| Keystone      Consolidated Industries, Inc.                |
|------------------------------------------------------------|
| (Exact      name of Registrant as specified in itscharter) |

| Delaware                                                                |   | 37-0364250                                 |
|-------------------------------------------------------------------------|--------|--------------------------------------------|
| (State      or other jurisdiction ofIncorporation      or organization) |   | (IRS      EmployerIdentification      No.) |

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

| Registrant’s      telephone number, including area code:   | (972) 458-0028 |
|------------------------------------------------------------------|----------------|
|                                                             |           |
| Securities      registered pursuant to Section 12(b) of the Act: | None.          |

| Securities      registered pursuant to Section 12(g) of the Act: | Title of each class               |
|------------------------------------------------------------------|-----------------------------------|
|                                                             | Common      Stock, $.01 par value |

----

----

| ·   | Future      supply and demand for our products (including cyclicality      thereof), |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | Customer      inventory levels, |
|--------------------|---------------------------------|

| ·   | Changes      in raw material and other operating costs (such as ferrous scrap and      energy), |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | The      possibility of labor disruptions, |
|--------------------|--------------------------------------------|

| ·   | General      global economic and politicalconditions, |
|--------------------|-------------------------------------------------------|

| ·   | Competitive      products (including low-priced imports) and substitute      products, |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | Customer      and competitor strategies, |
|--------------------|------------------------------------------|

| ·   | The      impact of pricing and productiondecisions, |
|--------------------|-----------------------------------------------------|

| ·   | Environmental      matters (such as those requiring emission and discharge standards for      existing and new facilities), |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Government      regulations and possible changestherein, |
|--------------------|----------------------------------------------------------|

| ·   | Significant      increases in the cost of providing medical coverage to      employees, |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | The      ultimate resolution of pendinglitigation, |
|--------------------|----------------------------------------------------|

| ·   | International      trade policies of the United States and certain foreign      countries, |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Operating      interruptions (including, but not limited to, labor disputes, fires,      explosions, unscheduled or unplanned downtime and transportation      interruptions), |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      ability to renew or refinance credit facilities,  and |
|--------------------|----------------------------------------------------------------|

| ·   | Any      possible future litigation. |
|--------------------|--------------------------------------|

----

| ·   | Keystone      Steel and Wire (“KSW”), located in Peoria, Illinois, operates an electric      arc furnace mini-mill and manufactures and sells billets, wire rod,      industrial wire, coiled rebar and fabricated wire products to      agricultural, industrial, construction, commercial, original equipment      manufacturers and retail consumermarkets; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Engineered      Wire Products (“EWP”), located in Upper Sandusky, Ohio, manufactures and      sells welded wire reinforcement in both roll and sheet form that is      utilized in concrete construction products including pipe, pre-cast boxes      and applications for use in roadways, buildings and bridges;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Keystone-Calumet,      Inc. (“Calumet”), located in Chicago Heights, Illinois, manufactures and      sells merchant and special bar quality products and special sections in      carbon and alloy steel grades for use in agricultural, cold drawn,      construction, industrial chain, service centers, and transportation      applications.  See Note 2 to our Condensed Consolidated      Financial Statements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | 700      are represented by the Independent Steel Workers’ Alliance at KSW under an      agreement expiring in May 2009; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ·   | 4      are represented by the International Association of Machinists and      Aerospace Workers (Local 1570) at a KSW distribution center in Sherman,      Texas under an agreement expiring in October 2008;  and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 70      are represented by Local Union #40, an Affiliate to the International      Brotherhood of Teamsters' Chauffeurs Warehousemen and Helpers of America,      AFL-CIO at EWP under an agreement expiring in November    2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                           |   | Year Ended December    31,  |   |
|--------------------------------|--------|----------------------------------|--------|
|                           |   | 2005                             |   |   | 2006 |   |   | 2007  |   |
|   Product            |   | Percentof      TonsShipped       |   |   | PercentofSales |   |   | Percentof      TonsShipped |   |   | PercentofSales |   |   | Percentof      TonsShipped |   |   | PercentofSales |   |
|                           |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fabricated      wire products  |   |                             | 19.2   | % |   |   | 30.1 | % |   |   | 16.5 | % |   |   | 26.6 | % |   |   | 16.0 | % |   |   | 25.2 | % |
| Welded      wire reinforcement |   |                             | 13.6   |   |   |   | 17.2 |   |   |   | 10.0 |   |   |   | 13.5 |   |   |   | 9.0 |   |   |   | 11.7 |   |
| Nails      (1)                 |   |                             | 3.2    |   |   |   | 3.4 |   |   |   | 2.6 |   |   |   | 2.8 |   |   |   | 0.1 |   |   |   | 0.1 |   |
| Industrial      wire           |   |                             | 13.7   |   |   |   | 14.4 |   |   |   | 11.2 |   |   |   | 12.6 |   |   |   | 10.1 |   |   |   | 11.2 |   |
| Coiled      rebar              |   |                             | -      |   |   |   | - |   |   |   | 0.2 |   |   |   | 0.1 |   |   |   | 2.4 |   |   |   | 1.9 |   |
| Bars      and shapes           |   |                             | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1.3 |   |   |   | 1.3 |   |
| Wire      rod                  |   |                             | 44.9   |   |   |   | 32.4 |   |   |   | 51.6 |   |   |   | 40.1 |   |   |   | 61.0 |   |   |   | 48.5 |   |
| Billets                        |   |                             | 5.4    |   |   |   | 2.5 |   |   |   | 7.9 |   |   |   | 4.3 |   |   |   | 0.1 |   |   |   | 0.1 |   |
|                           |   |                             | 100.0  | % |   |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
|                           |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                       |     KSW         |   |     EWP          |   |     Calumet          |
|----------------------------|------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------------------|
|                       | %      of Segments’ Sales          |
|                       |                                     |   |                                           |   |                                               |
| Ten      largest customers | 50%                                      |   | 51%                                            |   | 65%                                                |
|                       |                                     |   |                                           |   |                                               |
| Customers      > 10%    | 15%                                      |   | 11%                                            |   | 23%                                                |

| ·   | the      breadth of our fabricated wire products, welded wire reinforcement and      industrial wire offerings; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | our      ability to service diverse geographic and product markets;    and |
|--------------------|----------------------------------------------------------------------------|

| ·   | the      relatively low cost of our internal supply of wire  rod. |
|--------------------|-------------------------------------------------------------------|

----

----

----

----

| ·   | making      it more difficult for us to satisfy our obligations with respect to our      liabilities; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | increasing      our vulnerability to adverse general economic and industry      conditions; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | requiring      a portion of our cash flow from operations be used for the payment of      interest on our debt, therefore reducing our ability to use our cash flow      to fund working capital, capital expenditures, acquisitions and general      corporate requirements; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | limiting      our ability to obtain additional financing to fund future working capital,      capital expenditures, acquisitions and general corporate      requirements; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | limiting      our flexibility in planning for, or reacting to, changes in our business      and the industry in which we operate;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | placing      us at a competitive disadvantage relative to other less-leveraged      competitors. |
|--------------------|--------------------------------------------------------------------------------------------------|

----

----

|         Facility      Name      |      Location    |   | ApproximateSize(Square Feet) |      |          Products      Produced        |
|--------------------------------------------------------------------------------------------------|----------------------------------------------------------|--------|------------------------------|-----------|------------------------------------------------------------------------------------------------------------------------|
|                                                                                             |                                                     |   |                         |      |                                                                                                                   |
| Keystone      Steel & Wire                                                                   | Peoria,      IL                                          |   |                         | 1,951,000 |                                                                                                                   |     Fabricated      wire products, industrial wire, coiled rebar, wire rod and      billets |
| Engineered      Wire Products                                                                    | Upper      Sandusky, OH                             |   |                         | 126,000   |                                                                                                                   | Welded      wire reinforcement |
| Keystone-Calumet                                                                                 | Chicago      Heights, IL                                 |   |                         | 216,000   |                                                                                                                   | Steel      bars and shapes |
|                                                                                             |                                                     |   |                         |      |                                                                                                                   |   |
|                                                                                             |                                                     |   |                         | 2,293,000 |                                                                                                                   |   |

----

----

|                                                 |   | High   |   |   | Low    |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                 |   |   |   |   |   |   |
| Year      ended December 31, 2006                    |   |   |   |   |   |   |
|                                                 |   |   |   |   |   |   |
|   First      quarter                       |   |   | N/A    |   |   |   | N/A |   |
|   Second      quarter (April 1 to June 22) |   |   | N/A    |   |   |   | N/A |   |
|   Second      quarter (June 23 to June 30) |   | $      | 2.25   |   |   | $      | 2.00 |   |
|   Third      quarter                       |   | $      | 14.00  |   |   | $      | 2.55 |   |
|   Fourth      quarter                      |   | $      | 18.50  |   |   | $      | 11.70 |   |
|                                                 |   |   |   |   |   |   |   |   |
| Year      ended December 31, 2007                    |   |   |   |   |   |   |   |   |
|                                                 |   |   |   |   |   |   |   |   |
|   First      quarter                       |   | $      | 25.00  |   |   | $      | 14.50 |   |
|   Second      quarter                      |   | $      | 23.74  |   |   | $      | 20.00 |   |
|   Third      quarter                       |   | $      | 22.75  |   |   | $      | 18.00 |   |
|   Fourth      quarter                      |   | $      | 19.52  |   |   | $      | 13.00 |   |
|                                                 |   |   |   |   |   |   |   |   |
| First      Quarter 2008 through February 29, 2008    |   | $      | 16.98  |   |   | $      | 9.75 |   |

----

|                       |   |               |   |
|----------------------------|--------|--------------------|--------|
|                       |   | June      23, 2006 |   |   | December      31, 2006 |   |   | December      31, 2007 |   |
|                       |   |               |   |   |   |   |   |   |   |
| Keystone      common stock |   | $                  | 100    |   |   | $ | 750 |   |   | $ | 725 |   |
| S&P      500 Index     |   |               | 100    |   |   |   | 115 |   |   |   | 121 |   |
| S&P      Steel Index   |   |               | 100    |   |   |   | 117 |   |   |   | 142 |   |

