SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934




For the quarterly period March 31, 2002          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
 incorporation or organization)                              Identification No.)

 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:         (972) 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 May 10, 2002:  10,068,450




<PAGE>




                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                                      INDEX

                                                                        Page
                                                                       Number

PART I.        FINANCIAL INFORMATION

  Item 1.  Financial Statements

           Consolidated Balance Sheets - December 31, 2001
            and March 31, 2002                                          3

           Consolidated Statements of Operations - Three months
            ended March 31, 2001 and 2002                                5

           Consolidated Statements of Cash Flows - Three months
            ended March 31, 2001 and 2002                                6

           Consolidated Statement of Stockholders' Equity (Deficit) -
            Three months ended March 31, 2002                            7

           Notes to Consolidated Financial Statements                    8

  Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                         18


PART II. OTHER INFORMATION

  Item 1.  Legal Proceedings                                            25

  Item 6.  Exhibits and Reports on Form 8-K                             25


<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)


<TABLE>
<CAPTION>
                                                       December 31,      March 31,
                                   ASSETS                  2001            2002
                                                        ---------        -------

Current assets:
<S>                                                      <C>            <C>
  Notes and accounts receivable ..................       $ 29,411       $ 42,676
  Inventories ....................................         40,912         36,908
  Deferred income taxes ..........................          9,778           --
  Prepaid expenses and other .....................          3,211          2,711
                                                         --------       --------

     Total current assets ........................         83,312         82,295
                                                         --------       --------

Property, plant and equipment ....................        367,556        368,572
Less accumulated depreciation ....................        237,956        242,176
                                                         --------       --------

     Net property, plant and equipment ...........        129,600        126,396
                                                         --------       --------

Other assets:
  Restricted investments .........................          5,675          5,773
  Prepaid pension cost ...........................        131,985        132,735
  Deferred income taxes ..........................         11,844           --
  Deferred financing costs .......................          2,295          2,598
  Goodwill .......................................            752            752
  Other ..........................................          1,437          1,318
                                                         --------       --------

     Total other assets ..........................        153,988        143,176
                                                         --------       --------

                                                         $366,900       $351,867
                                                         ========       ========
</TABLE>






<PAGE>


          See accompanying notes to consolidated financial statements.

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)

<TABLE>
<CAPTION>
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                                                      December 31,     March 31,
                                                         2001            2002
                                                      ----------      ---------

Current liabilities:
  Notes payable and current maturities of
<S>                                                    <C>            <C>
    long-term debt ...............................     $  46,332      $  47,625
  Accounts payable ...............................        23,014         26,689
  Accounts payable to affiliates .................           633            617
  Accrued OPEB cost ..............................         7,215          7,215
  Other accrued liabilities ......................        37,100         39,932
                                                       ---------      ---------

      Total current liabilities ..................       114,294        122,078
                                                       ---------      ---------

Noncurrent liabilities:
  Long-term debt .................................       100,123         50,822
  Accrued OPEB cost ..............................       101,810        102,929
  Negative goodwill ..............................        19,998           --
  Other ..........................................        31,010         22,084
                                                       ---------      ---------

      Total noncurrent liabilities ...............       252,941        175,835
                                                       ---------      ---------

Minority interest ................................             1            161
                                                       ---------      ---------

Redeemable Series A preferred stock ..............          --            2,112
                                                       ---------      ---------

Stockholders' equity (deficit):
  Common stock ...................................        10,792         10,798
  Additional paid-in capital .....................        53,071         53,071
  Accumulated deficit ............................       (64,187)       (12,176)
  Treasury stock, at cost ........................           (12)           (12)
                                                       ---------      ---------

      Total stockholders' equity (deficit) .......          (336)        51,681
                                                       ---------      ---------

                                                       $ 366,900      $ 351,867
                                                       =========      =========
</TABLE>




<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                              Three months ended
                                                                  March 31,
                                                             2001         2002
                                                             ----         ----
Revenues and other income:
<S>                                                        <C>         <C>
  Net sales ............................................   $ 77,763    $ 85,912
  Interest .............................................         71          20
  Other, net ...........................................         77           1
                                                           --------    --------
                                                             77,911      85,933
                                                           --------    --------
Costs and expenses:
  Cost of goods sold ...................................     76,357      77,179
  Selling ..............................................      1,607       1,839
  General and administrative ...........................      3,286       5,915
  Overfunded defined benefit pension credit ............       (750)       (750)
  Interest .............................................      3,746       2,694
                                                           --------    --------
                                                             84,246      86,877
                                                           --------    --------

      Loss before income taxes, extraordinary item and
       cumulative effect of change in accounting
       principle .......................................     (6,335)       (944)

Income tax benefit .....................................     (2,636)       --

Minority interest in after-tax earnings ................          7         160
                                                           --------    --------

    Loss before extraordinary item and cumulative
     effect of change in accounting principle ..........     (3,706)     (1,104)

Extraordinary item, net of income tax ..................       --        33,117
                                                           --------    --------

  Income (loss) before cumulative effect of change in
   accounting principle ................................     (3,706)     32,013

Cumulative effect of change in accounting principle ....       --        19,998
                                                           --------    --------

    Net income (loss) ..................................   $ (3,706)   $ 52,011
                                                           ========    ========

Basic and diluted earnings (loss) per share:
  Loss before extraordinary item and
   cumulative effect of change in accounting principle .   $   (.37)   $   (.11)
  Extraordinary item ...................................       --          3.29
  Cumulative effect of change in accounting principle ..       --          1.99
                                                           --------    --------

    Net income (loss) ..................................   $   (.37)   $   5.17
                                                           ========    ========

Basic and diluted shares outstanding ...................     10,062      10,064
                                                           ========    ========
</TABLE>





<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                  March 31,
                                                              2001        2002
                                                              ----        ----

Cash flows from operating activities:
<S>                                                        <C>         <C>
  Net income (loss) ....................................   $ (3,706)   $ 52,011
  Depreciation and amortization ........................      4,559       4,466
  Amortization of deferred financing costs .............        119         166
  Deferred income taxes ................................     (2,651)       --
  Non-cash OPEB expense ................................         30       1,119
  Extraordinary item ...................................       --       (33,117)
  Cumulative effect of change in accounting principle ..       --       (19,998)
  Other, net ...........................................        156          71
  Change in assets and liabilities:
    Notes and accounts receivable ......................    (18,476)    (14,332)
    Inventories ........................................      3,380       4,004
    Prepaid pension cost ...............................       (750)       (750)
    Accounts payable ...................................     14,371       1,642
    Other, net .........................................     (5,037)      4,409
                                                           --------    --------

      Net cash used by operating activities ............     (8,005)       (309)
                                                           --------    --------

