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 June 30, 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 August 14, 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 June 30, 2002                                           3-4

            Consolidated Statements of Operations - Three months
             and six months ended June 30, 2001 and 2002                 5-6

            Consolidated Statements of Cash Flows - Six months
             ended June 30, 2001 and 2002                                 7

            Consolidated Statement of Common Stockholders'
             Equity (Deficit) - Six months ended June 30, 2002            8

            Notes to Consolidated Financial Statements                   9-20

  Item 2.   Management's Discussion and Analysis of Financial
             Condition and Results of Operations                        21-28

PART II. OTHER INFORMATION

  Item 1.   Legal Proceedings                                             29

  Item 4.   Submission of Matters to a Vote of Security Holders           29

  Item 6.   Exhibits and Reports on Form 8-K                              29



<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)


<TABLE>
<CAPTION>
                                                       December 31,      June 30,
                                   ASSETS                  2001            2002
                                                         --------        -------

Current assets:
<S>                                                      <C>            <C>
  Notes and accounts receivable ..................       $ 29,411       $ 43,693
  Inventories ....................................         40,912         37,805
  Deferred income taxes ..........................          9,778           --
  Prepaid expenses and other .....................          3,211          2,343
                                                         --------       --------

     Total current assets ........................         83,312         83,841
                                                         --------       --------

Property, plant and equipment ....................        367,556        370,115
Less accumulated depreciation ....................        237,956        246,229
                                                         --------       --------

     Net property, plant and equipment ...........        129,600        123,886
                                                         --------       --------

Other assets:
  Restricted investments .........................          5,675          5,777
  Prepaid pension cost ...........................        131,985        133,485
  Deferred income taxes ..........................         11,844           --
  Deferred financing costs .......................          2,295          2,717
  Goodwill .......................................            752            752
  Other ..........................................          1,437          1,292
                                                         --------       --------

     Total other assets ..........................        153,988        144,023
                                                         --------       --------

                                                         $366,900       $351,750
                                                         ========       ========
</TABLE>








<PAGE>

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)




<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        December 31,      June 30,
                                                          2001            2002
                                                        --------        -------

Current liabilities:
  Notes payable and current maturities of
<S>                                                    <C>            <C>
    long-term debt ...............................     $  46,332      $  32,399
  Accounts payable ...............................        23,014         23,079
  Payables to affiliates .........................           633            946
  Accrued OPEB cost ..............................         7,215          7,215
  Accrued preferred stock dividends ..............          --            1,713
  Other accrued liabilities ......................        37,100         42,101
                                                       ---------      ---------

      Total current liabilities ..................       114,294        107,453
                                                       ---------      ---------

Noncurrent liabilities:
  Long-term debt .................................       100,123         64,364
  Accrued OPEB cost ..............................       101,810        104,002
  Negative goodwill ..............................        19,998           --
  Other ..........................................        31,010         21,573
                                                       ---------      ---------

      Total noncurrent liabilities ...............       252,941        189,939
                                                       ---------      ---------

Minority interest ................................             1            274
                                                       ---------      ---------

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

Common stockholders' equity (deficit):
  Common stock ...................................        10,792         10,798
  Additional paid-in capital .....................        53,071         51,358
  Accumulated deficit ............................       (64,187)       (10,172)
  Treasury stock, at cost ........................           (12)           (12)
                                                       ---------      ---------

      Total stockholders' equity (deficit) .......          (336)        51,972
                                                       ---------      ---------

                                                       $ 366,900      $ 351,750
                                                       =========      =========
</TABLE>





<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                        Three months ended        Six months ended
                                             June 30,                  June 30,
                                       ---------------------   ------------------------
                                          2001         2002        2001         2002
                                          ----         ----        ----         ----

Revenues and other income:
<S>                                    <C>         <C>          <C>          <C>
  Net sales ........................   $ 86,294    $  94,244    $ 164,057    $ 180,156
  Gain on early extinguishment of
   debt ............................       --           --           --         54,739
  Interest .........................         53           21          124           41
  Other, net .......................        418           36          495           37
                                       --------    ---------    ---------    ---------
                                         86,765       94,301      164,676      234,973
                                       --------    ---------    ---------    ---------

Costs and expenses:
  Cost of goods sold ...............     80,461       83,433      156,818      160,612
  Selling ..........................      1,668        1,735        3,275        3,574
  General and administrative .......      4,531        6,812        7,817       12,727
  Overfunded defined benefit pension
   credit ..........................       (750)        (750)      (1,500)      (1,500)
  Interest .........................      3,601          953        7,347        3,647
                                       --------    ---------    ---------    ---------
                                         89,511       92,183      173,757      179,060
                                       --------    ---------    ---------    ---------

  Income (loss) before income taxes
   and cumulative effect of change
   in accounting principle .........     (2,746)       2,118       (9,081)      55,913

Income tax expense (benefit) .......     (1,276)        --         (3,912)      21,622

Minority interest in after-tax
  earnings .........................        158          114          165          274
                                       --------    ---------    ---------    ---------

Income (loss) before cumulative
 effect of change in accounting
 principle .........................     (1,628)       2,004       (5,334)      34,017

