SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period March 31, 1998
Commission file number 1-3919
Keystone Consolidated Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 37-0364250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5430 LBJ Freeway, Suite 1740, Three Lincoln Centre, Dallas, TX 75240-2697
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 458-0028
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of common stock outstanding at May 5, 1998: 9,357,259
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1997
and March 31, 1998 3-4
Consolidated Statements of Operations - Three months
ended March 31, 1997 and 1998 5
Consolidated Statements of Cash Flows - Three months
ended March 31, 1997 and 1998 6
Consolidated Statement of Redeemable Preferred Stock and
Common Stockholders' Equity - Three months ended
March 31, 1998 7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1997 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22,622 $ -
Notes and accounts receivable 37,841 52,657
Inventories 53,930 55,590
Deferred income taxes 18,869 18,582
Prepaid expenses 1,175 1,327
Total current assets 134,437 128,156
Property, plant and equipment 293,883 309,848
Less accumulated depreciation 181,129 185,840
Net property, plant and equipment 112,754 124,008
Other assets:
Restricted investments 7,694 7,817
Prepaid pension cost 111,072 113,380
Deferred financing costs 3,795 3,831
Goodwill 1,229 1,200
Other 3,150 4,357
Total other assets 126,940 130,585
$374,131 $382,749
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, March 31,
1997 1998
<S> <C> <C>
Current liabilities:
Notes payable and current maturities of
long-term debt $ 3,789 $ 9,501
Accounts payable 29,679 35,058
Accrued OPEB cost 8,415 8,415
Other accrued liabilities 39,870 33,145
Total current liabilities 81,753 86,119
Noncurrent liabilities:
Long-term debt 103,055 102,587
Accrued OPEB cost 101,470 101,436
Deferred income taxes 2,963 3,402
Negative goodwill 25,421 25,082
Other 11,758 13,582
Total noncurrent liabilities 244,667 246,089
Redeemable preferred stock 3,500 3,500
Stockholders' equity:
Common stock 10,029 10,088
Additional paid-in capital 47,191 47,830
Accumulated deficit (12,997) (10,865)
Treasury stock, at cost (12) (12)
Total stockholders' equity 44,211 47,041
$374,131 $382,749
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1998
<S> <C> <C>
Revenues and other income:
Net sales $89,149 $96,104
Interest 4 226
Other, net 195 113
89,348 96,443
Costs and expenses:
Cost of goods sold 80,791 88,173
Selling 1,245 1,519
General and administrative 4,383 3,466
Overfunded defined benefit pension credit (750) (2,308)
Interest 1,390 2,593
87,059 93,443
Income before income taxes 2,289 3,000
Provision for income taxes 665 798
Net income 1,624 2,202
Dividends on preferred stock 70 70
Net income available for common shares $ 1,554 $ 2,132
Net income per share available for common shares:
Basic $ .17 $ .23
Diluted $ .17 $ .22
Weighted average common and common equivalent
shares outstanding:
Basic 9,237 9,318
Diluted 9,265 9,526
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,624 $ 2,202
Depreciation and amortization 2,986 4,739
Amortization of deferred financing costs 30 126
Deferred income taxes 147 720
Other, net 464 22
Change in assets and liabilities:
Notes and accounts receivable (12,793) (15,611)
Inventories 1,585 (1,660)
Prepaid pension cost (750) (2,308)
Accounts payable (1,476) 5,379
Other, net 340 (4,529)
Net cash used by operating activities (7,843) (10,920)
Cash flows from investing activities:
Capital expenditures (4,901) (16,185)
Other, net 7 (773)
Net cash used by investing activities (4,894) (16,958)
Cash flows from financing activities:
Revolving credit facilities, net 13,698 5,728
Other notes payable and long-term debt:
Additions 116 -
Principal payments (1,007) (484)
Common stock issued - 82
Preferred stock dividend payments (70) (70)
Net cash provided by financing activities 12,737 5,256
Net change in cash and cash equivalents - (22,622)
Cash and cash equivalents, beginning of period - 22,622
Cash and cash equivalents, end of period $ - $ -
Supplemental disclosures:
Cash paid for:
Interest, net of amount capitalized $ 1,423 $ 4,858
Income taxes 48 77
Common stock contributed to employee benefit plan $ 587 $ 616
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY
Three months ended March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Common stockholders' equity
Redeemable Additional
preferred Common paid-in Accumulated Treasury
stock Stock capital deficit stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997 $3,500 $10,029 $47,191 $(12,997) $ (12) $44,211
Net income - - - 2,202 - 2,202
Issuance of common stock - 59 639 - - 698
Preferred dividends declared 70 - - (70) - (70)