Cash flows from investing activities:
  Capital expenditures .................................       (197)     (1,288)
  Proceeds from sale of business unit ..................        757        --
  Collection of notes receivable .......................         44       1,127
  Other, net ...........................................       --           160
                                                           --------    --------

      Net cash provided (used) by investing activities .        604          (1)
                                                           --------    --------

Cash flows from financing activities:
  Revolving credit facilities, net .....................      7,668         504
  Other notes payable and long-term debt:
    Additions ..........................................       --            38
    Principal payments .................................       (259)        (71)
    Deferred financing costs paid ......................         (8)       (161)
                                                           --------    --------

      Net cash provided by financing activities ........      7,401         310
                                                           --------    --------

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 ................   $  6,030    $  1,341
    Income taxes (refund received) .....................       (184)         69

  Note received in connection with sale
   of business unit ....................................   $    440    $   --
</TABLE>


<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                            CONSOLIDATED STATEMENT OF
                         STOCKHOLDERS' EQUITY (DEFICIT)

                        Three months ended March 31, 2002
                                 (In thousands)


<TABLE>
<CAPTION>
                                       Additional
                                Common   Paid-in  Accumulated Treasury
                                Stock    Capital    Deficit    Stock      Total

<S>                            <C>       <C>       <C>         <C>     <C>
Balance - December 31, 2001    $10,792   $53,071   $(64,187)   $(12)   $   (336)

Net income .................      --        --       52,011     --       52,011

Issuance of common stock ...         6      --         --       --            6
                               -------   -------   --------    ----    --------

Balance - March 31, 2002 ...   $10,798   $53,071   $(12,176)   $(12)   $ 51,681
                               =======   =======   ========    ====    ========
</TABLE>





<PAGE>



                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and basis of presentation:

     The consolidated balance sheet of Keystone  Consolidated  Industries,  Inc.
("Keystone"  or the  "Company") at December 31, 2001 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at March 31, 2002 and the consolidated  statements of
operations and cash flows for the interim periods ended March 31, 2001 and 2002,
and the consolidated statement of stockholders' equity (deficit) for the interim
period ended March 31,  2002,  have each 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 accounting  principles  generally  accepted in the United States
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, 2001 (the "Annual Report").

     At March 31,  2002,  Contran  Corporation  ("Contran")  and other  entities
related to Mr. Harold C. Simmons,  beneficially  owned  approximately 50% of the
Company.  Substantially  all of  Contran's  outstanding  voting stock is held by
trusts  established for the benefit of certain children and grandchildren of Mr.
Simmons,  of which Mr.  Simmons is sole  trustee.  Keystone  may be deemed to be
controlled by Contran and Mr. Simmons.

Note 2 - Inventories:

     Inventories are stated at the lower of cost or market. At December 31, 2001
and March 31, 2002, the last-in, first-out ("LIFO") method was used to determine
the cost of approximately  74% and 73%,  respectively,  of total inventories and
the first-in,  first-out or average cost methods were used to determine the cost
of other inventories.

<TABLE>
<CAPTION>
                                                         December 31,    March 31,
                                                            2001           2002
                                                          --------        ------
                                                               (In thousands)

Steel and wire products:
<S>                                                        <C>           <C>
  Raw materials ....................................       $ 9,818       $ 8,215
  Work in process ..................................         9,912         7,425
  Finished goods ...................................        16,132        16,856
  Supplies .........................................        13,446        12,750
                                                           -------       -------
                                                            49,308        45,246
  Less LIFO reserve ................................        10,768        10,768
                                                           -------       -------
                                                            38,540        34,478

Lawn and garden products - finished goods ..........         2,372         2,430
                                                           -------       -------

                                                           $40,912       $36,908
                                                           =======       =======
</TABLE>

Note 3 - Notes payable and long-term debt:

<TABLE>
<CAPTION>
                                                      December 31,        March 31,
                                                         2001               2002
                                                       --------           -------
                                                              (In thousands)

Revolving credit facilities:
<S>                                                    <C>               <C>
  Keystone ..................................          $ 40,823          $40,271
  EWP .......................................             3,225            3,486
  Garden Zone ...............................             1,738            2,533
8% Notes ....................................              --             29,304
6% Notes ....................................              --             16,031
9 5/8% Notes ................................           100,000            6,150
Other .......................................               669              672
                                                       --------          -------
                                                        146,455           98,447
  Less current maturities ...................            46,332           47,625
                                                       --------          -------

                                                       $100,123          $50,822
                                                       ========          =======
</TABLE>


     During  March 2002,  Keystone  completed an exchange  offer (the  "Exchange
Offer") with respect to its 9 5/8% Notes pursuant to which,  among other things,
holders of $93.9 million  principal amount of the 9 5/8% Notes exchanged their 9
5/8% Notes (along with accrued interest of  approximately  $10.1 million through
the date of exchange,  including  $2.1 million  which  accrued  during the first
quarter of 2002) for various forms of consideration, including newly-issued debt
and equity securities of the Company,  as described below, and such 9 5/8% Notes
were retired:

o    $79.2 million principal amount of 9 5/8% Notes were exchanged for (i) $19.8
     million principal amount of 8% Subordinated Secured Notes due 2009 (the "8%
     Notes") and (ii) 59,399  shares of the Company's  Series A 10%  Convertible
     Pay-In-Kind Preferred Stock,

o    $14.5  million  principal  amount of 9 5/8% Notes were  exchanged for $14.5
     million  principal amount of 6% Subordinated  Unsecured Notes due 2011 (the
     "6% Notes"), and

o    $175,000  principal  amount of 9 5/8% Notes were  exchanged  for $36,000 in
     cash and 6,481 shares of Keystone common stock.

     As a result of the Exchange Offer, the collateral previously securing the 9
5/8% Notes was released,  and the 9 5/8% Note indenture was amended to eliminate
substantially  all  covenants  related  to  the  9  5/8%  Notes,  including  all
financial-related covenants.

     The 8% Notes bear simple  interest at 8% per annum,  one-half of which will
be paid in cash on a semi-annual basis and one-half will be deferred and be paid
together  with the principal in three  installments,  one-third in each of March
2007, 2008 and 2009. The 8% Notes are  collateralized by a second-priority  lien
on substantially  all of the existing fixed and intangible assets of the Company
and its  wholly-owned  subsidiaries  (excluding EWP and Garden Zone LLC ("Garden
Zone")),  other  than  the real  property  and  other  fixed  assets  comprising
Keystone's  steel mill in Peoria,  Illinois,  on which there is a third-priority
lien.  Keystone may redeem the 8% Notes,  at its option,  in whole or in part at
any time  with no  prepayment  penalty.  The 8% Notes  are  subordinated  to all
existing senior indebtedness of Keystone,  including,  without  limitation,  the
revolving credit facilities of Keystone,  EWP and Garden Zone, the new Term Loan
(as defined  below) and,  to the extent of the  Company's  steel mill in Peoria,
Illinois,  the County Loan (as defined  below).  The 8% Notes rank senior to any
expressly subordinated indebtedness of Keystone, including the 6% Notes.

