EX-99.1 2 key3rdqrtprsrel061104.txt =============================================================================== PRESS RELEASE =============================================================================== FOR IMMEDIATE RELEASE CONTACT: Keystone Consolidated Industries, Inc. Bert E. Downing, Jr. 5430 LBJ Freeway, Suite 1740 Vice President and Chief Financial Dallas, Texas 75240-2697 Officer (972) 458-0028 (972) 458-0028 KEYSTONE REPORTS THIRD QUARTER 2006 RESULTS DALLAS, TEXAS . . . November 14, 2006 . . . Keystone Consolidated Industries, Inc. (OTCBB: KYCN), reported net income of $9.1 million, or $0.91 per diluted share, in the third quarter of 2006 as compared to $34.1 million, or $1.64 per diluted share, in the third quarter of 2005. The decrease in earnings was due primarily to the net effects of a $32.3 million gain on cancellation of debt recorded during the 2005 third quarter, higher costs for ferrous scrap (the Company's primary raw material), production interruptions and an increased provision for income taxes, all partially offset by increased shipment volumes, higher per-ton selling prices, lower costs for postretirement benefits ("OPEB") and reorganization costs as well as a significantly higher defined benefit pension credit. Keystone was operating under Chapter 11 protection during most of the third quarter of 2005 and emerged from its Chapter 11 proceedings on August 31, 2005. The $32.3 million gain on cancellation of debt in the 2005 third quarter was related to the Company's emergence from Chapter 11. Because the amount of the Company's net periodic defined benefit pension and OPEB expense or credits are unrelated to the operating activities of the Company, Keystone measures it's overall operating performance using operating profit before net pension and OPEB expense or credits. Excluding the net pension credit and the net OPEB expense or credits, operating profit decreased to $3.4 million from $6.2 million in the prior year (see reconciliation below). The decrease was primarily a result of increased ferrous scrap costs and production interruptions due to operating issues related to the reheat furnace in the Company's wire rod mill partially offset by higher per-ton selling prices and shipment volumes. Keystone's average per-ton ferrous scrap cost was $216 during the third quarter of 2006 as compared to $201 during the third quarter of 2005. A reconciliation of statement of operations line items as reported to statement of operations line items adjusted to exclude net periodic pension and OPEB expense or credits is set forth in the following table.
Three months ended September 30, ---------------------------------------------------------------------------------------------- (In thousands) 2005 2006 --------------------------------------------- -------------------------------------------- Operating Operating Elimination Profit Elimination Profit As of before As of before Reported Pension/OPEB Pension/OPEB Reported Pension/OPEB Pension/OPEB -------- ------------ ------------- -------- ------------ ------------ Net sales $84,770 $ - $84,770 $105,212 $ - $105,212 Cost of goods sold 75,854 (1,984) 73,870 96,017 1,450 97,467 ------- ------- ------- -------- -------- -------- Gross margin 8,916 1,984 10,900 9,195 (1,450) 7,745 ------- ------- ------- -------- -------- -------- Selling Expense 1,630 (1) 1,629 1,665 15 1,680 General and administrative expense 3,050 10 3,060 2,645 29 2,674 Defined benefit pension credit (3,226) 3,226 - (12,161) 12,161 - ------- ------- ------- -------- -------- -------- Total operating costs 1,454 3,235 4,689 (7,851) 12,205 4,354 ------- ------- ------- -------- -------- -------- Operating income $ 7,462 $(1,251) $ 6,211 $ 17,046 $(13,655) $ 3,391 ======= ======= ======= ======== ======== ========
The Company's consolidated sales volume and per-ton selling prices for the third quarter of 2005 and 2006 were as follows:
Sales Volume Selling Prices ------------ -------------- Three months ended Three months ended September 30, September 30, ------------------ ------------------ 2005 2006 2005 2006 ---- ---- ---- ---- (000 tons) (Per ton) Fabricated wire products 19 24 $1,065 $1,014 Welded wire reinforcement 21 19 860 880 Nails 4 3 718 714 Industrial wire 19 20 704 741 Coiled rebar - (1) - 589 Wire rod 61 85 470 523 Billets 5 5 277 307 ---- ---- 656 667 All products 129 156 ==== ==== (1) - Less than 1,000 tons
The higher shipment volume of fabricated wire products and wire rod in 2006 was due to increased market demand and general supply shortages resulting from competitor production problems. The higher per-ton selling prices in 2006 were due primarily to price increases the Company began implementing during the third quarter of 2006. During the third quarter of 2006 and 2005, the Company recorded a non-cash defined benefit pension credit of $12.2 million and $3.2 million, respectively. The increased pension credit in 2006 was a result of a $277 million increase in plan assets from the end of 2004 to the end of 2005. Keystone currently expects to record a non-cash defined benefit pension credit of approximately $50 million during 2006. As a result of an agreement with certain of the Company's retirees entered into in connection with Keystone's emergence from Chapter 11, the Company's postretirement benefit expense subsequent to its emergence from Chapter 11 