-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aKHLlNAiz25CBVH7Ue9rycz6LevPQfNF0PVvj8GRBvi6znNxd3dhsHakxNR6t3su ZKkNxue79V8iF0S15IlZIw== 0000055604-95-000007.txt : 19950508 0000055604-95-000007.hdr.sgml : 19950508 ACCESSION NUMBER: 0000055604-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950505 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE CONSOLIDATED INDUSTRIES INC CENTRAL INDEX KEY: 0000055604 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 370364250 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03919 FILM NUMBER: 95534802 BUSINESS ADDRESS: STREET 1: 5430 LBJ FWY STE 1440 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144580028 MAIL ADDRESS: STREET 1: 5430 LBJ FWY STE 1440 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE STEEL & WIRE CO DATE OF NAME CHANGE: 19710506 10-Q 1 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, 1995 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 Identification No.) incorporation or organization) 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: (214) 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 April 30, 1995: 5,636,507 KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - December 31, 1994 and March 31, 1995 3-4 Consolidated Statements of Operations - Three months ended March 31, 1994 and 1995 5 Consolidated Statements of Cash Flows - Three months ended March 31, 1994 and 1995 6 Consolidated Statement of Stockholders' Deficit - Three months ended March 31, 1995 7 Notes to Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
December 31, MARCH 31, ASSETS 1994 1995 Current assets: Notes and accounts receivable $ 41,915 $ 45,105 Inventories 35,861 37,459 Deferred income taxes 4,552 3,845 Prepaid expenses and other 2,057 1,609 Total current assets 84,385 88,018 Property, plant and equipment 231,708 233,809 Less accumulated depreciation 150,561 153,435 Net property, plant and equipment 81,147 80,374 Other assets: Unrecognized pension obligation 10,247 9,792 Deferred income taxes 23,783 25,008 Notes receivable 1,397 1,304 Other 4,642 5,165 Total other assets 40,069 41,269 $205,601 $209,661
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIT December 31, MARCH 31, 1994 1995 Current liabilities: Notes payable and current long-term debt $ 10,714 $ 18,664 Accounts payable 28,418 27,122 Accounts payable to affiliates 191 - Accrued pension cost 13,735 10,002 Accrued OPEB cost 6,825 7,813 Other accrued liabilities 21,973 20,457 Total current liabilities 81,856 84,058 Noncurrent liabilities: Long-term debt 15,340 14,396 Accrued pension cost 40,470 42,891 Accrued OPEB cost 98,310 97,655 Other 10,204 10,977 Total noncurrent liabilities 164,324 165,919 Stockholders' deficit: Common stock 6,313 6,357 Additional paid-in capital 19,393 19,948 Accumulated deficit (32,486) (32,231) Net pension liabilities adjustment (33,787) (34,378) Treasury stock, at cost (12) (12) Total stockholders' deficit (40,579) (40,316) $205,601 $209,661
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Three months ended March 31, 1994 1995 Revenues and other income: Net sales $87,580 $90,768 Other, net 65 159 87,645 90,927 Costs and expenses: Cost of goods sold 80,362 83,277 Selling, general and administrative 5,979 6,492 Interest 629 737 86,970 90,506 Income before income taxes 675 421 Provision for income taxes 267 166 Net income $ 408 $ 255 Income per common and common equivalent share $ .07 $ .05 Weighted average common and common equivalent shares outstanding 5,550 5,642
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three months ended March 31, 1994 1995 Cash flows from operating activities: Net income $ 408 $ 255 Depreciation 3,131 3,176 Noncash OPEB cost 448 333 Deferred income taxes (175) (140) Other, net 83 (104) 3,895 3,520 Change in assets and liabilities: Notes and accounts receivable (10,727) (3,144) Inventories (1,154) (1,598) Accounts payable (81) (1,487) Accrued pension cost (1,144) (1,826) Other, net 2,064 (128) Net cash used by operating activities (7,147) (4,663) Cash flows from investing activities: Capital expenditures (2,003) (2,821) Proceeds from disposition of property and equipment - 476 Net cash used by investing activities (2,003) (2,345) Cash flows from financing activities: Revolving credit facility, net 9,284 7,958 Other notes payable and long-term debt: Additions 133 78 Principal payments (736) (1,030) Common stock issued, net 469 2 Net cash provided by financing activities 9,150 7,008 Net change in cash and cash equivalents - - Cash and cash equivalents, beginning of period - - Cash and cash equivalents, end of period $ - $ - Supplemental disclosures: Cash paid for: Interest, net of amount capitalized $ 603 $ 784 Income taxes 24 4 Stock contributed to employee benefit plan 622 597
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT Three months ended March 31, 1995 (In thousands)
Additional Net pension Total Common paid-in Accumulated liabilities Treasury stockholders' stock capital deficit adjustment stock deficit Balance at December 31, 1994 $6,313 $19,393 $(32,486) $(33,787) $(12) $(40,579) Net income - - 255 - - 255 Issuance of common stock 44 555 - - - 599 Pension adjustment - - - (591) - (591) Balance at March 31, 1995 $6,357 $19,948 $(32,231) $(34,378) $ (12) $(40,316)
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Organization and basis of presentation: Keystone Consolidated Industries, Inc. (the "Company") is a majority-owned subsidiary of Contran Corporation ("Contran"). At March 31, 1995, Contran held, directly or indirectly, approximately 67% of the Company's outstanding common stock. The consolidated balance sheet at December 31, 1994 has been condensed from the Company's audited consolidated financial statements at that date. The consolidated balance sheet at March 31, 1995 and the consolidated statements of operations and cash flows for the interim periods ended March 31, 1994 and 1995, and the consolidated statement of stockholders' deficit for the interim period ended March 31, 1995 have 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, 1994 (the "Annual Report"). Note 2 - Income per share: Income per share is based on the weighted average number of common and common equivalent shares outstanding during each period. 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 three-fourths of total inventories with the first-in, first-out or average cost methods used to determine the cost of other inventories.