     The 6% Notes bear simple interest at 6% per annum, of which one-fourth will
be paid in cash on a semi-annual basis and three-fourths will accrue and be paid
together  with the principal in four  installments,  one-fourth in each of March
2009, 2010, 2011 and May 2011.  Keystone may redeem the 6% Notes, at its option,
in whole or in part at any time  with no  prepayment  penalty.  The 6% Notes are
subordinated  to all existing and future senior or secured  indebtedness  of the
Company,  including,  without  limitation,  the revolving  credit  facilities of
Keystone,  EWP and Garden Zone,  the new Term Loan (as defined  below),  the new
County Loan (as defined below),  the 8% Notes and any other future  indebtedness
of the Company which is expressly subordinated to the 6% Notes.

     Keystone  accounted for the 9 5/8% Notes  retired in the Exchange  Offer in
accordance  with SFAS No. 15,  Accounting  by Debtors and Creditors for Troubled
Debt Restructurings. In accordance with SFAS No. 15:

o    The 6,481 shares of Keystone  common stock were recorded at their aggregate
     fair  value at  issuance  of $7,000  based on the quoted  market  price for
     Keystone common stock on the date of exchange,

o    The  59,399  shares of Series A  preferred  stock  were  recorded  at their
     aggregate estimated fair value at issuance of $2.1 million,

o    The 8% Notes were  recorded  at their  aggregate  undiscounted  future cash
     flows (both  principal and interest) of $29.3 million,  and thereafter both
     principal and interest payments will be accounted for as a reduction of the
     carrying  amount of the debt,  and no interest  expense will be recognized,
     and

o    The 6% Notes were  recorded  at the $16.0  million  carrying  amount of the
     associated 9 5/8% Notes (both principal and interest),  and future interest
     expense on such debt will be recognized on the effective interest method at
     a rate of 3.8%.

     As a result, for financial  reporting purposes the Company reported a $54.7
million  pre-tax  extraordinary  gain ($33.1 million net of income taxes) in the
first  quarter of 2002 related to the  exchange of the 9 5/8% Notes.  Because of
differences  between  the  income  tax  treatment  and the  financial  reporting
treatment of the  exchange,  the Company  reported  $65.8  million of income for
federal  income tax purposes  resulting from the exchange.  However,  all of the
taxable  income  generated  from the exchange was offset by  utilization  of the
Company's net operating loss carryforwards, and no cash income tax payments were
required to be paid as a result of the exchange.

     As part of its  efforts  to  restructure  the 9 5/8%  Notes,  in April 2002
Keystone  received  a new $10  million  term  loan from the  County  of  Peoria,
Illinois  (the  "County  Loan") and a new $5 million term loan (the "Term Loan")
from the same lender  providing  the Keystone  revolving  credit  facility.  The
County Loan does not bear interest, requires no amortization of principal and is
due in 2007.  The Term Loan bears  interest at prime plus .5% or LIBOR plus 2.5%
at the Company's  option,  with  principal  payments  amortized over a four-year
period and due in March  2005.  The County  Loan is  collateralized  by a second
priority lien on the real property and other fixed assets comprising  Keystone's
steel  mill  in  Peoria,   Illinois.  The  Term  Loan  is  collateralized  by  a
first-priority  lien  on  all  of the  fixed  assets  of  the  Company  and  its
subsidiaries,  other than EWP and Garden Zone.  Proceeds  from the Term Loan and
County  Loan  were  used by  Keystone  to  reduce  the  outstanding  balance  of
Keystone's  revolving  credit  facility.  In addition,  during  April 2002,  the
Company extended  Keystone's  revolving credit facility through March 2005 under
substantially the same terms as the existing facility.

     In addition,  a  wholly-owned  subsidiary of Contran has agreed to loan the
Company up to an aggregate of $6 million  under the terms of a revolving  credit
facility that matures on December 31, 2002. This facility is  collateralized  by
the common stock of EWP owned by Keystone.  Through April 2002,  the Company has
not borrowed any amounts under such facility.

Note 4 - Redeemable Series A preferred stock:

     In connection  with the Exchange  Offer,  Keystone  issued 59,399 shares of
Series A 10%  Convertible  Pay-In-Kind  Preferred Stock (the "Series A Preffered
Stock"). The Series A Preferred Stock has a stated value of $1,000 per share and
has a  liquidation  preference  of $1,000  per share  plus  accrued  and  unpaid
dividends.  The Series A Preferred  Stock has an annual  dividend  commencing in
December 2002 of $100 per share,  and such  dividends may be paid in cash or, at
the Company's  option, in whole or in part in new Series A Preferred Stock based
on their stated  value.  After March 2003,  the Series A Preferred  Stock may be
converted into shares of Keystone common stock at the exchange rate of $4.00 per
share,  and holders of the Series A Preferred  Stock will be entitled to vote on
any matter brought before Keystone shareholders on an as-converted basis, voting
together with Keystone common  shareholders  as a single class.  The Company may
redeem  the  Series A  Preferred  Stock at any time,  in whole or in part,  at a
redemption  price of $1,000 per share plus  accrued  and  unpaid  dividends.  In
addition,  in the event of certain  sales of the  Company's  assets  outside the
ordinary course of business, the Company will be required to offer to purchase a
specified portion of the Series A Preferred Stock, at a purchase price of $1,000
per share plus  accrued  and unpaid  dividends,  based upon the  proceeds to the
Company from such asset sale. Otherwise, holders of the Series A Preferred Stock
have no mandatory redemption rights.

Note 5 - Income taxes:

     At March 31, 2002,  the Company  expects that its  long-term  profitability
should  ultimately  be  sufficient  to enable it to realize  full benefit of its
future tax attributes. However, considering all factors believed to be relevant,
including the Company's recent operating results,  its expected future near-term
productivity  rates;  cost of raw  materials,  electricity,  labor and  employee
benefits,  environmental  remediation,  and retiree medical  coverage;  interest
rates;  product mix; sales volumes and selling prices; and the fact that accrued
OPEB expenses will become deductible over an extended period of time and require
the  Company to  generate  significant  amounts of future  taxable  income,  the
Company  believes  the gross  deferred  tax  assets may not  currently  meet the
"more-likely-than-not" realizability test. As such, during the fourth quarter of
2001,  the  Company  provided  a  deferred  tax  asset  valuation  allowance  of
approximately   $14.5   million.   The  resulting  net  deferred  tax  asset  of
approximately  $21.6 million at December 31, 2001  approximated  the tax expense
for financial  reporting purposes which was recorded during the first quarter of
2002 related to the  cancellation  of  indebtedness  income  resulting  from the
Exchange Offer. As a result of the deferred tax asset valuation  allowance,  the
Company  does not  anticipate  recognizing  a tax  benefit  associated  with its
expected pre-tax losses during 2002 will be appropriate. Accordingly, during the
first quarter of 2002,  the Company  increased the deferred tax asset  valuation
allowance by $361,000.  Keystone will continue to review the  recoverability  of
its deferred tax assets,  and based on such  periodic  reviews,  Keystone  could
recognize a change in the valuation allowance related to its deferred tax assets
in the future.