Preferred dividends paid (70) - - - - -
Balance - March 31, 1998 $3,500 $10,088 $47,830 $(10,865) $(12) $47,041
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and basis of presentation:
The consolidated balance sheet at December 31, 1997 has been condensed from
the Company's audited consolidated financial statements at that date. The
consolidated balance sheet at March 31, 1998 and the consolidated statements of
operations and cash flows for the interim periods ended March 31, 1997 and 1998,
and the consolidated statement of redeemable preferred stock and common
stockholders' equity for the interim period ended March 31, 1998, have each been
prepared by the Company, without audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position, results of operations and
cash flows have been made. However, it should be understood that accounting
measurements at interim dates may be less precise than at year end. The results
of operations for the interim periods are not necessarily indicative of the
operating results for a full year or of future operations.
Certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted. The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "Annual
Report").
Contran Corporation ("Contran") holds, directly or through subsidiaries,
approximately 46% of the Company's outstanding stock. Contran may be deemed to
control the Company.
Note 2 - Acquisition
In November 1994, the Company entered into a Joint Venture Agreement with
an unrelated party and formed EWP, a manufacturer and distributor of wire mesh
for the concrete pipe and road construction business. The Company obtained a
20% interest in EWP, in exchange for contributions of $1 million in cash and
equipment in 1994 and $1 million in cash and inventory in 1995. On December 23,
1997, Keystone acquired the remaining 80% of EWP (the "Acquisition") and EWP
became a wholly-owned subsidiary of Keystone. Keystone paid $11.2 million in
cash to acquire PBC's 80% interest in the joint venture using available funds on
hand.
Keystone accounted for the step acquisition of EWP by the purchase method
of accounting and the purchase price has been allocated to the individual assets
acquired and liabilities assumed of EWP based upon preliminary estimated fair
values. The actual allocation of the purchase price may be different from the
preliminary allocation due to adjustments in the purchase price and refinements
in estimates of the fair values of the net assets acquired.
The following pro forma financial information has been prepared assuming
the Acquisition and Keystone's August 1997 $100 million bond offering and
application of the net proceeds therefrom occurred on January 1, 1997. The pro
forma financial information is not necessarily indicative of actual results had
the Acquisition occurred at January 1, 1997, nor do they purport to represent
results of future operations of the combined companies.
<TABLE>
<CAPTION>
Three months ended March 31, 1997
(In millions, except per
share data)
<S> <C>
Revenues and other income $92.2
Operating income 3.5
Net income 1.0
Net income available to common stockholders .9
Net income available for common shares
per common share - diluted $.10
</TABLE>
Note 3 - Inventories:
Inventories are stated at the lower of cost or market. The last-in, first-
out ("LIFO") method is used to determine the cost of approximately 78% of total
inventories and the first-in, first-out or average cost methods are used to
determine the cost of other inventories.
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
(In thousands)
<S> <C> <C>
Raw materials:
Steel and wire products $17,609 $17,084
Household cleaning products 854 1,001
18,463 18,085
Work in process -
Steel and wire products 15,475 12,371
Finished products:
Steel and wire products 16,707 23,854
Household cleaning products 150 210
16,857 24,064
Supplies:
Steel and wire products 16,290 14,226
67,085 68,746
Less LIFO reserve:
Steel and wire products 13,096 13,096
Household cleaning products 59 60
13,155 13,156
$53,930 $55,590
</TABLE>
Note 4 - Notes payable and long-term debt:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
(In thousands)
<S> <C> <C>
9 5/8% Senior Secured Notes, due August 2007 $100,000 $100,000
Commercial credit agreements:
Revolving credit facility - Keystone - 5,382
Revolving credit facility - EWP 2,471 2,817
Term loan - EWP 1,603 1,457
Other 2,770 2,432
106,844 112,088
Less current maturities 3,789 9,501
$103,055 $102,587
</TABLE>
Note 5 - Income taxes:
Summarized below are (i) the differences between the provision for income
taxes and the amounts that would be expected using the U.S. federal statutory
income tax rate of 35%, and (ii) the components of the comprehensive provision
for income taxes.
