Keystone Reports Q2 2010 Results
08/09/2010 - Keystone Consolidated Industries, Inc. reported net income of $6.7 million, or $0.56 per diluted share, in the second quarter of 2010 vs. net income of $1.0 million, or $0.08 per diluted share, for the same period last year. Sales volume was also significantly higher, resulting in more normal production schedules throughout the quarter.
Keystone Consolidated Industries, Inc. reported net income of $6.7 million, or $0.56 per diluted share, in the second quarter of 2010 vs. net income of $1.0 million, or $0.08 per diluted share, for the same period last year.
Sales volume was significantly higher during this year’s second quarter at 173,000 tons vs. 84,000 tons last year, resulting in more normal production schedules throughout the quarter, Keystone noted. Average per-ton selling prices for the second quarter were $773 compared to $838 last year.
During Q2 2009, the company operated on an extremely reduced production schedule, which resulted in a much higher percentage of fixed costs included in cost of goods sold, as these costs could not be capitalized into inventory.
Operating income as reported was $11.48 million in Q2 2010 vs. last year’s figure of $2.511 million. Operating income before pension and OPEB (other postretirement benefit) was $8.926 million compared to $2.764 million in Q2 2009.
Ferrous scrap costs increased during the first five months of 2010; Keystone implemented selling price increases to compensate for higher costs resulting in higher per-ton selling prices for most of its product lines. Because Keystone sold a higher volume of lower-priced products in Q2 2010, the result was a lower average per-ton selling price than the 2009 second quarter.
Other items affecting the comparability of Keystone's operating performance before pension and OPEB include:
- Increased utility costs at the company's largest manufacturing facility during the 2010 second quarter primarily due to extreme weather conditions
- An impairment charge to reduce certain inventories to net realizable value of $849,000 during Q2 2009, as compared to nominal impairment charges during the second quarter of 2010
- Bad debt expense of $1.6 million during the second quarter of 2009 primarily due to the Chapter 11 proceedings of one of Keystone's customers
- Higher incentive compensation expense during Q2 2010 due to increased profitability
- A $5.5 million decrease in the company's LIFO reserve and cost of goods sold during the second quarter of 2009 as compared to a $265,000 decrease during Q2 2010
- A $4.2 million credit to general and administrative expense during the 2009 second quarter related to the release of accrued environmental costs for certain inactive waste management units.
Primarily due to a $58 million increase in Keystone's pension plans' assets during 2009, the company currently expects to record a defined benefit pension credit of $4.9 million during 2010 as compared to the $5.9 million defined benefit pension expense recorded during 2009.
Keystone Consolidated Industries, Inc., headquartered in Dallas, Tex., is a leading manufacturer of steel fabricated wire products, industrial wire, and wire rod. It also manufactures wire mesh, coiled rebar, steel bar, and other products. The company's products are used in the agricultural, industrial, cold drawn, construction, transportation, original equipment manufacturer, and retail consumer markets.
