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 September 30, 2001

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 November 15, 2001: 10,061,969



<PAGE>





                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                                      INDEX


                                                                        Page
                                                                       number

PART I.  FINANCIAL INFORMATION

  Item 1.         Financial Statements

                  Consolidated Balance Sheets - December 31, 2000
                   and September 30, 2001                                3-4

                  Consolidated Statements of Operations - Three months
                   and nine months ended September 30, 2000 and 2001      5

                  Consolidated Statements of Cash Flows - Nine months
                   ended September 30, 2000 and 2001                      6

                  Consolidated Statement of Stockholders' Equity - Nine
                   months ended September 30, 2001                        7

                  Notes to Consolidated Financial Statements            8-14

  Item 2.         Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                 15-24

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,   September 30,
                     ASSETS                                2000           2001
                                                       -----------      --------

Current assets:
<S>                                                      <C>            <C>
  Notes and accounts receivable ..................       $ 21,813       $ 36,105
  Inventories ....................................         52,004         40,393
  Deferred income taxes ..........................         16,828         16,297
  Prepaid expenses and other .....................            786          1,511
                                                         --------       --------

     Total current assets ........................         91,431         94,306
                                                         --------       --------

Property, plant and equipment ....................        367,695        366,881
Less accumulated depreciation ....................        222,999        233,943
                                                         --------       --------

     Net property, plant and equipment ...........        144,696        132,938
                                                         --------       --------

Other assets:
  Restricted investments .........................          5,969          5,777
  Prepaid pension cost ...........................        126,506        128,756
  Deferred income taxes ..........................         10,696         16,204
  Deferred financing costs .......................          2,685          2,348
  Goodwill .......................................            877            783
  Other ..........................................          2,843          2,443
                                                         --------       --------

     Total other assets ..........................        149,576        156,311
                                                         --------       --------

                                                         $385,703       $383,555
                                                         ========       ========
</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         December 31,      September 30,
                                                       2000               2001
                                                    -----------         --------

Current liabilities:
  Notes payable and current maturities of
<S>                                                  <C>              <C>
    long-term debt ...........................       $  45,728        $ 148,732
  Accounts payable ...........................          34,614           37,379
  Accrued OPEB cost ..........................           8,767            8,767
  Other accrued liabilities ..................          41,565           42,676
                                                     ---------        ---------

      Total current liabilities ..............         130,674          237,554
                                                     ---------        ---------

Noncurrent liabilities:
  Long-term debt .............................         100,280              122
  Accrued OPEB cost ..........................          98,015           97,517
  Negative goodwill ..........................          21,353           20,337
  Other ......................................           9,323            8,490
                                                     ---------        ---------

      Total noncurrent liabilities ...........         228,971          126,466
                                                     ---------        ---------

Minority interest ............................            --                 61
                                                     ---------        ---------

Stockholders' equity:
  Common stock ...............................          10,792           10,792
  Additional paid-in capital .................          53,071           53,071
  Accumulated deficit ........................         (37,793)         (44,377)
  Treasury stock, at cost ....................             (12)             (12)
                                                     ---------        ---------

      Total stockholders' equity .............          26,058           19,474
                                                     ---------        ---------

                                                     $ 385,703        $ 383,555
                                                     =========        =========
</TABLE>





<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                        Three months ended          Nine months ended
                                           September 30,              September 30,
                                        -------------------         ----------------
                                         2000         2001         2000         2001
                                         ----         ----         ----         ----

Revenues and other income:
<S>                                    <C>         <C>          <C>          <C>
  Net sales ........................   $ 82,787    $  82,329    $ 274,591    $ 246,386
  Interest .........................        134           42          399          166
  Other, net .......................        137           58           98          553
                                       --------    ---------    ---------    ---------
                                         83,058       82,429      275,088      247,105
                                       --------    ---------    ---------    ---------

Costs and expenses:
  Cost of goods sold ...............     78,844       75,693      260,340      232,511
  Selling ..........................      1,453        1,513        4,967        4,788
  General and administrative .......      4,395        4,674       13,663       12,491
  Overfunded defined benefit pension
   credit ..........................     (1,260)        (750)      (2,732)      (2,250)
  Interest .........................      3,894        3,605       11,504       10,952
                                       --------    ---------    ---------    ---------
                                         87,326       84,735      287,742      258,492
                                       --------    ---------    ---------    ---------

                                         (4,268)      (2,306)     (12,654)     (11,387)

  Equity in losses of unconsolidated
   equity affiliate ................        (29)        --           (281)        --
                                       --------    ---------    ---------    ---------

    Loss before income taxes .......     (4,297)      (2,306)     (12,935)     (11,387)

Income tax benefit .................     (1,146)        (952)      (4,515)      (4,864)

Minority interest in after-tax
  earnings .........................        (58)        (104)        --             61
                                       --------    ---------    ---------    ---------

   Net loss ........................   $ (3,093)   $  (1,250)   $  (8,420)   $  (6,584)
                                       ========    =========    =========    =========


Basic and diluted net loss per share   $   (.31)   $    (.12)   $    (.84)   $    (.65)
                                       ========    =========    =========    =========

Basic and diluted shares
 outstanding .......................     10,062       10,062       10,032       10,062
                                       ========    =========    =========    =========
</TABLE>





<PAGE>


          See accompanying notes to consolidated financial statements.

