SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period June 30, 2001

Commission file number 1-3919


                     Keystone Consolidated Industries, Inc.
             (Exact name of registrant as specified in its charter)


          Delaware                                    37-0364250
(State or other jurisdiction of                      I.R.S. Employer
 incorporation or organization)                     Identification No.)

  5430 LBJ Freeway, Suite 1740, Three Lincoln Centre, Dallas, TX  75240-2697
(Address of principal executive offices)                          (Zip Code)


Registrant's telephone number, including area code:    (972) 458-0028
                                                    -------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes   X                            No _____
                               -----

Number of shares of common stock outstanding at August 14, 2001: 10,061,969



<PAGE>





                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                                      INDEX


                                                                          Page
                                                                         number

PART I.  FINANCIAL INFORMATION

  Item 1.         Financial Statements

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

                  Consolidated Statements of Operations - Three months
                   and six months ended June 30, 2000 and 2001             5

                  Consolidated Statements of Cash Flows - Six months
                   ended June 30, 2000 and 2001                            6

                  Consolidated Statement of Stockholders' Equity - Six
                   months ended June 30, 2001                              7

                  Notes to Consolidated Financial Statements              8-13

  Item 2.         Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                   14-22

PART II. OTHER INFORMATION

  Item 1.         Legal Proceedings                                        23

  Item 4.         Submission of Matters to a Vote of Security Holders      23

  Item 6.         Exhibits and Reports on Form 8-K                         23



<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)


<TABLE>
<CAPTION>
                                                        December 31,    June 30,
                                   ASSETS                  2000           2001
                                                        -----------      -------

Current assets:
<S>                                                      <C>            <C>
  Notes and accounts receivable ..................       $ 21,813       $ 41,916
  Inventories ....................................         52,004         43,145
  Deferred income taxes ..........................         16,828         15,920
  Prepaid expenses and other .....................            786            421
                                                         --------       --------

     Total current assets ........................         91,431        101,402
                                                         --------       --------

Property, plant and equipment ....................        367,695        366,071
Less accumulated depreciation ....................        222,999        229,618
                                                         --------       --------

     Net property, plant and equipment ...........        144,696        136,453
                                                         --------       --------

Other assets:
  Restricted investments .........................          5,969          5,720
  Prepaid pension cost ...........................        126,506        128,006
  Deferred income taxes ..........................         10,696         15,580
  Deferred financing costs .......................          2,685          2,461
  Goodwill .......................................            877            814
  Other ..........................................          2,843          2,473
                                                         --------       --------

     Total other assets ..........................        149,576        155,054
                                                         --------       --------

                                                         $385,703       $392,909
                                                         ========       ========
</TABLE>








<PAGE>

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)




<TABLE>
<CAPTION>
       LIABILITIES AND STOCKHOLDERS' EQUITY          December 31,       June 30,
                                                        2000              2001
                                                     -----------         -------

Current liabilities:
  Notes payable and current maturities of
<S>                                                  <C>              <C>
    long-term debt ...........................       $  45,728        $  53,121
  Accounts payable ...........................          34,614           41,954
  Accrued OPEB cost ..........................           8,767            8,767
  Other accrued liabilities ..................          41,565           40,997
                                                     ---------        ---------

      Total current liabilities ..............         130,674          144,839
                                                     ---------        ---------

Noncurrent liabilities:
  Long-term debt .............................         100,280          100,098
  Accrued OPEB cost ..........................          98,015           97,590
  Negative goodwill ..........................          21,353           20,675
  Other ......................................           9,323            8,818
                                                     ---------        ---------

      Total noncurrent liabilities ...........         228,971          227,181
                                                     ---------        ---------

Minority interest ............................            --                165
                                                     ---------        ---------

Stockholders' equity:
  Common stock ...............................          10,792           10,792
  Additional paid-in capital .................          53,071           53,071
  Accumulated deficit ........................         (37,793)         (43,127)
  Treasury stock, at cost ....................             (12)             (12)
                                                     ---------        ---------

      Total stockholders' equity .............          26,058           20,724
                                                     ---------        ---------

                                                     $ 385,703        $ 392,909
                                                     =========        =========
</TABLE>





<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                         Three months ended          Six months ended
                                               June 30,                  June 30,
                                         -------------------          --------------
                                          2000         2001         2000         2001
                                          ----         ----         ----         ----

Revenues and other income:
<S>                                    <C>          <C>          <C>          <C>
  Net sales ........................   $  95,382    $  86,294    $ 191,804    $ 164,057
  Interest .........................         139           53          265          124
  Other, net .......................         (61)         418          (39)         495
                                       ---------    ---------    ---------    ---------
                                          95,460       86,765      192,030      164,676
                                       ---------    ---------    ---------    ---------

Costs and expenses:
  Cost of goods sold ...............      91,515       80,461      181,496      156,818
  Selling ..........................       1,714        1,668        3,514        3,275
  General and administrative .......       4,244        4,531        9,268        7,817
  Overfunded defined benefit pension
   Credit ..........................        (736)        (750)      (1,472)      (1,500)
  Interest .........................       3,897        3,601        7,610        7,347
                                       ---------    ---------    ---------    ---------
                                         100,634       89,511      200,416      173,757
                                       ---------    ---------    ---------    ---------

                                          (5,174)      (2,746)      (8,386)      (9,081)

  Equity in losses of unconsolidated
   equity affiliate ................        (221)        --           (252)        --
                                       ---------    ---------    ---------    ---------

