |
|
|
|
3,677 |
|
|
|
17.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
1,453 |
|
|
|
6.7% |
|
|
|
1,164 |
|
|
|
5.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
3,037 |
|
|
|
13.9% |
|
|
$ |
2,513 |
|
|
|
11.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
Nine
Months Ended September 30
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
|
%
of
|
|
|
|
|
Amount
|
|
|
Sales
|
|
|
Amount
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
64,525 |
|
|
|
100.0% |
|
|
$ |
68,161 |
|
|
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
39,656 |
|
|
|
61.5% |
|
|
|
46,899 |
|
|
|
68.8% |
|
|
Selling,
general and administrative expenses
|
|
|
7,548 |
|
|
|
11.6% |
|
|
|
6,998 |
|
|
|
10.3% |
|
|
Depreciation
and Amortization
|
|
|
2,556 |
|
|
|
4.0% |
|
|
|
2,612 |
|
|
|
3.8% |
|
|
Operating
income
|
|
|
14,765 |
|
|
|
22.9% |
|
|
|
11,652 |
|
|
|
17.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
– |
|
|
|
0.0% |
|
|
|
(527 |
) |
|
|
(0.8% |
) |
|
Interest
income and other
|
|
|
217 |
|
|
|
0.3% |
|
|
|
69 |
|
|
|
0.1% |
|
|
Income
from operations before income taxes
|
|
|
14,982 |
|
|
|
23.2% |
|
|
|
11,194 |
|
|
|
16.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
5,447 |
|
|
|
8.4% |
|
|
|
4,129 |
|
|
|
6.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
9,535 |
|
|
|
14.8% |
|
|
$ |
7,065 |
|
|
|
10.3% |
|
2008
COMPARED TO 2007
Sales. Third
quarter 2008 volumes were 14% higher than volumes in the third quarter of 2007
and 4% higher than volumes in the second quarter of 2008. First nine
months’ 2008 volumes were 2.2% higher than volumes in the first nine months of
2007. Volumes for the 2007 third quarter were lower as a result of
the scheduled shutdown of the Canton plant to replace the kettle and furnace
during the month of July, 2007. Although higher than 2007, third
quarter 2008 volume was negatively impacted by the nine day shutdown of the
Company’s Houston, Texas plant due to Hurricane Ike.
Sales for
the three-months ended September 30, 2008 increased 1.4% over the same prior
year period primarily due to the volume increase. Sales for the
nine-month period ended September 30, 2008 decreased 5.3% compared to the same
period prior year due to a lower average sales price compared to the same period
in 2007. Sales price decreases relate to market decreases in zinc
costs, the Company’s primary variable cost component.
Cost of Goods
Sold. Cost of goods sold for the three-months ended September
30, 2008 decreased $.7 million over the same prior year period due to a $3.5
million decrease in zinc costs, offset by a $2.0 million cost increase due to
additional galvanizing volume, a $.3 million increase in labor costs, a $0.2
million increase in natural gas costs and a $0.3 million increase in other plant
overhead costs. For the nine month period ended September 30, 2008,
cost of goods sold decreased $7.2 million over the same period in
2007. Of the $7.2 million decrease, $9.8 million was due to a
decrease in zinc costs offset by a $.9 million cost increase due to additional
galvanizing volume, a $.7 million increase in other plant overhead costs, a $.6
million increase in natural gas costs and a $.4 million increase in labor
costs.
Selling, General and Administrative
(SG&A) Expenses. SG&A increased $.5 million in the
third quarter and in the nine month period ended September 30, 2008 compared to
the same prior year periods primarily due to increases in accruals for incentive
and share based compensation, $.3 million, and increased legal and professional
expenses, $.2 million.
Operating Income.
For the quarter ended September 30, 2008, operating income was $4.4 million
compared to $4.0 million for the third quarter of 2007. The operating income for
the nine-months ended September 30, 2008 was $14.8 million compared to $11.7
million for the same 2007 period. The increase in operating income is primarily
due to a decrease in zinc costs partially offset by a decrease in sales
price.