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1998
(In thousands)
<C> <C> <C>
Expected tax expense, at statutory rate $ 801 $1,050
U. S. state income taxes, net 67 66
Amortization of goodwill (211) (109)
Other, net 8 (209)
Comprehensive provision for income taxes $ 665 $ 798
Comprehensive provision for income taxes:
Currently payable:
U.S. federal $ 956 $ 401
U.S. state 177 7
Benefit of loss carryforwards - (201)
Utilization of alternative minimum tax credits (615) (129)
Net currently payable 518 78
Deferred income taxes, net 147 720
$ 665 $ 798
</TABLE>
Note 6 - Other accrued liabilities
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
(In thousands)
<S> <C> <C>
Current:
Salary, wages, vacations and other
employee expenses $12,275 $ 9,933
Environmental 7,498 5,427
Self insurance 6,605 5,786
Interest 4,146 1,902
Disposition of former facilities 2,306 1,963
Legal and professional 1,199 1,140
Other 5,841 6,994
$39,870 $33,145
Noncurrent:
Environmental $ 8,606 $10,611
Deferred gain 1,987 1,888
Other 1,165 1,083
$11,758 $13,582
</TABLE>
Note 7 - Contingencies
At March 31, 1998, the Company's financial statements reflected accrued
liabilities of $16 million for estimated remedial costs arising from
environmental issues. There is no assurance regarding the ultimate cost of
remedial measures that might eventually be required by environmental authorities
or that additional environmental hazards, requiring further remedial
expenditures, might not be asserted by such authorities or private parties.
Accordingly, the ultimate costs of remedial measures may exceed the amounts
currently accrued.
For additional information related to commitments and contingencies, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
Keystone is a leading manufacturer of fabricated wire products, industrial
wire and carbon steel rod for the agricultural, industrial, construction,
original equipment manufacturer and retail consumer markets. Historically, the
Company has experienced greater sales and profits during the first half of the
year due to the seasonality of sales in principal wire products markets,
including the agricultural and construction markets.
The statements in this Quarterly Report on Form 10-Q relating to matters
that are not historical facts including, but not limited to, statements found in
this Item 2 - Management's Discussion And Analysis Of Financial Condition And
Results Of Operations", are forward looking statements that involve a number of
risks and uncertainties. Factors that could cause actual future results to
differ materially from those expressed in such forward looking statements
include, but are not limited to, cost of raw materials, future supply and demand
for the Company's products (including cyclicality thereof), general economic
conditions, competitive products and substitute products, customers and
competitor strategies, the impact of pricing and production decisions,
environmental matters, government regulations and possible changes therein, and
the ultimate resolution of pending litigation and possible future litigation as
discussed in this Quarterly Report and the Annual Report, including, without
limitation, the section referenced above.
The following table sets forth the Company's production and sales volume
data for the periods indicated:
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1998
(In thousands of tons)
<S> <C> <C>
Production volume:
Billets:
Produced 154 171
Purchased 11 -
Rod 178 172
Sales volume:
Fabricated wire products 61 76
Industrial wire 39 42
Steel rod 77 64
177 182
</TABLE>
The following table sets forth the components of the Company's net sales
for the periods indicated.