has been substantially reduced. During the third quarter of 2006, the Company recorded a postretirement benefit credit of approximately $2.1 million as compared to a $2.2 million postretirement benefit expense recorded in the third quarter of 2005. During the third quarter of 2006 and 2005, Keystone incurred $270,000 and $4.3 million, respectively, of legal and professional fees relative to it's Chapter 11 proceedings and the associated reorganization activities including post-emergence activities related to closing the Chapter 11 cases and liquidation of certain pre-petition subsidiaries. The Company's provisions for income taxes were not significant during 2005 and prior to the second quarter of 2006. Due to Keystone's profitability during the first six months of 2006 and due to expectations of continued profitability, the Company had reversed its deferred income tax asset valuation allowance by the end of June 2006 and Keystone's effective income tax rate during the second and third quarter of 2006 is significantly higher than during 2005. 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 SEC including, but not limited to, the following: o Future supply and demand for Keystone's products (including cyclicality thereof), o Customer inventory levels, o Changes in raw material and other operating costs (such as ferrous scrap and energy) o The possibility of labor disruptions, o General global economic and political conditions, o Competitive products and substitute products, o Customer and competitor strategies, o The impact of pricing and production decisions, o The possibility of labor disruptions, o Environmental matters (such as those requiring emission and discharge standards for existing and new facilities), o Government regulations and possible changes therein, o Significant increases in the cost of providing medical coverage to employees and retirees, o The ultimate resolution of pending litigation, o International trade policies of the United States and certain foreign countries, o Operating interruptions (including, but not limited to, labor disputes, fires, explosions, unscheduled or unplanned downtime and transportation interruptions), o The Company's ability to renew or refinance credit facilities, o Any possible future litigation, and o Other risks and uncertainties as discussed in the Company's filings with the SEC. Should one or more of these risks materialize (or the consequences of such a development worsen), or should 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 new 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: o The Company discloses operating profit, which is used by the Company's management to assess its performance. The Company believes disclosure of operating profit provides useful information to investors because it allows investors to analyze the performance of the Company's operations in the same way that the Company's management assesses performance. The Company defines operating profit as operating income before its net periodic defined benefit pension and OPEB expense or credits. Keystone Consolidated Industries, Inc. is headquartered in Dallas, Texas. The Company is a leading manufacturer and distributor of fabricated wire products, welded wire reinforcement, nails, industrial wire, coiled rebar and wire rod for the agricultural, industrial, construction, 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, ------------------------- ------------------------ 2005 2006 2005 2006 -------- -------- -------- -------- (unaudited) (unaudited) Net sales $ 84,770 $105,212 $263,299 $353,422 Cost of goods sold 75,854 96,017 247,370 319,914 -------- -------- -------- -------- Gross margin 8,916 9,195 15,929 33,508 -------- -------- -------- -------- Selling expense 1,630 1,665 4,647 5,113 General and administrative expense 3,050 2,645 8,460 8,243 Defined benefit pension credit (3,226) (12,161) (9,675) (36,487) -------- -------- -------- -------- Total operating costs 1,454 (7,851) 3,432 (23,131) -------- -------- -------- -------- Operating income 7,462 17,046 12,497 56,639 -------- -------- -------- -------- Nonoperating income (expense): Corporate income (expense) (566) (209) (2,757) 1,273 Interest expense (1,040) (1,189) (2,816) (3,728) Interest income 138 67 220 159 Other income (expense), net 167 (361) 271 (94) -------- -------- -------- -------- Total nonoperating expense (1,301) (1,692) (5,082) (2,390) -------- -------- -------- -------- Income before income taxes and reorganization items 6,161 15,354 7,415 54,249 -------- -------- -------- -------- Reorganization items: Reorganization costs (4,342) (270) (10,323) (606) Gain on cancellation of debt 32,349 - 32,349 - -------- -------- -------- -------- Total reorganization items 28,007 (270) 22,026 (606) -------- -------- -------- -------- Income before income taxes 34,168 15,084 29,441 53,643 Provision for income taxes 64 5,990 272 9,790 -------- -------- -------- -------- Net income $ 34,104 $ 9,094 $ 29,169 $ 43,853 ======== ======== ======== ======== Basic income per share $ 3.61 $ 0.91 $ 3.11 $ 4.39 ======== ======== ======== ======== Basic shares outstanding 10,046 10,000 10,061 10,000 ======== ======== ======== ======== Diluted income per share $ 1.64 $ 0.91 $ 1.20 $ 4.39 ======== ======== ======== ======== Diluted shares outstanding 22,029 10,000 26,039 10,000 ======== ======== ======== ========