Income Taxes. The Company’s
effective income tax rates for the third quarter of 2008 and 2007 were 32.4% and
31.7%, respectively. For the nine months ended September 30,
2008 and 2007, the effective tax rates were 36.4% and 36.9%,
respectively. The effective tax rates differ from the federal
statutory rate primarily due to state income taxes and minor adjustments to
previous tax estimates.
Net Income. For the third
quarter of 2008, the Company reported net income of $3.0 million compared to net
income of $2.5 million for the third quarter of 2007. For the nine
months ended September 30, 2008, the net income was $9.5 million compared to
$7.1 million for the nine months ended September 30, 2007. The
increase in net income is primarily due to a decrease in zinc costs partially
offset by a decrease in sales price.
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 nine months of 2008 and 2007 was $11.2
million and $7.8 million, respectively. The increase of $3.4 million in 2008
cash flow from operations was primarily due to increased net
income.
Cash of
$2.1 million used in 2008 investing activities through September 30 consisted of
capital expenditures for equipment and upgrade of existing galvanizing
facilities. Investing activities in the first nine months of
2007 included $3.3 million in capital expenditures. The Company expects capital
expenditures for 2008 to approximate $4.7 million.
During
the first nine 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 September 30,
2008. Other financing activity during the first nine months 2008
consisted of purchases of common stock for the treasury totaling $3.4
million. During the first nine months of 2007, total debt (current
and long-term obligations and bonds payable) decreased $6.6 million to $2.7
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
September 30, 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 at
September 30, 2008, the applicable margin would have been 0.75% and the variable
interest rate including the applicable margin would have been
4.68%.
The
Company has various commitments primarily related to vehicle and equipment
operating leases, facilities operating leases, and zinc purchase commitments.
The Company’s off-balance sheet contractual obligations at September 30, 2008,
consist of $.3 million for vehicle and equipment operating leases, $5.7 million
for zinc purchase commitments, and $.7 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
nine months of 2008 and 2007 was approximately $1.3 million and $1.5 million,
respectively, for the disposal and recycling of wastes generated by the
galvanizing operations.
On August
30, 2004, the Company was informed by counsel for the Metropolitan Water
Reclamation District of Greater Chicago (the “Water District”) that the Water
District had, on August 25, 2004 filed a Second Amended Complaint in the
United States District Court, Northern District of Illinois, Eastern Division,
naming North American Galvanizing & Coatings, Inc. (formerly known as Kinark
Corporation) as an added defendant. Counsel for the Water District also gave the
Company notice of the Water District’s intent to file (or amend the Complaint to
include) a Citizens Suit under the Resource Compensation and Recovery Act
(“RCRA”) against North American Galvanizing & Coatings, Inc., pursuant to
Section 7002 of RCRA, 42 U.S.C. Section 6972. This Second Amended Complaint
seeks enforcement of an August 12, 2004 default judgment in the amount of
$1,810,463.34 against Lake River Corporation and Lake River Holding Company,
Inc. in connection with the operation of a storage terminal by Lake River
Corporation in violation of environmental laws. Lake River Corporation conducted
business as a subsidiary of the Company until 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 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.
In
September 2008, the United States Environmental Protection Agency (EPA) notified
the Company of a claim against the Company as a
potentially responsible party related to a Superfund site in Texas City,
Texas. This matter pertains to galvanizing facilities of the
Company’s subsidiary and their disposal of waste handled by their
supplier in the early 1980’s. The EPA offered the Company a special de minimis party settlement
to resolve potential liability that the Company and its subsidiaries may have
under CERCLA at this Site. The Company has accrued the $112,145 de minimis settlement amount
during the third quarter of 2008 and anticipates that the EPA’s offer will be
accepted on or before the deadline of December 30, 2008.
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 such matter will have a material adverse effect on the results of
operations, financial conditions or cash flows of the Company.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
The
Company’s operations include managing market risks related to changes in
interest rates and zinc commodity prices.
Interest Rate
Risk. The Company is exposed to financial market risk related
to changes in interest rates to the extent the company has borrowing
outstanding. At September 30, 2008, the Company had no outstanding
debt.