     Summarized  below are (i) the differences  between the income tax provision
(benefit)  and the amounts that would be expected by applying  the U.S.  federal
statutory income tax rate of 35% to the loss before income taxes,  extraordinary
item and  cumulative  effect  of  change in  accounting  principle  and (ii) the
components of the income tax provision (benefit).

<TABLE>
<CAPTION>
                                                              Three months ended
                                                                  March 31,
                                                              2001        2002
                                                              ----        ----
                                                                (In thousands)

<S>                                                        <C>         <C>
Expected tax provision (benefit), at statutory rate ....   $ (2,217)   $   (330)
U. S. state income taxes, net ..........................       (138)        (35)
Amortization of goodwill and negative goodwill .........       (108)       --
Deferred tax asset valuation allowance .................       --           361
Other, net .............................................       (173)          4
                                                           --------    --------

Income tax provision (benefit) .........................   $ (2,636)   $   --
                                                           ========    ========

Comprehensive provision (benefit) for income taxes:
  Currently refundable:
    U.S. federal .......................................   $     (9)   $     (8)
    U.S. state .........................................         24           8
                                                           --------    --------
      Net currently refundable .........................         15        --

  Deferred income taxes, net ...........................     (2,651)       --
                                                           --------    --------

                                                           $ (2,636)   $   --
                                                           ========    ========

  Comprehensive provision (benefit)
   for income taxes allocable to:
    Income before extraordinary item and cumulative
     effect of change in accounting principle ..........   $ (2,636)   $   --
    Extraordinary item .................................       --        21,622
    Cumulative effect of change in accounting
     principle .........................................       --          --
                                                           --------    --------

                                                           $ (2,636)   $ 21,622
                                                           ========    ========
</TABLE>



<PAGE>


Note 6 - Other accrued liabilities:


<TABLE>
<CAPTION>
                                                        December 31,     March 31,
                                                           2001             2002
                                                         ---------        -------
                                                                (In thousands)

Current:
<S>                                                       <C>            <C>
  Employee benefits ..............................        $11,168        $12,250
  Self insurance .................................          8,906          8,870
  Environmental ..................................          8,068          8,049
  Deferred vendor payments .......................          2,488          3,313
  Legal and professional .........................            887            954
  Disposition of former facilities ...............            530            584
  Interest .......................................          1,287            130
  Other ..........................................          3,766          5,782
                                                          -------        -------

                                                          $37,100        $39,932
                                                          =======        =======
Noncurrent:
  Deferred vendor payments .......................        $13,648        $12,616
  Environmental ..................................          7,508          7,501
  Workers compensation payments ..................          1,762          1,602
  Interest .......................................          7,735           --
  Other ..........................................            357            365
                                                          -------        -------

                                                          $31,010        $22,084
                                                          =======        =======
</TABLE>

     Keystone generally  undertakes  planned major maintenance  activities on an
annual  basis,  usually  in  the  fourth  quarter  of  each  year.  These  major
maintenance  activities are conducted  during a shut-down of the Company's steel
and rod  mills.  Repair  and  maintenance  costs  estimated  to be  incurred  in
connection  with these  planned  major  maintenance  activities  are  accrued in
advance on a straight-line basis throughout the year and are included in cost of
goods sold.

Note 7 - Operations:

     The Company's operations are comprised of two segments; the manufacture and
sale of carbon steel rod, wire and wire products for  agricultural,  industrial,
construction,  commercial,  original equipment manufacturers and retail consumer
markets and the distribution of wire,  plastic and wood lawn and garden products
to retailers through Garden Zone.

     Keystone is also engaged in a scrap recycling joint venture through its 50%
interest in Alter Recycling Company,  L.L.C.  ("ARC"), an unconsolidated  equity
affiliate.

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                 March 31,
                                                           2001           2002
                                                           ----           ----
                                                              (In thousands)

Revenues:
<S>                                                     <C>            <C>
  Steel and wire products ........................      $ 75,313       $ 82,009
  Lawn and garden products .......................         2,798          4,340
                                                        --------       --------
                                                          78,111         86,349
  Elimination of intersegment revenues ...........          (348)          (437)
                                                        --------       --------

                                                        $ 77,763       $ 85,912
                                                        ========       ========

Loss before income taxes, extraordinary
 item and cumulative effect of change in
 accounting principle:
  Operating profit (loss):
    Steel and wire products ......................      $ (3,407)      $  1,870
    Lawn and garden products .....................            78            356
                                                        --------       --------
                                                          (3,329)         2,226

  General corporate items:
    Interest income ..............................            71             20
    General income (expense), net ................           669           (496)
  Interest expense ...............................        (3,746)        (2,694)
                                                        --------       --------

                                                        $ (6,335)      $   (944)
                                                        ========       ========
</TABLE>

Note 8 - Contingencies:

     At March 31, 2002, the Company's  financial  statements  reflected  accrued
liabilities  of  $15.6  million  for  estimated   remedial  costs  arising  from
environmental  issues.  There is no assurance  regarding  the  ultimate  cost of
remedial measures that might eventually be required by environmental authorities
or  that  additional   environmental   hazards,   requiring   further   remedial
expenditures,  might not be asserted  by such  authorities  or private  parties.
Accordingly,  the  ultimate  costs of remedial  measures  may exceed the amounts
currently accrued.

     For additional  information  related to commitments and contingencies,  see
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the Annual Report.

Note 9 - Accounting principles newly adopted in 2002:

     Goodwill.  Effective  January 1, 2002,  the Company  adopted  Statement  of
Financial  Accounting  Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets.  Under SFAS No.  142,  goodwill,  including  goodwill  arising  from the
difference between the cost of an investment  accounted for by the equity method
and the  amount of the  underlying  equity in net assets of such  equity  method
investee  ("equity  method  goodwill"),  is not  amortized on a periodic  basis.
Goodwill (other than equity method goodwill) is subject to an impairment test to
be performed at least on an annual basis,  and impairment  reviews may result in
future periodic  write-downs charged to earnings.  Equity method goodwill is not
tested for  impairment  in  accordance  with SFAS No. 142;  rather,  the overall
carrying  amount of an equity  method  investee will continue to be reviewed for
impairment in accordance with existing GAAP. There is currently no equity method
goodwill associated with any of the Company's equity method investees. Under the
transition provisions of SFAS No. 142, all goodwill existing as of June 30, 2001
ceased to be periodically  amortized as of January 1, 2002.  Also, in connection
with the  adoption of SFAS No. 142,  negative  goodwill of  approximately  $20.0
million  recorded at December 31, 2001 was eliminated as a cumulative  effect of
change in accounting principle as of January 1, 2002.