    Loss before income taxes .......      (5,395)      (2,746)      (8,638)      (9,081)

Income tax benefit .................      (2,049)      (1,276)      (3,369)      (3,912)

Minority interest in after-tax
  Earnings .........................          49          158           58          165
                                       ---------    ---------    ---------    ---------

   Net loss ........................   $  (3,395)   $  (1,628)   $  (5,327)   $  (5,334)
                                       =========    =========    =========    =========


Basic and diluted net loss per share   $    (.34)   $    (.16)   $    (.53)   $    (.53)
                                       =========    =========    =========    =========

Basic and diluted shares
 outstanding                              10,062       10,062       10,017       10,062
                                       =========    =========    =========    =========
</TABLE>





<PAGE>

                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                              Six months ended
                                                                  June 30,
                                                             2000         2001
                                                             ----         ----

Cash flows from operating activities:
<S>                                                        <C>         <C>
  Net loss .............................................   $ (5,327)   $ (5,334)
  Depreciation and amortization ........................      9,207       8,599
  Amortization of deferred financing costs .............        239         239
  Deferred income taxes ................................     (3,401)     (3,976)
  Other, net ...........................................       (141)       (146)
  Change in assets and liabilities:
    Accounts receivable ................................    (11,633)    (20,773)
    Inventories ........................................     10,813       8,121
    Prepaid pension cost ...............................     (1,472)     (1,500)
    Accounts payable ...................................      4,386       7,691
    Other, net .........................................     (3,697)       (230)
                                                           --------    --------

      Net cash used by operating activities ............     (1,026)     (7,309)
                                                           --------    --------

Cash flows from investing activities:
  Capital expenditures .................................     (7,449)     (1,535)
  Proceeds from sale of business unit ..................       --           757
  Other, net ...........................................        (13)        876
                                                           --------    --------

      Net cash provided (used) by investing activities .     (7,462)         98
                                                           --------    --------

Cash flows from financing activities:
  Revolving credit facilities, net .....................      9,161       7,636
  Other notes payable and long-term debt:
    Additions ..........................................         27        --
    Principal payments .................................       (700)       (425)
                                                           --------    --------

      Net cash provided by financing activities ........      8,488       7,211
                                                           --------    --------

Net change in cash and cash equivalents ................       --          --

Cash and cash equivalents, beginning of period .........       --          --
                                                           --------    --------

Cash and cash equivalents, end of period ...............   $   --      $   --
                                                           ========    ========

Supplemental disclosures:
  Cash paid for:
    Interest, net of amount capitalized ................   $  7,383    $  7,117
    Income tax refund received .........................       (636)       (158)

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

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


<PAGE>


                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                         Six months ended June 30, 2001
                                 (In thousands)


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

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

Net loss ...................      --        --       (5,334)     --       (5,334)
                               -------   -------   --------     ----    --------

Balance - June 30, 2001 ....   $10,792   $53,071   $(43,127)    $(12)   $ 20,724
                               =======   =======   ========     ====    ========
</TABLE>





<PAGE>



                     KEYSTONE CONSOLIDATED INDUSTRIES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation:

     The consolidated balance sheet of Keystone  Consolidated  Industries,  Inc.
("Keystone"  or the  "Company") at December 31, 2000 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated  balance sheet at June 30, 2001 and the consolidated  statements of
operations and cash flows for the interim  periods ended June 30, 2000 and 2001,
and the consolidated  statement of  stockholders'  equity for the interim period
ended June 30, 2001,  have each been prepared by the Company,  without audit. In
the opinion of management, all adjustments,  consisting only of normal recurring
adjustments  necessary to present fairly the  consolidated  financial  position,
results of  operations  and cash flows,  have been made.  However,  it should be
understood  that  accounting  measurements  at interim dates may be less precise
than at year end.  The results of  operations  for the  interim  periods are not
necessarily  indicative  of the  operating  results for a full year or of future
operations.

     Certain information  normally included in financial  statements prepared in
accordance with accounting  principles  generally  accepted in the United States
has  been  condensed  or  omitted.  The  accompanying   consolidated   financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  included in the  Company's  Annual  Report on Form 10-K for the year
ended December 31, 2000 (the "Annual Report").

     At June 30,  2001,  Contran  Corporation  ("Contran")  and  other  entities
related to Mr. Harold C. Simmons,  beneficially  owned  approximately 50% of the
Company.  Substantially  all of  Contran's  outstanding  voting stock is held by
trusts  established for the benefit of certain children and grandchildren of Mr.
Simmons,  of which Mr.  Simmons is sole  trustee.  Keystone  may be deemed to be
controlled by Contran and Mr. Simmons.  On June 26, 2001, Contran disclosed in a
filing with the  Securities  and  Exchange  Commission  that  Contran and one of
Contran's  majority-owned  subsidiaries have offered to sell their aggregate 44%
ownership  interest in Keystone to Titanium  Metals  Corporation  ("TIMET"),  an
indirect, less-than majority owned subsidiary of Contran.

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

     In January 2001,  Keystone's  wholly-owned  subsidiary,  Fox Valley Steel &
Wire  ("Fox  Valley")  sold its  business  which  was  located  in  Hortonville,
Wisconsin.  The Company did not record any significant  gain or loss as a result
of the  sale.  Fox  Valley  manufactured  industrial  wire and  fabricated  wire
products (primarily ladder rods and nails). Fox Valley's revenues,  in the three
and six months ended June 30, 2000  amounted to $3.3  million and $5.8  million,
respectively.  During the three and six months ended June 30,  2000,  Fox Valley
recorded an operating loss of $151,000 and $377,000 respectively.