December 31, MARCH 31, 1994 1995 (In thousands) Raw materials $12,672 $10,759 Work in process 8,086 12,410 Finished products 14,501 14,239 Supplies 14,407 13,856 49,666 51,264 Less LIFO reserve 13,805 13,805 $35,861 $37,459
Note 4 - Notes payable and long-term debt:
December 31, MARCH 31, 1994 1995 (In thousands) Commercial credit agreements: Revolving credit facility $ 6,531 $14,489 Term loan 16,382 15,549 Other 3,141 3,022 26,054 33,060 Less current maturities 10,714 18,664 $15,340 $14,396
The Company maintains a $35 million revolving credit facility which matures December 31, 1996, is collateralized primarily by the Company's trade receivables and inventories, and bears interest at the prime rate plus 1.5% (an effective rate of 10.5% at March 31, 1995). The amount of available borrowings is based on formula-determined amounts of trade receivables and inventories, less the amount of outstanding letters of credit. Additional borrowings available were $20.2 million at March 31, 1995. This credit facility requires that the Company's daily cash receipts be used to reduce the outstanding borrowings, which results in the Company maintaining zero cash balances. The Company's term loan is with the financial institution that provides the Company's revolving credit facility, bears interest at the prime rate plus 1%, and is due in installments through December 31, 1996. The loan requires compliance with the restrictive covenants, security agreement and certain other terms of the revolving credit facility, is further collateralized by the Company's property, plant and equipment, and becomes due and payable if the Company terminates its revolving credit facility. The Company's commercial credit agreements contain restrictive covenants including a prohibition against the payment of dividends without lender consent and certain minimum working capital and net worth requirements. Note 5 - Income taxes: The difference between the provision for income taxes and the amounts that would be expected using the U.S. federal statutory income tax rate is primarily related to state income taxes. The net deferred tax asset at each of December 31, 1994 and March 31, 1995 is net of a $30 million valuation allowance. There was no change in the deferred tax valuation allowance during the first three months of 1994 or 1995. Note 6 - Pension plans: Variances from actuarial assumptions, including the rate of return on pension plan assets, will result in increases or decreases in accrued pension costs, deferred taxes, stockholders' deficit, pension expense and related funding requirements in future periods. During the early 1980's the Company received permission from the Internal Revenue Service to defer certain annual pension plan contributions. At March 31, 1995, the remaining balance of such deferred contributions was approximately $9.9 million. Such deferred amounts, with interest, are payable to the plans through 2000 and are collateralized by a lien on all of the Company's assets. Note 7 - Contingencies: Environmental matters. As discussed in the Annual Report, the Company is involved in the closure of inactive waste disposal units as well as the disposal of radioactive arc dust. In addition, the Company is subject to federal and state "Superfund" legislation at three sites involving cleanup of landfills and disposal facilities which allegedly received hazardous substances generated by discontinued operations of the Company. The Company has accrued its estimated costs related to these issues. The Company believes its comprehensive general liability insurance policies provide indemnification for certain costs the Company incurs at the "Superfund" sites and has recorded receivables for the estimated insurance recoveries. There was no significant change in the status of these environmental matters during the first three months of 1995. Other litigation. The Company is engaged in various legal proceedings incidental to its normal business activities. In the opinion of the Company, none of such proceedings are material in relation to the Company's consolidated financial position, results of operations or liquidity. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: The Company's principal operations are the manufacture and sale of carbon steel rod, wire and wire products for agricultural, industrial, construction, commercial, original equipment manufacturers 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. Net sales of $90.8 million for the first quarter of 1995 represent a 4% increase over the comparable 1994 quarter. Tons of product sold increased 2% with wire and wire products sales increasing 6% to 112,000 tons and rod sales decreasing 4% to 65,000 tons. Wire and wire products are sold at higher selling prices per ton than rod. Both rod and wire per ton selling prices increased approximately 4% in 1995 over the comparable 1994 period while per ton selling prices of wire products declined 3%, principally due to a 5% decrease in the average selling price of nails. Gross profit was $7.5 million for the first quarter of 1995, up slightly from 1994. Gross profit margins were approximately 8.3% during both periods as lower 1995 costs for scrap steel, the