SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period September 30, 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 November 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 September 30, 2002                                 3-4

                  Consolidated Statements of Operations - Three months
                   and nine months ended September 30, 2001 and 2002      5-6

                  Consolidated Statements of Cash Flows - Nine months
                   ended September 30, 2001 and 2002                        7

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

                  Notes to Consolidated Financial Statements              9-21

  Item 2.         Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                   22-30

  Item 4.         Controls and Procedures                                  30

PART II. OTHER INFORMATION

  Item 1.         Legal Proceedings                                        31

  Item 6.         Exhibits and Reports on Form 8-K                         31



<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)


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

Current assets:
<S>                                                      <C>            <C>
  Notes and accounts receivable ..................       $ 29,411       $ 36,787
  Inventories ....................................         40,912         45,419
  Deferred income taxes ..........................          9,778           --
  Prepaid expenses and other .....................          3,211          3,304
                                                         --------       --------

     Total current assets ........................         83,312         85,510
                                                         --------       --------

Property, plant and equipment ....................        367,556        371,449
Less accumulated depreciation ....................        237,956        250,290
                                                         --------       --------

     Net property, plant and equipment ...........        129,600        121,159
                                                         --------       --------

Other assets:
  Restricted investments .........................          5,675          5,633
  Prepaid pension cost ...........................        131,985        133,188
  Deferred income taxes ..........................         11,844           --
  Deferred financing costs .......................          2,295          2,560
  Goodwill .......................................            752            752
  Other ..........................................          1,437          1,274
                                                         --------       --------

     Total other assets ..........................        153,988        143,407
                                                         --------       --------

                                                         $366,900       $350,076
                                                         ========       ========
</TABLE>








<PAGE>

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)




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

Current liabilities:
  Notes payable and current maturities of
<S>                                                    <C>            <C>
    long-term debt ...............................     $  46,332      $  35,272
  Accounts payable ...............................        23,014         22,616
  Payables to affiliates .........................           633          1,197
  Accrued OPEB cost ..............................         7,215          7,215
  Accrued preferred stock dividends ..............          --            3,198
  Other accrued liabilities ......................        37,100         42,398
                                                       ---------      ---------

      Total current liabilities ..................       114,294        111,896
                                                       ---------      ---------

Noncurrent liabilities:
  Long-term debt .................................       100,123         63,639
  Accrued OPEB cost ..............................       101,810        105,480
  Negative goodwill ..............................        19,998           --
  Other ..........................................        31,010         21,096
                                                       ---------      ---------

      Total noncurrent liabilities ...............       252,941        190,215
                                                       ---------      ---------

Minority interest ................................             1            167
                                                       ---------      ---------

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

Common stockholders' equity (deficit):
  Common stock ...................................        10,792         10,798
  Additional paid-in capital .....................        53,071         49,873
  Accumulated deficit ............................       (64,187)       (14,973)
  Treasury stock, at cost ........................           (12)           (12)
                                                       ---------      ---------

      Total stockholders' equity (deficit) .......          (336)        45,686
                                                       ---------      ---------

                                                       $ 366,900      $ 350,076
                                                       =========      =========
</TABLE>





<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                         Three months ended         Nine months ended
                                           September 30,              September 30,
                                         ------------------         -----------------
                                         2001          2002         2001         2002
                                         ----          ----         ----         ----

Revenues and other income:
<S>                                    <C>          <C>          <C>          <C>
  Net sales ........................   $  82,329    $  79,445    $ 246,386    $ 259,601
  Gain on early extinguishment of
   debt ............................        --           --           --         54,739
  Interest .........................          42           22          166           63
  Other, net .......................          58          (12)         553           25
                                       ---------    ---------    ---------    ---------
                                          82,429       79,455      247,105      314,428
                                       ---------    ---------    ---------    ---------

Costs and expenses:
  Cost of goods sold ...............      75,693       75,111      232,511      235,723
  Selling ..........................       1,513        1,666        4,788        5,240
  General and administrative .......       4,674        6,353       12,491       19,080
  Overfunded defined benefit pension
   expense (credit) ................        (750)         297       (2,250)      (1,203)
  Interest .........................       3,605          937       10,952        4,584
                                       ---------    ---------    ---------    ---------
                                          84,735       84,364      258,492      263,424
                                       ---------    ---------    ---------    ---------

  Income (loss) before income taxes
   and cumulative effect of change
   in accounting principle .........      (2,306)      (4,909)     (11,387)      51,004

Income tax expense (benefit) .......        (952)        --         (4,864)      21,622

Minority interest in after-tax
  earnings (losses) ................        (104)        (108)          61          166
                                       ---------    ---------    ---------    ---------

Income (loss) before cumulative
 effect of change in accounting
 principle .........................      (1,250)      (4,801)      (6,584)      29,216

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

   Net income (loss) ...............      (1,250)      (4,801)      (6,584)      49,214

Dividends on preferred stock .......        --          1,485         --          3,198
                                       ---------    ---------    ---------    ---------

Net income (loss) available for
 common shares .....................   $  (1,250)   $  (6,286)   $  (6,584)   $  46,016
                                       =========    =========    =========    =========
</TABLE>




<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                        Three months ended           Nine months ended
                                          September 30,                September 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 ....................   $     (.12)   $     (.63)   $     (.65)   $     2.58

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

    Net income (loss) ...........   $     (.12)   $     (.63)   $     (.65)   $     4.57
                                    ==========    ==========    ==========    ==========