Note 2 - Inventories:

     Inventories are stated at the lower of cost or market. At December 31, 2000
and June 30, 2001, the last-in,  first-out ("LIFO") method was used to determine
the cost of approximately  76% and 71%,  respectively,  of total inventories and
the first-in,  first-out or average cost methods were used to determine the cost
of other inventories.

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

Steel and wire products:
<S>                                                        <C>           <C>
  Raw materials ....................................       $11,101       $ 9,577
  Work in process ..................................         9,492         9,787
  Finished goods ...................................        23,954        16,729
  Supplies .........................................        15,520        15,588
                                                           -------       -------
                                                            60,067        51,681

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

                                                            48,984        40,577

Lawn and garden products - finished goods ..........         3,020         2,568
                                                           -------       -------

                                                           $52,004       $43,145
                                                           =======       =======
</TABLE>

Note 3 - Notes payable and long-term debt:

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

<S>                                                    <C>              <C>
Senior Secured Notes .........................         $100,000         $100,000
Commercial credit agreements:
  Revolving credit facilities:
    Keystone .................................           37,772           44,468
    EWP ......................................            4,203            5,141
    Garden Zone ..............................            2,819            2,821
  Term loan - EWP ............................              164             --
Other ........................................            1,050              789
                                                       --------         --------
                                                        146,008          153,219
  Less current maturities ....................           45,728           53,121
                                                       --------         --------

                                                       $100,280         $100,098
                                                       ========         ========
</TABLE>

See Note 9.

Note 4 - Income taxes:

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


<TABLE>
<CAPTION>
                                                              Six months ended
                                                                   June 30,
                                                             2000         2001
                                                             ----         ----
                                                               (In thousands)

<S>                                                        <C>          <C>
Expected tax benefit, at statutory rate ..............     $(3,023)     $(3,178)
U. S. state income taxes, net ........................        (162)        (170)
Amortization of goodwill and negative goodwill .......        (217)        (215)
Other, net ...........................................          33         (349)
                                                           -------      -------

Income tax expense (benefit) .........................     $(3,369)     $(3,912)
                                                           =======      =======

Comprehensive income tax expense (benefit):
  Currently refundable:
    U.S. federal .....................................     $   (22)     $   (20)
    U.S. state .......................................          54           84
                                                           -------      -------
      Net currently refundable .......................          32           64

  Deferred income taxes, net .........................      (3,401)      (3,976)
                                                           -------      -------

                                                           $(3,369)     $(3,912)
                                                           =======      =======
</TABLE>


     At June 30,  2001,  the Company has  recognized a net deferred tax asset of
$31.5  million.  The  Company  periodically  reviews the  recoverability  of its
deferred   tax   assets   to   determine    whether   such   assets   meet   the
"more-likely-than-not"  recognition  criteria.  At June 30,  2001,  based on all
available  evidence,  the  Company  concluded  no deferred  tax asset  valuation
allowance was needed.  The Company will continue to review the recoverability of
its deferred tax assets,  and based on such periodic reviews,  the Company could
recognize  a  valuation  allowance  related  to its  deferred  tax assets in the
future.



<PAGE>


Note 5 - Other accrued liabilities:

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

Current:
<S>                                                       <C>            <C>
  Employee benefits ..............................        $12,137        $12,134
  Environmental ..................................          8,398          8,339
  Self insurance .................................          7,993          7,847
  Interest .......................................          4,160          4,156
  Accrued maintenance ............................           --            1,506
  Legal and professional .........................            836            979
  Disposition of former facilities ...............            384            449
  Unearned revenue ...............................          3,008             73
  Other ..........................................          4,649          5,514
                                                          -------        -------

                                                          $41,565        $40,997
                                                          =======        =======

Noncurrent:
  Environmental ..................................        $ 8,395        $ 7,855
  Other ..........................................            928            963
                                                          -------        -------

                                                          $ 9,323        $ 8,818
                                                          =======        =======
</TABLE>

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

Note 6 - Operations:

     The Company's operations are comprised of two segments; the manufacture and
sale of carbon steel rod, wire and wire products for  agricultural,  industrial,
construction,  commercial,  original equipment manufacturers and retail consumer
markets and the distribution of wire,  plastic and wood lawn and garden products
to retailers through its 51% owned subsidiary, Garden Zone LLC ("Garden Zone").

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

<TABLE>
<CAPTION>
                                 Three months ended         Six months ended
                                       June 30,                 June 30,
                                    -------------             -------------
                                  2000         2001         2000         2001
                                  ----         ----         ----         ----
                                                 (In thousands)

Revenues:
<S>                             <C>         <C>          <C>          <C>
  Steel and wire products ...   $ 92,807    $  82,401    $ 187,000    $ 157,714
  Lawn and garden products ..      2,671        3,893        4,932        6,691
                                --------    ---------    ---------    ---------
                                  95,478       86,294      191,932      164,405

  Elimination of intersegment
    revenues ................        (96)        --           (128)        (348)
                                --------    ---------    ---------    ---------

                                $ 95,382    $  86,294    $ 191,804    $ 164,057
                                ========    =========    =========    =========

Loss before income taxes:
  Operating profit (loss):
    Steel and wire products .   $ (1,486)   $     712    $    (342)   $  (2,695)
    Lawn and garden products         199          386          312          464
                                --------    ---------    ---------    ---------
                                  (1,287)       1,098          (30)      (2,231)

