Keystone Reports 2009 Third Quarter Results

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Symbol	Price	Change
KYCN.OB	3.50	-0.15

{"s" : "kycn.ob","k" : "c10,l10,p20,t10","o" : "","j" : ""}

DALLAS, Nov. 5 /PRNewswire-FirstCall/ -- Keystone Consolidated Industries, Inc. (OTC Bulletin Board: KYCN - News), reported net income of $5.9 million, or $0.48 per diluted share, in the third quarter of 2009 as compared to $24.0 million, or $1.98 per diluted share, in the third quarter of 2008. The decrease in earnings was due primarily to lower shipment volumes and a decrease in the market value of the Company's pension plans' assets during 2008, resulting in Keystone recording defined benefit pension expense of $1.5 million during the third quarter of 2009 as compared to a defined benefit pension credit of $18.5 million during the third quarter of 2008. Throughout the third quarter of 2009, customers continued just-in-time order philosophies which resulted in the lower shipment volumes and additional production costs due to frequent mill changes as customers ordered much smaller quantities of Keystone's many different products.

Because the amount of the Company's net periodic defined benefit pension and other postretirement benefit ("OPEB") expense or credits are unrelated to the ongoing operating activities of the Company, Keystone measures its overall operating performance using operating income before net pension and OPEB expense or credits. A reconciliation of operating income as reported to operating income adjusted for pension and OPEB credits is set forth in the following table.

                                                       Three months ended
                                                          September 30,
                                                          -------------
                                                         (In thousands)

                                                        2008          2009
                                                        ----          ----
    Operating income as reported                      $39,053        $9,262
       Defined benefit pension expense (credit)       (18,467)        1,515
       OPEB credit                                     (2,006)       (1,042)
                                                      -------       -------
    Operating income before pension and OPEB          $18,580        $9,735
                                                      =======        ======

The Company's total sales volume and average per-ton selling prices for the third quarter of 2008 and 2009 were as follows:

                                                       Three months ended
                                                          September 30,
                                                          -------------
                                                        2008          2009
                                                        ----          ----

        Total sales volume (000 tons)                     165           146
        Average per-ton selling prices                 $1,106          $686

Operating income before pension and OPEB for the third quarter of 2009 was significantly less than the third quarter of 2008 primarily due to the net effects of the following factors:

• lower shipment volumes as discussed above;
• substantially lower selling prices due to market pressures resulting primarily from a significant decline in ferrous scrap market prices from September 2008;
• increased variable costs of production due to frequent mill changes as Keystone's customers were managing their inventory by ordering much smaller quantities of the Company's many different products as discussed above;
• increased bad debt expense during the third quarter of 2009 primarily due to the Chapter 11 proceedings of one of the Company's customers;
• decreased cost of raw material during 2009;
• decreased cost of electricity and natural gas during 2009;
• decreased employee incentive compensation accruals during 2009 resulting from lower profitability; and
• a $3.5 million decrease in Keystone's LIFO reserve and cost of goods sold during the third quarter of 2009 (primarily because estimated raw material costs and inventory levels for December 2009 are substantially lower than December 2008 levels) as compared to a $1.6 million decrease in Keystone's LIFO reserve and cost of goods sold during the third quarter of 2008.

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this release that are not historical in nature are forward-looking and are not statements of fact. Forward-looking statements represent the Company's beliefs and assumptions based on currently available information. In some cases you can identify these forward-looking statements by the use of words such as "believes," "intends," "may," "should," "could," "anticipates," "expected" or comparable terminology, or by discussions of strategies or trends. Although Keystone believes the expectations reflected in forward-looking statements are reasonable, it does not know if these expectations will be correct. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause Keystone's actual future results to differ materially from those described herein are the risks and uncertainties discussed from time to time in the Company's filings with the Securities and Exchange Commission ("SEC") including, but not limited to, the following:

• Future supply and demand for Keystone's products (including cyclicality thereof),
• Customer inventory levels,
• Changes in raw material and other operating costs (such as ferrous scrap and energy),
• The possibility of labor disruptions,
• General global economic and political conditions,
• Competitive products (including low-priced imports) and substitute products,
• Customer and competitor strategies,
• The impact of pricing and production decisions,
• Environmental matters (such as those requiring emission and discharge standards for existing and new facilities),
• Government regulations and possible changes therein,
• Significant increases in the cost of providing medical coverage to employees,
• The ultimate resolution of pending litigation,
• International trade policies of the United States and certain foreign countries,
• Operating interruptions (including, but not limited to, labor disputes, fires, explosions, unscheduled or unplanned downtime and transportation interruptions),
• The Company's ability to renew or refinance credit facilities,
• Any possible future litigation, and
• Other risks and uncertainties as discussed in the Company's filings with the SEC.

Should one or more of these risks materialize, if the consequences worsen, or if the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. Keystone disclaims any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

In an effort to provide investors with additional information regarding the Company's results as determined by accounting principles generally accepted in the United States of America ("GAAP"), the Company has disclosed certain non-GAAP information, which the Company believes provides useful information to investors:

• The Company discloses operating income before pension and OPEB credits or expense, which is used by the Company's management to assess its performance. The Company believes disclosure of operating income before pension and OPEB credits or expense provides useful information to investors because it allows investors to analyze the performance of the Company's operations in the same way the Company's management assesses performance.

Keystone Consolidated Industries, Inc. is headquartered in Dallas, Texas. The Company is a leading manufacturer of steel fabricated wire products, industrial wire, billets and wire rod. Keystone also manufactures wire mesh, coiled rebar and steel bar. The Company's products are used in the agricultural, industrial, cold drawn, construction, transportation, original equipment manufacturer and retail consumer markets. Keystone's common stock is traded on the OTC Bulletin Board (Symbol: KYCN).

         KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
             Condensed Consolidated Statements of Operations
                  (In thousands, except per share data)

                               Three months ended    Nine months ended
                                  September 30,         September 30,
                               ------------------    -----------------
                                  2008     2009        2008       2009
                                  ----     ----        ----       ----
                                             (unaudited)

                               $183,209  $100,363   $495,375   $231,349
    Net sales
    Cost of goods sold         (156,867)  (85,452)  (440,170)  (212,998)
                              ---------  --------  ---------  ---------

      Gross margin               26,342    14,911     55,205     18,351
                                 ------    ------     ------     ------

    Other operating income
     (expense):
      Selling expense            (2,575)   (1,498)    (6,338)    (4,776)
      General and
       administrative expense    (5,187)   (3,678)   (12,850)    (7,539)
      Defined benefit pension
       credit (expense)          18,467    (1,515)    55,401     (4,543)
      Other postretirement
       benefit credit             2,006     1,042      6,542      3,562
                                  -----     -----      -----      -----


        Total other operating
         income (expense)        12,711    (5,649)    42,755    (13,296)
                                 ------   -------     ------   --------

    Operating income             39,053     9,262     97,960      5,055
                                 ------     -----     ------      -----

    Nonoperating income
     (expense):
      Interest expense             (879)     (474)    (3,124)    (1,214)
      Other income, net             306        42        604        144
                                    ---        --        ---        ---

        Total nonoperating
         expense                   (573)     (432)    (2,520)    (1,070)
                                  -----     -----    -------    -------

      Income before income
       taxes                     38,480     8,830     95,440      3,985

    Income tax expense          (14,505)   (2,962)   (35,936)    (1,491)
                               --------   -------   --------    -------

      Net income                $23,975    $5,868    $59,504     $2,494
                                =======    ======    =======     ======

    Basic and diluted income
     per share                    $1.98     $0.48      $5.25      $0.21
                                  =====     =====      =====   ========

    Basic and diluted
     weighted average shares
      outstanding                12,102    12,102     11,336     12,102
                                 ======    ======     ======     ======