     The Company has assigned its goodwill to the  reporting  unit (as that term
is defined  in SFAS No.  142)  consisting  of  Engineered  Wire  Products,  Inc.
("EWP").  Under SFAS No. 142,  such goodwill is deemed to not be impaired if the
estimated fair value of EWP exceeds the net carrying value of EWP, including the
allocated  goodwill.  If the fair value of EWP is less than the carrying  value,
then a goodwill  impairment loss is recognized  equal to the excess,  if any, of
the net carrying  value of the  reporting  unit  goodwill  over its implied fair
value  (up to a maximum  impairment  equal to the  carrying  of  goodwill).  The
implied  fair value of EWP  goodwill  is the  amount  equal to the excess of the
estimated  fair value of EWP over the  amount  that  would be  allocated  to the
tangible and  intangible net assets of EWP  (including  unrecognized  intangible
assets) as if such  reporting  unit had been  acquired  in a  purchase  business
combination  accounted for in accordance with SFAS No. 141. The Company will use
appropriate valuation techniques, such as discounted cash flows, to estimate the
fair value of EWP.

     The Company has completed  its initial,  transitional  goodwill  impairment
analysis  under SFAS No. 142 as of January 1, 2002,  and no goodwill  impairment
was deemed to exist.  In  accordance  with  requirements  of SFAS No.  142,  the
Company will review  goodwill for  impairment  during the third  quarter of each
year starting in 2002.  Goodwill  will also be reviewed for  impairment at other
times  during  each year when  events or changes in  circumstances  indicate  an
impairment might be present.

     As shown in the following table, the Company would have reported a net loss
of $4.0  million or $.40 per share  during the three months ended March 31, 2001
if the goodwill and negative goodwill amortization included in the Company's net
loss, as reported, had not been recognized.

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                March 31,
                                                          2001             2002
                                                          ----             ----
                                                      (In thousands, except per share
                                                               amounts)


Loss before extraordinary item and
 cumulative effect of change in accounting
<S>                                                       <C>        <C>
 principle as reported ................................   $(3,706)   $   (1,104)
Adjustments:
  Goodwill amortization ...............................        32          --
  Negative goodwill amortization ......................      (339)         --
                                                          -------    ----------
    Adjusted loss before extraordinary item and
     cumulative effect of change in accounting
     principle ........................................   $(4,013)   $   (1,104)
                                                          =======    ==========

Basic and diluted loss per share before extraordinary
 item and cumulative effect of change in accounting
 principle as reported ................................   $  (.37)   $     (.11)
Adjustments:
  Goodwill amortization ...............................      --            --
  Negative goodwill amortization ......................      (.03)         --
                                                          -------    ----------
    Adjusted basic and diluted loss per share before
     extraordinary item and cumulative effect of
     change in accounting principle ...................   $  (.40)   $     (.11)
                                                          =======    ==========

Net income (loss) as reported .........................   $(3,706)   $   52,011
Adjustments:
  Goodwill amortization ...............................        32          --
  Negative goodwill amortization ......................      (339)         --
  Cumulative effect of change in accounting principle .      --         (19,998)
                                                          -------    ----------

    Adjusted net income (loss) ........................   $(4,013)   $   32,013
                                                          =======    ==========

Basic and diluted earnings per share as reported ......   $  (.37)   $     5.17
Adjustments:
  Goodwill amortization ...............................      --            --
  Negative goodwill amortization ......................      (.03)         --
  Cumulative effect of change in accounting principle .      --           (1.99)
                                                          -------    ----------

    Adjusted basic and diluted earnings per share .....   $  (.40)   $     3.18
                                                          =======    ==========
</TABLE>


     Impairment  of  long-lived  assets.  The  Company  adopted  SFAS  No.  144,
Accounting  for the  Impairment  or Disposal  of  Long-Lived  Assets,  effective
January 1, 2002.  SFAS No. 144 retains the  fundamental  provisions  of existing
GAAP with  respect  to the  recognition  and  measurement  of  long-lived  asset
impairment  contained  in  SFAS  No.  121,  Accounting  for  the  Impairment  of
Long-Lived  Assets and for Lived-Lived  Assets to be Disposed Of. However,  SFAS
No. 144 provides new guidance intended to address certain  implementation issues
associated  with SFAS No.  121,  including  expanded  guidance  with  respect to
appropriate  cash  flows  to be used to  determine  whether  recognition  of any
long-lived  asset  impairment  is  required,  and if required how to measure the
amount of the  impairment.  SFAS No. 144 also requires that any net assets to be
disposed of by sale to be reported at the lower of carrying  value or fair value
less cost to sell,  and expands the  reporting  of  discontinued  operations  to
include any  component of an entity with  operations  and cash flows that can be
clearly distinguished from the rest of the entity.  Adoption of SFAS No. 144 did
not have a significant effect on the Company as of January 1, 2002.

Note 10 - Accounting principle not yet adopted:

     The  Company  will  adopt SFAS No.  143,  Accounting  for Asset  Retirement
Obligations,  no later than January 1, 2003.  Under SFAS No. 143, the fair value
of a liability  for an asset  retirement  obligation  covered under the scope of
SFAS No.  143  would be  recognized  in the  period in which  the  liability  is
incurred,  with an  offsetting  increase in the  carrying  amount of the related
long-lived  asset.  Over time,  the  liability  would be accreted to its present
value, and the capitalized cost would be depreciated over the useful life of the
related asset.  Upon settlement of the liability,  an entity would either settle
the obligation for its recorded amount or incur a gain or loss upon  settlement.
The Company is still  studying this  standard to determine,  among other things,
whether it has any asset  retirement  obligations  which are  covered  under the
scope of SFAS No. 143, and the effect,  if any, to the Company of adopting  SFAS
No. 143 has not yet been determined.

     The Company will adopt SFAS No. 145 no later than January 1, 2003. SFAS No.
145,  among other things,  eliminates the prior  requirement  that all gains and
losses  from  the  early  extinguishment  of  debt  are to be  classified  as an
extraordinary  item.  Upon  adoption of SFAS No. 145,  gains and losses from the
early extinguishment of debt will be classified as an extraordinary item only if
they meet the  "unusual and  infrequent"  criteria  for  extraordinary  items in
Accounting Principles Bulletin Opinion ("APBO") No. 30. In addition,  subsequent
to  adoption of SFAS No. 145,  any gain or loss on the early  extinguishment  of
debt that had been  classified  as an  extraordinary  item in prior periods will
have to be reassessed to determine if they meet the criteria of APBO No. 30. Any
such  gain or loss  that  does  not  meet  the  APBO  No.  30  criteria  will be
retroactively reclassified and reported as a component of income from continuing
operations.  The  Company is still  studying  SFAS No. 145 to  determine  if the
Company's gain on extinguishment of debt resulting from the Exchange Offer meets
the criteria of APBO No. 30, and the effect,  if any, to the Company of adopting
SFAS No. 145 has not yet been determined.