Company's primary raw material, and lower rod conversion costs were offset by changes in the product mix within the wire and wire products category and increased costs related to the production outages at the Peoria rod mill, discussed below. Scrap steel costs in the first quarter of 1995 were approximately 2% lower than one year ago and are currently expected to approximate current levels during the second quarter of 1995. During the first quarter of 1995, billet production of 158,000 tons at the Peoria steel mill increased 5% over the comparable 1994 period. As the Company's billet production capacity is less than its rod production capacity, the Company periodically purchases billets from other suppliers to increase utilization of the rod mill and thus assure the Company's ability to meet customer orders. The decision to purchase billets depends on prices, product demand and other market conditions. During the first quarter of 1995 the Company purchased 32,000 tons of billets compared to 30,000 tons purchased in the first quarter of 1994. However, despite the increased billet production and purchases, unscheduled downtime during the first quarter of 1995 limited rod production to the 1994 level of 171,000 tons. The Company has corrected the mechanical and operational problems that caused the downtime and production has returned to planned levels. Selling, general and administrative expenses, as a percentage of net sales, were comparable in both periods. Interest expense increased in the 1995 period due primarily to higher interest rates. 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, as well as the normal maintenance shutdown in December at the Company's Peoria, Illinois facility, impact the timing of production, sales and purchases and typically result in a use of cash from operations and increases in the outstanding balance under the Company's revolving credit facility during the first quarter of the year. At March 31, 1995 the Company had working capital of $4 million. Notes payable and current maturities of long-term debt, deductions in the computation of such working capital, aggregated $18.7 million at March 31, 1995 and included outstanding borrowings of $14.5 million under the Company's $35 million revolving credit facility. The amount of available borrowings is based on formula-determined amounts of trade receivables and inventories, less the amount of outstanding letters of credit. Additional borrowings available were $20.2 million at March 31, 1995. The revolving credit facility requires that the Company's daily cash receipts be used to reduce the outstanding borrowings, which results in the Company maintaining zero cash balances. Borrowings under the revolving credit facility currently mature December 31, 1996. Pension contributions and capital expenditures for the first quarter of 1995 were $4.4 million and $2.8 million, respectively, and are currently estimated to be approximately $20.4 million and $20 million for the full year, respectively. Management has budgeted profitable results of operations with sufficient cash flows from operations and financing activities to meet its anticipated operating needs for the remainder of 1995. This budget 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 benefit 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, potential liabilities under environmental laws and regulations with respect to the clean-up and disposal of wastes beyond present accruals, any significant increases in the required minimum fundings to the Company's pension funds or in the cost of providing medical coverage to active and retired employees could have a material adverse affect on the future liquidity, financial condition and results of operations of the Company. Additionally, any significant decline in the Company's markets or market share, any inability to maintain satisfactory billet and rod production levels, or any 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 13 to the Consolidated Financial Statements included in the Annual Report. Note 7 to the Consolidated Financial Statements is incorporate herein by reference. 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, 1995. (b) Reports on Form 8-K filed during the quarter ended March 31, 1995: None. 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, 1995 By /s/Harold M. Curdy Harold M. Curdy Vice President - Finance/Treasurer (Principal Financial Officer) Date: May 5, 1995 By /s/Bert E. Downing, Jr. Bert E. Downing, Jr. Corporate Controller (Principal Accounting Officer) 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, 1995 By ___________________________________ Harold M. Curdy Vice President - Finance/Treasurer (Principal Financial Officer) Date: May 5, 1995 By ___________________________________ Bert E. Downing, Jr. Corporate Controller (Principal Accounting Officer) EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KEYSTONE CONSOLIDATED INDUSTRIES, INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 0 0 45,612 507 37,459 88,018 233,809 153,435 209,661 84,058 14,396 6,357 0 0 (46,673) 209,661 90,768 90,768 83,277 83,277 0 (46) 737 421 166 255 0 0 0 255 .05 .05
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