Basic shares outstanding ........       10,062        10,068        10,062        10,067
                                    ==========    ==========    ==========    ==========

Diluted earnings (loss) per share
 available for common shares:
  Income (loss) before cumulative
   effect of change in accounting
   principle ....................   $     (.12)   $     (.63)   $     (.65)   $     1.46

  Cumulative effect of change in
   accounting principle .........         --            --            --            1.00
                                    ----------    ----------    ----------    ----------

    Net income (loss) ...........   $     (.12)   $     (.63)   $     (.65)   $     2.46
                                    ==========    ==========    ==========    ==========

Diluted shares outstanding ......       10,062        10,068        10,062        19,967
                                    ==========    ==========    ==========    ==========
</TABLE>









<PAGE>

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             Nine months ended
                                                                September 30,
                                                              2001        2002
                                                              ----        ----

Cash flows from operating activities:
<S>                                                        <C>         <C>
  Net income (loss) ....................................   $ (6,584)   $ 49,214
  Depreciation and amortization ........................     12,771      13,105
  Amortization of deferred financing costs .............        359         498
  Deferred income taxes ................................     (4,977)     21,622
  Non-cash OPEB expense (payments in excess of expense)        (497)      3,670
  Gain on early extinguishment of debt .................       --       (54,739)
  Cumulative effect of change in accounting principle ..       --       (19,998)
  Other, net ...........................................        288         250
  Change in assets and liabilities:
    Notes and accounts receivable ......................    (14,934)     (8,499)
    Inventories ........................................     10,873      (4,507)
    Prepaid pension cost ...............................     (2,250)     (1,203)
    Accounts payable ...................................      3,116         166
    Other, net .........................................         (5)      5,468
                                                           --------    --------

      Net cash provided (used) by operating activities .     (1,840)      5,047
                                                           --------    --------

Cash flows from investing activities:
  Capital expenditures .................................     (2,532)     (4,803)
  Proceeds from sale of business unit ..................        757        --
  Collection of notes receivable .......................        730       1,127
  Other, net ...........................................         61         166
                                                           --------    --------

      Net cash used by investing activities ............       (984)     (3,510)
                                                           --------    --------

Cash flows from financing activities:
  Revolving credit facilities, net .....................      3,256     (13,106)
  Other notes payable and long-term debt:
    Additions ..........................................         15      15,066
    Principal payments .................................       (425)     (1,025)
  Deferred financing costs paid ........................        (22)     (2,472)
                                                           --------    --------

      Net cash provided (used) by financing activities .      2,824      (1,537)
                                                           --------    --------

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 ................   $  8,133    $  2,739
    Income taxes .......................................       (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)

                      Nine months ended September 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 .................      --         --        49,214     --       49,214

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

Preferred stock dividends ..      --       (3,198)       --       --       (3,198)
                               -------   --------    --------    ----    --------

Balance - September 30, 2002   $10,798   $ 49,873    $(14,973)   $(12)   $ 45,686
                               =======   ========    ========    ====    ========
</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 September 30, 2002 and the consolidated statements
of operations  and cash flows for the interim  periods ended  September 30, 2001
and 2002, and the consolidated  statement of stockholders'  equity (deficit) for
the interim  period ended  September  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
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 September 30, 2002, Contran  Corporation  ("Contran") and other entities
related to Mr. Harold C. Simmons,  beneficially  owned  approximately 50% of the
outstanding  common  stock  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. In
October  2002,  Contran  purchased  54,956  shares of the  59,399  shares of the
Company's Redeemable Series A Preferred Stock. See Note 4. On or after March 15,
2003,  each share of Series A  Preferred  Stock will  entitle  the holder to 250
votes on any matter brought before Keystone common shareholders, voting together
with the Keystone  common  stockholders as a single class.  Assuming  Keystone's
outstanding  voting securities and Contran's and Mr. Simmons' current beneficial
ownership of such securities remain the same, after March 15, 2003,  Contran and
other entities  related to Mr. Simmons,  will control  approximately  75% of the
combined voting power of the Company's voting securities.



<PAGE>


Note 2 - Inventories:

     Inventories are stated at the lower of cost or market. At both December 31,
2001 and September 30, 2002, the last-in,  first-out ("LIFO") method was used to
determine the cost of approximately  74% of total  inventories and the first-in,
first-out  or average  cost  methods  were used to  determine  the cost of other
inventories.

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

Steel and wire products:
<S>                                                        <C>           <C>
  Raw materials ....................................       $ 9,818       $ 8,214
  Work in process ..................................         9,912        14,293
  Finished goods ...................................        16,132        16,133
  Supplies .........................................        13,446        14,607
                                                           -------       -------
                                                            49,308        53,247
  Less LIFO reserve ................................        10,768        10,768
                                                           -------       -------
                                                            38,540        42,479

Lawn and garden products - finished goods ..........         2,372         2,940
                                                           -------       -------


                                                           $40,912       $45,419
                                                           =======       =======
</TABLE>

Note 3 - Notes payable and long-term debt:

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

Revolving credit facilities:
<S>                                                    <C>               <C>
  Keystone ..................................          $ 40,823          $29,412
  EWP .......................................             3,225            2,205
  Garden Zone ...............................             1,738            1,063
8% Notes ....................................              --             28,908
6% Notes ....................................              --             16,031
9 5/8% Notes ................................           100,000            6,150
Keystone Term Loan ..........................              --              4,479
County Term Loan ............................              --             10,000
Other .......................................               669              663
                                                       --------          -------
                                                        146,455           98,911
  Less current maturities ...................            46,332           35,272
                                                       --------          -------

                                                       $100,123          $63,639
                                                       ========          =======
</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
prior 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  November  14,  2002,  the
Company has not borrowed any amounts under such facility.