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1998
<S> <C> <C>
Fabricated wire products $42.8 $52.5
Industrial wire 18.2 20.5
Rod 23.2 19.7
Household cleaning products and other 4.9 3.4
$89.1 $96.1
</TABLE>
The following table sets forth selected operating data of the Company as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1998
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 90.6 91.7
Gross profit 9.4 8.3
Selling expense 1.4 1.6
General and administrative expense 4.9 3.6
Overfunded defined benefit pension credit (.8) (2.4)
Income before income taxes 2.5% 3.1%
Provision for income taxes .7 .8
Net income 1.8% 2.3%
</TABLE>
Although rod production during the first quarter of 1998 (172,000 tons) was
comparable to 1997 first quarter production (178,000 tons), rod sales volume
declined 13,000 tons to 64,000 tons during the 1998 period as compared to the
1997 period. The primary reason for this decline was 12,000 tons of rod
production consumed by the Company's Engineered Wire Products, Inc. ("EWP")
subsidiary during the 1998 first quarter. Prior to the acquisition of EWP in
December 1997, these sales were reflected as rod sales. During the 1997 first
quarter, the Company shipped 10,000 tons of rod to EWP. Industrial wire sales
volume increased 8% to 42,000 tons during the 1998 first quarter and fabricated
wire products sales volume increased 15,000 tons from the 1997 first quarter to
the 1998 first quarter primarily as a result of the EWP acquisition. EWP
shipped 10,000 tons of fabricated wire products during the 1998 first quarter.
Although fabricated wire products selling prices decreased 3% in the 1998
first quarter as compared to the 1997 first quarter, a 4% increase in
industrial wire selling prices and a 3% increase in carbon steel rod selling
prices combined with the 3% overall increase in volume resulted in a 10%
increase in steel and wire product sales during the 1998 first quarter as
compared to the 1997 first quarter despite pressure in the wire rod markets on
both volume and selling prices due to the Southeast Asia financial situation.
The Company expects these market conditions to continue in the near term. The
EWP acquisition was the primary reason for the decline in fabricated wire
products selling prices as EWP's fabricated wire products sell for lower prices
than the Company's other fabricated wire products.
Gross profit decreased approximately 5% to $7.9 million in the first
quarter of 1998 from $8.4 million in the 1997 first quarter. Gross profit
percentage decreased to 8.3% in 1998 from 9.4% in 1997, as 7% higher overall
average selling prices, lower rod conversion costs and lower purchased billets
were more than offset by higher scrap costs and production inefficiencies due to
unplanned equipment downtime in the Company's steel mill. During the 1998 first
quarter, the Company purchased 175,000 tons of scrap at an average price of $125
per ton as compared to 1997 first quarter purchases of 152,000 tons at an
average price of $122 per ton. During the 1998 first quarter, Keystone did not
purchase any billets as compared to 11,000 tons of billets purchased in the
first quarter of 1997 at an average price of $238 per ton. The Company believes
the Southeast Asia financial situation is also putting pricing pressure on the
scrap markets. Such pressure should favorably impact Keystone's cost base and
operating results in the near future.
Selling expenses increased 22% to $1.5 million in the first quarter of 1998
from $1.2 million in the 1997 first quarter, primarily as the result of the EWP
acquisition, but remained relatively constant as a percentage of net sales.
General and administrative expenses decreased 21%, or $900,000 during the
first quarter of 1998 as compared to the first quarter of 1997. This decrease
was primarily due to lower insurance and legal expenses partially offset by
increases due to the acquisition of EWP.
Interest expense in the first quarter of 1998 was higher than the first
quarter of 1997 due principally to higher average borrowing levels and interest
rates. These higher borrowing levels and interest rates were due primarily to
the issuance of $100 million principal amount of 9 5/8% Senior Secured Notes
("the Notes") in August 1997. Average borrowings by the Company under its
revolving credit facilities, term loans and the Notes approximated $106.2
million in the first quarter of 1998 as compared to $58 million in the first
quarter of 1997. During the first quarter of 1998, the average interest rate
paid by the Company was 9.6% per annum as compared to 9.3% per annum in the
first quarter of 1997.
As a result of the issuance of the Notes, interest expense in 1998 will be
greater than the historic levels in the second and third quarters of 1997.
The principal reasons for the difference between the U.S. federal statutory
income tax rate and the Company's effective income tax rates are explained in
Note 5 to the Consolidated Financial Statements.
