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North American Galvanizing & Coatings Reports 1st Quarter 2010 Earnings

Published on 2010-05-03. Author : SpecialChem

TULSA, Okla. -- North American Galvanizing & Coatings, Inc. announced net income for the first quarter of 2010 was $1.6 million ($.10 per share), compared with $3.5 million net income for the first quarter of 2009 ($.21 per share).

On March 31, 2010, the Company entered into a definitive merger agreement with AZZ incorporated ("AZZ") (NYSE:AZZ - News) to be acquired through a cash tender offer, followed by a merger with a subsidiary of AZZ, for a price of $7.50 per share in cash. The tender offer is scheduled to commence on April 30, 2010, or within five business days thereafter, and to expire on the 20th business day from and including the commencement date unless extended in accordance with the terms of the merger agreement and applicable law. The merger agreement contains a "go-shop" provision whereby NGA's Board of Directors with the assistance of its financial advisor has the right to solicit acquisition proposals from third parties until April 30, 2010. There can be no assurance that the solicitation of proposals will result in an alternative transaction. NGA does not intend to disclose developments with respect to the solicitation process unless and until its Board of Directors decides to accept an alternative proposal. Within five business days after the end of the go-shop period, AZZ will commence the tender offer referred to above.

Sales for the first quarter ended March 31, 2010 were 21% lower than the prior year first quarter. In 2010, lower overall hot dip galvanizing demand adversely impacted the Company's operations. Total processing volumes for the first quarter of 2010 decreased 29% below the first quarter of 2009. Unusually high snowfall amounts occurring in January and February in the Central Midwest also impacted production. Approximately a third of the decline in volume is due to the temporary idling of the St. Louis plant due to a facility fire that occurred in November 2009. The St. Louis plant remained idle during the entire first quarter of 2010. The average selling price for the first quarter of 2010 was 12% higher than the average selling price for the same period in 2009. Although the Company experienced competitive pressure on selling prices due to weak market conditions, sales prices did increase over the prior year first quarter related to increases in zinc costs. The average cash LME cost for zinc was $0.53 per pound in the first quarter of 2009 compared to an average cash LME cost of $1.04 per pound in the first quarter of 2010, an increase of 96%.

SG&A expenses were comparable to the prior year first quarter. Legal and professional fees of approximately $0.3 million were incurred during the first quarter 2010 due to merger agreement related expenses, but other corporate legal fees were lower than the prior year first quarter 2009 by approximately the same amount. The Company recorded a gain in the first quarter 2010 of $0.4 million, net of tax, from insurance proceeds related to the claim for zinc inventory losses from the St. Louis plant fire in November 2009.

North American Galvanizing is a leading provider of hot-dip galvanizing and coatings for corrosion protection of fabricated steel products. The Company conducts its galvanizing and coating business through a network of plants located in Benwood, West Virginia, Canton, Ohio, Denver, Hurst (Dallas/Fort Worth), Houston, Kansas City, Louisville, Nashville, St. Louis and the Tulsa area. Hot-dip galvanizing provides metals corrosion protection for many product applications used in commercial, construction and industrial markets.

Cautionary Statement. This press release may contain "forward-looking statements" as defined under U.S. securities laws, including, but not limited to, statements concerning the Company's beliefs and expectations of future performance. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from such forward-looking statements and management's present expectations or projections. These risks and uncertainties include the risk factors described in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and other SEC filings. These forward-looking statements are made as of the date of this press release. The Company assumes no obligation to update or revise these statements or to provide reasons why actual results may differ.

Source: North American Galvanizing & Coatings, Inc.


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