     In October 2002, Contran purchased $18.3 million of the total $19.8 million
principal  amount of  maturity  of the 8% Notes.  As such,  approximately  $26.6
million of the recorded $28.9 million liability for the 8% Notes as of September
30, 2002 is payable to Contran subsequent to October 2002.

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 September 30,
2002 ($3.2 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, each share of Series A Preferred Stock may be
converted into 250 shares of Keystone common stock at the exchange rate of $4.00
per share based on the stated  value of each Series A 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 September 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  nine  months  of 2002,  the  Company  increased  the  deferred  tax asset
valuation  allowance by  approximately  $1.4 million.  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>
                                                             Nine months ended
                                                                September 30,
                                                           --------------------
                                                              2001        2002
                                                              ----        ----
                                                               (In thousands)

<S>                                                        <C>         <C>
Expected tax provision (benefit), at statutory rate ....   $ (3,985)   $ 17,851
U. S. state income taxes, net ..........................       (126)      2,315
Amortization of goodwill and negative goodwill .........       (323)       --
Deferred tax asset valuation allowance .................       --         1,429
Other, net .............................................       (430)         27
                                                           --------    --------

Income tax provision (benefit) .........................   $ (4,864)   $ 21,622
                                                           --------    --------

Comprehensive provision (benefit)
 for income taxes:
  Currently payable:
    U.S. federal .......................................   $    (30)   $    (28)
    U.S. state .........................................        143          28
      Net currently payable ............................        113        --
                                                           --------    --------

  Deferred income taxes, net ...........................     (4,977)     21,622
                                                           --------    --------

                                                           $ (4,864)   $ 21,622
                                                           ========    ========
</TABLE>


Note 6 - Other accrued liabilities:

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

Current:
<S>                                                       <C>            <C>
  Employee benefits ..............................        $11,168        $13,999
  Self insurance .................................          8,906          9,471
  Environmental ..................................          8,068          8,171
  Deferred vendor payments .......................          2,488          3,305
  Legal and professional .........................            887            860
  Disposition of former facilities ...............            530            638
  Interest .......................................          1,287            127
  Other ..........................................          3,766          5,827
                                                          -------        -------
                                                          $37,100        $42,398
                                                          =======        =======

Noncurrent:
  Deferred vendor payments .......................        $13,648        $11,051
  Environmental ..................................          7,508          7,312
  Workers compensation payments ..................          1,762          2,155
  Interest .......................................          7,735            198
  Other ..........................................            357            380
                                                          -------        -------
                                                          $31,010        $21,096
                                                          =======        =======
</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.

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        Nine months ended
                                            September 30,             September 30,
                                         -----------------        ------------------
                                         2001         2002        2001          2002
                                         ----         ----        ----          ----
                                                (In thousands)

Revenues:
<S>                                   <C>         <C>          <C>          <C>
  Steel and wire products .........   $ 81,427    $  78,255    $ 239,141    $ 251,156
  Lawn and garden products ........      1,007        1,347        7,698        9,481
                                      --------    ---------    ---------    ---------
                                        82,434       79,602      246,839      260,637

  Elimination of intersegment
    revenues ......................       (105)        (157)        (453)      (1,036)
                                      --------    ---------    ---------    ---------

                                      $ 82,329    $  79,445    $ 246,386    $ 259,601
                                      ========    =========    =========    =========

Income (loss) before income taxes
 and cumulative effect of change in
 accounting principle:
  Operating profit (loss):
    Steel and wire products .......   $  2,054    $  (3,476)   $    (641)   $   2,463
    Lawn and garden products ......       (163)        (200)         301          404
                                      --------    ---------    ---------    ---------
                                         1,891       (3,676)        (340)       2,867

    General corporate items:
      Interest income .............         42           22          166           63
      General expense, net ........       (634)        (318)        (261)      (2,081)
      Gain on early extinguishment
       of debt ....................       --           --           --         54,739
    Interest expense ..............     (3,605)        (937)     (10,952)      (4,584)
                                      --------    ---------    ---------    ---------

                                      $ (2,306)   $  (4,909)   $ (11,387)   $  51,004
                                      ========    =========    =========    =========
</TABLE>




<PAGE>


Note 8 - Contingencies:

     At September 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.

     At December 31, 2001,  the Company's  defined  benefit  pension plan's (the
"Plan") assets exceeded the Plan's  accumulated  benefit obligation and as such,
was considered  over-funded for financial reporting purposes. Due to an expected
significant  decline in the value of the Plan's  assets during 2002 and based on
expected interest rates at the end of 2002, it is likely the Plan's  accumulated
benefit  obligation at December 31, 2002 will exceed the Plan's  assets.  If the
Plan's accumulated  benefit obligation exceeds the Plan's assets at December 31,
2002, SFAS No. 87, Employers' Accounting for Pensions, provides that the Company
would be required to record an  additional  minimum  liability  that is at least
equal to the amount by which the Plan's  accumulated  benefit obligation exceeds
the Plan's  assets,  eliminate  any recorded  prepaid  pension  cost,  record an
intangible asset equal to the amount of any unrecognized  prior service cost and
charge a separate  component  of  stockholders'  equity for the  difference.  If
required to be  recorded,  the charge to  stockholders'  equity at December  31,
2002, is expected to approximate at least $123 million.