As a result of the items discussed above, net income during the first
quarter of 1998 increased to $2.2 million from $1.6 million in the first quarter
of 1997.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash flows from operating activities are affected by the
seasonality of its business as sales of certain products used in the
agricultural and construction industries are typically highest during the second
quarter and lowest during the fourth quarter of each year. These seasonal
fluctuations impact the timing of production, sales and purchases and have
typically resulted in a use of cash from operations during the first quarter of
each year.
At March 31, 1998 the Company had working capital of $42 million, including
$9.5 million of notes payable and current maturities of long-term debt. The
outstanding borrowings under the Company's revolving credit facilities were $8.2
million at March 31, 1998. The amount of available borrowings under these
credit facilities is based on formula-determined amounts of trade receivables
and inventories, less the amount of outstanding letters of credit. Under the
terms of the Indenture related to the Senior Secured Notes, the Company's
ability to borrow in excess of $25 million under its $55 million revolving
credit facility is dependent upon maintenance of a consolidated cash flow ratio,
(as defined), for the most recently completed four fiscal quarters of at least
2.5 to 1. Additional available borrowings under Keystone's $55 million
revolving credit facility, which expires December 31, 1999, and EWP's $6 million
revolving credit facility, which expiration was extended in April 1998 to June
30, 2000, were $49 million and $2.2 million, respectively, at March 31, 1998,
all of which could be borrowed under the terms of the Indenture. The Company's
$55 million revolving credit facility requires daily cash receipts be used to
reduce outstanding borrowings, which results in the Company maintaining zero
cash balances when there are balances outstanding under this credit facility.
During the first quarter of 1998, the Company's operating activities used
approximately $10.9 million of cash compared to $7.8 million in the first
quarter of 1997. Although higher earnings in the 1998 quarter reduced the
amount of cash used by operating activities, higher interest payments due to the
issuance of the Notes in August 1997 negatively impacted cash flows from
operating activities. Interest payments of $4.8 million are due on the Notes in
the first and third quarters of each year. Cash paid for interest during the
1997 and 1998 first quarters amounted to $1.4 million and $4.9 million,
respectively.
In February 1998, the Company purchased certain agricultural fencing
product manufacturing equipment and related inventory from Insteel Industries,
Inc. ("Insteel"), for approximately $13 million, subject to any adjustment due
to a physical inventory. Keystone expects to incur capital costs of $6 million
to $9 million to relocate and integrate such equipment into its manufacturing
facilities. As part of the agreement with Insteel, Keystone also acquired
Insteel's former customer list and certain other records and Insteel agreed not
to compete with Keystone in the North American agricultural fencing products
business for a period of five years.
During the first quarter of 1998, the Company made capital expenditures of
approximately $16.2 million primarily related to upgrades of production
equipment at its facility in Peoria, Illinois. Capital expenditures for 1998,
including those related to the purchase of equipment from Insteel, are currently
estimated to be approximately $57 million and are related primarily to upgrades
and debottlenecking of production equipment. During 1997, the Company commenced
a three year, $75 million capital improvement plan to upgrade certain of its
plant and equipment and eliminate production capacity bottlenecks in order to
reduce costs and improve production efficiency. The principal components of the
Company's capital improvements plan include reconfiguring its electric arc
furnace, replacing the caster and upgrading its wire and rod mills. These
capital expenditures will be funded using available cash and borrowing
availability under the Company's revolving credit facilities.
In December 1997, DeSoto entered into an agreement to settle its liability
as a potentially responsible party with respect to alleged hazardous substance
contamination of the American Chemical Site, a chemical recycling facility
located in Griffith, Indiana, for a cash payment of $1.6 million. Such amount
was within the previously accrued balance and DeSoto expects to pay the $1.6
million during the first half of 1998.
At March 31, 1998, the Company's financial statements reflected accrued
liabilities of $16 million for estimated remediation costs arising from
environmental issues. There is no assurance regarding the ultimate cost of
remedial measures that might eventually be required by environmental authorities
or that additional environmental hazards, requiring further remedial
expenditures, might not be asserted by such authorities or private parties.