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

   Net income (loss) ...............     (1,628)       2,004       (5,334)      54,015

Dividends on preferred stock .......       --          1,713         --          1,713
                                       --------    ---------    ---------    ---------

Net income (loss) available for
 common shares .....................   $ (1,628)   $     291    $  (5,334)   $  52,302
                                       ========    =========    =========    =========
</TABLE>



<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                       Three months ended           Six months ended
                                             June 30,                  June 30,
                                    -------------------------   ----------------------
                                        2001          2002        2001            2002
                                        ----          ----        ----            ----

Basic earnings (loss) per share
 available for common shares:

  Income (loss) before cumulative
   effect of change in accounting
<S>                                 <C>           <C>          <C>           <C>
   principle ....................   $     (.16)   $      .03   $     (.53)   $     3.21

  Cumulative effect of change in
   accounting principle .........         --            --           --            1.99
                                    ----------    ----------   ----------    ----------

    Net income (loss) ...........   $     (.16)   $      .03   $     (.53)   $     5.20
                                    ==========    ==========   ==========    ==========

Basic shares
 Outstanding ....................       10,062        10,068       10,062        10,066
                                    ==========    ==========   ==========    ==========

Diluted earnings (loss) per share
 available for common shares:

  Income (loss) before cumulative
   effect of change in accounting
   principle ....................   $     (.16)   $      .03   $     (.53)   $     1.94

  Cumulative effect of change in
   accounting principle .........         --            --           --            1.14
                                    ----------    ----------   ----------    ----------

    Net income (loss) ...........   $     (.16)   $      .03   $     (.53)   $     3.08
                                    ==========    ==========   ==========    ==========

Diluted shares outstanding ......       10,062        10,068       10,062        17,491
                                    ==========    ==========   ==========    ==========
</TABLE>






<PAGE>

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                               Six months ended
                                                                   June 30,
                                                              2001         2002
                                                              ----         ----

Cash flows from operating activities:
<S>                                                        <C>         <C>
  Net income (loss) ....................................   $ (5,334)   $ 54,015
  Depreciation and amortization ........................      8,599       8,931
  Amortization of deferred financing costs .............        239         334
  Deferred income taxes ................................     (3,976)     21,622
  Non-cash OPEB expense ................................       (424)      2,192
  Gain on early extinguishment of debt .................       --       (54,739)
  Cumulative effect of change in accounting principle ..       --       (19,998)
  Other, net ...........................................        278         124
  Change in assets and liabilities:
    Notes and accounts receivable ......................    (20,773)    (15,369)
    Inventories ........................................      8,121       3,107
    Prepaid pension cost ...............................     (1,500)     (1,500)
    Accounts payable ...................................      7,691         378
    Other, net .........................................       (230)      6,452
                                                           --------    --------

      Net cash provided (used) by operating activities .     (7,309)      5,549
                                                           --------    --------

Cash flows from investing activities:
  Capital expenditures .................................     (1,535)     (3,271)
  Proceeds from sale of business unit ..................        757        --
  Collection of notes receivable .......................        726       1,127
  Other, net ...........................................        165         273
                                                           --------    --------

      Net cash provided (used) by investing activities .        113      (1,871)
                                                           --------    --------

Cash flows from financing activities:
  Revolving credit facilities, net .....................      7,636     (15,980)
  Other notes payable and long-term debt:
    Additions ..........................................       --        15,066
    Principal payments .................................       (425)       (299)
    Deferred financing costs paid ......................        (15)     (2,465)
                                                           --------    --------

      Net cash provided (used) by financing activities .      7,196      (3,678)
                                                           --------    --------

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 ................   $  7,117    $  1,835
    Income taxes (refund received) .....................       (158)        108

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


<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

         CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)

                         Six months ended June 30, 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 ................      --         --        54,015       --        54,015

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

Preferred stock dividends .      --       (1,713)       --         --        (1,713)
                              -------   --------    --------    -------    --------

Balance - June 30, 2002 ...   $10,798   $ 51,358    $(10,172)   $   (12)   $ 51,972
                              =======   ========    ========    =======    ========
</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 June 30, 2002 and the consolidated  statements of
operations and cash flows for the interim  periods ended June 30, 2001 and 2002,
and the consolidated  statement of common stockholders' equity (deficit) for the
interim  period  ended June 30,  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 of
America 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 June 30,  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 June 30, 2002, the last-in,  first-out ("LIFO") method was used to determine
the cost of approximately 74% 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,    June 30,
                                                            2001           2002
                                                          --------       -------
                                                              (In thousands)

Steel and wire products:
<S>                                                        <C>           <C>
  Raw materials ....................................       $ 9,818       $ 7,963
  Work in process ..................................         9,912         9,383
  Finished goods ...................................        16,132        14,803
  Supplies .........................................        13,446        13,852
                                                           -------       -------
                                                            49,308        46,001
  Less LIFO reserve ................................        10,768        10,768
                                                           -------       -------
                                                            38,540        35,233

Lawn and garden products - finished goods ..........         2,372         2,572
                                                           -------       -------

                                                           $40,912       $37,805
                                                           =======       =======
</TABLE>


<PAGE>


Note 3 - Notes payable and long-term debt:

<TABLE>
<CAPTION>
                                                     December 31,       June 30,
                                                         2001             2002
                                                       --------         -------
                                                              (In thousands)

Revolving credit facilities:
<S>                                                    <C>               <C>
  Keystone ..................................          $ 40,823          $26,197
  EWP .......................................             3,225            2,541
  Garden Zone ...............................             1,738            1,068
8% Notes ....................................              --             29,304
6% Notes ....................................              --             16,031
9 5/8% Notes ................................           100,000            6,150
Keystone Term Loan ..........................              --              4,791
County Term Loan ............................              --             10,000
Other .......................................               669              681
                                                       --------          -------
                                                        146,455           96,763
  Less current maturities ...................            46,332           32,399
                                                       --------          -------

                                                       $100,123          $64,364
                                                       ========          =======
</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 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 Keystone Term Loan (as defined
below) and, to the extent of the Company's steel mill in Peoria,  Illinois,  the
County Term 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 Keystone Term Loan (as defined  below),  the
County  Term  Loan  (as  defined  below),  the 8%  Notes  and any  other  future
indebtedness of the Company which is not 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 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 Term Loan"), and a new $5 million term loan (the "Keystone
Term  Loan")  from the same  lender  providing  the  Keystone  revolving  credit
facility. The County Term Loan does not bear interest,  requires no amortization
of principal and is due in 2007.  The Keystone 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 Term 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 Keystone 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 Keystone  Term Loan and County Term Loan were used by Keystone to reduce the
outstanding balance of Keystone's revolving credit facility.  During April 2002,
the Company also extended  Keystone's  revolving  credit facility  through March
2005 under substantially the same terms as the existing facility.  In June 2002,
the EWP  Revolver was  extended  through June 2004 and in July 2002,  the Garden
Zone Revolver was extended  through April 2003, both under the same terms as the
existing facilities.

     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 August 14, 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% Cumulative  Convertible  Pay-In-Kind Preferred Stock (the "Series A
Preferred 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.  The amount of dividends  accrued at June 30, 2002
($1.7 million) has been  determined  based on the assumption such dividends will
be paid in cash  rather  than in the  form of  additional  shares  of  Series  A
Preferred Stock. 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. The Company does not currently believe it
is probable that holders of the Series A Preferred Stock will be able to require
the Company to purchase any of their stock,  and  accordingly the Company is not
accreting the Series A Preferred Stock up to its redemption value.

Note 5 - Income taxes:

     At June 30,  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 six months of 2002, the Company decreased the deferred tax asset valuation
allowance  by  approximately  $400,000.  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 income  (loss)  before income taxes and
cumulative effect of change in accounting principle,  and (ii) the components of
the income tax provision (benefit).

<TABLE>
<CAPTION>
                                                             Six months ended
                                                                  June 30,
                                                             2001         2002
                                                             ----         ----
                                                              (In thousands)

<S>                                                        <C>         <C>
Expected tax provision (benefit), at statutory rate ....   $ (3,178)   $ 19,570
U. S. state income taxes, net ..........................       (170)      2,471
Amortization of goodwill and negative goodwill .........       (215)       --
Deferred tax asset valuation allowance .................       --          (428)
Other, net .............................................       (349)          9
                                                           --------    --------

Income tax provision (benefit) .........................   $ (3,912)   $ 21,622
                                                           ========    ========

Comprehensive provision (benefit) for income taxes:
  Currently refundable:
    U.S. federal .......................................   $    (20)   $    (18)
    U.S. state .........................................         84          18
                                                           --------    --------
      Net currently refundable .........................         64        --

  Deferred income taxes, net ...........................     (3,976)     21,622
                                                           --------    --------

                                                           $ (3,912)   $ 21,622
                                                           ========    ========
</TABLE>



<PAGE>


Note 6 - Other accrued liabilities:

<TABLE>
<CAPTION>
                                                       December 31,      June 30,
                                                           2001            2002
                                                          ------          ------
                                                               (In thousands)

Current:
<S>                                                       <C>            <C>
  Employee benefits ..............................        $11,168        $12,398
  Self insurance .................................          8,906          9,095
  Environmental ..................................          8,068          7,991
  Deferred vendor payments .......................          2,488          3,304
  Legal and professional .........................            887          1,459
  Disposition of former facilities ...............            530            638
  Interest .......................................          1,287            433
  Other ..........................................          3,766          6,783
                                                          -------        -------

                                                          $37,100        $42,101
                                                          =======        =======
Noncurrent:
  Deferred vendor payments .......................        $13,648        $11,838
  Environmental ..................................          7,508          7,472
  Workers compensation payments ..................          1,762          1,890
  Interest .......................................          7,735           --
  Other ..........................................            357            373
                                                          -------        -------

                                                          $31,010        $21,573
                                                          =======        =======
</TABLE>

     During  the first  quarter of 2002,  two of the  Company's  major  vendors,
representing  approximately  $16.1 million of trade payables,  agreed to be paid
over a five-year period ending in March 2007 with no interest.  The repayment of
a portion of such deferred  vendor  payments could be accelerated if the Company
achieves specified levels of future earnings.