<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS:

     Keystone  believes it is a leading  manufacturer  of steel  fabricated wire
products, industrial wire and carbon steel rod for the agricultural, industrial,
construction,  original  equipment  manufacturer  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. Keystone
is also engaged in the  distribution  of wire,  plastic and wood lawn and garden
products to retailers through Garden Zone and in scrap recycling through ARC.

     As  provided  by the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995,  the Company  cautions  that  statements in this
Quarterly  Report on Form 10-Q relating to matters that are not historical facts
including, but not limited to, statements found in this "Management's Discussion
And  Analysis  Of  Financial   Condition   And  Results  Of   Operations",   are
forward-looking  statements that represent  management's  belief and assumptions
based on currently  available  information.  Forward-looking  statements  can be
identified 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 such forward-looking statements are reasonable, it cannot give any assurances
that these  expectations  will prove to be  correct.  Such  statements  by their
nature involve  substantial  risks and  uncertainties  that could  significantly
impact expected results,  and actual future results could differ materially from
those described in such forward-looking statements.  While it is not possible to
identify all factors,  Keystone  continues to face many risks and uncertainties.
Among the factors that could cause actual  future  results to differ  materially
are the risks and  uncertainties  discussed in this  Quarterly  Report and those
described  from time to time in the Company's  other filings with the Securities
and Exchange Commission, including, but not limited to, future supply and demand
for the Company's products (including  cyclicality thereof),  customer inventory
levels,  changes in raw  material and other  operating  costs (such as scrap and
energy)  general  economic  conditions,   competitive  products  and  substitute
products,  customer  and  competitor  strategies,  the  impact  of  pricing  and
production  decisions,  the  possibility  of  labor  disruptions,  environmental
matters (such as those requiring  emission and discharge  standards for existing
and new facilities),  government  regulations and possible changes therein,  any
significant increases in the cost of providing medical coverage to employees and
retirees,   the   ultimate   resolution   of  pending   litigation,   successful
implementation of the Company's capital  improvements plan,  international trade
policies of the United States and certain  foreign  countries,  and any possible
future  litigation  and  other  risks and  uncertainties  as  discussed  in this
Quarterly  Report and the Annual  Report,  including,  without  limitation,  the
section referenced above. 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.

     The following table sets forth Keystone's steel and wire production,  scrap
costs, sales volume and pricing data for the periods indicated:

<TABLE>
<CAPTION>
                                                               Three months ended
                                                                    March 31,
                                                               2001          2002
                                                               ----          ----
                                                               (Tons in thousands)

Production volume (tons):
<S>                                                             <C>          <C>
  Billets ............................................          163          175
  Wire rod ...........................................          150          182

Average per-ton scrap purchase cost ..................         $ 88         $ 82

Sales volume (tons):
  Fabricated wire products ...........................           71           75
  Industrial wire ....................................           27           25
  Wire rod ...........................................           64           81
                                                               ----         ----

                                                                162          181
                                                               ====         ====

Per-ton selling prices:
  Fabricated wire products ...........................         $671         $662
  Industrial wire ....................................          430          423
  Wire rod ...........................................          250          269
  All steel and wire products ........................          464          452
</TABLE>

     The  following  table sets forth the  components of the Company's net sales
for the periods indicated.

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                 March 31,
                                                                (In millions)
                                                           2001             2002
                                                           ----             ----

Steel and wire products:
<S>                                                        <C>             <C>
  Fabricated wire products .....................           $47.5           $49.4
  Industrial wire ..............................            11.4            10.6
  Wire rod .....................................            16.2            21.8
  Other ........................................              .2              .2
                                                           -----           -----
                                                            75.3            82.0

Lawn and garden products .......................             2.5             3.9
                                                           -----           -----
                                                           $77.8           $85.9
                                                           =====           =====
</TABLE>



     The following  table sets forth  selected  operating  data of Keystone as a
percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                  March 31,
                                                             2001         2002
                                                             ----         ----

<S>                                                          <C>         <C>
Net sales ..............................................     100.0%      100.0%
Cost of goods sold .....................................      98.2        89.8
                                                             -----       -----
Gross profit ...........................................       1.8%       10.2%
                                                             =====       =====

Selling expense ........................................       2.1%        2.1%
General and administrative expense .....................       4.2%        6.9%
Overfunded defined benefit pension credit ..............      (1.0)%       (.9)%

Loss before income taxes, extraordinary item
 and cumulative effect of change in accounting
 principle .............................................      (8.1)%      (1.1)%
Income tax benefit .....................................      (3.4)       --
                                                             -----       -----

Loss before extraordinary item and cumulative
 effect of change in accounting principle ..............      (4.7)%      (1.1)%
                                                             =====       =====
</TABLE>

     Net sales of $85.9 million in the 2002 first quarter were up 10% from $77.8
million  during the same period in 2001.  The increase in sales was due to a 12%
increase in shipments of the Company's steel and wire products  partially offset
by a 3% overall  decrease  in steel and wire  product  per-ton  selling  prices.
Management  believes high levels of imports of steel and wire products  continue
to depress  per-ton  selling  prices.  However,  the increase in shipment volume
during the 2002 first  quarter  was due  primarily  to lower 2001 first  quarter
shipments resulting from production  problems during that quarter.  Shipments of
wire rod increased 27% while  per-ton  selling  prices of wire rod increased 8%.
Industrial  wire  shipments  during 2002 declined 7% from the 2001 quarter while
per-ton selling prices declined 2%. Fabricated wire product shipments  increased
6% during the 2002 first  quarter as  compared to the 2001 first  quarter  while
per-ton  selling  prices  declined 1%. The lower  per-ton  selling  price of the
Company's  steel and wire  products  during  the 2002  first  quarter  adversely
impacted total net sales by $2.1 million.

     Billet  production  of  175,000  tons  during  the  first  quarter  of 2002
increased 7% from 2001's first quarter  production  level of 163,000  tons.  The
production  increase  was due  primarily to lower  production  in the 2001 first
quarter as a result of a ladle breakout that occurred at Keystone's electric arc
furnace during March 2001. This breakout  resulted in lost billet  production of
approximately  17,000 tons.  Keystone  did not  purchase any billets  during the
first quarter of either year. Wire rod production  increased 21% to 182,000 tons
from 150,000 tons in the 2001 first quarter.  The increase in rod production was
due primarily to the higher billet production.

