Business segment information

12 Months Ended

Dec. 31, 2012

Business segment information

Note 2 – Business segment information:

Our operating segments are organized by our manufacturing facilities and include three reportable segments. Each operating segment is separately managed, and each operating segment represents a strategic business unit offering different products as follows:

• Keystone Steel & Wire (“KSW”), located in Peoria, Illinois, operates an electric arc furnace mini-mill, rod mill, industrial wire mill and wire fabrication facilities and manufactures and sells wire rod, coiled rebar, industrial wire, fabricated wire and other products to agricultural, industrial, construction, commercial, original equipment manufacturers and retail consumer markets;

• Engineered Wire Products, Inc. (“EWP”), located in Upper Sandusky, Ohio, primarily manufactures and sells wire mesh in both roll and sheet form that is utilized as reinforcement in concrete construction products including pipe, pre-cast boxes and applications for use in roadways, buildings and bridges; and

• Keystone-Calumet, Inc. (“Calumet”), located in Chicago Heights, Illinois, manufactures and sells merchant and special bar quality products and special sections in carbon and alloy steel grades for use in agricultural, cold drawn, construction, industrial chain, service centers and transportation applications as well as in the production of a wide variety of products by original equipment manufacturers.

Calumet’s primary raw material is billet and EWP’s primary raw material is wire rod. Both Calumet and EWP source the majority of their primary raw material requirements from KSW. Sales between reportable segments are generally recorded at prices that approximate market prices to third-party customers.

The accounting policies of our segments are the same as those described in the summary of significant accounting policies except that no defined benefit pension or OPEB expense or credits are recognized and the elimination of intercompany profit or loss on ending inventory balances is not allocated to each segment.

	Years ended December 31,
	2010			2011			2012
	(In thousands)
Net sales:
KSW	$	433,729		$	544,011		$	520,207
EWP		41,310			55,928			59,468
Calumet		22,987			30,905			28,543
Elimination of intersegment sales		(47,281	)		(66,859	)		(60,561	)
Total net sales	$	450,745		$	563,985		$	547,657
Operating income (loss):
KSW	$	15,111		$	22,302		$	23,037
EWP		(362	)		1,840			3,004
Calumet		97			149			(3,192	)
Defined benefit pension credit		4,654			24,388			6,858
OPEB credit		5,258			5,799			6,075
Other(1)		(2,873	)		(2,910	)		(1,884	)
Total operating income		21,885			51,568			33,898
Nonoperating income (expense):
Interest expense		(1,863	)		(1,218	)		(1,213	)
Other, net		637			699			(518	)
Income before income taxes	$	20,659		$	51,049		$	32,167

⁽¹⁾  Other items primarily consist of the elimination of intercompany profit or loss on ending inventory balances and general corporate expenses.

Substantially all of our assets are located in the United States. Segment assets are comprised of all assets attributable to each reportable operating segment. Corporate assets consist principally of the pension asset, deferred tax assets and corporate property, plant and equipment.

	December 31,
	2010		2011		2012
	(In thousands)
Total assets:
KSW	$	165,350	$	192,270	$	193,148
EWP		23,757		28,069		31,536
Calumet		14,820		18,865		15,904
Corporate		168,552		88,743		120,241
Total	$	372,479	$	327,947	$	360,829

	Years ended December 31,
	2010		2011		2012
	(In thousands)
Depreciation:
KSW	$	9,874	$	9,160	$	9,364
EWP		1,593		1,397		1,271
Calumet		481		576		702
Corporate		114		101		69
Total	$	12,062	$	11,234	$	11,406
Capital expenditures:
KSW	$	13,456	$	14,720	$	12,311
EWP		528		289		648
Calumet		953		1,470		1,137
Total	$	14,937	$	16,479	$	14,096

Most of our products are distributed in the Midwestern and Southeastern regions of the United States. Information concerning geographic concentration of net sales based on location of customer is as follows:

	Years ended December 31,
	2010		2011		2012
	(In thousands)
United States	$	446,972	$	559,510	$	542,000
Canada		2,982		3,669		5,075
Other		791		806		582
Total	$	450,745	$	563,985	$	547,657