Zinc Price
Risk. NAGC periodically enters into fixed price purchase
commitments with domestic and foreign zinc producers to purchase a portion of
its zinc requirements for its hot dip galvanizing
operations. Commitments for the future delivery of zinc, which can be
for up to one (1) year, reflect rates quoted on the London Metals
Exchange. At September 30, 2008, the aggregate fixed price
commitments for the procurement of zinc were approximately $5.7 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
September 30, 2008 level represented a potential lost gross margin opportunity
of approximately $570,000.
The
Company’s financial strategy includes evaluating the selective use of derivative
financial instruments to manage zinc and interest costs. As part of
its inventory management strategy, the Company recognizes that hedging
instruments may be effective in minimizing the impact of zinc price
fluctuations. The Company’s current zinc forward purchase commitments
are considered derivatives, but the Company has elected to account for these
purchase commitments as normal purchases.
Item
4. Controls and Procedures
As of the
end of the period covered by this report, management, including our chief
executive officer and chief financial officer, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures. Based upon,
and as of the date of, the evaluation, our chief executive officer and chief
financial officer concluded that the disclosure controls and procedures were
effective, in all material respects, to ensure that information required to be
disclosed in the reports we file and submit under the Exchange Act is recorded,
processed, summarized and reported as and when required.
The
Company’s certifying officers have indicated that there were no significant
changes in internal controls over financial reporting that have occurred during
the fiscal quarter ended September 30, 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 June 30, 2000, at which time Lake
River Corporation was sold to Lake River Holding Company, Inc. and ceased to be
a subsidiary of the Company. The Second Amended Complaint asserts that prior to
the sale of Lake River Corporation, the Company directly operated the Lake River
facility and, accordingly, seeks to have the Court pierce the corporate veil of
Lake River Corporation and enforce the default judgment order of August 12, 2004
against the Company. The Company 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 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.
In
September 2008, the United States Environmental Protection Agency (EPA) notified
the Company of a claim against the Company as a
potentially responsible party related to a Superfund site in Texas City,
Texas. This matter pertains to galvanizing facilities of the
Company’s subsidiary and their disposal of waste handled by their
supplier in the early 1980’s. The EPA offered the Company a special de minimis party settlement
to resolve potential liability that the Company and its subsidiaries may have
under CERCLA at this Site. The Company has accrued the $112,145 de minimis settlement amount
during the third quarter of 2008 and anticipates that the EPA’s offer will be
accepted on or before the deadline of December 30, 2008.
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.
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
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|
|
|
|
|
|
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Total
|
|
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Approximate
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Dollar
Value
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
of
Shares
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
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that
May Yet
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|
|
|
|
|
|
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Average
|
|
|
as
Part of
|
|
|
be
Purchased
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|
|
Period
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|
Shares
|
|
|
Price
Paid
|
|
|
Publicly
|
|
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Under
|
|
|
(from/to)
|
|
Purchased
|
|
|
per
Share
|
|
|
Announced
Plan
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|
the
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
1, 2008 - July 30, 2008
|
|
|
37,219 |
|
|
$ |
5.78 |
|
|
|
693,817 |
|
|
$ |
744,278 |
|
|
Sept.
1, 2008 - Sept. 30, 2008
|
|
|
266,667 |
|
|
$ |
5.82 |
|
|
|
960,484 |
|
|
$ |
2,191,395 |
|
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. The company has completed the August 1998 and
March 2008 share repurchase programs. In August 2008, the Board of
Directors authorized the company to buy back an additional $3,000,000 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
the $2,191,395 remaining under the program at September 30, 2008. The
shares and per share amounts for all periods have been adjusted to reflect the
Company’s four-for-three stock split effected in the form of a stock dividend on
September 14, 2008.
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
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No.
|
Description |
| |
|
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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) filed with the
Commission on June 7, 1996).
|
|
3.2
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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).
|
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15
|
Awareness
Letter of Deloitte & Touche
LLP.
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|
31.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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31.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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32
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002.
|
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.
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| |
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By:
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/s/ Beth
B. Hood |
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| |
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Vice
President and
Chief
Financial Officer
(Principal
Financial Officer)
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| Date: October
20, 2008 |
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