     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.

     In  accordance  with  requirements  of SFAS No. 142,  the  Company  reviews
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.
Based on the Company's 2002 third quarter review,  no impairment of goodwill was
deemed to exist at September 30, 2002.

     As shown in the following table, the Company would have reported a net loss
of $1.6 million,  or $.15 per basic share,  for the 2001 third quarter and a net
loss of $7.5  million,  or $.74 per basic  share,  during the nine months  ended
September 30, 2001, if the goodwill and negative goodwill  amortization included
in the Company's net loss, as reported,  had not been recognized.  The per share
amounts shown in the following tables reflect the dilutive effect of the assumed
conversion of the Series A Convertible Preferred Stock. See Note 10.


<PAGE>



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

Income (loss) before cumulative effect
<S>                                              <C>          <C>          <C>          <C>
 of change in accounting principle as reported   $   (1,250)  $   (4,801)  $   (6,584)  $   29,216
Adjustments:
  Goodwill amortization ......................           31         --             94         --
  Negative goodwill amortization .............         (338)        --         (1,016)        --
                                                 ----------   ----------   ----------   ----------
    Adjusted income (loss) before
     cumulative effect of change in
     accounting principle ....................   $   (1,557)  $   (4,801)  $   (7,506)  $   29,216
                                                 ==========   ==========   ==========   ==========

Basic earnings (loss) per
 share available for common shares
 before cumulative effect of change
 in accounting principle as reported .........   $     (.12)  $     (.63)  $     (.65)  $     2.58
Adjustments:
  Goodwill amortization ......................         --           --            .01         --
  Negative goodwill amortization .............         (.03)        --           (.10)        --
                                                 ----------   ----------   ----------   ----------
    Adjusted basic earnings (loss)
     per share available for common shares
     before cumulative effect of change in
     accounting principle ....................   $     (.15)  $     (.63)  $     (.74)  $     2.58
                                                 ==========   ==========   ==========   ==========

Diluted earnings (loss) per
 share available for common shares
 before cumulative effect of change
 in accounting principle as reported .........   $     (.12)  $     (.63)  $     (.65)  $     1.46
Adjustments:
  Goodwill amortization ......................         --           --            .01         --
  Negative goodwill amortization .............         (.03)        --           (.10)        --
                                                 ----------   ----------   ----------   ----------
    Adjusted diluted earnings (loss)
     per share available for common shares
     before cumulative effect of change in
     accounting principle ....................   $     (.15)  $     (.63)  $     (.74)  $     1.46
                                                 ==========   ==========   ==========   ==========
</TABLE>


<PAGE>



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

<S>                                     <C>          <C>          <C>          <C>
Net income (loss) as reported .......   $   (1,250)  $   (4,801)  $   (6,584)  $   49,214
Adjustments:
  Goodwill amortization .............           31         --             94         --
  Negative goodwill amortization ....         (338)        --         (1,016)        --
  Cumulative effect of change in
   accounting principle .............         --           --           --        (19,998)
                                        ----------   ----------   ----------   ----------

    Adjusted net income (loss) ......   $   (1,557)  $   (4,801)  $   (7,506)  $   29,216
                                        ==========   ==========   ==========   ==========

Basic earnings (loss) per
 share available for common shares as
 reported ...........................   $     (.12)  $     (.63)        (.65)  $     4.75
Adjustments:
  Goodwill amortization .............         --           --            .01         --
  Negative goodwill amortization ....         (.03)        --           (.10)        --
  Cumulative effect of change in
   accounting principle .............         --           --           --          (1.99)
                                        ----------   ----------   ----------   ----------

    Adjusted basic earnings
     (loss) per share available for
     common shares ..................   $     (.15)        (.63)  $     (.74)  $     2.58
                                        ==========   ==========   ==========   ==========

Diluted earnings (loss) per
 share available for common shares as
 reported ...........................   $     (.12)  $     (.63)  $     (.65)  $     2.46

Adjustments:
  Goodwill amortization
                                              --           --            .01         --
  Negative goodwill amortization ....         (.03)        --           (.10)        --
                                        ----------   ----------   ----------   ----------
  Cumulative effect of change in
   accounting principle .............         --           --           --          (1.00)
                                        ----------   ----------   ----------   ----------

    Adjusted diluted earnings
     (loss) per share available for
     common shares ..................   $     (.15)        (.63)  $     (.74)  $     1.46
                                        ==========   ==========   ==========   ==========
</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
September 30, 2002 period.  The dilutive effect of the assumed conversion of the
Series A Preferred  Stock in the nine month ended  September  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     Nine months ended
                                            September 30,          September 30,
                                         ------------------       ---------------
                                          2001        2002       2001         2002
                                          ----        ----       ----         ----
                                                        (In thousands)

Numerator:
  Net income (loss) before cumulative
   effect of change in accounting
<S>                                    <C>         <C>         <C>         <C>
   principle .......................   $ (1,250)   $ (4,801)   $ (6,584)   $ 29,216