Accordingly, the costs of remedial measures may exceed the amounts accrued.
The Company incurs significant ongoing costs for plant and equipment and
substantial employee medical benefits for both current and retired employees.
As such, the Company is vulnerable to business downturns and increases in costs,
and accordingly, routinely compares its liquidity requirements and capital needs
against its estimated future operating cash flows. As a result of this process,
the Company has in the past, and may in the future, reduce controllable costs,
modify product mix, acquire and dispose of businesses, restructure certain
indebtedness, and raise additional equity capital. The Company will continue to
evaluate the need for similar actions or other measures in the future in order
to meet its obligations. The Company also routinely evaluates acquisitions of
interests in, or combinations with, companies related to the Company's current
businesses. The Company intends to consider such acquisition activities in the
future and, in connection with this activity, may consider issuing additional
equity securities or increasing the indebtedness of the Company. The Company's
ability to incur new debt in the future is limited by the terms of the
Indenture.
Management believes the cash flows from operations together with the funds
available under the Company's revolving credit facility will provide sufficient
funds to fund the anticipated needs of its operations and capital improvements
plan for the year ending December 31, 1998. This belief is based upon
management's assessment of various financial and operational factors, including,
but not limited to, assumptions relating to product shipments, product mix and
selling prices, production schedules, productivity rates, raw materials,
electricity, labor, employee benefits and other fixed and variable costs,
working capital requirements, interest rates, repayments of long-term debt,
capital expenditures, and available borrowings under the Company's revolving
credit facility. However, liabilities under environmental laws and regulations
with respect to the clean-up and disposal of wastes, or any significant
increases in the cost of providing medical coverage to active and retired
employees could have a material adverse effect on the future liquidity,
financial condition and results of operations of the Company. Additionally,
significant declines in the Company's end user markets or market share, the
inability to maintain satisfactory billet and rod production levels, or other
unanticipated costs, if significant, could result in a need for funds greater
than the Company currently has available. There can be no assurance the Company
would be able to obtain an adequate amount of additional financing.
PART II.
ITEM 1. Legal Proceedings
Reference is made to disclosure provided under the caption "Current
litigation" in Note 17 to the Consolidated Financial Statements included in the
Annual Report.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) The following exhibit is included herein:
27.1 Financial Data Schedule for the three month period ended
March 31, 1998.
(b) Reports on Form 8-K filed during the quarter ended March 31, 1998:
A current report on Form 8-K, dated as of December 23, 1997 was filed on
January 16, 1998 to report the Company had completed its acquisition of
Engineered Wire Products, Inc.
S I G N A T U R E S
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.
Keystone Consolidated Industries, Inc.
(Registrant)
Date: May 5, 1998 By /s/Harold M. Curdy
Harold M. Curdy
Vice President - Finance/Treasurer
(Principal Financial Officer)
Date: May 5, 1998 By /s/Bert E. Downing, Jr.
Bert E. Downing, Jr.
Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Keystone
Consolidated Industries, Inc.'s consolidated financial statements for the three
months ended March 31, 1998 and is qualified in its entirety by reference to
such.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 55,653
<ALLOWANCES> 2,996
<INVENTORY> 55,590
<CURRENT-ASSETS> 128,156
<PP&E> 309,848
<DEPRECIATION> 185,840
<TOTAL-ASSETS> 382,749
<CURRENT-LIABILITIES> 86,119
<BONDS> 102,587
3,500
0
<COMMON> 10,088
<OTHER-SE> 36,953
<TOTAL-LIABILITY-AND-EQUITY> 382,749
<SALES> 96,104
<TOTAL-REVENUES> 96,104
<CGS> 88,173
<TOTAL-COSTS> 88,173
<OTHER-EXPENSES> 2,622
<LOSS-PROVISION> 55
<INTEREST-EXPENSE> 2,593
<INCOME-PRETAX> 3,000
<INCOME-TAX> 798
<INCOME-CONTINUING> 2,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,202
<EPS-PRIMARY> .23
<EPS-DILUTED> .22
</TABLE>