     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.



<PAGE>


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 (a 51% owned subsidiary).

     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        Six months ended
                                             June 30,                 June 30,
                                     ---------------------    ----------------------
                                       2001         2002         2001          2002
                                       ----         ----         ----          ----
                                                     (In thousands)

Revenues:
<S>                                  <C>         <C>          <C>          <C>
  Steel and wire products ........   $ 82,401    $  90,892    $ 157,714    $ 172,901
  Lawn and garden products .......      3,893        3,794        6,691        8,134
                                     --------    ---------    ---------    ---------
                                       86,294       94,686      164,405      181,035

  Elimination of intersegment
    revenues .....................       --           (442)        (348)        (879)
                                     --------    ---------    ---------    ---------

                                     $ 86,294    $  94,244    $ 164,057    $ 180,156
                                     ========    =========    =========    =========

Income (loss) before income taxes
 and cumulative effect of change
 in accounting principle:
  Operating profit (loss):
    Steel and wire products ......   $    712    $   4,069    $  (2,695)   $   5,939
    Lawn and garden products .....        386          248          464          604
                                     --------    ---------    ---------    ---------
                                        1,098        4,317       (2,231)       6,543

    General corporate items:
      Interest income ............         53           21          124           41
      General income
       (expense), net ............       (296)      (1,267)         373       (1,763)
      Gain on early extinguishment
       of debt ...................       --           --           --         54,739
    Interest expense .............     (3,601)        (953)      (7,347)      (3,647)
                                     --------    ---------    ---------    ---------

                                     $ (2,746)   $   2,118    $  (9,081)   $  55,913
                                     ========    =========    =========    =========
</TABLE>

Note 8 - Contingencies:

         At June 30, 2002, the Company's financial statements reflected accrued
liabilities of $15.5 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 $1.9 million,  or $.19 per basic share, for the 2001 second quarter and a net
loss of $5.9 million,  or $.59 per basic share, during the six months ended June
30, 2001,  if the goodwill and negative  goodwill  amortization  included in the
Company's net loss, as reported, had not been recognized.


<PAGE>



<TABLE>
<CAPTION>
                                               Three months ended          Six months ended
                                                     June 30,                    June 30,
                                               ------------------          ---------------
                                                 2001        2002          2001       2002
                                                 ----        ----          ----       ----
                                                   (In thousands, except per share data)

Income (loss)
<S>                                          <C>          <C>        <C>          <C>
 available for common shares .............   $   (1,628)  $      291 $   (5,334)  $   52,302
Adjustments:
  Goodwill amortization ..................                                 --           --
                                                                             31           63
  Negative goodwill amortization
                                                   (339)        --         (678)        --
                                             ----------   ---------- ----------   ----------
    Adjusted income (loss) before
     cumulative effect of change in
     accounting principle
                                             $   (1,936)  $      291 $   (5,949)  $   52,302
                                             ==========   ========== ==========   ==========

Basic earnings (loss) per
 share available for common shares
 before cumulative effect of change
 in accounting principle as reported
                                             $     (.16)  $      .03 $     (.53)  $     3.21
Adjustments:
  Goodwill amortization ..................                                 --           --
                                                                           --            .01
  Negative goodwill amortization
                                                   (.03)        --         (.07)        --
                                             ----------   ---------- ----------   ----------
    Adjusted basic earnings (loss)
     per share available for common
     shares before cumulative effect
     of change in accounting principle ...   $     (.19)  $      .03 $     (.59)  $     3.21
                                             ==========   ========== ==========   ==========

Diluted earnings (loss) per share
 available for common shares before
 cumulative effect of change in
 accounting principle as reported ........   $     (.16)  $      .03 $     (.53)  $     1.94

Adjustments:
  Goodwill amortization ..................                                 --           --
                                                                           --            .01
  Negative goodwill amortization
                                                   (.03)        --         (.07)        --
                                             ----------   ---------- ----------   ----------
    Adjusted diluted earnings (loss)
     per share available for common shares
     before cumulative effect of change
     in accounting principle .............   $     (.19)  $      .03 $     (.59)  $     1.94
                                             ==========   ========== ==========   ==========
</TABLE>


<PAGE>



<TABLE>
<CAPTION>
                                            Three months ended          Six months ended
                                                  June 30,                 June 30,
                                            ------------------        ------------------
                                            2001          2002        2001          2002
                                            ----          ----        ----          ----
                                                (In thousands, except per share data)

<S>                                     <C>          <C>          <C>          <C>
Net income (loss) as reported .......   $   (1,628)  $    2,004   $   (5,334)  $   54,015
Adjustments:
  Goodwill amortization .............                                                --
                                                             31           63         --
  Negative goodwill amortization ....                                                --
                                                           (339)        (678)        --
  Cumulative effect of change in
   accounting principle
                                              --           --           --        (19,998)
                                        ----------   ----------   ----------   ----------

    Adjusted net income (loss)
                                        $   (1,936)  $    2,004   $   (5,949)  $   34,017
                                        ==========   ==========   ==========   ==========