  Less  Series A Preferred Stock
   Dividends .......................       --        (1,485)       --        (3,198)
                                       --------    --------    --------    --------
  Basic net income (loss) before
   cumulative effect of change in
   accounting principle ............     (1,250)     (6,286)     (6,584)     26,018
  Series A Preferred Stock dividends       --          --          --         3,198
                                       --------    --------    --------    --------
  Diluted net income (loss) before
   cumulative effect of change in
   accounting principle ............   $ (1,250)   $ (6,286)   $ (6,584)   $ 29,216
                                       ========    ========    ========    ========
Denominator:
  Average common shares outstanding      10,062      10,068      10,062      10,067
  Dilutive effect of Preferred Stock
   Series A ........................       --          --          --         9,900
                                       --------    --------    --------    --------

  Diluted shares ...................     10,062      10,068      10,062      19,967
                                       ========    ========    ========    ========
</TABLE>

Note 11 - Accounting principles 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>


ITEM 2. 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 wire 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  steel  and  wire  products
production, sales volume and pricing data for the periods indicated.

<TABLE>
<CAPTION>
                                            Three months ended   Nine months ended
                                               September 30,       September 30,
                                           -------------------   ----------------
                                              2001      2002      2001      2002
                                              ----      ----      ----      ----

Production volume (000 tons):
<S>                                            <C>       <C>       <C>       <C>
 Billets ...............................       190       202       542       586
 Wire rod ..............................       174       182       509       556

Sales volume(000 tons):
 Fabricated wire products ..............        72        71       225       230
 Industrial wire .......................        22        24        75        76
 Wire rod ..............................        97        75       230       236
                                              ----      ----      ----      ----

                                               191       170       530       542
                                              ====      ====      ====      ====

Per-ton selling prices:
  Fabricated wire products .............      $636      $642      $651      $655
  Industrial wire ......................      $422      $425      $425      $423
  Wire rod .............................      $270      $299      $261      $284
  All steel and wire products ..........      $425      $460      $449      $461
</TABLE>


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

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

Steel and wire products:
<S>                                       <C>       <C>        <C>        <C>
  Fabricated wire products ..........     $ 45.5    $ 45.5     $146.3     $150.9
  Industrial wire ...................        9.3      10.1       31.9       32.2
  Wire rod ..........................       26.3      22.4       60.0       67.1
  Other .............................         .3        .3        1.0        1.0
                                          ------    ------     ------     ------
                                            81.4      78.3      239.2      251.2

Lawn and garden products ............         .9       1.1        7.2        8.4
                                          ------    ------     ------     ------

                                          $ 82.3    $ 79.4     $246.4     $259.6
                                          ======    ======     ======     ======
</TABLE>




<PAGE>


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

<TABLE>
<CAPTION>
                                       Three months ended     Nine months ended
                                         September 30,          September 30,
                                       ------------------     -----------------
                                         2001     2002        2001         2002
                                         ----     ----        ----         ----

<S>                                     <C>      <C>         <C>         <C>
Net sales ...........................   100.0 %  100.0 %     100.0 %     100.0 %
Cost of goods sold ..................      91.9     94.5        94.4        90.8
                                        -------  -------     -------     -------
Gross profit ........................     8.1 %    5.5 %       5.6 %       9.2 %
                                        =======  =======     =======     =======

Selling expense .....................     1.8 %    2.1 %       1.9 %       2.0 %
General and administrative expense ..     5.7 %    8.0 %       5.1 %       7.3 %
Overfunded defined benefit pension
 expense (credit) ...................       (.9)%   .4 %         (.9)%       (.5)%
Gain on early extinguishment of debt       --       --          --          21.1

Income (loss) before income taxes
 and cumulative effect of change
 in accounting principle ............      (2.8)%   (6.2)%      (4.6)%    19.7 %
Income tax provision (benefit) ......      (1.2)    --          (1.9)        8.3
Minority interest in after-tax
  earnings (losses) .................        .1      (.2)       --            .1
                                        -------  -------     -------     -------

Net income (loss) before cumulative
 effect of change in accounting
 principle ..........................      (1.5)%   (6.0)%      (2.7)%    11.3 %
                                        =======  =======     =======     =======
</TABLE>


     Net sales of $79.4  million  in the 2002  third  quarter  were down 4% from
$82.3  million  during the same  period in 2001.  This  decline in sales was due
primarily  to an 11%  decline  in  shipments  of the  Company's  steel  and wire
products  partially  offset by a $35 per-ton  increase in overall steel and wire
product selling prices. Shipments of wire rod declined 23% during the 2002 third
quarter as compared  to the 2001 third  quarter  while  per-ton  selling  prices
increased  11%.  Industrial  wire shipments  increased 9% while per-ton  selling
prices  increased 1%.  Fabricated wire products  shipments during the 2002 third
quarter  declined 1% as compared to the 2001 third quarter while per-ton selling
prices increased 1%. Management  believes the decline in shipment volume of wire
rod during the 2002 third quarter was due to large volumes of import product and
softening  demand.  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,  rod imports have filled the production shortfall caused
by former  competitors  leaving the marketplace and as such,  Keystone has still
been unable to achieve levels of per-ton  selling prices that Keystone  realized
in the late 1990's.