----

|                                                                                             |   |  Years ended December      31,                  |    |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                                                             |   | 2003                                                      |    |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
|                                                                                             |   | (In      thousands, except per share and per ton amounts) |    |
| Statement      of Operations Data:                                                               |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net      sales                                                                       |   | $                                                         | 306,671 |   |   | $ | 364,335 |   |   | $ | 367,545 |   |   | $ | 440,540 |   |   | $ | 451,178 |   |
|   Operating      income (loss)                                                         |   |                                                      | (34,704 | ) |   |   | 31,486 |   |   |   | 20,193 |   |   |   | 79,750 |   |   |   | 97,972 |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Defined      benefit pension credit  (expense)                             |   |                                                      | (6,898  | ) |   |   | 6,752 |   |   |   | 11,710 |   |   |   | 55,978 |   |   |   | 80,443 |   |
|   Other      postretirement benefit credit (expense)                              |   |                                                      | (17,503 | ) |   |   | (20,909 | ) |   |   | (8,885 | ) |   |   | 8,297 |   |   |   | 8,526 |   |
|   Operating      income (loss) before pension and OPEB (5)                             |   |                                                      | (10,303 | ) |   |   | 45,643 |   |   |   | 17,368 |   |   |   | 15,475 |   |   |   | 9,003 |   |
|   Gain      on cancellation of debt                                                    |   |                                                      | -       |   |   |   | - |   |   |   | 32,510 |   |   |   | - |   |   |   | 10,074 |   |
|   Gain      on legal settlement                                                        |   |                                                      | -       |   |   |   | 5,284 |   |   |   | - |   |   |   | - |   |   |   | 5,400 |   |
|   Reorganization      costs                                                            |   |                                                      | -       |   |   |   | (11,158 | ) |   |   | (10,308 | ) |   |   | (679 | ) |   |   | (190 | ) |
|   Provision      for income taxes                                                      |   |                                                      | -       |   |   |   | (1,379 | ) |   |   | (430 | ) |   |   | (17,055 | ) |   |   | (37,619 | ) |
|   Income      (loss) before income taxes and other items (5)                           |   |                                                      | (12,817 | ) |   |   | 37,470 |   |   |   | 14,635 |   |   |   | 11,191 |   |   |   | (1,869 | ) |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net      income (loss)                                                               |   | $                                                         | (37,517 | ) |   | $ | 16,060 |   |   | $ | 39,232 |   |   | $ | 57,732 |   |   | $ | 64,765 |   |
|   Net      income (loss) available for common shares (1)                          |   | $                                                         | (43,457 | ) |   | $ | 14,837 |   |   | $ | 39,232 |   |   | $ | 57,732 |   |   | $ | 64,765 |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Basic      net income (loss) available for common shares per    share                 |   | $                                                         | (4.32   | ) |   | $ | 1.47 |   |   | $ | 4.12 |   |   | $ | 5.77 |   |   | $ | 6.48 |   |
|  Diluted      net income (loss) available for common shares per    share               |   | $                                                         | (4.32   | ) |   | $ | .57 |   |   | $ | 1.88 |   |   | $ | 5.77 |   |   | $ | 6.48 |   |
|   Weighted      average common and common equivalent shares outstanding (3): |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Basic                                                                    |   |                                                      | 10,068  |   |   |   | 10,068 |   |   |   | 10,046 |   |   |   | 10,000 |   |   |   | 10,000 |   |
|     Diluted                                                                  |   |                                                      | 10,068  |   |   |   | 28,043 |   |   |   | 22,029 |   |   |   | 10,000 |   |   |   | 10,000 |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Other      Steel and Wire Products Operating Data:                                    |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Shipments      (000 tons):                                                           |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Fabricated      wire products                                            |   |                                                      | 135     |   |   |   | 116 |   |   |   | 101 |   |   |   | 112 |   |   |   | 103 |   |
|     Welded      wire reinforcement                                           |   |                                                      | 66      |   |   |   | 71 |   |   |   | 71 |   |   |   | 67 |   |   |   | 58 |   |
|     Nails                                                                    |   |                                                      | 53      |   |   |   | 28 |   |   |   | 17 |   |   |   | 18 |   |   |   | 1 |   |
|     Industrial      wire                                                     |   |                                                      | 91      |   |   |   | 82 |   |   |   | 72 |   |   |   | 75 |   |   |   | 66 |   |
|     Coiled      rebar                                                        |   |                                                      | -       |   |   |   | - |   |   |   | - |   |   |   | 1 |   |   |   | 15 |   |
|     Bars      and shapes                                                     |   |                                                      | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 9 |   |
|     Wire      rod                                                            |   |                                                      | 252     |   |   |   | 200 |   |   |   | 236 |   |   |   | 349 |   |   |   | 395 |   |
|     Billets                                                                  |   |                                                      | 17      |   |   |   | 17 |   |   |   | 29 |   |   |   | 53 |   |   |   | 1 |   |
|       Total                                                        |   |                                                      | 614     |   |   |   | 514 |   |   |   | 526 |   |   |   | 675 |   |   |   | 648 |   |
|    Per-ton      selling prices:                                                   |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Fabricated      wire products                                            |   | $                                                         | 783     |   |   | $ | 984 |   |   | $ | 1,090 |   |   | $ | 1,037 |   |   | $ | 1,089 |   |
|     Welded      wire reinforcement                                           |   |                                                      | 539     |   |   |   | 829 |   |   |   | 881 |   |   |   | 870 |   |   |   | 896 |   |
|     Nails                                                                    |   |                                                      | 558     |   |   |   | 759 |   |   |   | 742 |   |   |   | 692 |   |   |   | 834 |   |
|     Industrial      wire                                                     |   |                                                      | 452     |   |   |   | 709 |   |   |   | 731 |   |   |   | 726 |   |   |   | 763 |   |
|     Coiled      rebar                                                        |   |                                                      | -       |   |   |   | - |   |   |   | - |   |   |   | 529 |   |   |   | 563 |   |
|     Bars      and shapes                                                     |   |                                                      | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 663 |   |
|     Wire      rod                                                            |   |                                                      | 314     |   |   |   | 539 |   |   |   | 503 |   |   |   | 500 |   |   |   | 548 |   |
|     Billets                                                                  |   |                                                      | 192     |   |   |   | 176 |   |   |   | 321 |   |   |   | 354 |   |   |   | 234 |   |
|     Steel      and wire products in total                                    |   |                                                      | 479     |   |   |   | 707 |   |   |   | 696 |   |   |   | 645 |   |   |   | 690 |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Average      per-ton ferrous scrap purchase cost                                |   | $                                                         | 115     |   |   | $ | 205 |   |   | $ | 220 |   |   | $ | 210 |   |   | $ | 239 |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Financial Data:                                                                       |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Capital      expenditures                                                            |   | $                                                         | 2,683   |   |   | $ | 5,080 |   |   | $ | 9,772 |   |   | $ | 18,739 |   |   | $ | 16,602 |   |
|   Depreciation      and amortization                                                   |   |                                                      | 16,461  |   |   |   | 15,812 |   |   |   | 15,745 |   |   |   | 15,222 |   |   |   | 15,434 |   |
|                                                                                             |   |                                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                |   |  As of December 31, |    |
|---------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                |   | 2003                     |    |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
|                                                                |   | (In      thousands)      |    |
| Balance      Sheet Data:                                            |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |
|   Working      capital (deficit) (2)                      |   | $                        | (90,210 | ) |   | $ | 11,910 |   |   | $ | 36,373 |   |   | $ | 31,776 |   |   | $ | 20,630 |   |
|   Property,      plant and equipment, net            |   |                     | 105,316 |   |   |   | 94,033 |   |   |   | 86,773 |   |   |   | 88,695 |   |   |   | 92,469 |   |
|   Total      assets(4)                                    |   |                     | 282,194 |   |   |   | 323,282 |   |   |   | 358,364 |   |   |   | 763,936 |   |   |   | 763,023 |   |
|   Total      debt                                         |   |                     | 88,897  |   |   |   | 65,985 |   |   |   | 99,895 |   |   |   | 76,448 |   |   |   | 91,577 |   |
|   Redeemable      preferred stock (3)                     |   |                     | 2,112   |   |   |   | 2,112 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|   Stockholders’      equity  (deficit)(4) |   |                     | (10,050 | ) |   |   | 4,787 |   |   |   | 67,531 |   |   |   | 403,662 |   |   |   | 404,694 |   |

| (1)   | Includes      the effect of dividends on preferred stock of $5,940,000 and $1,223,000 in      2003 and 2004, respectively.  We discontinued accruing dividends      on our preferred stock upon filing for Chapter 11 on February 26,      2004. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Working      capital (deficit) represents current assets minus current      liabilities. |
|-----------------|------------------------------------------------------------------------------------------|

| (3)   | All      of our outstanding common and preferred stock at August 31, 2005 was      cancelled in connection with our emergence from Chapter 11 on August 31,      2005, and at that time, we issued 10 million shares of a new issue of      common stock. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | We      adopted Statement of Financial Accounting Standards (“SFAS”) No. 158      effective December 31, 2006, and, as a result, amounts reported as of      December 31, 2006 and subsequent periods include the funded status of our      pension plan. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Because      pension and other postretirement benefit (“OPEB”) expense or credit, gain      on legal settlement, gain on cancellation of debt and reorganization costs      are all unrelated to operating activities of our businesses, we measure      and evaluate the performance of our businesses using income (loss) before      income taxes and other items as well as operating income before pension      and OPEB credit or expense.  As such, we believe the      presentation of income (loss) before income taxes and other items and      operating income before pension and OPEB credit or expense provides more      useful information to investors.  Income (loss) before income      taxes and other items and operating income before pension and OPEB credit      or expense are non-GAAP measures of profitability that are not in      accordance with accounting principles generally accepted in the United      States of America (“GAAP”) and they should not be considered in isolation      or as substitutes for measures prepared in accordance with      GAAP. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                 |   | Years ended December 31, |    |
|----------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                 |   | 2003                     |    |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
|                                                                 |   | (In      thousands)      |    |
| Income      (loss) before income taxes                               |   | $                        | (37,218 | ) |   | $ | 17,439 |   |   | $ | 39,662 |   |   | $ | 74,787 |   |   | $ | 102,384 |   |
|    Adjustments:                                       |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Defined      benefit pension expense (credit) |   |                     | 6,898   |   |   |   | (6,752 | ) |   |   | (11,710 | ) |   |   | (55,978 | ) |   |   | (80,443 | ) |
|    OPEB      expense (credit)                         |   |                     | 17,503  |   |   |   | 20,909 |   |   |   | 8,885 |   |   |   | (8,297 | ) |   |   | (8,526 | ) |
|    Gain      on legal settlement                      |   |                     | -       |   |   |   | (5,284 | ) |   |   | - |   |   |   | - |   |   |   | (5,400 | ) |
|    Gain      on cancellation of debt                  |   |                     | -       |   |   |   | - |   |   |   | (32,510 | ) |   |   | - |   |   |   | (10,074 | ) |
|    Reorganization      costs                          |   |                     | -       |   |   |   | 11,158 |   |   |   | 10,308 |   |   |   | 679 |   |   |   | 190 |   |
| Income      (loss) before income taxes and other items               |   | $                        | (12,817 | ) |   | $ | 37,470 |   |   | $ | 14,635 |   |   | $ | 11,191 |   |   | $ | (1,869 | ) |

----

|                                                      |   | Years ended December 31, |    |
|-----------------------------------------------------------|--------|--------------------------|---------|
|                                                      |   | 2003                     |    |   | 2004 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
|                                                      |   | (In thousands)           |    |
| Operating      income (loss) as reported                  |   | $                        | (34,704 | ) |   | $ | 31,486 |   |   | $ | 20,193 |   |   | $ | 79,750 |   |   | $ | 97,972 |   |
|   Defined      benefit pension expense (credit) |   |                     | 6,898   |   |   |   | (6,752 | ) |   |   | (11,710 | ) |   |   | (55,978 | ) |   |   | (80,443 | ) |
|   OPEB      expense (credit)                    |   |                     | 17,503  |   |   |   | 20,909 |   |   |   | 8,885 |   |   |   | (8,297 | ) |   |   | (8,526 | ) |
| Operating      income (loss) before pension/OPEB          |   | $                        | (10,303 | ) |   | $ | 45,643 |   |   | $ | 17,368 |   |   | $ | 15,475 |   |   | $ | 9,003 |   |

----

----

| ·   | higher      shipment volumes of fabricated wire products, wire rod and      billets; |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | lower      shipment volumes of welded wirereinforcement; |
|--------------------|----------------------------------------------------------|

| ·   | lower      overall per-ton selling prices in2006; |
|--------------------|---------------------------------------------------|

| ·   | increased      conversion costs in 2006 resulting from production interruptions due to      operating issues with our wire rod mill reheat  furnace; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an      extra week of operations as 2006 was a 53-week year as compared to a      52-week year in 2005; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | lower      costs for ferrous scrap in 2006; |
|--------------------|---------------------------------------------|

| ·   | lower      costs for natural gas in 2006; |
|--------------------|-------------------------------------------|

| ·   | lower      state franchise taxes and general insurance expense in 2006;      and |
|--------------------|----------------------------------------------------------------------------------|

| ·   | higher      professional fees in 2006. |
|--------------------|----------------------------------------|

| ·   | lower      shipment volumes of fabricated wire products, welded wire reinforcement,      industrial wire and billets; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | higher      shipment volumes of wire rod and coiledrebar; |
|--------------------|-----------------------------------------------------------|

| ·   | higher      overall per-ton selling prices in2007; |
|--------------------|----------------------------------------------------|

| ·   | decreased      conversion costs in 2007 as a result of the wire rod mill reheat furnace      overhaul during the fourth quarter of2006; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an      extra week of operations as 2006 was a 53-week year as compared to a      52-week year in 2007; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | higher      costs for ferrous scrap in 2007; |
|--------------------|----------------------------------------------|

| ·   | higher      electricity costs in 2007 due to deregulation on January 1, 2007 after a      ten-year rate freeze; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | a      $5.4 million gain on legal settlement in2007. |
|--------------------|------------------------------------------------------|

| ·   | Keystone      Steel and Wire (“KSW”), located in Peoria, Illinois, operates an electric      arc furnace mini-mill and manufactures and sells billets, wire rod,      industrial wire, coiled rebar and fabricated wire products to      agricultural, industrial, construction, commercial, original equipment      manufacturers and retail consumermarkets; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Engineered      Wire Products (“EWP”), located in Upper Sandusky, Ohio, manufactures and      sells welded wire reinforcement in both roll and sheet form that is      utilized in concrete construction products including pipe, pre-cast boxes      and applications for use in roadways, buildings and bridges;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Keystone-Calumet,      Inc. (“Calumet”), located in Chicago Heights, Illinois, manufactures and      sells merchant and special bar quality products and special sections in      carbon and alloy steel grades for use in agricultural, cold drawn,      construction, industrial chain, service centers, and transportation      applications.  See Note 2 to our Consolidated Financial      Statements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                        |   |  KSW           |     |   |  EWP |   |    |  Calumet |   |   |  Other(1) |   |   |  Total |    |
|-------------------------------------------------------------|--------|---------------------|----------|--------|-----------|--------|---------|---------------|--------|--------|----------------|--------|--------|-------------|---------|
|                                                        |   | (In      thousands) |     |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |
| For      the year ended December 31, 2005:                  |   |                |     |   |      |   |    |          |   |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |
|  Net      sales                                        |   | $                   | 338,903  |   |      | $      | 62,777  |          |   | $      | -              |   |   | $           | (34,135 | ) |   | $ | 367,545 |   |
|  Cost      of goods sold                               |   |                | (317,044 | )      |      |   | (48,801 | )             |   |   | -              |   |   |        | 36,256  |   |   |   | (329,589 | ) |
|    Gross      margin                         |   |                | 21,859   |   |      |   | 13,976  |          |   |   | -              |   |   |        | 2,121   |   |   |   | 37,956 |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
|  Selling      and administrative      expense     |   |                | (13,575  | )      |      |   | (4,277  | )             |   |   |  -        |   |   |        | (2,736  | ) |   |   | (20,588 | ) |
|  Operating      income (loss) before pension/OPEB |   | $                   | 8,284    |   |      | $      | 9,699   |          |   | $      | -              |   |   | $           | (615    | ) |   | $ | 17,368 |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
| For      the year ended December 31, 2006:                  |   |                |     |   |      |   |    |          |   |   |           |   |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
|  Net      sales                                        |   | $                   | 412,866  |   |      | $      | 58,748  |          |   | $      | -              |   |   | $           | (31,074 | ) |   | $ | 440,540 |   |
|  Cost      of goods sold                               |   |                | (392,082 | )      |      |   | (45,397 | )             |   |   | -              |   |   |        | 31,760  |   |   |   | (405,719 | ) |
|    Gross      margin                         |   |                | 20,784   |   |      |   | 13,351  |          |   |   | -              |   |   |        | 686     |   |   |   | 34,821 |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
|  Selling      and administrative      expense     |   |                | (14,226  | )      |      |   | (3,887  | )             |   |   | -              |   |   |        | (1,233  | ) |   |   | (19,346 | ) |
|  Operating      income (loss) before pension/OPEB |   | $                   | 6,558    |   |      | $      | 9,464   |          |   | $      | -              |   |   | $           | (547    | ) |   | $ | 15,475 |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
| For      the year ended December 31, 2007:                  |   |                |     |   |      |   |    |          |   |   |           |   |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
|  Net      sales                                        |   | $                   | 426,652  |   |      | $      | 52,509  |          |   | $      | 5,659          |   |   | $           | (33,642 | ) |   | $ | 451,178 |   |
|  Cost      of goods sold                               |   |                | (413,556 | )      |      |   | (41,189 | )             |   |   | (6,651         | )      |   |        | 33,488  |   |   |   | (427,908 | ) |
|    Gross      margin (loss)                  |   |                | 13,096   |   |      |   | 11,320  |          |   |   | (992           | )      |   |        | (154    | ) |   |   | 23,270 |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |
|  Selling      and administrative      expense     |   |                | (14,026  | )      |      |   | (3,618  | )             |   |   | (399           | )      |   |        | (1,624  | ) |   |   | (19,667 | ) |
|  Gain      on legal settlement                         |   |                | -        |   |      |   | -       |          |   |   | -              |   |   |        | 5,400   |   |   |   | 5,400 |   |
|  Operating      income (loss) before pension/OPEB |   | $                   | (930     | )      |      | $      | 7,702   |          |   | $      | (1,391         | )      |   | $           | 3,622   |   |   | $ | 9,003 |   |
|                                                        |   |                |     |   |      |   |    |          |   |   |           |   |   |        |    |   |   |   |   |   |