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                               Nine months ended
                                                                 September 30,
                                                              2000         2001
                                                              ----         ----

Cash flows from operating activities:
<S>                                                        <C>         <C>
  Net loss .............................................   $ (8,420)   $ (6,584)
  Depreciation and amortization ........................     13,664      12,771
  Amortization of deferred financing costs .............        359         359
  Deferred income taxes ................................     (4,287)     (4,977)
  Other, net ...........................................     (1,221)       (209)
  Change in assets and liabilities:
    Accounts receivable ................................     (2,392)    (14,934)
    Inventories ........................................     10,579      10,873
    Prepaid pension cost ...............................     (2,732)     (2,250)
    Accounts payable ...................................      4,893       3,116
    Other, net .........................................     (8,120)         (5)
                                                           --------    --------

      Net cash provided (used) by
       operating activities ............................      2,323      (1,840)
                                                           --------    --------

Cash flows from investing activities:
  Capital expenditures .................................     (9,692)     (2,532)
  Proceeds from sale of business unit ..................       --           757
  Other, net ...........................................        (47)        769
                                                           --------    --------

      Net cash used by investing activities ............     (9,739)     (1,006)
                                                           --------    --------

Cash flows from financing activities:
  Revolving credit facilities, net .....................      8,702       3,256
  Other notes payable and long-term debt:
    Additions ..........................................        201          15
    Principal payments .................................     (1,487)       (425)
                                                           --------    --------

      Net cash provided by financing activities ........      7,416       2,846
                                                           --------    --------

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 ................   $ 13,595    $  8,133
    Income tax refund received .........................       (766)       (158)

  Common stock contributed to employee benefit plan ....   $    809    $   --

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


<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      Nine months ended September 30, 2001
                                 (In thousands)


<TABLE>
<CAPTION>
                                        Additional
                                Common   Paid-in  Accumulated Treasury
                                Stock    capital    deficit    stock     Total

<S>                            <C>       <C>       <C>         <C>     <C>
Balance - December 31, 2000    $10,792   $53,071   $(37,793)   $(12)   $ 26,058

Net loss ...................      --        --       (6,584)    --       (6,584)
                               -------   -------   --------    ----    --------

Balance - September 30, 2001   $10,792   $53,071   $(44,377)   $(12)   $ 19,474
                               =======   =======   ========    ====    ========
</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, 2000 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at September 30, 2001 and the consolidated statements
of operations  and cash flows for the interim  periods ended  September 30, 2000
and 2001, and the consolidated statement of stockholders' equity for the interim
period ended September 30, 2001, 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, 2000 (the "Annual Report").

     At September 30, 2001, 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.

     Effective  January 1, 2001,  the Company  adopted  Statement  of  Financial
Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and
Hedging  Activities,  as  amended.  Under  SFAS No.  133,  all  derivatives  are
recognized  as either  assets or  liabilities  and  measured at fair value.  The
accounting  for  changes  in fair  value of  derivatives  will  depend  upon the
intended use of the  derivative,  and such changes are recognized  either in net
income  or  other   comprehensive   income.   As  permitted  by  the  transition
requirements  of SFAS No. 133, as amended,  Keystone has exempted from the scope
of SFAS No. 133 all host contracts  containing  embedded  derivatives which were
acquired  or issued  prior to January 1,  1999.  Keystone  is not a party to any
significant  derivative  or  hedging  instrument  covered  by SFAS  No.  133 and
therefore the Company's financial  statements were not impacted by adopting SFAS
No. 133.

     Effective  July  1,  2001  the  Company  adopted  SFAS  No.  141,  Business
Combinations,  for all business combinations initiated on or after July 1, 2001,
and all purchase business combinations completed on or after July 1, 2001. Under
SFAS No. 141, all business combinations  initiated on or after July 1, 2001 will
be accounted for by the purchase  method,  and the  pooling-of-interests  method
will be prohibited.

     In January 2001,  Keystone's  wholly-owned  subsidiary,  Fox Valley Steel &
Wire  ("Fox  Valley")  sold its  business  which  was  located  in  Hortonville,
Wisconsin.  The Company did not record any significant  gain or loss as a result
of the  sale.  Fox  Valley  manufactured  industrial  wire and  fabricated  wire
products (primarily ladder rods and nails). Fox Valley's revenues,  in the three
and nine  months  ended  September  30, 2000  amounted to $3.0  million and $8.8
million,  respectively.  During the three and nine months  ended  September  30,
2000,   Fox  Valley   recorded  an  operating   loss  of  $49,000  and  $426,000
respectively.