     Net sales of $259.6  million  in the first  nine  months of 2002 were up 5%
from $246.4 million in the first nine months of 2001. This increase in sales was
primarily  due to a 2%  increase  in  shipments  of  Keystone's  steel  and wire
products,  a $1.2  million  increase  in Garden  Zone's  sales and a $12 per-ton
increase in selling prices of the Company's  steel and wire products  during the
first nine months of 2002.  Garden  Zone's sales during the first nine months of
2002 amounted to $8.4 million as compared to $7.2 million during the same period
in 2001.  Wire rod shipments  during the first nine months of 2002  increased 3%
over the first nine months of 2001 while per-ton  selling  prices  increased 9%.
Industrial wire shipments increased 1% while per-ton selling prices declined 1%.
Fabricated  wire  products  shipments  during  the  first  nine  months  of 2002
increased 2% as compared to the first nine months of 2001 while per-ton  selling
prices increased 1%. Management  believes the increase in shipment volume during
the first nine months of 2002 was due to abnormally  low shipment  volume during
the  first  six  months of 2001 as  compared  to the  first  six  months of 2002
partially  offset by the lower  shipping  volume  of wire rod  during  the third
quarter of 2002.  The  shipment  volume  during the first six months of 2002 was
consistent with those levels in years prior to 2001.

     Billet production during the third quarter of 2002 increased 12,000 tons or
6% to 202,000  tons from  190,000  tons  during the third  quarter of 2001.  The
primary  reason for the higher  billet  production  level  during the 2002 third
quarter was improved  performance from Keystone's  steel mill.  Keystone did not
purchase any billets during the third quarters of either 2001 or 2002.  Wire rod
production  during  the third  quarter  of 2002  increased  to  182,000  tons as
compared to production of 174,000 tons in the 2001 third quarter, primarily as a
result of the higher billet production during the 2002 third quarter.

     Increased billet production during each of the first three quarters of 2002
as compared to the first three  quarters of 2001  resulted in billet  production
during the first nine months of 2002 increasing 44,000 tons to 586,000 tons from
542,000 tons during the first nine months of 2001. Keystone did not purchase any
billets during the first nine months of either 2001 or 2002.  Increased wire rod
production  during the first and third  quarters of 2002 as compared to the 2001
periods  resulted in an increase of 47,000 tons of wire rod produced  during the
first nine  months of 2002 to 556,000  tons from  509,000  tons during the first
nine months of 2001. The lower wire rod production  during the first nine months
of 2001 was due  primarily to  intentional  production  curtailments  during the
first quarter of 2001 designed to avoid using high cost natural gas and to allow
billet  inventories to build in  anticipation  of planned outages for repair and
maintenance projects in the steel mill during that quarter.

     Gross profit  during the 2002 third  quarter  declined to $4.3 million from
$6.6 million in the 2001 third  quarter as the Company's  gross margin  declined
from 8.1% in the 2001 period to 5.5% in the 2002 third quarter.  This decline in
gross  margin was due  primarily  to higher  costs for scrap  steel,  Keystone's
primary raw material and a favorable  $1.7  million  settlement  recorded in the
third quarter of 2001 with a utility provider in connection with litigation over
a 1999  fuel-adjustment  surcharge  billed to the  Company by the  utility,  all
partially  offset by increased  production  efficiencies  in the Company's steel
mill. The higher costs for scrap steel  adversely  impacted gross profit by $4.7
million.

     Gross  profit  during  the first  nine  months of 2002  increased  to $23.9
million  from $13.9  million in the first nine  months of 2001 as the  Company's
gross  margin  increased  from 5.6% in the 2001 period to 9.2% in the first nine
months of 2002.  This  increase in gross margin was due  primarily to the higher
steel and wire per-ton product selling prices, increased shipment volume, a more
favorable  product mix and increased  production  efficiencies  in the Company's
steel mill,  all  partially  offset by higher costs for scrap steel and the $1.7
million  utility  settlement  received  in the 2001  third  quarter.  The higher
selling  prices,  increased  shipment  volumes  and more  favorable  product mix
combined to  favorably  impact gross  profit by $2.6  million.  The higher scrap
steel costs adversely impacted gross profit by $4.8 million. In addition, during
the first nine months of 2002,  Keystone received $925,000 of insurance proceeds
from  business  interruption  policies  related to  incidents  in prior years as
compared to $1.6 million  received during the first nine months of 2001.  During
the first nine 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 nine months of 2002.

     Selling expense was approximately  $1.7 million during the third quarter of
2002 as  compared  to  $1.5  million  in the  third  quarter  of  2001,  but was
relatively  constant as a percentage of sales.  Selling  expense of $5.2 million
during the first nine months of 2002 was approximately  $500,000 higher than the
same period in 2001, but was also relatively constant as a percentage of sales.

     General and  administrative  expense  increased to $6.4 million  during the
third  quarter of 2002 as compared to $4.7 million  during the third  quarter of
2001 primarily due to higher OPEB expense.  General and  administrative  expense
increased from $12.5 million during the first nine months 2002. The higher legal
and  professional  expenses  during the first nine months of 2002 were primarily
related to the Exchange Offer  described  below.  In addition,  amortization  of
negative  goodwill  reduced general and  administrative  expenses during 2001 by
$328,000  and $1.0  million  during the third  quarter  and first  nine  months,
respectively. As a result of adopting SFAS No. 142, there was no amortization of
negative goodwill during the 2002 period.

