UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of the earliest event reported)
March 30, 2006
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Keystone Consolidated Industries, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 1-3919 37-0364250
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 458-0028
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
(a) In connection with finalizing the preparation of the Company's consolidated
financial statements for the year ended December 31, 2005, the Company
determined that cash overdrafts, which currently would be financed by borrowings
under the Company's revolving credit facility, and cash receipts which would be
applied against the revolving credit facility, were improperly classified as
part of accounts payable. Under accounting principles generally accepted in the
United States of America ("GAAP"), such cash overdrafts should have been
classified as part of the current portion of long-term debt. In addition, the
relative changes in such cash overdrafts were improperly included in the
determination of cash flows from operating activities, while under GAAP relative
changes in such cash overdrafts should have been included in the determination
of cash flows from financing activities.
As a result, the Company's consolidated financial statements as of December 31,
2003 and 2004, and for the years ended December 31, 2002, 2003 and 2004, in each
case as reflected in the Company's 2004 Annual Report on Form 10-K filed with
the Commission on February 13, 2006 ("Original Form 10-K"), were misstated as
follows:
o Accounts payable and the current portion of long-term debt at December
31, 2003 were each misstated by $1.2 million.
o Accounts payable and the current portion of long-term debt at December
31, 2004 were each misstated by $2.7 million ($3.8 million of cash
receipts net of $1.1 million of cash overdrafts).
o Cash flows from operating and financing activities for the year ended
December 31, 2002 were each misstated by $63,000.
o Cash flows from operating and financing activities for the year ended
December 31, 2003 were each misstated by $221,000.
o Cash flows from operating and financing activities for the year ended
December 31, 2004 were each misstated by $3.9 million.
As a result of these misstatements, on March 30, 2006, management of the Company
and the Company's audit committee determined the Company's previously-issued
consolidated financial statements as of December 31, 2003 and 2004 and for the
years ended December 31, 2002, 2003 and 2004 included in the Original Form 10-K
should no longer be relied upon. The Company will include restated consolidated
financial statements as of December 31, 2004 and for the years ended December
31, 2003 and 2004 in its 2005 Annual Report on Form 10-K ("2005 Form 10-K"), to
be filed with the Commission concurrently with the filing of this Current Report
on Form 8-K. The Company has not previously issued any consolidated financial
statements for its 2004 or 2005 interim periods. The Company will file its 2005
Quarterly Reports on Form 10-Q for its 2005 and corresponding 2004 interim
periods concurrently with the filing of this Current Report on Form 8-K.
Attached hereto as Exhibit 99.1 are selected consolidated balance sheet data of
the Company as of December 31, 2003 and 2004, and selected consolidated
statement of cash flow data of the Company for the years ended December 31,
2002, 2003 and 2004, in each case as previously reported in the Original Form
10-K, (ii) adjustments to such consolidated financial statement data to reflect
the effect of this restatement and (iii) such consolidated financial statement
data, as restated.
As of December 31, 2005, the Company did not maintain effective controls over
the presentation and classification of cash overdrafts. Specifically, effective
controls were not designed and in place to ensure that cash overdrafts were
properly classified as indebtedness in the Company's consolidated balance sheet,
and that changes in its cash overdrafts were properly included in the
determination of cash flows from financing activities. This control deficiency
resulted in the restatement of the Company's 2002, 2003 and 2004 annual
consolidated financial statements and audit adjustments to both its 2004 interim
consolidated financial statements and its annual and interim 2005 consolidated
financial statements. This control deficiency could result in a misstatement of
the aforementioned accounts that would result in a material misstatement to the
Company's annual or interim consolidated financial statements that would not be
prevented or detected.
Accordingly, management of the Company determined that this control deficiency
constitutes a material weakness.
As a result of the material weakness described above, the Company will conclude
that its disclosure controls and procedures as defined by Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended, were not effective
as of December 31, 2005.
In order to remediate this material weakness, in March 2006 the Company revised
the recurring reclassification journal entry used in the preparation of its
consolidated balance sheet to properly classify the amount of any cash
overdrafts as part of the current portion of long-term debt. In addition, the
Company intends to institute quarterly and annual close procedures, to be
implemented for the first time for the quarter ending March 31, 2006, to ensure
(i) that an adequate review of the Company's balance sheet and statement of cash
flow consolidation occurs each period and (ii) the continued appropriateness of
the reclassification journal entry to classify bank overdrafts as part of the
current portion of long-term debt.
The Company's management and audit committee have discussed the matters
disclosed in this Form 8-K with the Company's independent registered public
accounting firm, PricewaterhouseCoopers LLP.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
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99.1* Unaudited selected consolidated balance sheet data of the Company
as of December 31, 2003 and 2004, and selected consolidated
statement of cash flow data of the Company for the years ended
December 31, 2002, 2003 and 2004.
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* Filed herewith.
SIGNATURE
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 hereunto duly authorized.
Keystone Consolidated Industries, Inc.
(Registrant)
By: /s/ Bert E. Downing, Jr.
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Bert E. Downing, Jr.
Vice President, Chief Financial Officer,
Corporate Controller and Treasurer
Date: March 31, 2006
INDEX TO EXHIBITS
Exhibit No. Description
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99.1* Unaudited selected consolidated balance sheet data of the Company
as of December 31, 2003 and 2004, and selected consolidated
statement of cash flow data of the Company for the years ended
December 31, 2002, 2003 and 2004.