Note 2 - Inventories:

     Inventories are stated at the lower of cost or market. At December 31, 2000
and  September  30, 2001,  the last-in,  first-out  ("LIFO")  method was used to
determine  the  cost  of  approximately  76% and  71%,  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, September 30,
                                                             2000          2001
                                                           --------      --------
                                                               (In thousands)

Steel and wire products:
<S>                                                        <C>           <C>
  Raw materials ....................................       $11,101       $ 9,673
  Work in process ..................................         9,492         9,370
  Finished goods ...................................        23,954        14,688
  Supplies .........................................        15,520        15,007
                                                           -------       -------
                                                            60,067        48,738

  Less LIFO reserve ................................        11,083        11,104
                                                           -------       -------

                                                            48,984        37,634

Lawn and garden products - finished goods ..........         3,020         2,759
                                                           -------       -------

                                                           $52,004       $40,393
                                                           =======       =======
</TABLE>



<PAGE>


Note 3 - Notes payable and long-term debt:

<TABLE>
<CAPTION>
                                                    December 31,      September 30,
                                                        2000              2001
                                                      --------          --------
                                                              (In thousands)

<S>                                                   <C>               <C>
Senior Secured Notes                                  $100,000          $100,000
Commercial credit agreements:
  Revolving credit facilities:
    Keystone ...............................            37,772            41,318
    EWP ....................................             4,203             4,542
    Garden Zone ............................             2,819             2,190
  Term loan - EWP ..........................               164              --
Other ......................................             1,050               804
                                                      --------          --------
                                                       146,008           148,854
  Less current maturities ..................            45,728           148,732
                                                      --------          --------

                                                      $100,280          $    122
                                                      ========          ========
</TABLE>

     On August 1, 2001,  Keystone did not make a $4.8 million  interest  payment
due on its  Senior  Secured  Notes  (the  "Notes").  As  such,  the  Notes  were
classified as current at September 30, 2001.  Under the governing  indenture,  a
failure to make a scheduled  interest  payment for thirty days gives the holders
of the Notes the right to  accelerate  the unpaid  portion of the Notes.  Such a
failure also gives the trustee for the Notes the ability to take certain actions
and to exercise  certain remedies on behalf of holders of the Notes. The Company
has received  consents from holders  representing more than 75% of the principal
amount of the Notes in which the noteholders  agreed to defer  exercising  their
right to  accelerate  the  payment  of the Notes  pursuant  to the  acceleration
provisions of the governing  indenture until December 7, 2001, and agreed to not
direct the trustee of the Notes through such date to take any action or exercise
any remedy available to the trustee as a result of the Company's failure to make
the interest  payment.  Keystone  continues to evaluate  possible  restructuring
alternatives to improve its overall financial condition, including the potential
conversion of the Notes into equity  securities of the Company.  In this regard,
Keystone  has entered into  discussions  with  financial  advisors to assist the
Company  in the  process  of  evaluating  possible  restructuring  alternatives.
Keystone has received an agreement from its primary  revolving  credit lender to
forbear remedies  available to it solely as a result of the Company's failure to
make the August 1, 2001 interest payment on the Notes.




<PAGE>


Note 4 - Income taxes:

     Summarized  below are (i) the  differences  between  the income tax expense
(benefit)  and the  amounts  that  would be  expected  using  the  U.S.  federal
statutory  income  tax rate of 35%,  and (ii) the  components  of the income tax
expense (benefit).


<TABLE>
<CAPTION>
                                                            Nine months ended
                                                               September 30,
                                                           2000           2001
                                                           ----           ----
                                                              (In thousands)

<S>                                                        <C>          <C>
Expected tax benefit, at statutory rate ..............     $(4,527)     $(3,985)
U. S. state income taxes, net ........................          96         (126)
Amortization of goodwill and negative goodwill .......        (323)        (323)
Other, net ...........................................         239         (430)
                                                           -------      -------

Income tax expense (benefit) .........................     $(4,515)     $(4,864)
                                                           =======      =======

Comprehensive income tax expense (benefit):
  Currently payable (refundable):
    U.S. federal .....................................     $  (271)     $   (30)
    U.S. state .......................................          43          143
                                                           -------      -------
      Net currently payable (refundable) .............        (228)         113

  Deferred income taxes, net .........................      (4,287)      (4,977)
                                                           -------      -------

                                                           $(4,515)     $(4,864)
                                                           =======      =======
</TABLE>



     At September 30, 2001,  the Company has recognized a net deferred tax asset
of $32.5 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 September 30, 2001, based on all
available  evidence,  the  Company  concluded  no deferred  tax asset  valuation
allowance was needed.  The Company will continue to review the recoverability of
its deferred tax assets,  and based on such periodic reviews,  the Company could
recognize  a  valuation  allowance  related  to its  deferred  tax assets in the
future.



<PAGE>


Note 5 - Other accrued liabilities:

<TABLE>
<CAPTION>
                                                        December 31,  September 30,
                                                           2000            2001
                                                          -------         ------
                                                              (In thousands)

Current:
<S>                                                       <C>            <C>
  Employee benefits ..............................        $12,137        $12,791
  Environmental ..................................          8,398          8,189
  Self insurance .................................          7,993          7,681
  Interest .......................................          4,160          6,626
  Accrued maintenance ............................           --            1,083
  Legal and professional .........................            836            864
  Disposition of former facilities ...............            384            494
  Unearned revenue ...............................          3,008             28
  Other ..........................................          4,649          4,920
                                                          -------        -------

                                                          $41,565        $42,676
                                                          =======        =======

Noncurrent:
  Environmental ..................................        $ 8,395        $ 7,222
  Other ..........................................            928          1,268
                                                          -------        -------

                                                          $ 9,323        $ 8,490
                                                          =======        =======
</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 6 - 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 its 51% owned subsidiary, Garden Zone LLC ("Garden Zone").