     During the first two quarters of 2002, Keystone  anticipated the total 2002
overfunded  defined  benefit pension credit would  approximate  $3.0 million and
accordingly,  recorded  a  $750,000  credit in each  quarter.  During  the third
quarter of 2002, Keystone determined the 2002 overfunded defined benefit pension
credit would  approximate only $1.6 million,  and accordingly,  recorded pension
expense  during the 2002 third quarter of $297,000.  As such the net  overfunded
defined  benefit  pension credit  recorded  during the first nine months of 2002
amounted to $1.2 million as compared to $2.3 million  recorded  during the first
nine  months of 2001.  The  total  overfunded  defined  benefit  pension  credit
recorded during 2001 amounted to $5.5 million.

     Interest  expense  in the third  quarter  of 2002 was lower  than the third
quarter of 2001 due principally to lower debt levels and interest rates. Average
borrowings by Keystone  approximated  $97.1 million in the third quarter of 2002
as compared  to $149.5  million in the third  quarter of 2001.  During the third
quarter of 2002,  the  Keystone's  weighted-average  interest  rate was 2.9% per
annum as compared to 8.5% per annum in the third quarter of 2001.

     Interest  expense in the first nine  months of 2002 was also lower than the
first nine  months of 2001 due  principally  to lower debt  levels and  interest
rates.  Average borrowings by Keystone  approximated $110.5 million in the first
nine months of 2002 as  compared  to $150.6  million in the first nine months of
2001.  During the first nine  months of 2002,  the  Keystone's  weighted-average
interest rate was 4.9% per annum as compared to 9.0% per annum in the first nine
months 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 September 30, 2002,  the
Company had recorded a deferred tax asset  valuation  allowance of $15.9 million
resulting  in no net  deferred  tax assets.  Keystone  periodically  reviews the
recoverability  of its deferred tax assets to determine whether such assets meet
the  "more-likely-than-not"  recognition criteria.  The Company will continue to
review the recoverability of its deferred tax assets, and based on such periodic
reviews,  Keystone could recognize a change in the recorded valuation  allowance
related to its  deferred  tax assets in the future.  As a result of the deferred
tax  asset  valuation  allowance,  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  a net loss
during the third  quarter of 2002 of $4.8  million as  compared to a net loss of
$1.3  million  in the third  quarter of 2001,  and net  income  during the first
nine-months of 2002 of $49.2 million as compared to a net loss in the first nine
months of 2001 of $6.6 million.

Outlook for 2002

     Management  currently  believes,  despite  the  current  level  of wire 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 raw material,  energy and OPEB costs
and 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.

     At December 31, 2001,  the Company's  defined  benefit  pension plan's (the
"Plan") assets exceeded the Plan's  accumulated  benefit obligation and as such,
was considered  over-funded for financial reporting purposes. Due to an expected
significant  decline in the value of the Plan's  assets during 2002 and based on
expected interest rates at the end of 2002, it is likely the Plan's  accumulated
benefit  obligation at December 31, 2002 will exceed the Plan's  assets.  If the
Plan's accumulated  benefit obligation exceeds the Plan's assets at December 31,
2002, SFAS No. 87, Employers' Accounting for Pensions, provides that the Company
would be required to record an  additional  minimum  liability  that is at least
equal to the amount by which the Plan's  accumulated  benefit obligation exceeds
the Plan's  assets,  eliminate  any recorded  prepaid  pension  cost,  record an
intangible asset equal to the amount of any unrecognized  prior service cost and
charge a separate  component  of  stockholders'  equity for the  difference.  If
required to be  recorded,  the charge to  stockholders'  equity at December  31,
2002, is expected to approximate at least $123 million.

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  September  30, 2002  Keystone  had  negative  working  capital of $26.4
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 $32.7  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 September 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 were $13.4 million, $4.8 million and $1.6
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  November 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 nine months of 2002,  the Company's  operating  activities
provided  approximately  $5.0  million of cash  compared to $1.8 million used by
operations  in the first  nine  months of 2001  principally  due to  changes  in
relative balances of accounts receivable and other liabilities.

     During the first nine months of 2002, Keystone made capital expenditures of
$4.8  million as  compared  to $2.5  million  in the first nine  months of 2001.
During  2001 and the  first  nine  months  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 2002 are currently estimated to be approximately $8 million and
are related primarily to upgrades of production  equipment.  Keystone  currently
anticipates  these  capital  expenditures  will be funded  using cash flows from
operations  together with  borrowing  availability  under  Keystone's  revolving
credit facilities.

     At September 30, 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 $21.7
million.

     The Company  periodically  reviews the  recoverability  of its deferred tax
assets  to  determine  whether  such  assets  meet  the   "more-likely-than-not"
recognition  criteria.  At  September  30,  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  $15.9
million.  The Company will continue to review the recoverability of its deferred
tax assets,  and based on such  periodic  reviews,  the Company could change the
valuation allowance related to its deferred tax assets in the future.