Basic earnings (loss) per
 share available for common shares as
 reported ...........................   $     (.16)  $      .03   $     (.53)  $     5.20
Adjustments:
  Goodwill amortization .............         --           --            .01         --
  Negative goodwill amortization ....         (.03)        --           (.07)        --
  Cumulative effect of change in
   accounting principle .............         --           --           --          (1.99)
                                        ----------   ----------   ----------   ----------

    Adjusted basic earnings
     (loss) per share available for
     common shares ..................   $     (.19)         .03   $     (.59)  $     3.21
                                        ==========   ==========   ==========   ==========

Diluted earnings (loss) per
 share available for common shares as
 reported ...........................   $     (.16)  $      .03         (.53)        3.09
Adjustments:
  Goodwill amortization .............         --           --            .01         --
  Negative goodwill amortization ....         (.03)        --           (.07)        --
  Cumulative effect of change in
   accounting principle .............         --           --           --          (1.15)
                                        ----------   ----------   ----------   ----------

    Adjusted diluted earnings
     (loss) per share available for
     common shares ..................   $     (.19)         .03   $     (.59)  $     1.94
                                        ==========   ==========   ==========   ==========
</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.

     Gain or loss on early  extinguishment of debt. The Company adopted SFAS No.
145 effective  April 1, 2002.  SFAS No. 145, among other things,  eliminated the
prior  requirement  that all gains and losses from the early  extinguishment  of
debt be  classified  as an  extraordinary  item.  Upon adoption of SFAS No. 145,
gains and losses from the early  extinguishment of debt are now classified as an
extraordinary  item  only if they meet the  "unusual  and  infrequent"  criteria
contained in Accounting  Principles Bulletin ("APBO") No. 30. In addition,  upon
adoption of SFAS No. 145, all gains and losses from the early  extinguishment of
debt that had been classified as an  extraordinary  item are to be reassessed to
determine if they would have met the "unusual and  infrequent"  criteria of APBO
No. 30;  any such gain or loss that would not have met the APBO No. 30  criteria
are  retroactively  reclassified  and reported as a component  of income  before
extraordinary  item. The Company has concluded that its 2002 first quarter $54.7
million pre-tax extraordinary gain ($33.1 million, or $3.29 per basic share, net
of income taxes) discussed in Note 3 would not have met the APBO No. 30 criteria
for classification as an extraordinary  item, and accordingly such gain has been
retroactively  reclassified  and is now reported as a component of income before
extraordinary item.

Note 10 - Earnings per share:

     Net income  (loss) per share is based upon the weighted  average  number of
common shares and dilutive  securities.  A reconciliation  of the numerators and
denominators  used in the  calculations of basic and diluted  earnings per share
computations of income (loss) before  cumulative  effect of change in accounting
principle is presented below. The effect of the assumed conversion of the Series
A Convertible  Preferred  Stock was  antidilutive in the three months ended June
30, 2002 period.  The dilutive effect of the assumed  conversion of the Series A
Preferred  Stock in the six month ended June 30, 2002 period is calculated  from
its  issuance  in March 2002.  Keystone  stock  options  were  omitted  from the
calculation because they were antidilutive in all periods presented.

<TABLE>
<CAPTION>
                                           Three months ended       Six months ended
                                                June 30,                 June 30,
                                            ----------------        ----------------
                                            2001        2002        2001        2002
                                            ----        ----        ----        ----
                                                         (In thousands)

Numerator:
  Net income (loss) before cumulative
   effect of change in accounting
<S>                                      <C>         <C>         <C>         <C>
   principle .........................   $ (1,628)   $  2,004    $ (5,334)   $ 34,017

  Less  Series A Preferred Stock
   Dividends .........................       --        (1,713)       --        (1,713)
                                         --------    --------    --------    --------
  Basic net income (loss) before
   cumulative effect of change in
   accounting principle ..............     (1,628)        291      (5,334)     32,304

    Series A Preferred Stock dividends       --          --         1,713
                                         --------    --------    --------    --------

  Diluted net income (loss) before
   cumulative effect of change in
   accounting principle ..............   $ (1,628)   $    291    $ (5,334)   $ 34,017
                                         ========    ========    ========    ========

Denominator:
  Average common shares outstanding ..     10,062      10,068      10,062      10,066
  Dilutive effect of Preferred Stock
   Series A ..........................       --          --          --         7,425
                                         --------    --------    --------    --------

  Diluted shares .....................     10,062      10,068      10,062      17,491
                                         ========    ========    ========    ========
</TABLE>



<PAGE>


Note 11 - 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. 146,  Accounting for Costs  Associated with
Exit or Disposal Activities,  no later than January 1, 2003 for exit or disposal
activities initiated on or after the date of adoption. Under SFAS No. 146, costs
associated with exit  activities,  as defined,  that are covered by the scope of
SFAS No. 146 will be recognized and measured initially at fair value,  generally
in the period in which the liability is incurred.  Costs covered by the scope of
SFAS No. 146  include  termination  benefits  provided  to  employees,  costs to
consolidate  facilities or relocate employees,  and costs to terminate contracts
(other than a capital lease).  Under existing GAAP, a liability for such an exit
cost is recognized at the date an exit plan is adopted,  which may or may not be
the date at which the liability has been incurred.