  Equity in loss of ARC .....       (221)        --           (252)        --

    General corporate items:
      Interest income .......        139           53          265          124
      General income
       (expense), net .......       (129)        (296)      (1,011)         373
    Interest expense ........     (3,897)      (3,601)      (7,610)      (7,347)
                                --------    ---------    ---------    ---------

                                $ (5,395)   $  (2,746)   $  (8,638)   $  (9,081)
                                ========    =========    =========    =========
</TABLE>


Note 7 - Contingencies:

     At June 30, 2001,  the Company's  financial  statements  reflected  accrued
liabilities  of  $16.2  million  for  estimated   remedial  costs  arising  from
environmental  issues.  There is no assurance  regarding  the  ultimate  cost of
remedial measures that might eventually be required by environmental authorities
or  that  additional   environmental   hazards,   requiring   further   remedial
expenditures,  might not be asserted  by such  authorities  or private  parties.
Accordingly,  the  ultimate  costs of remedial  measures  may exceed the amounts
currently accrued.

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

Note 8 - Accounting principles not yet adopted:

     The Company will adopt Statement of Financial Accounting Standards ("SFAS")
No. 141, Business  Combinations,  for all business combinations  initiated on or
after July 1, 2001, and all purchase business combinations completed on or after
July 1, 2001.  Under SFAS No. 141,  all  business  combinations  initiated on or
after  July 1,  2001  will be  accounted  for by the  purchase  method,  and the
pooling-of-interests method will be prohibited.

     The Company will adopt SFAS No. 142, Goodwill and Other Intangible  Assets,
effective January 1, 2002. Under SFAS No. 142, goodwill will not be amortized on
a periodic  basis,  but  instead  will be subject  to an  impairment  test to be
performed at least  annually.  Under the transition  provisions of SFAS No. 142,
goodwill existing as of June 30, 2001 will cease to be periodically amortized as
of January 1, 2002, but any goodwill arising in a purchase business  combination
completed on or after July 1, 2001 would not be periodically  amortized from the
date of such combination. In addition, any negative goodwill recorded at January
1, 2002  will be  eliminated  as a  cumulative  effect  of change in  accounting
principle at that date.  Keystone  anticipates the recorded negative goodwill at
January 1, 2002 will approximate $20.0 million.  The Company would have reported
a net loss of $6.3 million,  or $.63 per share,  in the first six months of 2001
if the goodwill and negative goodwill amortization included in the Company's net
loss, as reported, had not been recognized.

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

Note 9 - Subsequent event:

     On August 1, 2001,  Keystone did not make a $4.8 million  interest  payment
due on its Senior Secured Notes (the "Notes").  Under the governing indenture, a
failure to make a  scheduled  interest  payment  for  thirty  days will give the
holders of the Notes the right to  accelerate  the unpaid  portion of the Notes.
Such a failure  also gives the trustee for the Notes the ability to take certain
actions and to exercise  certain remedies on behalf of holders of the Notes. The
Company has requested a consent from holders of the Notes,  asking them to defer
exercising  their right to accelerate  the payment of the Notes  pursuant to the
acceleration  provisions of the governing  indenture until November 1, 2001, and
to direct the trustee of the Notes to not take any action or exercise any remedy
available  to the  trustee  as a result  of the  Company's  failure  to make the
interest payment. Keystone plans to evaluate possible restructuring alternatives
to improve its overall financial  condition,  including the potential conversion
of the Notes into equity  securities  of the  Company.  Keystone has received an
agreement from its primary revolving credit lender to forbear remedies available
to it solely as a result of the  Company's  failure  to make the  August 1, 2001
interest payment on the Notes.



<PAGE>


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

RESULTS OF OPERATIONS:

     Keystone believes it is a leading manufacturer of fabricated wire products,
industrial  wire  and  carbon  steel  rod  for  the  agricultural,   industrial,
construction,  original  equipment  manufacturer  and retail  consumer  markets.
Historically,  the Company has experienced  greater sales and profits during the
first  half of the  year due to the  seasonality  of  sales  in  principal  wire
products markets,  including the agricultural and construction markets. Keystone
is also engaged in the  distribution  of wire,  plastic and wood lawn and garden
products to retailers  through its 51% ownership  interest in Garden Zone and in
scrap recycling through ARC.

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


<PAGE>


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

<TABLE>
<CAPTION>
                                            Three months ended   Six months ended
                                                 June 30,            June 30,
                                              --------------      --------------
                                              2000      2001      2000      2001
                                              ----      ----      ----      ----

Production volume (000 tons):
 Billets:
<S>                                            <C>       <C>       <C>       <C>
  Produced .............................       137       189       332       352
  Purchased ............................         8       --          8       --
 Carbon steel rod ......................       150       186       348       336

Sales volume(000 tons):
 Fabricated wire products ..............        94        82       177       153
 Industrial wire .......................        35        27        71        54
 Carbon steel rod ......................        53        68       133       132
                                              ----      ----      ----      ----

                                               182       177       381       339
                                              ====      ====      ====      ====

Per-ton selling prices:
  Fabricated wire products .............      $662      $646      $671      $657
  Industrial wire ......................      $450      $421      $449      $426
  Carbon steel rod .....................      $268      $257      $267      $254
  All steel and wire products ..........      $507      $463      $488      $463
</TABLE>