----

|                                                         |   |                  |     |
|--------------------------------------------------------------|--------|-----------------------|----------|
|                                                         |   | 2005                  |     |   | %      ofsales |   |   | 2006 |   |   | %      ofsales |   |   | 2007 |   |   | %      ofsales |   |
|                                                         |   | ($      in thousands) |     |
|                                                         |   |                  |     |
| Net      sales                                               |   | $                     | 338,903  |   |   |   | 100.0 | % |   | $ | 412,866 |   |   |   | 100.0 | % |   | $ | 426,652 |   |   |   | 100.0 | % |
| Cost      of goods sold                                      |   |                  | (317,044 | ) |   |   | (93.6 | ) |   |   | (392,082 | ) |   |   | (95.0 | ) |   |   | (413,556 | ) |   |   | (96.9 | ) |
|   Gross      margin                                |   |                  | 21,859   |   |   |   | 6.4 |   |   |   | 20,784 |   |   |   | 5.0 |   |   |   | 13,096 |   |   |   | 3.1 |   |
|                                                         |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling      and administrative                              |   |                  | (13,575  | ) |   |   | (4.0 | ) |   |   | (14,226 | ) |   |   | (3.4 | ) |   |   | (14,026 | ) |   |   | (3.3 | ) |
|   Operating      income (loss) before pension/OPEB |   | $                     | 8,284    |   |   |   | 2.4 | % |   | $ | 6,558 |   |   |   | 1.6 | % |   | $ | (930 | ) |   |   | (0.2 | )% |
|                                                         |   |                  |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                    |   | 2005   |   |   | 2006   |   |   | 2007   |   |
|---------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Sales      volume(000 tons):                            |   |   |   |   |   |   |   |   |   |
|   Fabricated      wire products               |   |   | 101    |   |   |   | 112    |   |   |   | 103 |   |
|   Nails                                       |   |   | 17     |   |   |   | 18     |   |   |   | 1 |   |
|   Industrial      wire                        |   |   | 72     |   |   |   | 76     |   |   |   | 66 |   |
|   Coiled      rebar                           |   |   | -      |   |   |   | 1      |   |   |   | 15 |   |
|   Wire      rod                               |   |   | 304    |   |   |   | 409    |   |   |   | 448 |   |
|   Billets                                     |   |   | 29     |   |   |   | 60     |   |   |   | 15 |   |
|     Total                           |   |   | 523    |   |   |   | 676    |   |   |   | 648 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Per-ton      selling prices:                            |   |   |   |   |   |   |   |   |   |   |   |   |
|   Fabricated      wire products               |   | $      | 1,090  |   |   | $      | 1,037  |   |   | $ | 1,089 |   |
|   Nails                                       |   |   | 742    |   |   |   | 692    |   |   |   | 834 |   |
|   Industrial      wire                        |   |   | 731    |   |   |   | 717    |   |   |   | 763 |   |
|   Coiled      rebar                           |   |   | -      |   |   |   | 529    |   |   |   | 563 |   |
|   Wire      rod                               |   |   | 501    |   |   |   | 496    |   |   |   | 545 |   |
|   Billets                                     |   |   | 321    |   |   |   | 359    |   |   |   | 445 |   |
|   All      products                           |   |   | 644    |   |   |   | 603    |   |   |   | 653 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      per-ton ferrous scrap purchase cost   |   | $      | 220    |   |   | $      | 210    |   |   | $ | 239 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      electricity cost per kilowatt hour(1) |   | $      | 0.04   |   |   | $      | 0.04   |   |   | $ | 0.05 |   |
|                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      natural gas cost per therm(1)              |   | $      | 0.89   |   |   | $      | 0.77   |   |   | $ | 0.76 |   |

----

----

|                                                       |   | 2005                  |    |   | %      ofsales |   |       | 2006   |   |   | %      ofsales |   |   | 2007   |   |   | %      ofsales |   |
|------------------------------------------------------------|--------|-----------------------|---------|--------|----------------|--------|------------|--------|--------|--------|----------------|--------|--------|--------|--------|--------|----------------|--------|
|                                                       |   | ($      in thousands) |    |
|                                                       |   |                  |    |   |           |   |       |   |   |   |           |   |   |   |   |   |           |   |
| Net      sales                                             |   | $                     | 62,777  |   |           |   | 100.0      | %      |   | $      | 58,748         |   |   |   | 100.0  | %      |           | $      | 52,509 |   |   |   | 100.0 | % |
| Cost      of goods sold                                    |   |                  | (48,801 | )      |           |   | (77.7      | )      |   |   | (45,397        | )      |   |   | (77.3  | )      |           |   | (41,189 | ) |   |   | (78.4 | ) |
|   Gross      margin                              |   |                  | 13,976  |   |           |   | 22.3       |   |   |   | 13,351         |   |   |   | 22.7   |   |           |   | 11,320 |   |   |   | 21.6 |   |
|                                                       |   |                  |    |   |           |   |       |   |   |   |           |   |   |   |   |   |           |   |   |   |   |   |   |   |
| Selling      and administrative                            |   |                  | (4,277  | )      |           |   | (6.8       | )      |   |   | (3,887         | )      |   |   | (6.6   | )      |           |   | (3,618 | ) |   |   | (6.9 | ) |
|   Operating      income before pension/OPEB |   | $                     | 9,699   |   |           |   |  15.5 | %      |   | $      | 9,464          |   |   |   | 16.1   | %      |           | $      | 7,702 |   |   |   | 14.7 | % |
|                                                       |   |                  |    |   |           |   |       |   |   |   |           |   |   |   |   |   |           |   |   |   |   |   |   |   |

|                                                        |   | 2005   |   |   | 2006   |   |   | 2007   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Sales      volume (000 tons):                               |   |   |   |   |   |   |   |   |   |
|   Welded      wire reinforcement                  |   |   | 71     |   |   |   | 67     |   |   |   | 58 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Per-ton      selling prices:                                |   |   |   |   |   |   |   |   |   |   |   |   |
|   Welded      wire reinforcement                  |   | $      | 881    |   |   | $      | 870    |   |   | $ | 896 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      per-ton wire rod  purchase      cost |   | $      | 536    |   |   | $      | 504    |   |   | $ | 547 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                     |   | 2007                  |       |   | %      ofsales |   |
|----------------------------------------------------------|--------|-----------------------|------------|--------|----------------|--------|
|                                                     |   | ($      in thousands) |       |
|                                                     |   |                  |       |   |           |   |   |   |
| Net      sales                                           |   | $                     | 5,659      |   |           |   | 100.0 | % |
| Cost      of goods sold                                  |   |                  | (6,651     | )      |           |   | (117.5 | ) |
|   Gross      margin (loss)                     |   |                  | (992       | )      |           |   | (17.5 | ) |
|                                                     |   |                  |       |   |           |   |   |   |
| Selling      and administrative                          |   |                  |  (399 | )      |           |   |  (7.1 | ) |
|   Operating      loss before pension/OPEB |   | $                     | (1,391     | )      |           |   | (24.6 | )% |

|                                           |   | 2007   |   |
|------------------------------------------------|--------|--------|--------|
|                                           |   |   |   |
| Sales      volume (000 tons):                  |   |   |   |
|   Bars      and shapes               |   |   | 9      |   |
|                                           |   |   |   |   |
| Per-ton      selling prices:                   |   |   |   |   |
|   Bars      and shapes               |   | $      | 663    |   |
|                                           |   |   |   |   |
| Average      per-ton billet purchase      cost |   | $      | 457    |   |

----

|                                |   | 2005                  |   |   | 2006   |   |   | 2007   |   |
|-------------------------------------|--------|-----------------------|--------|--------|--------|--------|--------|--------|--------|
|                                |   | ($      in thousands) |   |
|                                |   |                  |   |   |   |   |   |   |   |
| Average      debt balance           |   | $                     | 91,582 |   |   | $      | 89,375 |   |   | $ | 95,483 |   |
|                                |   |                  |   |   |   |   |   |   |   |   |   |   |
| Weighted      average interest rate |   |                  | 4.2    | %      |   |   | 5.0    | %      |   |   | 6.2 | % |

----

| ·   | increased      shipment volumes of fabricated wire products as we believe 2007      agricultural and construction projects which were cancelled due to      inclement weather will be completed in2008; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increased      shipment volumes of bar products as we continue to gain customer      confidence at Calumet; |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | increased      shipment volumes of coiled rebar as we continue to penetrate that      market; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | slightly      lower shipment volumes of wire rod as we plan to use more wire rod      internally in the production of value-added products; partially offset by      an increase in wire rod demand due to higher Chinese export tariffs and a      weak US dollar; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | level      shipment volumes of industrial wire due to price  increases; |
|--------------------|-------------------------------------------------------------------------|

| ·   | higher      shipment volumes of welded wire reinforcement due to the additional      products manufactured at EWP as a result of their plant expansion      partially offset by continued weakness in the construction      market; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increased      overall per-ton selling prices; and |
|--------------------|----------------------------------------------------|

| ·   | slightly      lower ferrous scrapcosts. |
|--------------------|-----------------------------------------|

|                                                     |   |  December 31,  |   |
|----------------------------------------------------------|--------|---------------------|--------|
|                                                     |   | 2006                |   |   | 2007 |   |
|                                                     |   | (In      thousands) |   |
|                                                     |   |                |   |   |   |   |
| Working      Capital                                     |   | $                   | 31,776 |   |   | $ | 20,630 |   |
| Outstanding      balance under revolving credit facility |   |                | 17,734 |   |   |   | 46,261 |   |
|                                                     |   |                |   |   |   |   |   |   |
| Borrowing      availability                              |   |                | 23,697 |   |   |   | 22,836 |   |

----

| ·   | lower      operating income before pension/OPEB in 2006 of $1.9    million; |
|--------------------|-----------------------------------------------------------------------------|

| ·   | lower      OPEB payments made in 2006 of $4.4 million as OPEB participant benefits      were substantially reduced as a result of our bankruptcy      proceedings; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower      reorganization costs of $6.4 million paid in  2006; |
|--------------------|----------------------------------------------------------------|

| ·   | higher      net cash generated from relative changes in our accounts receivable in      2006 of $34.1 million primarily due to an abnormally low accounts      receivable balance at December 31, 2004 as a result of decreased demand      during the fourth quarter of 2004 and an abnormally high accounts      receivable balance at December 31, 2005 as a result of increased demand      during the third and fourth quarters of2005; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | higher      net cash generated from relative changes in our inventory in 2006 of $25.1      million due to the net effects of operating issues with our wire rod mill      reheat furnace during 2006 and a more significant shutdown for planned      major maintenance during the fourth quarter of 2006 than in      2005; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | less      cash generated from accounts payable in 2006 as the increase in accounts      payable from 2004 to 2005 was the result of obtaining credit terms from      vendors subsequent to our emergence from bankruptcy;  and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | less      other net cash used in operations in 2006 due to lower environmental costs      of $1.2 million paid in 2006, lower income tax payments in 2006, and $4.0      million received related to an insurance settlement during 2006 that was      recorded as a liability subject to compromise (see Note 3 to our      Consolidated Financial Statements) and the $4.1 million payment to our      creditors upon emergence from bankruptcy on August 31,    2005. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower      operating income before pension/OPEB in 2007 of $6.5    million; |
|--------------------|-----------------------------------------------------------------------------|

| ·   | lower      reorganization costs of $3.6 million paid in  2007; |
|--------------------|----------------------------------------------------------------|

| ·   | higher      net cash used due to relative changes in our accounts receivable in 2007      of $37.9 million primarily due to an abnormally high accounts receivable      balance at both December 31, 2005 and December 31, 2007 as a result of      exceptional demand at the end of 2005 and 2007 (the seasonality of our      business generally results in lower accounts receivable at the end of each      year); |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | higher      net cash generated from relative changes in our inventory in 2007 of $2.2      million due to exceptional demand at the end of  2007; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | more      cash generated from accounts payable of $4.0 million in 2007 primarily due      to an increase in the cost of ferrous scrap at the end of 2007 as compared      to the end of 2006 and better credit terms with certain vendors;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | final      payments to our pre-petition creditors of $4.3 million in      2007. |
|--------------------|---------------------------------------------------------------------------------|

----

----

|                           |   | Payment due date    |   |
|--------------------------------|--------|---------------------|--------|
|  Contractual commitment   |   | 2008                |   |   |   | 2009/2010 |   |   |   | 2011/2012 |   |   | 2013      and after |   |   | Total |   |
|                           |   | (In      thousands) |   |
|                           |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Indebtedness:                  |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Principal    |   | $                   | 15,914 |   |   | $ | 69,771 |   |   | $ | 2,745 |   |   | $ | 3,437 |   |   | $ | 91,867 |   |
|    Interest     |   |                | 5,426  |   |   |   | 7,864 |   |   |   | 595 |   |   |   | 163 |   |   |   | 14,048 |   |
|                           |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      leases          |   |                | 578    |   |   |   | 621 |   |   |   | 58 |   |   |   | - |   |   |   | 1,257 |   |
|                           |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Product      supply agreements |   |                | 1,200  |   |   |   | 2,400 |   |   |   | 1,500 |   |   |   | - |   |   |   |  5,100 |   |
|                           |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                          |   | $                   | 23,118 |   |   | $ | 80,656 |   |   | $ | 4,898 |   |   | $ | 3,600 |   |   | $ | 112,272 |   |