<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 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 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  billet and wire rod production,
scrap costs sales volume and pricing data for the periods indicated. The per-ton
selling  prices  shown  reflect the average  price of all grades of all products
sold to all customers in each product category.

<TABLE>
<CAPTION>
                                            Three months ended    Six months ended
                                                  June 30,            June 30,
                                              --------------      ---------------
                                              2001      2002      2001       2002
                                              ----      ----      ----       ----
                                                        (Tons in thousands)

Production volume (tons):
<S>                                            <C>       <C>       <C>       <C>
 Billets ...............................       189       209       352       384
 Wire rod ..............................       186       192       336       374

Average per-ton scrap
 purchase cost .........................      $ 85      $ 93      $ 87      $ 88

Sales volume(tons):
 Fabricated wire products ..............        82        85       153       159
 Industrial wire .......................        27        28        54        52
 Wire rod ..............................        68        80       132       162
                                              ----      ----      ----      ----

                                               177       193       339       373
                                              ====      ====      ====      ====

Per-ton selling prices:
  Fabricated wire products .............      $646      $660      $657      $661
  Industrial wire ......................      $421      $420      $426      $421
  Wire rod .............................      $257      $286      $254      $277
  All steel and wire products ..........      $463      $469      $463      $461
</TABLE>


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

<TABLE>
<CAPTION>
                                         Three months ended    Six months ended
                                              June 30,              June 30,
                                          ----------------     ----------------
                                           2001      2002       2001       2002
                                           ----      ----       ----       ----
                                                       (In millions)

Steel and wire products:
<S>                                       <C>       <C>        <C>        <C>
  Fabricated wire products ..........     $ 53.3    $ 56.0     $100.8     $105.4
  Industrial wire ...................       11.2      11.5       22.6       22.1
  Wire rod ..........................       17.5      23.0       33.7       44.8
  Other .............................         .5        .4         .7         .6
                                          ------    ------     ------     ------
                                            82.5      90.9      157.8      172.9

Lawn and garden products ............        3.8       3.3        6.3        7.3
                                          ------    ------     ------     ------

                                          $ 86.3    $ 94.2     $164.1     $180.2
                                          ======    ======     ======     ======
</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   Six months ended
                                             June 30,            June 30,
                                        2001        2002      2001        2002
                                        ----        ----      ----        ----

<S>                                    <C>         <C>       <C>         <C>
Net sales ..........................   100.0 %     100.0 %   100.0 %     100.0 %
Cost of goods sold .................      93.2        88.5      95.6        89.2
                                       -------     -------   -------     -------
Gross profit .......................     6.8 %      11.5 %     4.4 %      10.8 %
                                       =======     =======   =======     =======

Selling expense ....................     1.9 %       1.8 %     2.0 %       2.0 %
General and administrative expense .     5.2 %       7.2 %     4.8 %       7.1 %
Overfunded defined benefit pension
 Credit ............................       (.9)%       (.8)%     (.9)%       (.8)%
Gain on early extinguishment of
 Debt ..............................       - %         - %       - %       (30.4)%

Income (loss) before income taxes
 and cumulative effect of change in
 accounting principle ..............      (3.2)%     2.2 %      (5.5)%    31.0 %
Income tax provision (benefit) .....      (1.5)       --        (2.3)     12.0 %
Minority interest in after-tax
  Earnings .........................        .2          .1        .1          .1
                                       -------     -------   -------     -------

Net income (loss) before cumulative
 effect of change in accounting
 principle .........................      (1.9)%     2.1 %      (3.3)%    18.9 %
                                       =======     =======   =======     =======
</TABLE>


     Net sales of $94.2 million in the 2002 second quarter were up 9% from $86.3
million during the same period in 2001. This increase in sales was due primarily
to a 9% increase in shipments of the Company's steel and wire products  combined
with a $6 per-ton  increase in overall  steel and wire product  selling  prices,
partially offset by a decline in Garden Zone's sales. Garden Zone's sales during
the 2002 second quarter  declined  $500,000 from the 2001 second quarter to $3.3
million.  Shipments of wire rod increased 18% during the 2002 second  quarter as
compared to the 2001 second quarter while per-ton selling prices  increased 11%.
Industrial  wire shipments  increased 4% while per-ton  selling prices  remained
relatively  constant.  Fabricated wire products shipments during the 2002 second
quarter  increased  3% as  compared  to the 2001 second  quarter  while  per-ton
selling prices increased 2%. Management believes the increase in shipment volume
during the 2002 second quarter was due to abnormally low shipment  volume in the
2001  second  quarter  resulting  from high  levels of  imported  steel and wire
products.  The 2002 second quarter  shipment  volume was  consistent  with those
levels in years prior to 2001.  Although high levels of imported  steel and wire
products  continues,  these import levels have been somewhat mitigated by former
competitors  of the  Company  exiting the  marketplace.  However,  despite  this
decline  in  competition,  Keystone  has still been  unable to achieve  historic
levels of per-ton selling prices.