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

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

Steel and wire products:
<S>                                       <C>       <C>        <C>        <C>
  Fabricated wire products ..........     $ 62.3    $ 53.3     $118.5     $100.8
  Industrial wire ...................       15.9      11.2       32.0       22.6
  Carbon steel rod ..................       14.1      17.5       35.7       33.7
  Other .............................         .5        .5         .8         .7
                                          ------    ------     ------     ------
                                            92.8      82.5      187.0      157.8

Lawn and garden products ............        2.6       3.8        4.8        6.3
                                          ------    ------     ------     ------

                                          $ 95.4    $ 86.3     $191.8     $164.1
                                          ======    ======     ======     ======
</TABLE>




<PAGE>


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

<TABLE>
<CAPTION>
                                           Three months ended   Six months ended
                                               -----------        ----------
                                                June  30,          June 30,
                                             2000     2001     2000        2001
                                             ----     ----     ----        ----

<S>                                          <C>     <C>      <C>         <C>
Net sales ..............................     100.0%  100.0 %  100.0 %     100.0 %
Cost of goods sold .....................      95.9    93.2     94.6        95.6
                                           -------   -------  -------     -------
Gross profit ...........................       4.1%    6.8 %    5.4 %       4.4 %
                                           =======   =======  =======     =======

Selling expense ........................       1.8%    1.9 %    1.8 %       2.0 %
General and administrative expense .....       4.4%    5.2 %    4.8 %       4.8 %
Overfunded defined benefit pension
 Credit ................................       (.8)%   (.9)%    (.8)%       (.9)%

Loss before income taxes ...............      (5.7)%  (3.2)%   (4.5)%      (5.5)%
Income tax benefit .....................      (2.1)   (1.5)    (1.8)       (2.3)
Minority interest in after-tax
  earnings .............................      --        .2     --            .1
                                           -------   -------  -------     -------

Net loss ...............................      (3.6)%  (1.9)%   (2.7)%      (3.3)%
                                           =======   ======   ======      ======
</TABLE>


     Net sales of $86.3  million in the 2001 second  quarter  were down 10% from
$95.4  million  during the same  period in 2000.  This  decline in sales was due
primarily to a 3% decline in shipments of the Company's  steel and wire products
combined with a 9% decline in overall per-ton  product selling prices  partially
offset by an increase in Garden  Zone's  sales.  Garden  Zone's sales during the
2001 second quarter  increased $1.2 million from the 2000 second quarter to $3.8
million.  Shipments  of carbon  steel rod  increased  28% during the 2001 second
quarter as compared to the 2000 second  quarter  while  per-ton  selling  prices
declined 4%. Industrial wire shipments declined 23% while per-ton selling prices
declined 6%.  Fabricated wire products  shipments during the 2001 second quarter
declined 13% as compared to the 2000 second quarter while per-ton selling prices
declined 2%.

     Net sales of $164.1  million  in the first six months of 2001 were down 14%
from $191.8  million in the first six months of 2000.  This decline in sales was
primarily due to an 11% decline in shipments and a 5% decline in per-ton selling
prices of the  Company's  steel  and wire  products  partially  offset by a $1.5
million  increase in Garden  Zone's  sales  during the first six months of 2001.
Garden Zone's sales during the first six months of 2001 amounted to $6.3 million
as compared to $4.8  million  during the same period in 2000.  Carbon  steel rod
shipments during the first six months of 2001 approximated  shipments during the
first six months of 2000 while per-ton  selling prices  declined 5%.  Industrial
wire shipments declined 24% while per-ton selling prices declined 5%. Fabricated
wire  products  shipments  during the first six months of 2001  declined  14% as
compared to the first six months of 2000 while per-ton  selling prices  declined
2%.

     Billet  production  during the second quarter of 2001 increased 52,000 tons
or 38% to 189,000 tons from 137,000 tons during the second  quarter of 2000. The
primary reason for the higher  production  levels during the 2001 second quarter
was the abnormally  low production  levels during the 2000 second quarter due to
extended   outages   incurred  in   connection   with  the   correction  of  the
infrastructure  problems related to Keystone's  capital  improvements  that were
completed during 1998 and a "break-out" that occurred at the Company's  electric
arc furnace  during June 2000.  Keystone did not purchase any billets during the
2001  second  quarter as  compared  to  purchases  of 8,000 tons during the 2000
second  quarter.  Rod production  during the second quarter of 2001 increased to
186,000  tons as  compared  to  production  of 150,000  tons in the 2000  second
quarter,  primarily as a result of the higher billet  production during the 2001
second quarter.

     The  increased  billet  production  during  the  second  quarter of 2001 as
compared to the 2000 second quarter more than offset the lower production levels
during the 2001 first  quarter  that were due  primarily to a  "break-out"  that
occurred during March of 2001. As a result,  billet  production during the first
six months of 2001  increased  20,000  tons to 352,000  tons from  332,000  tons
during the first six  months of 2000.  Keystone  did not  purchase  any  billets
during the first six months of 2001 as compared to 8,000 tons  purchased  during
the first six months of 2000. Despite increased rod production during the second
quarter of 2001 as  compared  to the 2000  second  quarter,  low rod  production
during the first  quarter of 2001  resulted  in a decline of 12,000  tons of rod
produced  during the first six months of 2001 to 336,000  tons from 348,000 tons
during  the  first  six  months  of  2000.  The  decline  was due  primarily  to
intentional production curtailments during the first quarter of 2001 designed to
avoid using high cost  natural gas and to allow billet  inventories  to build in
anticipation of planned outages for repair and maintenance projects in the steel
mill during that quarter.