----

----

----

|                          Discount      rates used      for:                         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Obligations      atDecember      31, 2005 and expense in      2006                                                                                                                                                                                                                                                   | Obligations      atDecember      31, 2006 and expense in      2007    | Obligations      atDecember      31, 2007 and expense in      2008    |
|                                                                                                                                                                                                                                                                                                                                     |   |   |
| 5.5%                                                                                                                                                                                                                                                                                                                                     | 5.8% | 6.3% |

----

----

----

|                                                                   |   | Contracted Maturity      Date |   |   | Estimated Fair      Value |   |
|------------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------------------------------|--------|
|                                                                   |   | 2008                          |   |   | 2009                           |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | Thereafter |   |   | Total |   |   | December 31, 2007 |   |
|                                                                   |   | ($      In thousands)         |   |   |                           |   |
| Fixed-rate      debt -                                                 |   |                          |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Principal      amount                                      |   | $                             | 10,581 |   |                           | $      | 11,327 |   |   | $ | 1,230 |   |   | $ | 1,324 |   |   | $ | 1,421 |   |   | $ | 3,437 |   |   | $ | 29,320 |   |   | $ | 21,961 |   |
|                                                                   |   |                          |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted-average    interest      rate |   |                          | 1.8    | %      |                           |   | 1.5 | % |   |   | 7.5 | % |   |   | 7.5 | % |   |   | 7.5 | % |   |   | 5.1 | % |   |   | 2.9 | % |   |   |   |   |
|                                                                   |   |                          |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Variable-rate      debt-                                               |   |                          |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Principal      amount                                      |   | $                             | 5,333  |   |                           | $      | 5,333 |   |   | $ | 51,881 |   |   | $ | - |   |   | $ |  - |   |   | $ | - |   |   | $ | 62,547 |   |   | $ | 62,547 |   |
|                                                                   |   |                          |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted-average    interest      rate |   |                          | 7.8    | %      |                           |   | 7.8 | % |   |   | 7.8 | % |   |   | - | % |   |   | - | % |   |   | - | % |   |   | 7.8 | % |   |   |   |   |

----

| ·   | pertain      to the maintenance of records that in reasonable detail accurately and      fairly reflect our transactions and dispositions of our      assets, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with GAAP, and that our      receipts and expenditures are made only in accordance with authorizations      of our management and directors,and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use or disposition of our assets that could have      a material effect on our Consolidated Financial  Statements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|  Name           |  Age  |  Position(s)                                                                     |
|---------------------------|-----------------|--------------------------------------------------------------------------------------------|
| Glenn      R. Simmons     | 80              | Chairman      of the Board                                                                 |
| David      L. Cheek       | 58              | President      and Chief Executive Officer                                                 |
| C.      Vic Stirnaman     | 60              | Executive      Vice President                                                              |
| Bert      E. Downing, Jr. | 51              | Vice      President, Chief Financial Officer, Corporate Controller and      Treasurer |
| John      M. Thomas       | 69              | Vice      President – Structural Products                                            |

----

----

| Donald      P. ZimaChairman      of Our Audit Committee | Paul      M. BassMember      of Our Audit Committee | John      R. ParkerMember      of Our Audit Committee |
|---------------------------------------------------------|-----------------------------------------------------|-------------------------------------------------------|

| Name                      | Position(s)                                                                                |
|---------------------------|--------------------------------------------------------------------------------------------|
|                      |                                                                                       |
| David      L. Cheek       | President      and Chief Executive Officer                                                 |
| C.Vic      Stirnaman      | Executive      Vice President                                                              |
| Bert      E. Downing, Jr. | Vice      President, Chief Financial Officer, Corporate Controller and      Treasurer |
| John      M. Thomas       | Vice      President – Structural Products                                            |

| ·   | have      a total individual compensation package that is easy to      understand; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | encourage      them to maximize long-term stockholder value;  and |
|--------------------|-------------------------------------------------------------------|

| ·   | achieve      a balanced competitive compensation package that would attract and retain      highly qualified senior officers and appropriately reflect each such      officer’s individual performance, contributions and general market      value. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | the      annualized base salary of such officer at the beginning of each      year; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | the      bonus Contran paid such officer (other than bonuses for specific matters)      in the prior year, which served      as a reasonable approximation of the bonus that may be paid in the current      year; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an      overhead factor (19% in 2007 and 21% in 2006) applied to the base salary      for the cost of medical and life insurance benefits, social security and      medicare taxes, unemployment taxes, disability insurance, defined benefit      and defined contribution plan benefits, professional education and      licensing and costs of providing an office, equipment and supplies related      to the provision of such services. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Steven      L. Watson                                                  | Paul      M. Bass, Jr.                                                   | John      R. Parker                                                      |
|------------------------------------------------------------------------|--------------------------------------------------------------------------|--------------------------------------------------------------------------|
| Chairman      of Our Management Development and Compensation Committee | Member      of Our ManagementDevelopment      and Compensation Committee | Member      of Our ManagementDevelopment      and Compensation Committee |

| Name      and   Principal      Position                | Year   |   | Salary |    |   | Bonus  |   |    | Change      in Pension Value and Nonqualified Deferred Compensation Earnings      (2) |   |   | All      Other Compensation(3) |   |   | Total  |   |
|--------------------------------------------------------------------------------------|--------|--------|--------|---------|--------|--------|--------|---------|--------------------------------------------------------------------------------------------|--------|--------|--------------------------------|--------|--------|--------|--------|
|                                                                                 |   |   |   |    |   |   |   |    |                                                                                       |   |   |                           |   |   |   |   |
| Glenn      R. Simmons (4)                                                            | 2006   |   | $      | 131,900 |   |   | $      | -0-     |                                                                                       |   | $      | -0-                            |   |   | $      | -0-    |   |   | $ | 131,900 |   |
| Chairman      of the Board                                                           | 2007   |   |   | 131,995 |   |   |   | -0-     |                                                                                       |   |   | -0-                            |   |   |   | -0-    |   |   |   | 131,995 |   |
|                                                                                 |   |   |   |    |   |   |   |    |                                                                                       |   |   |                           |   |   |   |   |   |   |   |   |   |
| David      L. Cheek                                                                  | 2006   |   |   | 370,230 |   |   |   | 165,000 |                                                                                       |   |   | 27,842                         |   |   |   | 11,000 |   |   |   | 574,072 |   |
| President      and Chief Executive Officer                                           | 2007   |   |   | 386,683 |   |   |   | -0-     |                                                                                       |   |   | 21,180                         |   |   |   | -0-    |   |   |   | 407,863 |   |
|                                                                                 |   |   |   |    |   |   |   |    |                                                                                       |   |   |                           |   |   |   |   |   |   |   |   |   |
| C.      Vic Stirnaman                                                                | 2006   |   |   | 202,196 |   |   |   | 125,000 |                                                                                       |   |   | 24,906                         |   |   |   | 11,000 |   |   |   | 363,102 |   |
| Executive      Vice President                                                        | 2007   |   |   | 215,000 |   |   |   | -0-     |                                                                                       |   |   | 15,288                         |   |   |   | -0-    |   |   |   | 230,288 |   |
|                                                                                 |   |   |   |    |   |   |   |    |                                                                                       |   |   |                           |   |   |   |   |   |   |   |   |   |
| Bert      E. Downing, Jr.                                                            | 2006   |   |   | 248,956 |   |   |   | 125,000 |                                                                                       |   |   | 24,420                         |   |   |   | 11,000 |   |   |   | 409,376 |   |
| Vice      President, ChiefFinancial      Officer, Corporate Controller and Treasurer | 2007   |   |   | 251,568 |   |   |   | -0-     |                                                                                       |   |   | 14,704                         |   |   |   | -0-    |   |   |   | 266,272 |   |
|                                                                                 |   |   |   |    |   |   |   |    |                                                                                       |   |   |                           |   |   |   |   |   |   |   |   |   |
| John      M. Thomas                                                                  | 2006   |   |   | 187,500 |   |   |   | 184,557 |                                                                                       |   |   | 6,543                          |   |   |   | 11,000 |   |   |   | 389,600 |   |
| Vice      President StructuralProducts                                               | 2007   |   |   | 207,385 |   |   |   | -0-     |                                                                                       |   |   | -0-                            |   |   |   | -0-    |   |   |   | 207,385 |   |
|                                                                                 |   |   |   |    |   |   |   |    |                                                                                       |   |   |                           |   |   |   |   |   |   |   |   |   |

| (1)   | Certain      non-applicable columns have been omitted from this  table. |
|-----------------|-------------------------------------------------------------------------|

----

| (2)   | The      change in pension value and earnings on nonqualified deferred compensation      for each executive is asfollows: |
|-----------------|---------------------------------------------------------------------------------------------------------------------------|

| Name                      |     Year |   | Change      inPension      Value |            |   | Above      Market Nonqualified Deferred Compensation Earnings (a) |   |   | Total  |   |
|---------------------------|------------------------------|--------|----------------------------------|-----------------|--------|-------------------------------------------------------------------|--------|--------|--------|--------|
|                      |                         |   |                             |            |   |                                                              |   |   |   |   |
|                      |                         |   |                             |            |   |                                                              |   |   |   |   |
| David      L. Cheek       | 2006                         |   | $                                | 25,353          |   |                                                              | $      | 2,489  |   |   | $ | 27,842 |   |
|                      | 2007                         |   |                             | 17,601          |   |                                                              |   | 3,579  |   |   |   | 21,180 |   |
|                      |                         |   |                             |            |   |                                                              |   |   |   |   |   |   |   |
| C.      Vic Stirnaman     | 2006                         |   |                             | 24,906          |   |                                                              |   | -0-    |   |   |   | 24,906 |   |
|                      | 2007                         |   |                             | 15,288          |   |                                                              |   | -0-    |   |   |   | 15,288 |   |
|                      |                         |   |                             |            |   |                                                              |   |   |   |   |   |   |   |
| Bert      E. Downing, Jr. | 2006                         |   |                             | 23,538          |   |                                                              |   | 882    |   |   |   | 24,420 |   |
|                      | 2007                         |   |                             | 13,191          |   |                                                              |   | 1,513  |   |   |   | 14,704 |   |
|                      |                         |   |                             |            |   |                                                              |   |   |   |   |   |   |   |
| John      M. Thomas       | 2006                         |   |                             | 6,543           |   |                                                              |   | -0-    |   |   |   | 6,543 |   |
|                      | 2007                         |   |                             | (b)   |   |                                                              |   | -0-    |   |   |   | -0- |   |
|                      |                         |   |                             |            |   |                                                              |   |   |   |   |   |   |   |

| (a)   | The      balance of the nonqualified deferred compensation reserve accounts accrue      credits in lieu of interest compounded quarterly.  Pursuant to      SEC rules, the amounts shown represent the portion of the interest      credited that exceeds 120% of the applicable federal long-term rate as      prescribed by the U.S. Internal Revenue Code of 1986, as      amended.  The applicable federal long-term rate used for such      computations was the 120% rate for quarterly compounding in effect for the      month of the respective quarter that the credit accrual was added to the      account. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | The      change from December 31, 2006 to December 31, 2007 in the actuarial      present value of Mr. Thomas’ accumulated benefit under our pension plan      for active employees was a negative $3,322.  This negative      change is a result of him being over 65 with no change in life expectancy,      which results in him receiving less future benefits.  Pursuant      to SEC rules, we do not report any negative changes in this column, but      instead disclose the negative change in a footnote.  For more      details regarding these pension plan benefits, see the pension benefits      section below. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Represents      company contributions to our 401(k)plan. |
|-----------------|----------------------------------------------------------|

| (4)   | The      amount shown in the Summary Compensation table as salary for Glenn R.      Simmons represents the portion of the fees we paid to Contran pursuant to      the ISA with respect to the services Mr. Simmons rendered to us and our      subsidiaries, as well as the amount we paid to him for director      fees.  The components of his salary shown in the Summary      Compensation table are as follows: |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    |   | 2006   |    |   | 2007   |   |
|---------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Glenn      R. Simmons                                   |   |   |    |   |   |   |
| Contran      ISA Fee                                    |   | $      | 99,900  |   |   | $      | 98,995 |   |
| Keystone      Director Fees Earned or Paid in Cash |   |   | 32,000  |   |   |   | 33,000 |   |
|                                                    |   | $      | 131,900 |   |   | $      | 131,995 |   |