<PAGE>


     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         Nine months ended
                                    September 30,              September 30,
                                  ----------------            ----------------
                                  2000          2001        2000         2001
                                  ----          ----        ----         ----
                                                 (In thousands)

Revenues:
<S>                             <C>         <C>          <C>          <C>
  Steel and wire products ...   $ 81,795    $  81,427    $ 268,795    $ 239,141
  Lawn and garden products ..      1,051        1,007        5,983        7,698
                                --------    ---------    ---------    ---------
                                  82,846       82,434      274,778      246,839

  Elimination of intersegment
    revenues ................        (59)        (105)        (187)        (453)
                                --------    ---------    ---------    ---------

                                $ 82,787    $  82,329    $ 274,591    $ 246,386
                                ========    =========    =========    =========

Loss before income taxes:
  Operating profit (loss):
    Steel and wire products .   $    181    $   2,054    $    (161)   $    (641)
    Lawn and garden products         (85)        (163)         227          301
                                --------    ---------    ---------    ---------
                                      96        1,891           66         (340)

  Equity in loss of ARC .....        (29)        --           (281)        --

    General corporate items:
      Interest income .......        134           42          399          166
      General income
       (expense), net .......       (604)        (634)      (1,615)        (261)
    Interest expense ........     (3,894)      (3,605)     (11,504)     (10,952)
                                --------    ---------    ---------    ---------

                                $ (4,297)   $  (2,306)   $ (12,935)   $ (11,387)
                                ========    =========    =========    =========
</TABLE>


Note 7 - Contingencies:

     At September 30, 2001, the Company's financial statements reflected accrued
liabilities  of  $15.4  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.



<PAGE>


Note 8 - Accounting principles not yet adopted:

     The Company will adopt SFAS No. 142, Goodwill and Other Intangible  Assets,
effective January 1, 2002. Under SFAS No. 142, goodwill will not be amortized on
a periodic  basis,  but  instead  will be subject  to an  impairment  test to be
performed at least  annually.  Under the transition  provisions of SFAS No. 142,
goodwill existing as of June 30, 2001 will cease to be periodically amortized as
of January 1, 2002, but any goodwill arising in a purchase business  combination
(including  step  acquisitions)  completed on or after July 1, 2001 would not be
periodically  amortized  from the date of such  combination.  The  Company  will
complete its initial goodwill  impairment analysis under the new standard during
2002. If any goodwill  impairment under the new standard is determined to exist,
such  impairment  would be  recognized  as a  cumulative  effect  of a change in
accounting  principle  no later than  December  31,  2002,  as  provided  by the
transition  requirement  of SFAS No. 142. In  addition,  any  negative  goodwill
recorded at January 1, 2002 will be eliminated as a cumulative  effect of change
in accounting principle at that date. Keystone anticipates the recorded negative
goodwill at January 1, 2002 will  approximate  $20.0 million.  The Company would
have reported a net loss of $7.5 million,  or $.75 per share,  in the first nine
months of 2001 if the goodwill and negative  goodwill  amortization  included in
the Company's net loss, as reported, had not been recognized.

     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  newly-issued  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. 144,  Accounting  for the  Impairment  or
Disposal  of  Long-Lived  Assets,  no later than  January 1, 2002.  SFAS No. 144
retains the fundamental  provisions of existing  generally  accepted  accounting
principles 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   significant
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.  The Company is
still  studying  this  newly-issued  standard,  and the  effect,  if any, to the
Company of adopting SFAS No. 144 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 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 its 51% ownership  interest in 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 the 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 beliefs 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.


<PAGE>


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

<TABLE>
<CAPTION>
                                            Three months ended  Nine months ended
                                              September 30,        September 30,
                                           -------------------   ----------------
                                              2000      2001      2000      2001
                                              ----      ----      ----      ----

Production volume (000 tons):
 Billets:
<S>                                            <C>       <C>       <C>       <C>
  Produced .............................       196       190       529       542
  Purchased ............................       --        --          8       --
 Carbon steel rod ......................       185       174       533       509

Sales volume(000 tons):
 Fabricated wire products ..............        76        72       253       225
 Industrial wire .......................        30        22       101        75
 Carbon steel rod ......................        68        97       201       230
                                              ----      ----      ----      ----

                                               174       191       555       530
                                              ====      ====      ====      ====

Per-ton selling prices:
  Fabricated wire products .............      $648      $636      $664      $651
  Industrial wire ......................      $451      $422      $449      $425
  Carbon steel rod .....................      $272      $270      $269      $261
  All steel and wire products ..........      $468      $425      $482      $449
</TABLE>


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

<TABLE>
<CAPTION>
                                        Three months ended      Nine months ended
                                           September 30,          September 30,
                                        -------------------    ------------------
                                           2000      2001       2000       2001
                                           ----      ----       ----       ----
                                                       (In millions)

Steel and wire products:
<S>                                       <C>       <C>        <C>        <C>
  Fabricated wire products ..........     $ 49.5    $ 45.5     $168.0     $146.3
  Industrial wire ...................       13.5       9.3       45.5       31.9
  Carbon steel rod ..................       18.4      26.3       54.1       60.0
  Other .............................         .4        .3        1.2        1.0
                                          ------    ------     ------     ------
                                            81.8      81.4      268.8      239.2