     Gross profit during the 2001 second quarter  increased to $5.8 million from
$3.9 million in the 2000 second quarter as the Company's gross margin  increased
from 4.1% in the 2000 period to 6.8% in the 2001 second  quarter.  This increase
in gross margin was due primarily to lower  purchased  billets,  lower costs for
scrap  steel,   Keystone's  primary  raw  material,   and  improved   production
efficiencies  due to extended  production  outages caused by planned repairs and
the furnace "break-out" during the 2000 second quarter,  all partially offset by
the lower overall  per-ton  selling  price of the Company's  products and higher
costs for natural gas.  During the 2001 second  quarter,  the Company  purchased
172,000  tons of scrap at an average  price of $85 per ton as  compared  to 2000
second  quarter  purchases of 197,000 tons at an average  price of $104 per ton.
During the 2000 second quarter,  Keystone  purchased 8,000 tons of billets at an
average  price of $215 per ton, as compared  to none  purchased  during the 2001
second quarter.  Relative improvement in production efficiencies during the 2001
second quarter resulted  primarily from 2000 second quarter  production  outages
and  the  furnace   "break-out"   that   adversely   impacted  gross  profit  by
approximately $3.6 million, including lost billet production of 39,000 tons. The
lower per-ton  selling price of the Company's steel and wire products during the
second  quarter of 2001 and higher  natural gas costs  adversely  impacted gross
profit by $7.8 million and $700,000, respectively.

     Gross profit  during the first six months of 2001  declined to $7.2 million
from $10.3 million in the first six months of 2000 as the Company's gross margin
declined  from 5.4% in the 2000  period to 4.4% in the first six months of 2001.
This  decrease in gross margin was due  primarily to the lower  overall  per-ton
selling  price of the Company's  steel and wire products and higher  natural gas
costs, partially offset by lower costs for scrap steel and purchased billets and
$1.6 million of business  interruption  insurance  proceeds received in the 2001
first  quarter  related to incidents in prior  years.  In addition,  the adverse
impact  on gross  profit  from  production  outages  amounted  to  approximately
$800,000  during the first six months of 2001 and $5.3  million in the first six
months of 2000. The lower per-ton  selling price of the Company's steel and wire
products during the first six months of 2001 adversely  impacted gross profit by
$8.4 million  while the effect of higher  natural gas costs  adversely  impacted
gross profit by $3.7 million.  During the first six months of 2001,  the Company
purchased  418,000 tons of scrap at an average  price of $87 per ton as compared
to 2000  purchases of 390,000 tons at an average  price of $108 per ton.  During
the first six  months of 2000,  Keystone  purchased  8,000 tons of billets at an
average  price of $215 per ton, as compared to none  purchased  in the first six
months of 2000.

     Selling expense was $1.7 million during the second quarter of both 2001 and
2000.  Selling  expense of $3.3 million  during the first six months of 2001 was
approximately  $200,000  lower than the same period in 2000,  but was relatively
constant as a percentage of sales.

     General and  administrative  expense  increased to $4.5 million  during the
second  quarter of 2001 as compared to $4.2 million during the second quarter of
2000  primarily  due to an  unfavorable  legal  settlement  in 2001 of  $500,000
partially  offset by the impact of  reductions in salaried  headcount  resulting
from employees  accepting  Keystone's early retirement package during the fourth
quarter of 2000. General and  administrative  expense declined from $9.3 million
during  the first  half of 2000 to $7.8  million  during the first half of 2001,
primarily   due  to  the   reduction  in  salaried   headcount  and  a  $650,000
reimbursement  of  legal  fees  received  in  2001,   partially  offset  by  the
unfavorable legal settlement.

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

     Interest  expense in the  second  quarter of 2001 was lower than the second
quarter of 2000 due principally to lower interest rates.  Average  borrowings by
the Company  under its  revolving  credit  facilities,  EWP term loan and Senior
Secured  Notes  (the  "Notes")  approximated  $152.2  million in both the second
quarter of 2001 and the second  quarter  of 2000.  During the second  quarter of
2001, the average  interest rate paid by Keystone was 8.9% per annum as compared
to 9.6% per annum in the second quarter of 2000.

     Interest  expense  in the first  half of 2001 was also lower than the first
half of 2000 due principally to lower interest rates.  Average borrowings by the
Company  under  its  revolving  credit  facilities,  EWP term loan and the Notes
approximated  $151.1  million  in the first half of 2001 as  compared  to $151.4
million in the first half of 2000.  During the first half of 2001,  the  average
interest  rate paid by Keystone was 9.2% per annum as compared to 9.5% per annum
in the first half of 2000.

     The principal reasons for the difference between the U.S. federal statutory
income tax rate and the  Company's  effective  income tax rates are explained in
Note 4 to the Consolidated Financial Statements.

     As a result of the items  discussed  above,  Keystone  incurred  a net loss
during the second  quarter of 2001 of $1.6  million as compared to a net loss of
$3.4 million in the second quarter of 2000, and a net loss during the first half
of both 2001 and 2000 of $5.3 million.