----

| Name                      | Plan      Name                                                      |   | Number      of Years Credited Service (#) |                                                                             |   | Present      Value of Accumulated Benefit (2) |   |
|---------------------------|---------------------------------------------------------------------|--------|-------------------------------------------|----------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                      |                                                                |   |                                      |                                                                             |   |                                          |   |
| David      L. Cheek       | Keystone      Employees’ Retirement Plan for Active Employees |   |                                      | 8               |   |                                          | $      | 218,439 |   |
|                      |                                                                |   |                                      |                                                                             |   |                                          |   |   |   |
| C.      Vic Stirnaman     | Keystone      Employees’ Retirement Plan for Active Employees |   |                                      | 15              |   |                                          |   | 235,960 |   |
|                      |                                                                |   |                                      |                                                                             |   |                                          |   |   |   |
| Bert      E. Downing, Jr. | Keystone      Employees’ Retirement Plan for Active Employees |   |                                      | 14              |   |                                          |   | 297,176 |   |
|                      |                                                                |   |                                      |                                                                             |   |                                          |   |   |   |
| John      M. Thomas       | Keystone      Employees’ Retirement Plan for Active Employees |   |                                      | 19              |   |                                          |   | 180,473 |   |

| (1) | Certain      non-applicable columns have been omitted from this  table. |
|-----|-------------------------------------------------------------------------|

| (2) | For      purposes of calculating the present values of each executive’s accumulated      benefits, we assumed the following (actual benefits will be based on      actual future facts andcircumstances): |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | credited      service and eligible earnings as of December 31, 2007 (the measurement      date used for financial statement reporting purposes) would not      change; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | normal      retirement age of 65 or December 31, 2007, whichever is    later; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | the      commencement of the payments of benefits under these plans at attaining      age 65 or January 1, 2008, whichever islater; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | payments      continuing for a life expectancy derived from a mortality table;      and |
|--------------------|-----------------------------------------------------------------------------------------|

|         ·  | a      discount rate for the present value calculation at December 31, 2007 of      6.55%, which rate is the same rate we used for financial statement      reporting purposes in determining the present value of our aggregate      accumulated benefits for all participants under this  plan. |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|           Name           |   | RegistrantContributions in Last FY (2) |   |   | AggregateEarnings      in Last FY (3) |   |   | AggregateBalance      at Last FYE |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                         |   |                                        |   |   |                                       |   |   |                                   |   |
| David      L. Cheek                                                                                                          |   | $                                           | 11,683 |   |                                       | $      | 8,233  |                                   |   | $ | 101,812 |   |
| Bert      E. Downing, Jr.                                                                                                    |   |                                        | 1,568  |   |                                       |   | 3,480  |                                   |   |   | 39,669 |   |

| (1)   | Certain      non-applicable columns have been omitted from this  table. |
|-----------------|-------------------------------------------------------------------------|

| (2)   | These      amounts are included in the 2007 salary column on the Summary Compensation      table above. |
|-----------------|---------------------------------------------------------------------------------------------------------|

| (3)   | The      agreements for these unfunded reserve accounts provide that the balance of      such accounts accrue credits in lieu of interest compounded      quarterly.  Pursuant to SEC rules, the amounts shown include the      portion of the credit accruals to the unfunded reserve accounts that      exceeds 120% of the applicable federal long-term rate as prescribed by the      U.S. Internal Revenue Code as disclosed in the Summary Compensation      table.  The rate used for such computations was the rate in      effect on December 31, 2007, the date that the credit accruals for 2007      were credited to the unfunded reserveaccounts. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2007      Director Compensation (1)                                    |   |                                 |    |
|------------------------------------------------------------------------|--------|--------------------------------------|---------|
|      Name       |   | Fees      Earned or Paid in Cash (2) |    |
| Paul      M. Bass, Jr.                                                 |   | $                                    | 41,000  |   |
| Richard      R. Burkhart                                               |   |                                 | 31,000  |   |
| John      R. Parker                                                    |   |                                 | 39,000  |   |
| Troy      T. Taylor                                                    |   |                                 | 31,000  |   |
| Steven      L. Watson                                                  |   |                                 | 170,202 |   |
| Donald      P. Zima                                                    |   |                                 | 37,000  |   |

----

| (1)   | Certain      non-applicable columns have been omitted from this table.  See      footnote 2 to the Summary Compensation table above for compensation Glenn      R. Simmons earned or received from us for director    services. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Represents      retainers and meeting fees the director earned for director services he      provided to us in 2007, all of which were paid in cash during      2007.  Additionally, for Mr. Watson, the amount includes      $135,202, which represents the portion of the annual charge we paid in      2007 under our ISA with Contran attributable to his    services. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                  |   | Keystone      Common Stock                             |      |
|---------------------------------------------------------------------------------------|--------|--------------------------------------------------------|-----------|
| Name      of Beneficial Owner                                                         |   | Amount      and Nature ofBeneficial      Ownership (1) |      |   | Percent      ofClass      (1)(2) |   |
|                                                                                  |   |                                                   |      |   |   |   |
| Harold      C. Simmons (3)                                                            |   |                                                   | -0-       | (4) |   |   | -0- |   |
|       Contran      Corporation (3)                      |   |                                                   | 5,100,369 | (4) |   |   | 53.1 | % |
|       Annette      C. Simmons (3)                       |   |                                                   | 10,000    | (4) |   |   | * |   |
|                                                                                  |   |                                                   | 5,110,369 | (4) |   |   | 53.2 | % |
|                                                                                  |   |                                                   |      |   |   |   |   |   |
| Third      Point LLC (5)                                                              |   |                                                   | 990,000   | (6) |   |   | 10.3 | % |
| JMB      Capital Partners, Master Fund L.P.      (7)                                  |   |                                                   | 558,006   | (8) |   |   | 5.8 | % |
| Carl      C. Icahn (9)                                                                |   |                                                   | 503,389   | (10) |   |   | 5.2 | % |
|                                                                                  |   |                                                   |      |   |   |   |   |   |
| Paul      M. Bass                                                                     |   |                                                   | -0-       |   |   |   | -0- |   |
| Richard      R. Burkhart                                                              |   |                                                   | -0-       |   |   |   | -0- |   |
| John      R. Parker                                                                   |   |                                                   | -0-       |   |   |   | -0- |   |
| Glenn      R. Simmons                                                                 |   |                                                   | -0-       | (4) |   |   | -0- |   |
| Troy      T. Taylor                                                                   |   |                                                   | -0-       |   |   |   | -0- |   |
| Steven      L. Watson                                                                 |   |                                                   | -0-       | (4) |   |   | -0- |   |
| Donald      P. Zima                                                                   |   |                                                   | -0-       |   |   |   | -0- |   |
| David      L. Cheek                                                                   |   |                                                   | -0-       |   |   |   | -0- |   |
| Bert      E. Downing, Jr.                                                             |   |                                                   | -0-       |   |   |   | -0- |   |
| C.      Vic Stirnaman                                                                 |   |                                                   | -0-       |   |   |   | -0- |   |
| John      M. Thomas                                                                   |   |                                                   | -0-       |   |   |   | -0- |   |
| All      our directors and executive officers as a  group (11      persons) |   |                                                   | -0-       | (4) |   |   | -0- |   |

----

| (1)   | Except      as otherwise noted, the listed entities, individuals or group have sole      investment power and sole voting power as to all shares set forth opposite      their names. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2)   | The      percentages are based on 9,601,932 shares of our common stock outstanding      as of December 31, 2007. |
|-----------------|------------------------------------------------------------------------------------------------------------------|

| (3)   | The      business address of Contran Corporation, Harold C. Simmons, and Annette C.      Simmons is Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,      Texas 75240-2697. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Substantially      all of Contran’s outstanding voting stock is held by trusts established      for the benefit of certain children and grandchildren of Harold C.      Simmons, of which Mr. Simmons is the sole trustee, or held by Mr. Simmons      or persons or other entities related to Mr. Simmons.  As sole      trustee of these trusts, Mr. Simmons has the power to vote and direct the      disposition of the shares of Contran stock held by these      trusts.  Mr. Simmons, however, disclaims beneficial ownership of      any Contran shares these trusts hold.  Mr. Simmons is also the      chairman of the board of Contran. By      virtue of the holding of his office with Contran, Contran’s stock      ownership and his services as trustee, as described above, (a) Harold C.      Simmons may be deemed to control us and (b) Mr. Simmons may be deemed to      possess indirect beneficial ownership of the shares or our common stock      directly held by Contran.  However, Mr. Simmons disclaims      beneficial ownership of any shares beneficially owned, directly or      indirectly, by Contran. Annette      C. Simmons is the wife of Harold C. Simmons.  She is the direct      owner of 10,000 shares of our common stock.  Mr. Simmons may be      deemed to share indirect beneficial ownership of such      shares.  Mr. Simmons disclaims all such beneficial      ownership. Messrs.      Glenn Simmons and Watson are directors and officers of      Contran. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | The      business address of Third Point LLC is 390 Park Avenue, New York, NY      10022. |
|-----------------|-------------------------------------------------------------------------------------------|

| (6)   | Of      the reported holdings, Third Point Offshore Fund, Ltd. holds shared voting      power, shared dispositive power and beneficial ownership with respect to      662,900 shares and Third Point LLC and Daniel S. Loeb each hold shared      voting power, shared dispositive power and beneficial ownership with      respect to 990,000 shares. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | Of      the reported holdings, JMB Capital Partners Master Fund, L.P., Smithwood      Advisers, L.P., Smithwood General Partner, LLC, Smithwood Partners, LLC,      and Jonathan Brooks hold shared voting power, shared dispositive power and      beneficial ownership with respect to 558,006  shares. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8)   | The      business address of JMB Capital Partners Master Fund, L.P. is c/o      Smithwood Advisers, L.P., 1999 Avenue of the Stars, Suite 2040, Los      Angeles, CA 90067. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | The      business address of Carl C. Icahn is 767 Fifth Avenue – 4th      Floor, New York, NY 10153. |
|-----------------|------------------------------------------------------------------------------------------------------------|

| (10)   | Of      the reported holdings, Carl C. Icahn, Beckton Corp., Icahn Enterprises      G.P. Inc., Icahn Enterprises Holdings L.P., AREH Oil & Gas Corp. and      Cloud Holding LLC hold shared voting power, shared dispositive power and      beneficial ownership with respect to 503,389 shares and PSC Metals, Inc.      holds sole voting power, sole dispositive power and beneficial ownership      with respect to 503,389 shares. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | directors      and officers owe a duty to us to advance our legitimate interests when the      opportunity to do so arises; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | they      are prohibited from (a) taking for themselves personally opportunities      that properly belong to us or are discovered through the use of our      property, information or position; (b) using corporate property,      information or position for improper personal gain; and (c) competing with      our interests. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | intercorporate      transactions, such as guarantees, management and expense sharing      arrangements, shared fee arrangements, tax sharing agreements, joint      ventures, partnerships, loans, options, advances of funds on open account      and sales, leases and exchanges of assets, including securities issued by      both related and unrelated parties;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | common      investment and acquisition strategies, business combinations,      reorganizations, recapitalizations, securities repurchases and purchases      and sales (and other acquisitions and dispositions) of subsidiaries,      divisions or other business units, which transactions have involved both      related and unrelated parties and have included transactions that resulted      in the acquisition by one related party of an equity interest in another      related party. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | Contran’s      hiring effective January 1, 2007 of his son as lawyer in Contran’s legal      department; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | In      2005, 2006 and 2007 Annette C. Simmons, the wife of Harold C. Simmons,      contributed shares of TIMET common stock to the Southwestern Medical      Foundation for the benefit of Parkland Memorial Hospital, of which      foundation Mr. Bass serves as the chairman of the board of      trustees; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Harold      C. Simmons, Contran and its related entities or persons execute trades on      a regular basis with First Southwest Company, of which Mr. Bass is the      vice chairman of the board; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | First      Southwest Company is also serving as our Managing Dealer in connection      with the subscription rights offering described herein, offering to sell      shares as required in Arizona. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mr.      Bass’ son is an adult who does not reside with his father and who will not      perform services for us while employed by  Contran; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | he      receives no compensation for serving as chairman of the board of trustees      of Southwestern Medical Foundation; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | the      aggregate brokerage commissions paid to First Southwest Company by Mr.      Simmons and Contran related entities or persons over each of the last      three years did not exceed $200,000 and represented less than 2% of the      consolidated gross revenues of First Southwest Company for each of those      years; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the      broker relationship is solely a business relationship that does not afford      him any special benefits; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | First      Southwest Company is not receiving any commissions in its capacity as our      Managing Dealer in the subscription rights  offering. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Type      of Fees          |   | 2006   |      |   | 2007   |   |
|----------------------------|--------|--------|-----------|--------|--------|--------|
|                       |   |   |      |   |   |   |
| Audit      Fees(1)         |   | $      | 405,272   |   |   | $      | 514,016 |   |
| Audit-Related      Fees(2) |   |   | 10,000    |   |   |   | -0- |   |
| Tax      Fees              |   |   | -0-       |   |   |   | -0- |   |
| All      Other Fees        |   |   |  -0- |   |   |   | 48,381 |   |
|                       |   |   |      |   |   |   |   |   |
| Total                      |   | $      | 415,272   |   |   | $      | 562,397 |   |

| (1)   | Fees      for the following services: |
|-----------------|---------------------------------------|

|   | (a) | audits      of consolidated year-end financial statements for each    year; |
|--------|-----|-----------------------------------------------------------------------------|

|   | (b) | reviews      of the unaudited quarterly financial statements appearing in Forms 10-Q      for each of the first three quarters of each year;  and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | the      out-of-pocket costs incurred by PwC in providing all of such services, for      which PwC is reimbursed. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------|

| (2)   | Fees      for assurance and related services reasonably related to the audit or      review of financial statements for eachyear. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | the      committee must specifically preapprove, among other things, the engagement      of our independent registered public accounting firm for audits and      quarterly reviews of our financial statements, services associated with      certain regulatory filings, including the filing of registration      statements with the SEC, and services associated with potential business      acquisitions and dispositions involving us;and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | for      certain categories of permitted non-audit services of our independent      registered public accounting firm, the committee may preapprove limits on      the aggregate fees in any calendar year without specific approval of the      service. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | audit      services, such as certain consultations regarding accounting treatments or      interpretations and assistance in responding to certain SEC comment      letters; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | audit-related      services, such as certain other consultations regarding accounting      treatments or interpretations, employee benefit plan audits, due diligence      and control reviews; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | tax      services, such as tax compliance and consulting, transfer pricing, customs      and duties and expatriate tax services;and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | other      permitted non-audit services, such as assistance with corporate governance      matters and filing documents in foreign jurisdictions not involving the      practice of law. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (a)      and (c) | Financial      Statements and Schedules The      Registrant Our      Consolidated Financial Statements listed on the accompanying Index of      Consolidated Financial Statements (see page F-1) are filed as part of      this Annual Report.  All financial statement schedules have been      omitted either because they are not applicable or required, or the      information that would be required to be included is disclosed in the      notes to our Consolidated Financial  Statements. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Exhibits Included      as exhibits are the items listed in the Exhibit Index.  We have      retained a signed original of any of these exhibits that contain      signatures, and we will provide such exhibit to the Commission or its      staff upon request. We will furnish a copy of any of the exhibits listed      below upon request and payment of $4.00 per exhibit to cover our costs of      furnishing the exhibits.  Such requests should be directed to      the attention of our Corporate Secretary at our corporate offices located      at 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240.  Pursuant      to Item 601(b)(4)(iii) of Regulation S-K, we will furnish to the      Commission upon request any instrument defining the rights of holders of      long-term debt issues and other agreements related to indebtedness which      do not exceed 10% of our consolidated total assets as of December 31,      2007. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Exhibit No. | Exhibit Item                                                                                                                                                                                                                                                                                   |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1         | Amended      and Restated Certificate of Incorporation of the Registrant dated January      18, 2008, as filed with the Secretary of State of      Delaware.  (Incorporated by reference to Exhibit 99.1 to the      Registrant's Report on Form 8-K dated January 18, 2008).   |
| 3.2         | Amended      and Restated Bylaws of the Registrant dated August 31,      2005.  (Incorporated by reference to Exhibit 3.6 to the      Registrant's Annual Report on Form 10-K for the year ended December 31,      2003).                                                       |
| 4.1         | Loan      Agreement dated as of March 13, 2002 between Registrant and the County of      Peoria, Illinois.  (Incorporated by reference to Exhibit 4.17 to      the Registrant's Annual Report on Form 10-K for the year ended December      31, 2001).                          |
| 4.2         | Subordinate      Security Agreement dated as of March 13, 2002 made by Registrant in favor      of the County of Peoria, Illinois.  (Incorporated by reference      to Exhibit 4.18 to the Registrant's Annual Report on Form 10-K for the      year ended December 31, 2001).  |
| 4.3         | First      Amendment to Loan dated as of April 4, 2007 by and between the Registrant      and the County of Peoria, Illinois. (Incorporated by reference to Exhibit      4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter      ended March 31, 2007).          |
| 4.4         | Second      Amendment to Loan dated as of May 22, 2007 by and between the Registrant      and the County of Peoria, Illinois. (Incorporated by reference to Exhibit      4.1 to the Registrant’s Report on Form 8-K dated May 24,      2007).                                       |
| 4.5         | Form      of Registrant’s 8% Subordinated Secured Note dated as of March 15,      2002.  (Incorporated by reference to Exhibit 4.23 to the      Registrant's Annual Report on Form 10-K for the year ended December      31, 2001).                                            |