Lawn and garden products ............        1.0        .9        5.8        7.2
                                          ------    ------     ------     ------

                                          $ 82.8    $ 82.3     $274.6     $246.4
                                          ======    ======     ======     ======
</TABLE>




<PAGE>


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

<TABLE>
<CAPTION>
                                           Three months ended  Nine months ended
                                              September 30,      September 30,
                                           ------------------  ----------------
                                             2000     2001     2000        2001
                                             ----     ----     ----        ----

<S>                                          <C>     <C>      <C>         <C>
Net sales ..............................     100.0%  100.0 %  100.0 %     100.0 %
Cost of goods sold .....................      95.2      91.9     94.8        94.4
                                           -------   -------  -------     -------
Gross profit ...........................       4.8%    8.1 %    5.2 %       5.6 %
                                           =======   =======  =======     =======

Selling expense ........................       1.8%    1.8 %    1.8 %       1.9 %
General and administrative expense .....       5.3%    5.7 %    5.0 %       5.1 %
Overfunded defined benefit pension
 Credit ................................      (1.5)%   (.9)%   (1.0)%       (.9)%

Loss before income taxes ...............      (5.2)%  (2.8)%   (4.7)%      (4.6)%
Income tax benefit .....................      (1.4)   (1.2)    (1.6)       (1.9)
Minority interest in after-tax
  earnings .............................       (.1)    (.1)    --          --
                                           -------   -------  ------      -----

Net loss ...............................      (3.7)%  (1.5)%   (3.1)%      (2.7)%
                                           =======  ======   ======       =====
</TABLE>


     Net sales of $82.3  million  in the 2001 third  quarter  were down .6% from
$82.8 million during the same period in 2000. This $500,000 decline in sales was
due primarily to a 9% decline in per-ton  selling prices of the Company's  steel
and wire products partially offset by a 10% increase in shipments.  Shipments of
carbon steel rod  increased 44% during the 2001 third quarter as compared to the
2000 third quarter while per-ton  selling prices  declined .5%.  Industrial wire
shipments declined 26% while per-ton selling prices declined 6%. Fabricated wire
products  shipments during the 2001 third quarter declined 7% as compared to the
2000 third quarter while per-ton selling prices declined 2%.

     Net sales of $246.4  million in the first nine months of 2001 were down 10%
from $274.6 million in the first nine months of 2000. This $28.2 million decline
in sales was  primarily  due to a 5%  decline in  shipments  and a 7% decline in
per-ton selling prices of the Company's steel and wire products partially offset
by a $1.4 million  increase in Garden  Zone's sales during the first nine months
of 2001.  Garden  Zone's sales during the first nine months of 2001  amounted to
$7.2 million as compared to $5.8 million during the same period in 2000.  Carbon
steel rod  shipments  during  the first  nine  months of 2001  increased  14% as
compared to the first nine months of 2000 while per-ton  selling prices declined
3%. Industrial wire shipments declined 26% while per-ton selling prices declined
5%.  Fabricated  wire  products  shipments  during the first nine months of 2001
declined 11% as compared to the first nine months of 2000 while per-ton  selling
prices declined 2%.

     Billet  production during the third quarter of 2001 decreased 6,000 tons or
3% to 190,000 tons from 196,000 tons during the third quarter of 2000.  Keystone
did not purchase any billets  during the third  quarters of either 2000 or 2001.
Rod  production  during the third  quarter of 2001  declined to 174,000  tons as
compared to production of 185,000 tons in the 2000 third quarter.

     Billet  production  during the first nine months of 2001  increased  13,000
tons to 542,000 tons from 529,000 tons during the first nine months of 2000. The
primary reason for the higher  production levels during the first nine months of
2001 was the abnormally low production levels during the 2000 second quarter due
to  extended   outages  incurred  in  connection  with  the  correction  of  the
infrastructure  problems related to Keystone's  capital  improvements  that were
completed during 1998 and a "break-out" that occurred at the Company's  electric
arc furnace  during June 2000.  Keystone did not purchase any billets during the
first nine months of 2001 as compared to 8,000 tons  purchased  during the first
nine months of 2000.  Despite increased rod production during the second quarter
of 2001 as compared to the 2000 second quarter,  lower rod production during the
first and third  quarters  of 2001  resulted  in a decline of 24,000 tons of rod
produced  during the first nine months of 2001 to 509,000 tons from 533,000 tons
during  the  first  nine  months  of 2000.  The  decline  was due  primarily  to
intentional production curtailments during the first quarter of 2001 designed to
avoid using high cost  natural gas and to allow billet  inventories  to build in
anticipation of planned outages for repair and maintenance projects in the steel
mill during that quarter.