     Keystone has  announced a $15 per-ton  increase in carbon steel rod selling
prices for all  shipments  after July 1, 2001.  The Company  has also  announced
increases of from 3% to 6% in fabricated wire products  selling prices effective
with shipments  after September 1, 2001.  Several other domestic  producers have
announced  similar  fabricated wire products price  increases.  Carbon steel rod
imports  continue to cause  disruption in the  marketplace  as evidenced by a $9
per-ton  decline in carbon  steel rod  selling  prices  during  the 2001  second
quarter  from  the  average  for all of the year  2000.  As a  result,  Keystone
management  believes  it is too  early to  determine  the  extent  to which  the
announced July carbon steel rod selling price increase will be realized. Despite
strong  market  demand and  anticipated  increased  selling  prices,  management
believes  Keystone  will record a net loss during the third  quarter of 2001 and
will record a net loss for  calendar  2001 due  primarily  to higher  energy and
interest costs, continued high levels of imported rod and relative lower overall
product selling prices.

     At June 30,  2001,  the Company has  recognized a net deferred tax asset of
$31.5  million.  The  Company  periodically  reviews the  recoverability  of its
deferred   tax   assets   to   determine    whether   such   assets   meet   the
"more-likely-than-not"  recognition  criteria.  At June 30,  2001,  based on all
available  evidence,  the  Company  concluded  no deferred  tax asset  valuation
allowance was needed.  The Company will continue to review the recoverability of
its deferred tax assets,  and based on such periodic reviews,  the Company could
recognize  a  valuation  allowance  related  to its  deferred  tax assets in the
future.

LIQUIDITY AND CAPITAL RESOURCES:

     The  Company's  cash flows from  operating  activities  are affected by the
seasonality  of  its  business  as  sales  of  certain   products  used  in  the
agricultural and construction industries are typically highest during the second
quarter  and  lowest  during the fourth  quarter  of each year.  These  seasonal
fluctuations  impact  the timing of  production,  sales and  purchases  and have
typically  resulted  in a use of  cash  from  operations  and  increases  in the
outstanding  balance under the Company's  revolving credit facilities during the
first quarter of each year.

     At June 30, 2001  Keystone had negative  working  capital of $43.4  million
(compared to negative  working  capital of $39.2  million at December 31, 2000),
including  $691,000 of notes payable and current maturities of long-term debt as
well as outstanding  borrowings under the Company's  revolving credit facilities
of $52.4  million.  The amount of  available  borrowings  under these  revolving
credit  facilities is based on  formula-determined  amounts of trade receivables
and  inventories,  less the amount of outstanding  letters of credit.  Under the
terms of the indenture related to the Company's Senior Secured Notes, Keystone's
ability to borrow under its revolving credit facilities may be limited.  At June
30, 2001,  unused credit  available for borrowing  under  Keystone's $60 million
revolving credit facility (the "Primary  Revolver"),  which expires December 31,
2001, EWP's $7 million  revolving credit facility,  which expires June 30, 2002,
and Garden Zone's $4 million  revolving credit facility,  which expires December
1, 2001 were $8.2 million, $1.9 million and $.8 million, respectively. The terms
of the  indenture  will  permit  Keystone  to borrow  all of the  unused  credit
available under the Primary Revolver during the third quarter of 2001.  However,
Keystone  currently  believes,  as a result of an expected  decline in borrowing
base,  the available  borrowings  under the Primary  Revolver will be limited to
approximately $50 million during the 2001 third quarter.  As of August 15, 2001,
unused credit availability under the Primary Revolver had declined to $5 million
($1 million after  consideration  of  outstanding  payments to vendors and other
creditors of the Company).  The Primary Revolver requires daily cash receipts be
used to reduce outstanding borrowings,  which results in the Company maintaining
zero cash  balances  when  there are  balances  outstanding  under  this  credit
facility.  Keystone  presently  intends to renew or replace the Primary Revolver
upon its maturity on December 31, 2001.

     During the first half of 2001,  the  Company's  operating  activities  used
approximately  $7.3 million of cash  compared to $1.0 million used in operations
in the first half of 2000  principally  due to changes in  relative  balances of
accounts receivable and accounts payable.

     During the first half of 2001,  Keystone made capital  expenditures of $1.5
million  as  compared  to $7.4  million  in the 2000 first  half.  During  2001,
Keystone has deferred capital expenditures,  including maintenance items, due to
liquidity  constraints.  As many of these items cannot be deferred indefinitely,
capital  expenditures for 2001 are currently  estimated to be approximately $8.0
million and are related primarily to upgrades of production equipment.  Keystone
currently anticipates these capital expenditures will be funded using cash flows
from operations together with borrowing  availability under Keystone's revolving
credit facilities.

     At June 30, 2001,  the Company's  financial  statements  reflected  accrued
liabilities  of $16.2  million for  estimated  remediation  costs  arising  from
environmental  issues.  There is no assurance  regarding  the  ultimate  cost of
remedial measures that might eventually be required by environmental authorities
or  that  additional   environmental   hazards,   requiring   further   remedial
expenditures,  might not be asserted  by such  authorities  or private  parties.
Accordingly, the costs of remedial measures may exceed the amounts accrued.

     In addition to the planned  reductions in fixed costs discussed  previously
and announced increases in product selling prices, Keystone is taking additional
action  towards  improving its  liquidity.  These actions  include,  but are not
limited  to,  reducing  inventory  levels  through  more  efficient   production
schedules,  offering  enhanced  cash  discounts  to  significant  customers  for
prepayment  of  their  purchase  orders,  modifying  coverages  and  participant
contribution levels of medical plans for both employees and retirees, attempting
to restructure certain indebtedness, restructuring the bargaining agreement with
the labor  union at its  Peoria  facility  and  reducing  capital  expenditures.
Keystone is also considering the sale of certain  divisions or subsidiaries that
are not  necessary  to achieve  the  Company's  long-term  business  objectives.
However,  there can be no assurance  Keystone will be successful in any of these
or other efforts, or that if successful,  they will provide sufficient liquidity
for the Company's operations during the next year.