----

| Exhibit No. | Exhibit Item                                                                                                                                                                                                                                                                                                                                                                                                   |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.6         | Indenture      Dated as of March 15, 2002, related to Registrant’s 8% Subordinated      Secured Notes Between Registrant as Issuer, and U.S. Bank National      Association, as Trustee.  (Incorporated by reference to Exhibit      4.24 to the Registrant's Annual Report on Form 10-K for the year ended      December 31, 2001).                                                      |
| 4.7         | Supplemental      Indenture No. 1 dated as of August 31, 2005, related to Registrant’s 8%      Subordinated Secured Notes between Registrant as issuer, and U.S. Bank      National Association as Trustee.  (Incorporated by reference to      Exhibit 4.42 to the Registrant’s Annual Report on Form 10-K for the year      ended December 31, 2005).                             |
| 4.8         | Loan      and Security Agreement dated August 31, 2005 by and between the Registrant      and Wachovia Capital Finance Corporation      (Central).  (Incorporated by reference to Exhibit 4.51 to the      Registrant’s Annual Report on Form 10-K for the year ended December 31,      2003).                                                                                            |
| 4.9         | First      Amendment to Loan and Security Agreement dated as of June 30, 2006 by and      between the Registrant and Wachovia Capital Finance Corporation (Central).      (Incorporated by reference to Exhibit 4.7 to the Registrant’s Annual      Report on Form 10-K for the year ended December 31, 2006).                                                                                      |
| 4.10        | Amendment      No. 2 to Loan and Security Agreement dated as of March 23, 2007 by and      between the Registrant and Wachovia Capital Finance Corporation (Central).      (Incorporated by reference to Exhibit 4.8 to the Registrant’s Annual      Report on Form 10-K for the year ended December 31, 2006).                                                                                     |
| 4.11        | Promissory      Note dated August 31, 2005, from Registrant to Jack B. Fishman Esq. as      trustee for holders of Class A6 claims. (Incorporated by reference to      Exhibit 4.54 to the Registrant’s Annual Report on Form 10-K for the year      ended December 31, 2005).                                                                                                                      |
| 4.12        | Securities      Pledge Agreement dated August 31, 2005, by and between Registrant and Jack      B. Fishman Esq. as trustee for holders of Class A6 claims. (Incorporated      by reference to Exhibit 4.55 to the Registrant’s Annual Report on Form      10-K for the year ended December 31, 2005).                                                                                               |
| 10.1        | Agreement      Regarding Shared Insurance between Registrant, CompX International Inc.,      Contran Corporation, Kronos Worldwide, Inc., NL Industries, Inc., Titanium      Metals Corp. and Valhi, Inc. dated as of October 30,      2003.  (Incorporated by reference to Exhibit 10.1 to the      Registrant’s Annual Report on Form 10-K for the year ended December 31,      2003).  |
| 10.2        | The      Combined Master Retirement Trust between Contran Corporation and Harold C.      Simmons as amended and restated effective September 30, 2005.      (Incorporated by reference to Exhibit 10.2 to the Registrant’s Annual      Report on Form 10-K for the year ended December 31, 2006).                                                                                                   |
| 10.3        | Keystone      Consolidated Industries, Inc. Master Retirement Trust I between the      Registrant and U.S. Bank National Association as amended and restated      effective January 1, 2006. (Incorporated by reference to Exhibit 10.3 to      the Registrant’s Annual Report on Form 10-K for the year ended December      31, 2006).                                                             |

----

| Exhibit No. | Exhibit Item                                                                                                                                                                                                                                                                                                                                         |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.4        | Keystone      Consolidated Industries, Inc. Master Retirement Trust II between the      Registrant and U.S. Bank National Association as amended and restated      effective January 1, 2006. (Incorporated by reference to Exhibit 10.4 to      the Registrant’s Annual Report on Form 10-K for the year ended December      31, 2006).  |
| 10.5*       | Form      of Deferred Compensation Agreement between the Registrant and certain      executive officers.  (Incorporated by reference to Exhibit 10.1      to the Registrant's Quarterly Report on Form 10-Q (File No. 1-3919) for      the quarter ended March 31, 1999).                                                             |
| 10.6        | Intercorporate      Services Agreement dated as of January 1, 2007 by and between Registrant      and Contran Corporation.                                                                                                                                                                                                                      |
| 14.1        | Amended      Code of Business Conduct and Ethics dated August 14, 2007.                                                                                                                                                                                                                                                                         |
| 21.1        | Subsidiaries      of the Company                                                                                                                                                                                                                                                                                                                |
| 23.1        | Consent      of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                   |
| 31.1        | Certification                                                                                                                                                                                                                                                                                                                                   |
| 31.2        | Certification                                                                                                                                                                                                                                                                                                                                   |
| 32.1        | Certification                                                                                                                                                                                                                                                                                                                                   |

----

| KEYSTONE      CONSOLIDATED INDUSTRIES, INC.(Registrant)   /s/ GLENN R.      SIMMONS                                                                         Glenn R. SimmonsChairman of the      Board |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  /s/ GLENN R.      SIMMONS                                                                              Glenn      R. SimmonsChairman      of the Board                                                                    |  /s/      STEVEN L.      WATSON                                                                                    Steven      L. WatsonDirector                                                                                                                                                              |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  /s/ PAUL      M. BASS,      JR.                                                                                           Paul      M. Bass, Jr.Director |  /s/      DONALD P.      ZIMA                                                                                           Donald      P. ZimaDirector                                                                                                                        |
|  /s/ RICHARD R.      BURKHART                                                                              Richard      R. BurkhartDirector                                                                                |  /s/ DAVID L.      CHEEK                                                                                                      David      L. CheekPresident      and Chief Executive Officer                                                  |
|  /s/ JOHN      R.      PARKER                                                                                          John      R. ParkerDirector             |  /s/ BERT      E. DOWNING,      JR.                                                                               Bert      E. Downing, Jr.Vice      President, Chief Financial Officer,      Corporate Controller and Treasurer       (Principal   Accounting      andFinancial      Officer) |
|  /s/ TROY T.      TAYLOR                                                                               Troy      T. TaylorDirector                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

----

|                                                                                                                                                                                 |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|  Page                                                                                                                                                                           |   |   |   |
|                                                                                                                                                                                 |   |   |   |
|                                                                                                                                                                                 |   |   |   |
|      Report      of Independent Registered Public Accounting Firm                                                                                           |   |   | F-2    |   |
|                                                                                                                                                                                 |   |   |   |   |
|      Consolidated      Balance Sheets – December      31, 2006 and 2007                                                                          |   |   | F-4    |   |
|                                                                                                                                                                                 |   |   |   |   |
|      Consolidated      Statements of Operations - Years      ended December 31, 2005, 2006 and 2007                                                    |   |   | F-6    |   |
|                                                                                                                                                                                 |   |   |   |   |
|           Consolidated Statements of Stockholders' Equity (Deficit) and      Comprehensive Income – Years      ended December 31, 2005, 2006 and 2007 |   |   | F-8    |   |
|                                                                                                                                                                                 |   |   |   |   |
|      Consolidated      Statements of Cash Flows – Years      ended December 31, 2005, 2006 and 2007                                              |   |   | F-9    |   |
|                                                                                                                                                                                 |   |   |   |   |
|      Notes      to Consolidated Financial Statements                                                                                                        |   |   | F-11   |   |
|                                                                                                                                                                                 |   |   |   |   |

----

----

----

|                                                                               |   | December 31, |    |
|------------------------------------------------------------------------------------|--------|--------------|---------|
| ASSETS                                                                             |   | 2006         |    |   | 2007 |   |
|                                                                               |   |         |    |   |   |   |
|                                                                               |   |         |    |   |   |   |
| Current      assets:                                                               |   |         |    |   |   |   |
|   Accounts      receivable, net of allowances of      $304 and $335 |   | $            | 31,661  |   |   | $ | 54,891 |   |
|   Inventories                                                            |   |         | 61,343  |   |   |   | 53,551 |   |
|   Restricted      investments                                            |   |         | 1,067   |   |   |   | - |   |
|   Deferred      income taxes                                             |   |         | 12,571  |   |   |   | 10,055 |   |
|   Prepaid      expenses and other                                        |   |         | 3,516   |   |   |   | 2,465 |   |
|                                                                               |   |         |    |   |   |   |   |   |
|     Total      current assets                                  |   |         | 110,158 |   |   |   | 120,962 |   |
|                                                                               |   |         |    |   |   |   |   |   |
| Property,      plant and equipment:                                                |   |         |    |   |   |   |   |   |
|   Land                                                                   |   |         | 1,193   |   |   |   | 1,272 |   |
|   Buildings      and improvements                                        |   |         | 56,953  |   |   |   | 58,946 |   |
|   Machinery      and equipment                                           |   |         | 300,301 |   |   |   | 315,874 |   |
|   Construction      in progress                                          |   |         | 12,563  |   |   |   | 3,675 |   |
|                                                                               |   |         | 371,010 |   |   |   | 379,767 |   |
|   Less      accumulated depreciation                                     |   |         | 282,315 |   |   |   | 287,298 |   |
|                                                                               |   |         |    |   |   |   |   |   |
|     Net      property, plant and equipment                     |   |         | 88,695  |   |   |   | 92,469 |   |
|                                                                               |   |         |    |   |   |   |   |   |
| Other      assets:                                                                 |   |         |    |   |   |   |   |   |
|   Restricted      investments                                            |   |         | 6,079   |   |   |   | 2,245 |   |
|   Pension      asset                                                     |   |         | 557,279 |   |   |   | 545,656 |   |
|   Other,      net                                                        |   |         | 1,725   |   |   |   | 1,691 |   |
|                                                                               |   |         |    |   |   |   |   |   |
|     Total      other assets                                    |   |         | 565,083 |   |   |   | 549,592 |   |
|                                                                               |   |         |    |   |   |   |   |   |
|                                                                               |   |         |    |   |   |   |   |   |
|     Total      assets                                          |   | $            | 763,936 |   |   | $ | 763,023 |   |
|                                                                               |   |         |    |   |   |   |   |   |

----

| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                      |   | December 31,  |    |
|----------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|                                                                                                           |   | 2006               |    |   | 2007 |   |
|                                                                                                           |   |               |    |   |   |   |
|                                                                                                           |   |               |    |   |   |   |
| Current      liabilities:                                                                                      |   |               |    |   |   |   |
|   Notes      payable and current maturities of long-term      debt                              |   | $                  | 43,699  |   |   | $ | 62,175 |   |
|   Accounts      payable                                                                              |   |               | 9,947   |   |   |   | 14,078 |   |
|   Accrued      OPEB cost                                                                             |   |               | 4,157   |   |   |   | 4,482 |   |
|   Other      accrued liabilities                                                                     |   |               | 20,579  |   |   |   | 19,597 |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
|     Total      current liabilities                                                         |   |               | 78,382  |   |   |   | 100,332 |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
| Noncurrent      liabilities:                                                                                   |   |               |    |   |   |   |   |   |
|   Long-term      debt                                                                                |   |               | 32,749  |   |   |   | 29,402 |   |
|   Accrued      OPEB cost                                                                             |   |               | 31,005  |   |   |   | 27,167 |   |
|   Deferred      income taxes                                                                         |   |               | 197,712 |   |   |   | 194,728 |   |
|   Other                                                                                              |   |               | 6,414   |   |   |   | 6,700 |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
|     Total      noncurrent liabilities                                                      |   |               | 267,880 |   |   |   | 257,997 |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
| Liabilities      subject to compromise                                                                         |   |               | 14,012  |   |   |   | - |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
| Stockholders'      equity:                                                                                     |   |               |    |   |   |   |   |   |
|   Common      stock $.01 par value, 11,000,000 shares authorized;      10,000,000 shares issued |   |               | 100     |   |   |   | 100 |   |
|   Additional      paid-in capital                                                                    |   |               | 75,423  |   |   |   | 75,423 |   |
|   Accumulated      other comprehensive income                                                        |   |               | 278,399 |   |   |   | 215,462 |   |
|   Retained      earnings                                                                             |   |               | 49,740  |   |   |   | 114,505 |   |
|   Treasury      stock, at cost – 0 and 398,068 shares                                          |   |               | -       |   |   |   | (796 | ) |
|                                                                                                           |   |               |    |   |   |   |   |   |
|     Total      stockholders' equity                                                        |   |               | 403,662 |   |   |   | 404,694 |   |
|                                                                                                           |   |               |    |   |   |   |   |   |
|     Total      liabilities and stockholders’ equity                                  |   | $                  | 763,936 |   |   | $ | 763,023 |   |
|                                                                                                           |   |               |    |   |   |   |   |   |