     Net sales of  $180.2  million  in the first six  months of 2002 were up 10%
from $164.1 million in the first six months of 2001.  This increase in sales was
primarily  due to a 10%  increase  in  shipments  of  Keystone's  steel and wire
products and a $900,000 increase in Garden Zone's sales partially offset by a $2
per-ton  decline  in selling  prices of the  Company's  steel and wire  products
during the first six months of 2002.  Garden  Zone's  sales during the first six
months of 2002  amounted to $7.3 million as compared to $6.3 million  during the
same  period in 2001.  Wire rod  shipments  during  the first six months of 2002
increased  22% over the first six months of 2001 while  per-ton  selling  prices
increased 9%. Industrial wire shipments declined 1% while per-ton selling prices
declined 1%.  Fabricated wire products  shipments during the first six months of
2002  increased  4% as  compared  to the first six months of 2001 while  per-ton
selling prices increased 1%. Despite increases in per-ton selling prices of wire
rod and fabricated  wire products,  overall per-ton selling prices declined as a
result of a change in the  product  mix between the first six months of 2001 and
2002.  Management  believes the increase in shipment volume during the first six
months of 2002 was also due to abnormally  low shipment  volume during the first
six months of 2001. The shipment  volume during the first six months of 2002 was
consistent with those levels in years prior to 2001.

     Billet  production  during the second quarter of 2002 increased 20,000 tons
or 10% to 209,000 tons from 189,000 tons during the second  quarter of 2001. The
primary reason for the higher  production  levels during the 2002 second quarter
was improved  performance from Keystone's steel mill.  Keystone did not purchase
any  billets  during  the  second  quarter  of either  2001 and  2002.  Wire rod
production  during  the  second  quarter of 2002  increased  to 192,000  tons as
compared to production of 186,000 tons in the 2001 second quarter,  primarily as
a result of the higher billet production during the 2002 second quarter.

     The increased  billet  production  during the first and second  quarters of
2002 as compared to the first two quarters of 2001 resulted in billet production
during the first six months of 2002 increasing  32,000 tons to 384,000 tons from
352,000 tons during the first six months of 2001.  Keystone did not purchase any
billets  during the first six months of either 2001 or 2002.  Increased wire rod
production  during  the first  quarter  of 2002 as  compared  to the 2001  first
quarter  resulted in an increase of 38,000 tons of wire rod produced  during the
first six months of 2002 to 374,000  tons from 336,000 tons during the first six
months of 2001. The low wire rod production during the first quarter of 2001 was
due primarily to  intentional  production  curtailments  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 2002 second quarter increased to $10.8 million from
$5.8 million in the 2001 second quarter as the Company's gross margin  increased
from 6.8% in the 2001 period to 11.5% in the 2002 second quarter.  This increase
in gross margin was due  primarily to the higher  per-ton steel and wire product
selling prices,  increased  production  efficiencies in the Company's steel mill
and lower  natural gas costs  partially  offset by higher costs for scrap steel,
Keystone's primary raw material, and electricity.  The higher selling prices and
lower gas costs during the 2002 second quarter  favorably  impacted gross profit
by $1.2 million and $800,000, respectively, whereas higher scrap and electricity
costs  negatively  impacted  gross  profit  by $1.8  million  and $1.7  million,
respectively.  In addition,  during the 2002 second quarter,  Keystone  received
$400,000 of insurance  proceeds from business  interruption  policies related to
incidents  in prior years as compared  to none  received  during the 2001 second
quarter.

     Gross profit during the first six months of 2002 increased to $19.5 million
from $7.2 million in the first six months of 2001 as the Company's  gross margin
increased from 4.4% in the 2001 period to 10.8% in the first six months of 2002.
This  increase  in  gross  margin  was due  primarily  to  increased  production
efficiencies  in the Company's  steel mill and lower natural gas costs partially
offset by the lower steel and wire product  selling  prices and higher costs for
electricity  and scrap steel.  The lower natural gas costs during the first half
of 2002  favorably  impacted  gross  profit  by  $3.8  million,  whereas  higher
electricity and scrap costs negatively impacted gross profit by $3.4 million and
$400,000, respectively. The lower selling prices adversely impacted gross profit
during  the first six months of 2002 by  approximately  $900,000.  In  addition,
during the first six months of 2002,  Keystone  received  $800,000 of  insurance
proceeds from business interruption policies related to incidents in prior years
as compared to $1.6 million received during the first six months of 2001. During
the first six months of 2001,  Keystone  experienced  certain production outages
that adversely impacted gross profit by approximately $800,000. Keystone did not
experience any such production outages during the first six months of 2002.

     Selling expense was $1.7 million during the second quarter of both 2002 and
2001.  Selling  expense of $3.6 million  during the first six months of 2002 was
approximately  $300,000 higher than the same period in 2001, but was constant as
a percentage of sales.

     General and  administrative  expense  increased to $6.8 million  during the
second  quarter of 2002 as compared to $4.5 million during the second quarter of
2001  primarily  due to higher legal and  professional  and OPEB expenses in the
second quarter of 2002 partially  offset by an unfavorable  legal  settlement of
$500,000 during the second quarter of 2001. General and  administrative  expense
increased  from $7.8  million  during  the first  half of 2001 to $12.7  million
during the first half of 2002,  primarily  due to higher legal and  professional
and OPEB expenses in the first half of 2002 as well as a $650,000  reimbursement
of legal fees received during the first half of 2001 all partially offset by the
unfavorable legal settlement during the first half of 2001. The higher legal and
professional  expenses  during the first half of 2002 were primarily  related to
the Exchange Offer described below.