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

     Management  currently  believes  cash flows from  operations  together with
funds available under the Company's credit facilities will be sufficient to fund
the anticipated needs of the Company's  operations and capital  improvements for
the year  ending  December  31,  2002.  This  belief is based upon  management's
assessment of various  financial and  operational  factors,  including,  but not
limited to, assumptions  relating to product shipments,  product mix and selling
prices,  production schedules,  productivity rates, raw materials,  electricity,
labor,  employee  benefits and other fixed and variable  costs,  interest rates,
repayments of long-term debt,  capital  expenditures,  and available  borrowings
under the  Company's  credit  facilities.  However,  there are many factors that
could cause actual future results to differ materially from management's current
assessment. While it is not possible to identify all factors, Keystone continues
to face many risks and uncertainties.  Among the factors that could cause actual
future results to differ materially are the risks and uncertainties discussed in
this  Quarterly  Report and those  described  from time to time in the Company's
other filings with the Securities and Exchange  Commission,  including,  but not
limited  to,  future  supply and demand for the  Company's  products  (including
cyclicality  thereof),  customer  inventory levels,  changes in raw material and
other operating costs (such as scrap and energy),  general economic  conditions,
competitive   products  and   substitute   products,   customer  and  competitor
strategies,  the impact of pricing and production decisions,  the possibility of
labor disruptions,  environmental  matters (such as those requiring emission and
discharge standards for existing and new facilities), government regulations and
possible  changes  therein,  any significant  increases in the cost of providing
medical  coverage to active and retired  employees,  the ultimate  resolution of
pending  litigation,  international  trade  policies  of the  United  States and
certain foreign countries and any possible future litigation and other risks and
uncertainties as discussed in this Quarterly Report. Should one or more of these
risks materialize (or the consequences of such a development  worsen), or should
the  underlying  assumptions  prove  incorrect,   actual  results  could  differ
materially  from those  forecasted  or  expected  and as a result,  could have a
material adverse effect on the future liquidity, financial condition and results
of  operations  of  the  Company.  Additionally,  significant  declines  in  the
Company's   end-user   markets  or  market  share,  the  inability  to  maintain
satisfactory  billet  and wire rod  production  levels,  or other  unanticipated
costs, if significant, could result in a need for funds greater than the Company
currently has available.  There can be no assurance the Company would be able to
obtain an adequate  amount of additional  financing.  See Notes 12 and 14 to the
Consolidated Financial Statements in the Annual Report.

ITEM 4.  CONTROLS AND PROCEDURES

     The Company maintains a system of disclosure  controls and procedures.  The
term  "disclosure  controls and  procedures,"  as defined by  regulations of the
Securities and Exchange Commission ("SEC"),  means controls and other procedures
that are  designed to ensure that  information  required to be  disclosed in the
reports  that the  Company  files or  submits  to the SEC under  the  Securities
Exchange Act of 1934, as amended (the "Act"), is recorded, processed, summarized
and  reported,  within the time periods  specified in the SEC's rules and forms.
Disclosure  controls and procedures include,  without  limitation,  controls and
procedures  designed to ensure that information  required to be disclosed by the
Company  in the  reports  that it files or  submits  to the SEC under the Act is
accumulated  and  communicated  to  the  Company's  management,   including  its
principal  executive officer and its principal financial officer, as appropriate
to allow timely  decisions to be made  regarding  required  disclosure.  Each of
David L. Cheek, the Company's President and Chief Operating Officer, and Bert E.
Downing, Jr., the Company's Vice President,  Corporate Controller and Treasurer,
have  evaluated the Company's  disclosure  controls and  procedures as of a date
within  90 days  of the  filing  date  of  this  Form  10-Q.  Based  upon  their
evaluation,   these  executive   officers  have  concluded  that  the  Company's
disclosure  controls  and  procedures  are  effective  as of the  date  of  such
evaluation.

     The  Company  also  maintains  a  system  of  internal  controls.  The term
"internal  controls," as defined by the American  Institute of Certified  Public
Accountants'  Codification of Statement on Auditing  Standards,  AU Section 319,
means controls and other  procedures  designed to provide  reasonable  assurance
regarding the  achievement  of objectives  in the  reliability  of the Company's
financial   reporting,   the  effectiveness  and  efficiency  of  the  Company's
operations and the Company's  compliance with  applicable laws and  regulations.
There have been no significant  changes in the Company's internal controls or in
other factors that could significantly  affect such controls,  subsequent to the
date of their last evaluation,  including any corrective  actions with regard to
significant deficiencies and material weaknesses.


<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 6. Exhibits and Reports on Form 8-K

(a)     The following exhibit is included herein:

         99.1       ChiefExecutive 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 September 30, 2001:

        None.


<PAGE>



                               S I G N A T U R E S



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                              Keystone Consolidated Industries, Inc.
                              --------------------------------------
                                          (Registrant)



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






<PAGE>




                                 CERTIFICATIONS


     I, David L. Cheek,  the President and Chief  Operating  Officer of Keystone
Consolidated Industries, Inc. certify that:

1)   I have reviewed this quarterly report on Form 10-Q of Keystone Consolidated
     Industries, Inc.;

2)   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  quarterly  report  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4)   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5)   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6)   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.





Date:  November 14, 2002

/s/ David L. Cheek


--------------------------
David L. Cheek
President and Chief Operating Officer
(Chief Executive Officer)




<PAGE>



                                 CERTIFICATIONS



I, Bert E. Downing, Jr., the Vice President,  Corporate Controller and Treasurer
of Keystone Consolidated Industries, Inc. certify that:

1)   I have reviewed this quarterly report on Form 10-Q of Keystone Consolidated
     Industries, Inc.;

2)   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  quarterly  report  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4)   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5)   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6)   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:  November 14, 2002

/s/ Bert E. Downing, Jr.
--------------------------
Bert E. Downing, Jr.
Vice President, Corporate Controller and Treasurer
(Chief Financial Officer)