----

|                                                                      |   | Years Ended December 31, |         |
|---------------------------------------------------------------------------|--------|--------------------------|--------------|
|                                                                      |   | 2005                     |         |   | 2006 |   |   | 2007 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |
| Net      sales                                                            |   | $                        | 367,545      |   |   | $ | 440,540 |   |   | $ | 451,178 |   |
| Cost      of goods sold                                                   |   |                     | (329,589     | ) |   |   | (405,719 | ) |   |   | (427,908 | ) |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Gross      margin                                 |   |                     | 37,956       |   |   |   | 34,821 |   |   |   | 23,270 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
| Other      operating income (expenses):                                   |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Selling      expense                                          |   |                     | (6,247       | ) |   |   | (6,864 | ) |   |   | (6,682 | ) |
|   General      and administrative expense                       |   |                     | (14,341      | ) |   |   | (12,482 | ) |   |   | (12,985 | ) |
|   Defined      benefit pension credit                           |   |                     | 11,710       |   |   |   | 55,978 |   |   |   | 80,443 |   |
|   Other      postretirement benefit credit (expense)       |   |                     | (8,885       | ) |   |   |  8,297 |   |   |   |  8,526 |   |
|   Gain      on legal settlement                                 |   |                     | -            |   |   |   | - |   |   |   | 5,400 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Total      other operating income (expense)       |   |                     | (17,763      | ) |   |   | 44,929 |   |   |   | 74,702 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
| Operating      income                                                     |   |                     | 20,193       |   |   |   | 79,750 |   |   |   | 97,972 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
| Nonoperating      income (expense):                                       |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Interest      expense                                         |   |                     | (3,992       | ) |   |   | (4,720 | ) |   |   | (6,073 | ) |
|   Interest      income                                          |   |                     | 266          |   |   |   | 361 |   |   |   | 401 |   |
|   Other      income, net                                        |   |                     | 993          |   |   |   | 75 |   |   |   | 200 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Total      nonoperating income (expense)          |   |                     | (2,733       | ) |   |   | (4,284 | ) |   |   | (5,472 | ) |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Income      before income taxes and reorganization items |   |                     |  17,460 |   |   |   |  75,466 |   |   |   |  92,500 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
| Reorganization      items:                                                |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Reorganization      costs                                     |   |                     | (10,308      | ) |   |   | (679 | ) |   |   | (190 | ) |
|   Gain      on cancellation of debt                             |   |                     | 32,510       |   |   |   | - |   |   |   |  10,074 |   |
|     Total      reorganization items                   |   |                     | 22,202       |   |   |   | (679 | ) |   |   |  9,884 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Income      before income taxes                               |   |                     | 39,662       |   |   |   | 74,787 |   |   |   | 102,384 |   |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes                                           |   |                     | (430         | ) |   |   | (17,055 | ) |   |   | (37,619 | ) |
|                                                                      |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Net      income                                   |   | $                        | 39,232       |   |   | $ | 57,732 |   |   | $ | 64,765 |   |

----

|                            |   | Years Ended December 31, |   |
|---------------------------------|--------|--------------------------|--------|
|                            |   | 2005                     |   |   | 2006 |   |   | 2007 |   |
|                            |   |                     |   |   |   |   |   |   |   |
| Basic      earnings per share   |   | $                        | 4.12   |   |   | $ | 5.77 |   |   | $ | 6.48 |   |
|                            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Basic      shares outstanding   |   |                     | 10,046 |   |   |   | 10,000 |   |   |   | 10,000 |   |
|                            |   |                     |   |   |   |   |   |   |   |   |   |   |
|                            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Diluted      earnings per share |   | $                        | 1.88   |   |   | $ | 5.77 |   |   | $ | 6.48 |   |
|                            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Diluted      shares outstanding |   |                     | 22,029 |   |   |   | 10,000 |   |   |   | 10,000 |   |
|                            |   |                     |   |   |   |   |   |   |   |   |   |   |
|                            |   |                     |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                             |   | Common |          |   | Additionalpaid-in |   |    | Accumulated      other comprehensive income |   |   | Retained      earnings(accumulated |   |   |   Treasury |    |   |   |   |    | Comprehensive |   |
|------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|-------------------|--------|---------|--------------------------------------------------|--------|--------|------------------------------------|--------|--------|----------------------|---------|--------|--------|--------|---------|---------------|--------|
|                                                                                                             |   | stock  |          |   | capital           |   |    | Pensions                                         |   |   | OPEB                               |   |   | deficit)             |    |   | stock  |   |    | Total         |   |   | Income |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |
| Balance      – December 31, 2004                                                                           |   | $      | 10,798        |   |              | $      | 41,225  |                                             |   | $      | -                                  |   |   | $                    | -       |   |   | $      | (47,224 | )             |   | $ | (12 | ) |   | $ | 4,787 |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                  |   |   | -             |   |              |   | -       |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | 39,232  |          |   |   | - |   |   |   | 39,232 |   |   | $ | 39,232 |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cancellation      of common stock                                                                                |   |   | (10,798       | )      |              |   | 10,786  |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | -       |          |   |   | 12 |   |   |   | - |   |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cancellation      of Series A         Preferred      Stock          |   |   | -             |   |              |   | 2,112   |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | -       |          |   |   | - |   |   |   | 2,112 |   |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock                                                                                    |   |   | 100           |   |              |   | 21,300  |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | -       |          |   |   | - |   |   |   | 21,400 |   |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
|   Comprehensive      income                                                                            |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   | $ | 39,232 |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      – December 31, 2005                                                                           |   |   | 100           |   |              |   | 75,423  |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | (7,992  | )             |   |   | - |   |   |   | 67,531 |   |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                  |   |   | -             |   |              |   | -       |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | 57,732  |          |   |   | - |   |   |   | 57,732 |   |   | $ | 57,732 |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Adoption      of SFAS No. 158                                                                                    |   |   | -             |   |              |   | -       |                                             |   |   | 222,202                            |   |   |                 | 56,197  |   |   |   | -       |          |   |   | - |   |   |   | 278,399 |   |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
|   Comprehensive      income                                                                            |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   | $ | 57,732 |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      – December 31, 2006                                                                           |   |   | 100           |   |              |   | 75,423  |                                             |   |   | 222,202                            |   |   |                 | 56,197  |   |   |   | 49,740  |          |   |   | - |   |   |   | 403,662 |   |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                                  |   |   | -             |   |              |   | -       |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | 64,765  |          |   |   | - |   |   |   | 64,765 |   |   | $ | 64,765 |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Treasury      stock acquired                                                                                     |   |   | -             |   |              |   | -       |                                             |   |   | -                                  |   |   |                 | -       |   |   |   | -       |          |   |   | (796 | ) |   |   | (796 | ) |   |   |   |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      actuarial gain (loss) arising during 2007                                                               |   |   |        - |   |              |   |  - |                                             |   |   | (48,651                            | )      |   |                 | 1,129   |   |   |   | -       |          |   |   |  - |   |   |   | (47,522 | ) |   |   | (47,522 | ) |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Plan      amendment                                                                                              |   |   | -             |   |              |   |  - |                                             |   |   | (48                                | )      |   |                 |  - |   |   |   |  - |          |   |   |  - |   |   |   | (48 | ) |   |   | (48 | ) |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of actuarial       (gains)      losses, net of tax          |   |   |  -       |   |              |   | -       |                                             |   |   | (9,507                             | )      |   |                 | 4,382   |   |   |   | -       |          |   |   |  - |   |   |   | (5,125 | ) |   |   | (5,125 | ) |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of prior service        cost      (credit), net of tax |   |   |  -       |   |              |   |  - |                                             |   |   |  767                          |   |   |                 | (11,009 | )      |   |   | -       |          |   |   |  - |   |   |   | (10,242 | ) |   |   | (10,242 | ) |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
|   Comprehensive      income                                                                            |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   | $ | 1,828 |   |
|                                                                                                             |   |   |          |   |              |   |    |                                             |   |   |                               |   |   |                 |    |   |   |   |    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      – December 31, 2007                                                                           |   | $      | 100           |   |              | $      | 75,423  |                                             |   | $      | 164,763                            |   |   | $                    | 50,699  |   |   | $      | 114,505 |          |   | $ | (796 | ) |   | $ | 404,694 |   |   |   |   |   |

----

|                                                                                  |   | Years ended December 31, |         |
|---------------------------------------------------------------------------------------|--------|--------------------------|--------------|
|                                                                                  |   | 2005                |         |   | 2006 |   |   | 2007 |   |
|                                                                                  |   |                     |         |   |   |   |   |   |   |
| Cash      flows from operating activities:                                            |   |                     |         |   |   |   |   |   |   |
|   Net      income                                                           |   | $                        | 39,232       |   |   | $ | 57,732 |   |   | $ | 64,765 |   |
|   Depreciation      and amortization                                        |   |                     | 15,745       |   |   |   | 15,222 |   |   |   | 15,434 |   |
|   Deferred      income taxes                                                |   |                     | -            |   |   |   | 17,317 |   |   |   | 37,474 |   |
|   Defined      benefit pension credit                                       |   |                     | (11,710      | ) |   |   | (55,978 | ) |   |   | (80,443 | ) |
|   OPEB      expense (credit)                                                |   |                     | 8,885        |   |   |   | (8,297 | ) |   |   | (8,526 | ) |
|   OPEB      payments                                                        |   |                     | (8,324       | ) |   |   | (3,931 | ) |   |   | (3,800 | ) |
|   Gain      on cancellation of debt                                         |   |                     | (32,510      | ) |   |   | - |   |   |   | (10,074 | )  |
|   Reorganization      costs accrued                                         |   |                     | 10,308       |   |   |   | 679 |   |   |   | 190 |   |
|   Reorganization      costs paid                                            |   |                     | (10,133      | ) |   |   | (3,722 | ) |   |   | (164 | ) |
|   Impairment      of long-lived assets                                      |   |                     | -            |   |   |   | 529 |   |   |   | - |   |
|   Other,      net                                                           |   |                     | 723          |   |   |   | 1,111 |   |   |   | 909 |   |
|   Change      in assets and liabilities (net of acquisition):          |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Accounts      receivable                                      |   |                     | (19,473      | ) |   |   | 14,610 |   |   |   | (23,261 | ) |
|     Inventories                                                   |   |                     | (16,674      | ) |   |   | 8,348 |   |   |   | 10,551 |   |
|     Accounts      payable                                         |   |                     | 4,252        |   |   |   | 94 |   |   |   | 4,131 |   |
|     Other,      net                                               |   |                     | (11,006      | ) |   |   | (257 | ) |   |   |  (4,581 | ) |
|                                                                                  |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Net      cash provided by (used in) operating activities |   |                     | (30,685      | ) |   |   |  43,457 |   |   |   |  2,605 |   |
|                                                                                  |   |                     |         |   |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                            |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Capital      expenditures                                                 |   |                     | (9,772       | ) |   |   | (18,739 | ) |   |   | (16,602 | ) |
|   Acquisition      of CaluMetals’ assets                              |   |                     | -            |   |   |   | - |   |   |   | (6,240 | ) |
|   Restricted      investments, net                                          |   |                     | 5,540        |   |   |   | (1,348 | ) |   |   | 4,901 |   |
|   Other,      net                                                           |   |                     | 1,336        |   |   |   | 108 |   |   |   |  1,159 |   |
|                                                                                  |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Net      cash used in investing activities                    |   |                     | (2,896       | ) |   |   | (19,979 | ) |   |   | (16,782 | ) |
|                                                                                  |   |                     |         |   |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                            |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Revolving      credit facilities, net                                     |   |                     | 28,314       |   |   |   | (18,439 | ) |   |   | 28,526 |   |
|   Other      notes payable and long-term debt:                              |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Additions                                                     |   |                     | 23,372       |   |   |   | 468 |   |   |   | 4,065 |   |
|     Principal      payments                                       |   |                     | (17,575      | ) |   |   | (5,477 | ) |   |   | (18,025 | ) |
|   Deferred      financing costs paid                                        |   |                     | (530         | ) |   |   | (30 | ) |   |   |  (389 | ) |
|                                                                                  |   |                     |         |   |   |   |   |   |   |   |   |   |
|     Net      cash provided by (used in) financing activities |   |                     |  33,581 |   |   |   | (23,478 | ) |   |   |  14,177 |   |
|                                                                                  |   |                     |         |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                     |   | Years ended December 31, |          |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------------|
|                                                                                                                                     |   | 2005                     |          |   | 2006 |   |   | 2007 |   |
|                                                                                                                                     |   |                     |          |   |   |   |   |   |   |
| Cash      and cash equivalents:                                                                                                          |   |                     |          |   |   |   |   |   |   |
|   Net      change from operations, investing and      financing activities                                                |   |                     | -             |   |   |   | - |   |   |   | - |   |
|                                                                                                                                     |   |                     |          |   |   |   |   |   |   |   |   |   |
|   Balance      at beginning of year                                                                                            |   |                     | -             |   |   |   | - |   |   |   | - |   |
|                                                                                                                                     |   |                     |          |   |   |   |   |   |   |   |   |   |
|   Balance      at end of year                                                                                                  |   | $                        | -             |   |   | $ | - |   |   | $ | - |   |
|                                                                                                                                     |   |                     |          |   |   |   |   |   |   |   |   |   |
|                                                                                                                                     |   |                     |          |   |   |   |   |   |   |   |   |   |
| Supplemental      disclosures:                                                                                                           |   |                     |          |   |   |   |   |   |   |   |   |   |
|   Cash      paid for:                                                                                                          |   |                     |          |   |   |   |   |   |   |   |   |   |
|     Interest,      net of amounts capitalized                                                                        |   | $                        | 3,195         |   |   | $ | 3,950 |   |   | $ | 5,681 |   |
|     Income      taxes, net                                                                                           |   |                     | 985           |   |   |   | 179 |   |   |   | 347 |   |
|   Non-cash      issuance of debt for acquisition of CaluMetals’assets                                               |   |                     | -             |   |   |   | - |   |   |   | 781 |   |
|   Common      stock issued in exchange for extinguishment      of certain pre-petition unsecured      and DIP claims |   |                     |   21,400 |   |   |   |    - |   |   |   |    - |   |
|   Note      issued in exchange for extinguishment of      certain pre-petition unsecured claims                           |   |                     | 4,800         |   |   |   |  - |   |   |   |  - |   |
|                                                                                                                                     |   |                     |          |   |   |   |   |   |   |   |   |   |