     Gross profit during the 2002 first  quarter  increased to $8.7 million from
$1.4 million in the 2001 first quarter as the Company's  gross margin  increased
from 1.8% in the 2001 period to 10.2% in the 2002 first  quarter.  This increase
in gross margin was due  primarily  to lower costs for scrap  steel,  Keystone's
primary raw material,  lower  utility  costs and the adverse  effect of the 2001
furnace  breakout,  all partially  offset by the lower overall  per-ton  selling
price of the Company's  steel and wire  products.  In addition,  during the 2001
first  quarter,  the Company  received  $1.6 million of insurance  proceeds from
business  interruption  policies related to incidents in prior years as compared
to $428,000 received during the 2002 first quarter.  The lower scrap and utility
costs between the 2001 and 2002 first quarters  favorably  impacted gross profit
by $1.2 million and $1.0 million,  respectively.  The adverse effect of the 2001
furnace breakout amounted to approximately $800,000.

     Selling  expenses  in the 2002 first  quarter of $1.8  million  were,  as a
percentage of sales,  comparable  with selling  expenses in the first quarter of
2001 of $1.6 million.

     General and administrative expenses during the 2002 first quarter increased
$2.6 million to $5.9  million  from $3.3  million in the 2001 first  quarter due
primarily  to higher  legal and  professional  and OPEB  expenses  in 2002 and a
$650,000 reimbursement of legal fees received in 2001.

     The overfunded  defined benefit pension credit in the first quarter of both
2002 and 2001 was  $750,000.  Keystone  currently  anticipates  the  total  2002
overfunded defined benefit pension credit will approximate $3.0 million.

     Interest  expense  in the first  quarter  of 2002 was lower  than the first
quarter of 2001 due  principally to lower debt levels and lower interest  rates.
Average  borrowings  by the  Company  approximated  $137.8  million in the first
quarter of 2002 as  compared  to $150.0  million  in the first  quarter of 2001.
During the first quarter of 2002, the Company's  weighted-average  interest rate
was 7.7% per annum as compared to 9.5% per annum in the first quarter of 2001.

     The principal reasons for the difference between the U.S. federal statutory
income tax rate and the  Company's  effective  income tax rates are explained in
Note 5 to the Consolidated Financial Statements.  At March 31, 2002, the Company
had recorded a deferred tax asset valuation allowance of $14.9 million resulting
in no net deferred tax assets.  Keystone periodically reviews the recoverability
of  its  deferred  tax  assets  to  determine   whether  such  assets  meet  the
"more-likely-than-not" recognition criteria. The Company will continue to review
the  recoverability  of its  deferred  tax  assets,  and based on such  periodic
reviews,  Keystone could recognize a change in the recorded valuation  allowance
related to its  deferred  tax assets in the future.  As a result of the deferred
tax asset valuation allowance, the Company does not anticipate recognizing a tax
benefit  associated  with  its  expected  pre-tax  losses  during  2002  will be
appropriate.

     In the first  quarter of 2002,  the Company  completed  an  exchange  offer
related  to its 9 5/8% Notes  whereby  94% of the  holders of the 9 5/8%  Notes,
exchanged their notes for either a discounted cash amount and common stock,  new
preferred  equity and  subordinated  secured debt  securities,  or  subordinated
unsecured debt  securities (the "Exchange  Offer").  As a result of the Exchange
Offer,  for financial  reporting  purposes the Company  reported a $54.7 million
pre-tax  extraordinary  gain ($33.1 million net of income taxes).  See Note 3 to
Consolidated Financial Statements.

     During the 2002 first quarter,  the Company adopted  Statement of Financial
Accounting  Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. As
a result of adopting  SFAS No. 142,  negative  goodwill of  approximately  $20.0
million  recorded at January 1, 2002 was  eliminated  as a cumulative  effect of
change  in  accounting  principle  at  that  date.  See  Note 9 to  Consolidated
Financial Statements.

     As a result of the items  discussed  above,  Keystone  recorded  net income
during the first  quarter of 2002 of $52.0  million as compared to a net loss of
$3.7 million in the first quarter of 2001.


Outlook for 2002

     Management  currently  believes,  despite the current level of rod imports,
capacity  utilization and shipment volumes in 2002 will approximate 2001 levels.
Although the 2002 first quarter  average  per-ton  selling  prices were slightly
higher than the 2001 fourth quarter per-ton selling prices, management currently
believes for the year 2002,  average  per-ton  selling  prices will  approximate
those  of  the  fourth  quarter  of  2001.  In  addition,  management  currently
anticipates  the effect of higher energy and OPEB costs, a lower pension credit,
offset in part by lower interest costs, will result in Keystone recording a loss
before income taxes  (exclusive of  non-recurring  effects of the Exchange Offer
and adoption of SFAS No. 142) for calendar 2002,  although,  both operating loss
and pre-tax loss are expected to decline in 2002 as compared to 2001 levels.

Accounting principle not yet adopted

     See Note 10 to the Consolidated Financial Statements.

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  impact  the timing of  production,  sales and  purchases  and have
typically  resulted  in a use of  cash  from  operations  and  increases  in the
outstanding  balance under  Keystone's  revolving credit  facilities  during the
first quarter of each year.

     At March 31, 2002 Keystone had negative  working  capital of $39.8 million,
including $1.3 million of notes payable and current maturities of long-term debt
as  well  as  outstanding   borrowings  under  the  Company's  revolving  credit
facilities  of $46.3  million.  The amount of available  borrowings  under these
revolving  credit  facilities  is based on  formula-determined  amounts of trade
receivables and inventories,  less the amount of outstanding  letters of credit.
At March 31, 2002,  unused credit  available for borrowing under  Keystone's $45
million revolving credit facility (the "Keystone Revolver"), which expires March
31, 2005, as amended in April 2002, EWP's $7 million  revolving credit facility,
which  expires June 30, 2002 (the "EWP  Revolver")  and Garden Zone's $4 million
revolving credit facility, which expires July 2, 2002, as amended in April 2002,
the ("Garden Zone Revolver") were $3.5 million,  $2.1 million, and $1.5 million,
respectively.  In April 2002, Keystone received a $10 million term loan and a $5
million term loan.  Proceeds from the term loans were used by Keystone to reduce
the outstanding  balance of the Keystone  Revolver.  As a result,  unused credit
availability  under the Keystone  Revolver had  increased to $11.5 million as of
May 10, 2002.  The Keystone  Revolver  requires  daily cash  receipts be used to
reduce  outstanding  borrowings,  which results in the Company  maintaining zero
cash balances when there are balances  outstanding  under this credit  facility.
Keystone  currently  intends to renew or replace  both the EWP  Revolver and the
Garden Zone  Revolver  upon their  respective  maturities  in June 2002 and July
2002. A wholly-owned  subsidiary of Contran has agreed to loan Keystone up to an
aggregate  of $6 million  under the terms of a revolving  credit  facility  that
matures on December 31, 2002. Through May 10, 2002, the Company had not borrowed
any amounts under such facility.