     Gross profit during the 2001 third  quarter  increased to $6.6 million from
$3.9 million in the 2000 third quarter as the Company's  gross margin  increased
from 4.8% in the 2000 period to 8.1% in the 2001 third quarter. This increase in
gross  margin was due  primarily to lower costs for  utilities  and scrap steel,
Keystone's  primary raw  material,  lower rod  conversion  costs due to improved
production  efficiencies and a favorable $1.7 million  settlement with a utility
provider in connection  with litigation  over a 1999  fuel-adjustment  surcharge
billed to the Company by the utility,  all partially offset by the lower overall
per-ton selling price of the Company's steel and wire products.  During the 2001
third quarter,  the Company  purchased 211,000 tons of scrap at an average price
of $83 per ton as compared to 2000 third quarter purchases of 141,000 tons at an
average price of $94 per ton. The lower  per-ton  selling price of the Company's
steel and wire  products  during the third  quarter of 2001  adversely  impacted
gross profit by $7.5 million.

     Gross profit during the first nine months of 2001 declined to $13.9 million
from $14.3 million in the first nine months of 2000 although the Company's gross
margin  increased  from 5.2% in the 2000 period to 5.6% in the first nine months
of 2001.  This  decrease in gross profit was due  primarily to the lower overall
per-ton  selling  price of the  Company's  steel and wire  products  and  higher
natural gas costs, partially offset by lower costs for scrap steel and purchased
billets,  $1.6 million of business  interruption  insurance proceeds received in
the 2001 first quarter  related to incidents in prior years and the $1.7 million
utility settlement received in the 2001 third quarter. In addition,  the adverse
impact  on gross  profit  from  production  outages  amounted  to  approximately
$800,000 during the first nine months of 2001 and $5.3 million in the first nine
months of 2000. The lower per-ton  selling price of the Company's steel and wire
products during the first nine months of 2001 adversely impacted gross profit by
$17.5 million while the effect of higher  natural gas costs  adversely  impacted
gross profit by $3.0 million.  During the first nine months of 2001, the Company
purchased  629,000 tons of scrap at an average  price of $85 per ton as compared
to 2000  purchases of 531,000 tons at an average  price of $104 per ton.  During
the first nine months of 2000,  Keystone  purchased  8,000 tons of billets at an
average  price of $215 per ton, as compared to none  purchased in the first nine
months of 2001.

     Selling expense was approximately  $1.5 million during the third quarter of
both 2001 and 2000. Selling expense of $4.8 million during the first nine months
of 2001 was  approximately  $200,000 lower than the same period in 2000, but was
relatively constant as a percentage of sales.

     General and  administrative  expense  increased to $4.7 million  during the
third  quarter of 2001 as compared to $4.4 million  during the third  quarter of
2000 primarily due to higher legal and  professional  costs partially  offset by
the  impact  of  reductions  in  salaried  headcount  resulting  from  employees
accepting Keystone's early retirement package during the fourth quarter of 2000.
General and administrative  expense declined from $13.7 million during the first
nine  months of 2000 to $12.5  million  during  the first  nine  months of 2001,
primarily   due  to  the   reduction  in  salaried   headcount  and  a  $650,000
reimbursement  of  legal  fees  received  in  2001,   partially  offset  by  the
unfavorable legal settlement and the higher legal and professional costs.

     Keystone  currently  anticipates the total 2001 overfunded  defined benefit
pension  credit will  approximate  $3.0 million as compared to a total credit in
2000 of $380,000.

     Interest  expense  in the third  quarter  of 2001 was lower  than the third
quarter of 2000 due  principally  to lower  interest  rates and lower  borrowing
levels. Average borrowings by the Company under its revolving credit facilities,
EWP term loan and Senior Secured Notes (the "Notes") approximated $149.5 million
in the third quarter of 2001 as compared to $153.9  million in the third quarter
of 2000.  During the third  quarter of 2001,  the average  interest rate paid by
Keystone  was 8.5% per annum as compared to 9.7% per annum in the third  quarter
of 2000.

     Interest  expense in the first nine  months of 2001 was also lower than the
first nine  months of 2000 due  principally  to lower  interest  rates and lower
borrowing levels.  Average  borrowings by the Company under its revolving credit
facilities, EWP term loan and the Notes approximated $150.6 million in the first
nine months of 2001 as  compared  to $152.2  million in the first nine months of
2000.  During the first nine months of 2001,  the average  interest rate paid by
Keystone  was 9.0% per annum as  compared  to 9.6% per  annum in the first  nine
months of 2000.

     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 4 to the Consolidated Financial Statements.

     As a result of the items  discussed  above,  Keystone  incurred  a net loss
during the third  quarter of 2001 of $1.3  million as  compared to a net loss of
$3.1 million in the third quarter of 2000,  and a net loss during the first nine
months of 2001 of $6.6  million as compared to a net loss of $8.4 million in the
first nine months of 2000.

     Carbon steel rod imports  continue to cause  disruption in the  marketplace
and market demand has weakened.  As a result,  management believes Keystone will
record a net loss  during the fourth  quarter of 2001 and will record a net loss
for calendar 2001 due primarily to higher energy and interest  costs,  continued
high levels of imported rod and relative lower overall product selling prices.

     At September 30, 2001,  the Company has recognized a net deferred tax asset
of $32.5 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 September 30, 2001, based on all
available  evidence,  the  Company  concluded  no deferred  tax asset  valuation
allowance was needed.  The Company will continue to review the recoverability of
its deferred tax assets,  and based on such periodic reviews,  the Company could
recognize  a  valuation  allowance  related  to its  deferred  tax assets in the
future.