     The overfunded defined benefit pension credit in the second quarter of both
2001 and 2002 was $750,000 and during the first six months of both 2001 and 2002
was $1.5  million.  Keystone  currently  anticipates  the total 2002  overfunded
defined  benefit pension credit will  approximate  $3.0 million as compared to a
total credit in 2001 of $5.5 million.

     Interest  expense in the  second  quarter of 2002 was lower than the second
quarter of 2001 due principally to lower debt levels and interest rates. Average
borrowings by Keystone  approximated $97.1 million in the second quarter of 2002
as compared to $152.2 million in the second  quarter of 2001.  During the second
quarter of 2002, Keystone's weighted-average interest rate was 3.0% per annum as
compared to 8.9% per annum in the second quarter of 2001.

     Interest  expense  in the first  half of 2002 was also lower than the first
half of 2001 due  principally to lower debt levels and interest  rates.  Average
borrowings by Keystone  approximated $116.5 million in the first half of 2002 as
compared to $151.1  million in the first half of 2001.  During the first half of
2002, Keystone's  weighted-average  interest rate was 5.8% per annum as compared
to 9.2% per annum in the first half 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 June 30, 2002, the Company
had recorded a deferred tax asset valuation allowance of $14.1 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,  other  than  the tax  provision  recorded  in
connection  with the  Exchange  Offer  described  below,  the  Company  does not
anticipate  recording 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 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 second  quarter of 2002 of $2.0  million as compared to a net loss of
$1.6 million in the second quarter of 2001, and net income during the first half
of 2002 of $54.0  million as compared to a net loss in the first half of 2000 of
$5.3 million.

Outlook for 2002

     Management  currently  believes,  despite the current level of rod imports,
capacity  utilization and shipment  volumes in 2002 will only be slightly higher
than 2001  levels  and  average  per-ton  selling  prices for the 2002 year 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) for  calendar  2002,  although  the pre-tax loss is expected to
significantly decline in 2002 as compared to the 2001 level.

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

     At June 30, 2002 Keystone had negative  working  capital of $23.6  million,
including $2.6 of notes payable and current maturities of long-term debt as well
as outstanding  borrowings under the Company's  revolving  credit  facilities of
$29.8 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 June 30, 2002,
unused credit  available for borrowing  under  Keystone's $45 million  revolving
credit facility (the "Keystone  Revolver"),  which expires March 31, 2005, EWP's
$7 million  revolving  credit  facility,  which expires June 30, 2004, (the "EWP
Revolver") and Garden Zone's $4 million revolving credit facility, which expires
April 2, 2003 (as  amended in July 2002) were $16.6  million,  $4.1  million and
$2.3 million,  respectively.  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.  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 August 14, 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 at the completion of the Exchange Offer.

     During the first half of 2002, the Company's operating  activities provided
approximately  $5.5 million of cash  compared to $7.3 million used in operations
in the  first  half of 2001 due  primarily  to a  greater  decline  in  accounts
receivable and a greater increase in accrued expenses.

     During the first half of 2002,  Keystone made capital  expenditures of $3.3
million as compared to $1.5  million in the first half of 2001.  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 existing credit facilities.

     At June 30, 2002,  the Company's  financial  statements  reflected  accrued
liabilities  of  $15.5  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 $21.5
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 June 30, 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  $14.1 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.  OTHER INFORMATION

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 4. Submission of Matters to a Vote of Security Holders

     On May 16, 2002,  the annual  meeting of the  stockholders  of Keystone was
held for the purpose of voting to elect one director for a term of two years and
two directors for terms of three years.

     Results of voting at the annual  meeting  are  detailed  below  (10,068,450
common shares were entitled to vote at the meeting).

<TABLE>
<CAPTION>
                                           For           Withheld        Total

Director -

  Two-year term
<S>                                      <C>             <C>           <C>
J. Walter Tucker, Jr .............       9,157,749       102,186       9,259,935

Three-year term
Glenn R. Simmons .................       9,181,704        78,231       9,259,935
Steven L. Watson .................       9,182,796        77,139       9,259,935
</TABLE>

ITEM 6. Exhibits and Reports on Form 8-K

(a)     The following exhibit is included herein:

          99.1 Chief  Executive  Officer's  Certification  Pursuant to 18 U.S.C.
               Section   1350  as  Adopted   Pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002

          99.2 Chief  Financial  Officer's  Certification  Pursuant to 18 U.S.C.
               Section   1350  as  Adopted   Pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002

(b)     Reports on Form 8-K filed during the quarter ended June 30, 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:  August 14, 2002               By /s/Bert E. Downing, Jr.
                                        -------------------------------------
                                        Bert E. Downing, Jr.
                                        Vice President and Corporate Controller
                                        (Principal Financial and Accounting
                                        Officer)