     In  addition,  in  connection  with the  Exchange  Offer,  during the first
quarter  of 2002,  two of the  Company's  major  vendors  agreed to a  five-year
non-interest bearing repayment of their past due balances which aggregated $16.1
million.

     During the first  quarter of 2002,  Keystone's  operating  activities  used
approximately  $309,000  of cash  compared  to $8.0  million  used in the  first
quarter  of 2001,  due  primarily  to  higher  earnings,  a higher  increase  in
receivables and a lower increase in accounts payable.

     During the first quarter of 2002, the Company made capital  expenditures of
approximately  $1.3  million as compared to $197,000 in the 2001 first  quarter.
During  2001  and  the  first  quarter  of  2002,   Keystone   deferred  capital
expenditures,   including  maintenance  items,  due  to  liquidity  constraints,
although  many  of  these  items  cannot  be  deferred   indefinitely.   Capital
expenditures for calendar year 2002 are currently  estimated to be approximately
$10 million  and are related  primarily  to  upgrades of  production  equipment.
Keystone currently  anticipates these capital  expenditures will be funded using
cash  flows from  operations  together  with  borrowing  availability  under the
Company's credit facilities.

     At March 31, 2002, the Company's  financial  statements  reflected  accrued
liabilities  of  $15.6  million  for  estimated   remediation  costs  for  those
environmental matters which Keystone believes are reasonably estimable. Although
the  Company  has   established  an  accrual  for  estimated   future   required
environmental  remediation costs,  there is no assurance  regarding the ultimate
cost of remedial  measures that might  eventually  be required by  environmental
authorities or that additional environmental hazards, requiring further remedial
expenditures,  might not be asserted  by such  authorities  or private  parties.
Accordingly,  the costs of remedial  measures  may exceed the  amounts  accrued.
Keystone  believes it is not possible to estimate the range of costs for certain
sites. The upper end of range of reasonably possible costs to Keystone for sites
for which the Company believes it is possible to estimate costs is approximately
$22.0 million.

     The Company  periodically  reviews the  recoverability  of its deferred tax
assets  to  determine  whether  such  assets  meet  the   "more-likely-than-not"
recognition  criteria. At March 31, 2002, the Company expects that its long-term
profitability  should  ultimately  be  sufficient  to enable it to realize  full
benefit of its future tax deductions. Although, considering all factors believed
to be relevant,  including the Company's recent operating results,  its expected
future near-term productivity rates; cost of raw materials,  electricity,  labor
and employee benefits,  environmental remediation, and retiree medical coverage;
interest rates;  product mix; sales volumes and selling prices and the fact that
accrued OPEB expenses will become deductible over an extended period of time and
require the Company to generate  significant  amounts of future taxable  income,
the Company  believes the gross  deferred tax assets may not currently  meet the
"more-likely-than-not"  realizability  test. As such, the Company has a deferred
tax asset valuation allowance of approximately  $14.9 million.  The Company will
continue to review the  recoverability of its deferred tax assets,  and based on
such periodic reviews,  the Company could change the valuation allowance related
to its deferred tax assets in the future.

     Keystone  incurs  significant  ongoing  costs for plant and  equipment  and
substantial employee medical benefits for both current and retired employees. As
such,  Keystone is vulnerable to business  downturns and increases in costs, and
accordingly,  routinely  compares its liquidity  requirements  and capital needs
against  its  estimated  future  operating  cash  flows.  In addition to planned
reductions in fixed costs and  announced  increases in certain  product  selling
prices,  Keystone is taking  additional  action towards improving its liquidity.
These actions include, but are not limited to, reducing inventory levels through
more  efficient  production  schedules and modifying  coverages and  participant
contribution  levels of medical plans for both employees and retirees.  Keystone
has  also  considered,  and may in the  future  consider,  the  sale of  certain
divisions  or  subsidiaries  that are not  necessary  to achieve  the  Company's
long-term business objectives.  However, there can be no assurance Keystone will
be successful in any of these or other efforts, or that if successful, they will
provide sufficient liquidity for the Company's operations during the next year.

     Management  currently  believes  cash flows from  operations  together with
funds available under the Company's credit facilities will be sufficient to fund
the anticipated needs of the Company's  operations and capital  improvements for
the year  ending  December  31,  2002.  This  belief 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  benefits and other fixed and variable  costs,  interest rates,
repayments of long-term debt,  capital  expenditures,  and available  borrowings
under the  Company's  credit  facilities.  However,  there are many factors that
could cause actual future results to differ materially from management's current
assessment. While it is not possible to identify all factors, Keystone continues
to face many risks and uncertainties.  Among the factors that could cause actual
future results to differ materially are the risks and uncertainties discussed in
this  Quarterly  Report and those  described  from time to time in the Company's
other filings with the Securities and Exchange  Commission,  including,  but not
limited  to,  future  supply and demand for the  Company's  products  (including
cyclicality  thereof),  customer  inventory levels,  changes in raw material and
other operating costs (such as scrap and energy),  general economic  conditions,
competitive   products  and   substitute   products,   customer  and  competitor
strategies,  the impact of pricing and production decisions,  the possibility of
labor disruptions,  environmental  matters (such as those requiring emission and
discharge standards for existing and new facilities), government regulations and
possible  changes  therein,  any significant  increases in the cost of providing
medical  coverage to active and retired  employees,  the ultimate  resolution of
pending  litigation,  international  trade  policies  of the  United  States and
certain foreign countries and any possible future litigation and other risks and
uncertainties as discussed in this Quarterly Report. 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  and as a result,  could have a
material adverse effect on the future liquidity, financial condition and results
of  operations  of  the  Company.  Additionally,  significant  declines  in  the
Company's   end-user   markets  or  market  share,  the  inability  to  maintain
satisfactory  billet  and wire rod  production  levels,  or 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.  See Notes 12 and 14 to the
Consolidated Financial Statements in the Annual Report.




<PAGE>


PART II.

ITEM 1. Legal Proceedings

     Reference  is  made to  disclosure  provided  under  the  caption  "Current
litigation" in Note 14 to the Consolidated  Financial Statements included in the
Annual Report.

ITEM 6. Exhibits and Reports on Form 8-K.
        --------------------------------

(a)     The following exhibits are included herein:

        None

(b)     Reports on Form 8-K filed during the quarter ended March 31, 2002:

        None


<PAGE>


                               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 14, 2002               By /s/Bert E. Downing, Jr.
                                     ----------------------------------
                                    Bert E. Downing, Jr.
                                    Vice President and Corporate Controller
                                    (Principal Financial and Accounting Officer)




<PAGE>