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 the Company's  revolving credit facilities during the
first quarter of each year.

     Primarily  as a result of the  classification  of the $100  million  Senior
Secured  Notes as current  liabilities  at  September  30,  2001,  Keystone  had
negative working capital of $143.2 million (compared to negative working capital
of $39.2  million at  December  31,  2000),  including  $100.7  million of notes
payable  and  current  maturities  of  long-term  debt as  well  as  outstanding
borrowings under the Company's revolving credit facilities of $48.1 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.  Under  the terms of the  indenture
related to the Company's  Senior  Secured  Notes,  Keystone's  ability to borrow
under its revolving  credit  facilities  may be limited.  At September 30, 2001,
unused credit  available for borrowing  under  Keystone's $60 million  revolving
credit facility (the "Primary Revolver"), which expires December 31, 2001, EWP's
$7 million  revolving credit  facility,  which expires June 30, 2002, and Garden
Zone's $4 million revolving credit facility (the "Garden Zone Revolver"),  which
expires  December  1,  2001  were  $6.1  million,   $2.5  million  and  $64,000,
respectively.  The terms of the indenture will permit  Keystone to borrow all of
the unused credit available under the Primary Revolver during the fourth quarter
of 2001.  However,  Keystone  currently  believes,  as a result  of an  expected
decline in borrowing base, the available  borrowings  under the Primary Revolver
will be limited to approximately $45 million during the 2001 fourth quarter.  As
of November 15, 2001, unused credit  availability under the Primary Revolver had
increased to $6 million ($4 million after consideration of outstanding  payments
to vendors and other creditors of the Company).  The Primary  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  presently intends to renew or replace the
Primary  Revolver and the Garden Zone Revolver  upon their  maturity in December
2001.

     During the first nine months of 2001,  the Company's  operating  activities
used  approximately  $1.8 million of cash  compared to $2.3 million  provided by
operations  in the first  nine  months of 2000  principally  due to  changes  in
relative balances of accounts receivable and other liabilities.

     During the first nine months of 2001, Keystone made capital expenditures of
$2.5  million as  compared  to $9.7  million  in the first nine  months of 2000.
During 2001, Keystone has deferred capital  expenditures,  including maintenance
items,  due to  liquidity  constraints,  although  many of these items cannot be
deferred indefinitely.  Capital expenditures for 2001 are currently estimated to
be  approximately  $3.0  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 Keystone's revolving credit facilities.

     At September 30, 2001, the Company's financial statements reflected accrued
liabilities  of $15.4  million for  estimated  remediation  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 costs of remedial measures may exceed the amounts accrued.

     In addition to the planned  reductions in fixed costs discussed  previously
and announced increases in 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,  offering  enhanced  cash  discounts  to  significant  customers  for
prepayment  of  their  purchase  orders,  modifying  coverages  and  participant
contribution levels of medical plans for both employees and retirees, attempting
to restructure certain indebtedness, restructuring the bargaining agreement with
the labor  union at its  Peoria  facility  and  reducing  capital  expenditures.
Keystone is also considering 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.

     Keystone  incurs  significant  ongoing  costs for plant and  equipment  and
substantial employee medical benefits for both employees and retirees.  As such,
the Company 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. As a result of this process,
Keystone  has in the past,  and may in the future,  reduce  controllable  costs,
modify  product  mix,  acquire and dispose of  businesses,  restructure  certain
indebtedness,  and raise  additional  equity capital.  Keystone will continue to
evaluate the need for similar  actions or other  measures in the future in order
to meet its obligations.  The Company also routinely  evaluates  acquisitions of
interests in, or combinations  with,  companies related to the Company's current
businesses.  Keystone  intends to consider  such  acquisition  activities in the
future and, in connection with this activity,  may consider  issuing  additional
equity  securities  or  increasing  the  indebtedness  of the Company.  However,
Keystone's  ability to incur new debt in the future will be limited by the terms
of the indenture related to the Senior Secured Notes.

     Although  operating results in the 2001 third quarter improved over that of
the 2000 third quarter,  due to improved  operating  efficiencies,  medical cost
sharing arrangements and other initiatives,  the prolonged downturn in the steel
industry  continues  to  adversely  effect  Keystone's   liquidity  and  capital
resources.  In  response,  the  Company  has  been  required  to  defer  capital
expenditures,  defer maintenance  expenditures and delay payments to vendors and
other creditors to the extent  possible.  Despite these measures,  the Company's
availability  under the Primary  Revolver is limited ($4 million at November 15,
2001 after consideration of outstanding payments to creditors) and a significant
portion of the Company's accounts payable are past due compared to stated terms.
As a result of the above  factors,  on August 1, 2001,  Keystone  did not make a
$4.8 million interest payment due on the Notes.

