Keystone Reports 2nd Quarter Results
08/11/2008 - Keystone Consolidated Industries reports net income of $21.9 million on net sales of $178 million for the second quarter, and net income of $35.5 million on net sales of $312.2 million for the first six months of 2008.
Keystone Consolidated Industries, Inc. reported net income of $21.9 million on net sales of $178 million for the second quarter, and net income of $35.5 million on net sales of $312.2 million for the first six months of 2008.
The $21.9 million ($1.81 per diluted share) compares to net income of $17.2 million ($1.72 per diluted share) in the second quarter of 2007. The company said the increase in earnings was due primarily to the net effects of increased selling prices in 2008, increased costs for ferrous scrap and energy in 2008, a lower pension credit in 2008, and a $5.4-million gain on legal settlement recorded in 2007.
Because the amount of the company's net periodic defined benefit pension and other postretirement benefit (OPEB) expense or credits and certain non-recurring gains and losses (such as the 2007 legal settlement) are unrelated to the company’s ongoing operating activities, Keystone measures its overall operating performance using operating income before net pension and OPEB expense or credits and any of these non-recurring items.
Operating income before pension and OPEB for the second quarter of 2008 was significantly higher than operating income before pension and OPEB and legal settlement for the second quarter of 2007. The company said the increase was primarily due to the net effects of the following factors:
- Higher per-ton product selling prices resulting from price increases Keystone implemented to offset increased costs for ferrous scrap as well as increased demand for domestic wire rod.
- Higher bar products shipment volumes due to Calumet's success in regaining former market share and obtaining recurring monthly orders.
- Higher wire rod shipment volumes due to lower quantities of import product available for sale and higher prices for import products as well as the weak U.S. dollar;
- Decreased costs for zinc.
- Cost savings (approximately $500,000) resulting from a reduction-in-force at Keystone's largest manufacturing facility during the first quarter of 2008.
- Lower fabricated wire products shipment volumes of as a result of customer resistance to Keystone's price increases.
- Increased costs for ferrous scrap and natural gas.
- Higher costs in 2008 for certain excise taxes as a result of the expiration of certain exemptions for which Keystone previously qualified.
- Increased employee incentive compensation accruals as a result of increased profitability.
The 2008 pension credit is lower than the pension credit for 2007 due to the component of the pension credit related to the expected return on plan assets; Keystone's plan assets decreased $19.5 million during 2007.
Headquartered in Dallas, Texas, Keystone Consolidated Industries 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.