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

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

     Under the  governing  indenture,  a failure  to make a  scheduled  interest
payment  for  thirty  days  will  give the  holders  of the  Notes  the right to
accelerate  the  unpaid  portion  of the  Notes.  Such a failure  also gives the
trustee  for the Notes the  ability  to take  certain  actions  and to  exercise
certain  remedies on behalf of holders of the Notes. The Company has requested a
consent from holders of the Notes,  asking them to defer  exercising their right
to accelerate the payment of the Notes pursuant to the  acceleration  provisions
of the governing  indenture until November 1, 2001, and to direct the trustee of
the Notes to not take any action or exercise any remedy available to the trustee
as a result of the  Company's  failure to make the  interest  payment.  Keystone
plans to evaluate  possible  restructuring  alternatives  to improve its overall
financial condition, including the potential conversion of the Notes into equity
securities of the Company.  Keystone has received an agreement  from its primary
working capital lender to forbear remedies available to it solely as a result of
the Company's  failure to make the August 1, 2001 interest payment on the Notes.
There can be no assurance the Company will receive a consent from the holders of
the Notes to defer  their  acceleration  rights,  or that if such a  consent  is
received the Company  will be able to  restructure  the Notes in a  satisfactory
manner  within the time period  permitted  in the  consent.  If a consent is not
received  from the holders of the Notes,  there can be no assurance  the Company
would have the available  liquidity or other financial resources to enable it to
make the $4.8 million interest payment,  and the Company does not currently have
the liquidity of other financial  resources to retire the Notes in the event the
holders elect to accelerate  payment of the Notes. In addition,  an acceleration
of the Notes will also permit the Company's  Primary Revolver lender to exercise
certain  rights  available  to it under  the  terms of its loan  agreement  with
Keystone, including acceleration.

     At June 30, 2001,  Keystone  cannot give any assurance that cash flows from
operations  together  with the funds  available  under the  Company's  revolving
credit  facilities will be sufficient to fund the anticipated  cash needs of its
operations,  capital  improvements  and debt service  requirements  for the year
ending  December  31,  2001.  Keystone's  anticipated  cash needs are based upon
management's assessment of various financial and operational factors, including,
but not limited to, assumptions  relating to product shipments,  product mix and
selling  prices,  production  schedules,   productivity  rates,  raw  materials,
electricity  and  natural  gas,  labor,  employee  benefits  and other fixed and
variable  costs,  interest  rates,  repayments  of  principal  and  interest  on
long-term  debt,  capital   expenditures  and  available  borrowings  under  the
Company's  revolving  credit  facilities.  However,  there are many factors that
could cause actual future results to differ materially from management's current
assessment. While it is not possible to identify all factors, Keystone continues
to face many risks and uncertainties.  Among the factors that could cause actual
future results to differ materially are the risks and uncertainties discussed in
this  Quarterly  Report and those  described  from time to time in the Company's
other filings with the Securities and Exchange  Commission,  including,  but not
limited  to,  future  supply and demand for the  Company's  products  (including
cyclicality  thereof),  customer  inventory levels,  changes in raw material and
other operating costs (such as scrap and energy),  general economic  conditions,
competitive   products  and   substitute   products,   customer  and  competitor
strategies,  the impact of pricing and production decisions,  the possibility of
labor disruptions,  environmental  matters (such as those requiring emission and
discharge standards for existing and new facilities), government regulations and
possible  changes  therein,  any significant  increases in the cost of providing
medical  coverage to active and retired  employees,  the ultimate  resolution of
pending  litigation,  international  trade  policies  of the  United  States and
certain foreign countries and any possible future litigation and other risks and
uncertainties as discussed in this Quarterly Report. Should one or more of these
risks materialize (or the consequences of such a development  worsen), or should
the  underlying  assumptions  prove  incorrect,   actual  results  could  differ
materially  from those  forecasted  or  expected  and as a result,  could have a
material adverse effect on the future liquidity, financial condition and results
of  operations  of  the  Company.  Additionally,  significant  declines  in  the
Company's   end-user   markets  or  market  share,  the  inability  to  maintain
satisfactory billet and rod production levels, or other unanticipated  costs, if
significant, could result in a need for funds greater than the Company currently
has available.  There can be no assurance the Company would be able to obtain an
adequate amount of additional financing.



<PAGE>


PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings

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


ITEM 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

     On May 15, 2001,  the annual  meeting of the  stockholders  of Keystone was
held for the purpose of voting to elect one director for a term of three years.

     Results of voting at the annual  meeting  are  detailed  below  (10,061,969
common shares were entitled to vote at the meeting).

                            For               Withheld              Total

Director -

  Three-year term
  Paul M. Bass, Jr.       8,990,224             99,664            9,089,888


ITEM 6. Exhibits and Reports on Form 8-K

(a)     The following exhibit is included herein:

        None

(b)     Reports on Form 8-K filed during the quarter ended June 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:  August 20, 2001            By /s/Bert E. Downing, Jr.
                                     -------------------------------------
                                     Bert E. Downing, Jr.
                                     Vice President and Corporate Controller
                                     (Principal Financial and Accounting
                                      Officer)