     Under the  governing  indenture,  a failure  to make a  scheduled  interest
payment for thirty  days gives the holders of the Notes the right to  accelerate
the unpaid  portion of the Notes.  Such a failure also gives the trustee for the
Notes the ability to take certain  actions and to exercise  certain  remedies on
behalf of holders of the Notes.  The Company has received  consents from holders
representing  more  than 75% of the  principal  amount of the Notes in which the
noteholders  agreed to defer exercising their right to accelerate the payment of
the Notes  pursuant to the  acceleration  provisions of the governing  indenture
until  December  7, 2001,  and  agreed to not  direct  the  trustee of the Notes
through  such date to take any action or exercise  any remedy  available  to the
trustee  as a result of the  Company's  failure  to make the  interest  payment.
Keystone  continues to evaluate possible  restructuring  alternatives to improve
its overall financial condition, including the potential conversion of the Notes
into equity securities of the Company. In this regard, Keystone has entered into
discussions  with  financial  advisors  to assist the  Company in the process of
evaluating  possible  restructuring  alternatives.   Keystone  has  received  an
agreement from its primary working capital lender to forbear remedies  available
to it solely as a result of the  Company's  failure  to make the  August 1, 2001
interest  payment on the Notes.  There can be no  assurance  the Company will be
able to restructure  the Notes in a  satisfactory  manner within the time period
permitted in the consents.  If the Notes are not  restructured,  there can be no
assurance  the Company  would have the  available  liquidity or other  financial
resources  to  enable  it to make the $4.8  million  interest  payment,  and the
Company does not currently  have the liquidity or other  financial  resources to
retire the Notes in the event the  holders  elect to  accelerate  payment of the
Notes. In addition,  an acceleration of the Notes will also permit the Company's
Primary  Revolver  lender to exercise  certain rights  available to it under the
terms of its loan agreement with Keystone, including acceleration.

     At September 30, 2001,  Keystone  cannot give any assurance that cash flows
from operations  together with the funds available under the Company's revolving
credit  facilities will be sufficient to fund the anticipated  cash needs of its
operations,  capital  improvements  and debt service  requirements  for the year
ending  December  31,  2002.  Keystone's  anticipated  cash needs are 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  and  natural  gas,  labor,  employee  benefits  and other fixed and
variable  costs,  interest  rates,  repayments  of  principal  and  interest  on
long-term  debt,  capital   expenditures  and  available  borrowings  under  the
Company's  revolving  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 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.

OUTLOOK

     The outlook section contains a number of forward-looking statements, all of
which are based on current  expectations.  Actual results may differ materially.
See Note 7 to the Consolidated Financial Statements - "Contingencies" and Note 8
to the  Consolidated  Financial  Statements  -  "Accounting  principles  not yet
adopted", regarding commitments,  contingencies, legal, environmental, and other
matters,  which  information is incorporated  herein by reference and may affect
the  Company's  future  results  of  operations  and  liquidity.  As  previously
announced,  the Company is pursuing  discussions  with creditors of the Company,
with  the  assistance  of  its  financial   advisors,   regarding  a  consensual
restructuring   of  the   Company's   obligations   to  its   various   creditor
constituencies.  The  information set forth below does not reflect the effect of
any potential restructuring of such obligations.

     The  Company  currently  expects net sales for 2001 of  approximately  $308
million,  an  operating  loss of  approximately  $6  million  and a net  loss of
approximately  $13  million.  Overall,  the  Company  expects  volumes  for 2001
compared to 2000 will decrease  approximately 3% and average selling prices will
decrease 4%. The Company  currently  expects net sales for 2002 will approximate
$327 million,  a break-even  operating profit and a net loss of approximately $8
million  excluding the  cumulative  effect of a change in accounting  principle.
Overall,  the Company  expects  volumes for 2002  compared to 2001 will increase
approximately 4% and average selling prices will increase 2%.

     The Company expects cash flows from operations for 2001 to be approximately
break-even,  capital expenditures of approximately $3 million and net borrowings
under existing  revolving credit  facilities of  approximately $3 million,  with
estimated borrowing  availability on Keystone's Primary Revolver at December 31,
2001 of approximately $2 million. The Company expects cash flows from operations
for  2002  will be  approximately  $7  million,  with  capital  expenditures  of
approximately  $11 million and net borrowings  under existing  revolving  credit
facilities of approximately $2 million.  The increase in capital expenditures in
2002 is primarily the result of deferred  maintenance and other capital projects
from 2001 that the Company believes cannot be deferred indefinitely. The Company
estimates that it would require borrowings or other financing sources in 2002 of
approximately  $2 million in addition to the  estimated  availability  under the
terms of Keystone's  existing Primary Revolver.  The estimates of cash flows for
2001 and 2002  also  assume a  significant  portion  of the  Company's  accounts
payable will be past due compared to stated  terms.  The estimates of cash flows
for 2001 and 2002 also assume interest  payments on the Senior Secured Notes are
not paid,  other than the February 2001  payment.  There can be no assurance the
Company  can obtain  additional  sources of  financing  or continue to defer and
delay past due payment obligations to its creditors.





<PAGE>


PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings

     Reference  is  made to  disclosure  provided  under  the  caption  "Current
litigation" in Note 15 to the Consolidated  Financial Statements included in the
Annual Report.


ITEM 6. Exhibits and Reports on Form 8-K

(a)     The following exhibit is included herein:

        None

(b)     Reports on Form 8-K filed during the quarter ended September 30, 2001:

        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:  November 19, 2001            By /s/Bert E. Downing, Jr.
                                       -------------------------------------
                                       Bert E. Downing, Jr.
                                       Vice President and Corporate Controller
                                        (Principal Financial and Accounting
                                        Officer)