----

----

----

----

| ·   | greater      employee participation in healthcarecosts; |
|--------------------|---------------------------------------------------------|

| ·   | a      permanent reduction in healthcare related payments to      retirees; |
|--------------------|-----------------------------------------------------------------------------|

| ·   | cancellation      of all shares of our common and preferred stock outstanding at the      petition date; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | full      reinstatement of obligations due to our pre-petition secured lenders other      than our debtor-in-possession (“DIP”) lenders;  and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | pre-petition      unsecured creditors, a DIP secured lender and certain post-petition      creditors with allowed claims against KCI in the amount of approximately      $63.9 million received, on a pro rata basis, in the aggregate, $5.2      million in aggregate cash consideration, a $4.8 million secured promissory      note and 100% of our new common stock (valued at $21.4 million). As a      result, we recorded a $32.5 million gain from cancellation of debt during      2005.  The following table summarizes the significant components      of compromised liabilities and the related gain from cancellation of      debt. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |   | Unsecuredclaimsother      thanContran |   |   |  Contran claims |   |   |   Total |   |
|------------------------------------------------------|--------|---------------------------------------|--------|--------|---------------------------|--------|--------|-------------------|--------|
|                                                 |   | (In      thousands)                   |   |
|                                                 |   |                                  |   |   |                      |   |   |              |   |
| Liabilities      compromised:                        |   |                                  |   |   |                      |   |   |              |   |
| 6%      Notes                                        |   | $                                     | 16,031 |   |                      | $      | -      |              |   | $ | 16,031 |   |
| Accrued      Series A Preferred Stock dividends |   |                                  | 1,098  |   |                      |   | 10,748 |              |   |   | 11,846 |   |
| Accounts      payable – pre-petition           |   |                                  | 7,576  |   |                      |   | 3,279  |              |   |   | 10,855 |   |
| Accounts      payable – post-petition          |   |                                  | -      |   |                      |   | 1,179  |              |   |   | 1,179 |   |
| Deferred      vendor payments                        |   |                                  | 10,518 |   |                      |   | -      |              |   |   | 10,518 |   |
| 9      5/8% Notes                                    |   |                                  | 6,150  |   |                      |   | -      |              |   |   | 6,150 |   |
| DIP      loan                                        |   |                                  | -      |   |                      |   | 5,000  |              |   |   | 5,000 |   |
| Accrued      interest                                |   |                                  | 1,236  |   |                      |   | -      |              |   |   | 1,236 |   |
| Accrued      environmental                           |   |                                  | 868    |   |                      |   | -      |              |   |   | 868 |   |
| Other,      net                                      |   |                                  | 227    |   |                      |   | -      |              |   |   | 227 |   |
|    Total      liabilities compromised |   |                                  | 43,704 |   |                      |   | 20,206 |              |   |   | 63,910 |   |
|                                                 |   |                                  |   |   |                      |   |   |              |   |   |   |   |
| Consideration      provided:                         |   |                                  |   |   |                      |   |   |              |   |   |   |   |
| Cash                                                 |   |                                  | 5,200  |   |                      |   | -      |              |   |   | 5,200 |   |
| Secured      Note                                    |   |                                  | 4,800  |   |                      |   | -      |              |   |   | 4,800 |   |
| Common      stock                                    |   |                                  | 10,486 |   |                      |   | 10,914 |              |   |   | 21,400 |   |
|    Total      consideration provided  |   |                                  | 20,486 |   |                      |   | 10,914 |              |   |   | 31,400 |   |
|                                                 |   |                                  |   |   |                      |   |   |              |   |   |   |   |
| Gain      on cancellation of debt                    |   | $                                     | 23,218 |   |                      | $      | 9,292  |              |   | $ | 32,510 |   |

----

|                                  |   | December 31, 2006   |   |
|---------------------------------------|--------|---------------------|--------|
|                                  |   | (In      thousands) |   |
|                                  |   |                |   |
| Environmental                         |   | $                   | 8,481  |   |
| Accounts      payable                 |   |                | 789    |   |
| Disposition      of former facilities |   |                | 442    |   |
| Legal      and professional           |   |                | 80     |   |
| Other                                 |   |                | 4,220  | (1) |
|                                  |   | $                   | 14,012 |   |

----

| ·   | Keystone      Steel and Wire (“KSW”), located in Peoria, Illinois, operates an electric      arc furnace mini-mill and manufactures and sells billets, wire rod,      industrial wire, coiled rebar and fabricated wire products to      agricultural, industrial, construction, commercial, original equipment      manufacturers and retail consumermarkets; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Engineered      Wire Products (“EWP”), located in Upper Sandusky, Ohio, manufactures and      sells welded wire reinforcement in both roll and sheet form that is      utilized in concrete construction products including pipe, pre-cast boxes      and applications for use in roadways, buildings and bridges;      and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Keystone-Calumet      (“Calumet”), located in Chicago Heights, Illinois, manufactures and sells      merchant and special bar quality products and special sections in carbon      and alloy steel grades for use in agricultural, cold drawn, construction,      industrial chain, service centers, and transportation      applications.  See Note2. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                |   |  Years ended December      31,  |    |
|-----------------------------------------------------|--------|-------------------------------------------|---------|
|                                                |   | 2005                                      |    |   | 2006 |   |   | 2007 |   |
|                                                |   | (In      thousands)                       |    |
|                                                |   |                                      |    |   |   |   |   |   |   |
| Net      sales:                                     |   |                                      |    |   |   |   |   |   |   |
|   KSW                                     |   | $                                         | 338,903 |   |   | $ | 412,866 |   |   | $ | 426,652 |   |
|   EWP                                     |   |                                      | 62,777  |   |   |   | 58,748 |   |   |   | 52,509 |   |
|   Calumet                                 |   |                                      | -       |   |   |   | - |   |   |   | 5,659 |   |
|   Elimination      of intersegment sales: |   |                                      |    |   |   |   |   |   |   |   |   |   |
|     KSW                         |   |                                      | (34,135 | ) |   |   | (31,074 | ) |   |   | (33,642 | ) |
|                                                |   |                                      |    |   |   |   |   |   |   |   |   |   |
|     Total      net sales        |   | $                                         | 367,545 |   |   | $ | 440,540 |   |   | $ | 451,178 |   |
|                                                |   |                                      |    |   |   |   |   |   |   |   |   |   |
| Operating      income (loss):                       |   |                                      |    |   |   |   |   |   |   |   |   |   |
|   KSW                                     |   | $                                         | 8,284   |   |   | $ | 6,558 |   |   | $ | (930 | ) |
|   EWP                                     |   |                                      | 9,699   |   |   |   | 9,464 |   |   |   | 7,702 |   |
|   Calumet                                 |   |                                      | -       |   |   |   | - |   |   |   | (1,391 | ) |
|   Defined      benefit pension credit     |   |                                      | 11,710  |   |   |   | 55,978 |   |   |   | 80,443 |   |
|   OPEB      credit (expense)              |   |                                      | (8,885  | ) |   |   | 8,297 |   |   |   | 8,526 |   |
|   Gain      on legal settlement           |   |                                      | -       |   |   |   | - |   |   |   | 5,400 |   |
|   Other(1)                                |   |                                      | (615    | ) |   |   | (547 | ) |   |   | (1,778 | ) |
|                                                |   |                                      |    |   |   |   |   |   |   |   |   |   |
|     Total      operating income |   |                                      | 20,193  |   |   |   | 79,750 |   |   |   | 97,972 |   |
|                                                |   |                                      |    |   |   |   |   |   |   |   |   |   |
| Nonoperating      income (expense):                 |   |                                      |    |   |   |   |   |   |   |   |   |   |
|   Interest      expense                   |   |                                      | (3,992  | ) |   |   | (4,720 | ) |   |   | (6,073 | ) |
|   Interest      income                    |   |                                      | 266     |   |   |   | 361 |   |   |   | 401 |   |
|   Other      income, net                  |   |                                      | 993     |   |   |   | 75 |   |   |   | 200 |   |
|   Reorganization      costs               |   |                                      | (10,308 | ) |   |   | (679 | ) |   |   | (190 | ) |
|   Gain      on cancellation of debt       |   |                                      | 32,510  |   |   |   | - |   |   |   | 10,074 |   |
|                                                |   |                                      |    |   |   |   |   |   |   |   |   |   |
| Income      before income taxes                     |   | $                                         | 39,662  |   |   | $ | 74,787 |   |   | $ | 102,384 |   |

----

|                          |   | December 31,        |    |
|-------------------------------|--------|---------------------|---------|
|                          |   | 2005                |    |   | 2006 |   |   | 2007 |   |
|                          |   | (In      thousands) |    |
| Total      assets:            |   |                |    |   |   |   |   |   |   |
|   KSW               |   | $                   | 183,910 |   |   | $ | 162,439 |   |   | $ | 164,182 |   |
|   EWP               |   |                | 22,750  |   |   |   | 19,381 |   |   |   | 24,189 |   |
|   Calumet           |   |                | -       |   |   |   | - |   |   |   | 11,641 |   |
|   Corporate         |   |                | 151,704 |   |   |   | 582,116 |   |   |   | 566,826 |   |
|                          |   |                |    |   |   |   |   |   |   |   |   |   |
|     Total |   | $                   | 358,364 |   |   | $ | 763,936 |   |   | $ | 766,838 |   |
|                          |   |                |    |   |   |   |   |   |   |   |   |   |

|                                |   |  Years ended December      31,  |   |
|-------------------------------------|--------|-------------------------------------------|--------|
|                                |   | 2005                                      |   |   | 2006 |   |   | 2007 |   |
|                                |   | (In      thousands)                       |   |
| Depreciation      and amortization: |   |                                      |   |   |   |   |   |   |   |
|   KSW                     |   | $                                         | 14,619 |   |   | $ | 13,897 |   |   | $ | 13,618 |   |
|   EWP                     |   |                                      | 1,034  |   |   |   | 1,040 |   |   |   | 1,477 |   |
|   Calumet                 |   |                                      | -      |   |   |   | - |   |   |   | 181 |   |
|   Corporate               |   |                                      | 92     |   |   |   |  285 |   |   |   |  158 |   |
|                                |   |                                      |   |   |   |   |   |   |   |   |   |   |
|     Total       |   | $                                         | 15,745 |   |   | $ | 15,222 |   |   | $ | 15,434 |   |
|                                |   |                                      |   |   |   |   |   |   |   |   |   |   |
| Capital      expenditures:          |   |                                      |   |   |   |   |   |   |   |   |   |   |
|   KSW                     |   | $                                         | 9,571  |   |   | $ | 12,290 |   |   | $ | 9,027 |   |
|   EWP                     |   |                                      | 201    |   |   |   | 6,388 |   |   |   | 6,807 |   |
|   Calumet                 |   |                                      | -      |   |   |   | - |   |   |   | 588 |   |
|   Corporate               |   |                                      | -      |   |   |   | 61 |   |   |   | 180 |   |
|                                |   |                                      |   |   |   |   |   |   |   |   |   |   |
|     Total       |   | $                                         | 9,772  |   |   | $ | 18,739 |   |   | $ | 16,602 |   |
|                                |   |                                      |   |   |   |   |   |   |   |   |   |   |

|                          |   | Years ended December 31, |    |
|-------------------------------|--------|--------------------------|---------|
|                          |   | 2005                     |    |   | 2006 |   |   | 2007 |   |
|                          |   | (In      thousands)      |    |
|                          |   |                     |    |   |   |   |   |   |   |
| United      States            |   | $                        | 360,282 |   |   | $ | 431,122 |   |   | $ | 444,518 |   |
| Canada                        |   |                     | 6,329   |   |   |   | 8,036 |   |   |   | 5,145 |   |
| Other                         |   |                     | 934     |   |   |   | 1,382 |   |   |   | 1,515 |   |
|                          |   |                     |    |   |   |   |   |   |   |   |   |   |
|     Total |   | $                        | 367,545 |   |   | $ | 440,540 |   |   | $ | 451,178 |   |

----

|                                           |   |  December 31,  |   |
|------------------------------------------------|--------|--------------------------|--------|
|                                           |   | 2006                     |   |   | 2007 |   |
|                                           |   | (In      thousands)      |   |
|                                           |   |                     |   |   |   |   |
|   Raw      materials                 |   | $                        | 5,329  |   |   | $ | 6,954 |   |
|   Billets                            |   |                     | 10,332 |   |   |   | 8,158 |   |
|   Wire      rods                     |   |                     | 12,321 |   |   |   | 12,897 |   |
|   Work      in process               |   |                     | 6,893  |   |   |   | 5,079 |   |
|   Finished      products             |   |                     | 26,764 |   |   |   | 24,855 |   |
|   Supplies                           |   |                     | 18,283 |   |   |   | 19,900 |   |
|                                           |   |                     |   |   |   |   |   |   |
|     Inventory      at FIFO |   |                     | 79,922 |   |   |   | 77,843 |   |
|     Less      LIFO reserve |   |                     | 18,579 |   |   |   | 24,292 |   |
|                                           |   |                     |   |   |   |   |   |   |
|       Total      |   | $                        | 61,343 |   |   | $ | 53,551 |   |
|                                           |   |                     |   |   |   |   |   |   |

|                                                 |   | December 31,        |   |
|------------------------------------------------------|--------|---------------------|--------|
|                                                 |   | 2006                |   |   | 2007 |   |
|                                                 |   | (In      thousands) |   |
|                                                 |   |                |   |   |   |   |
| Wachovia      revolving credit facility              |   | $                   | 17,734 |   |   | $ | 46,261 |   |
| 8%      Notes                                        |   |                | 25,740 |   |   |   | 17,160 |   |
| UC      Note                                         |   |                | 5,465  |   |   |   | 2,501 |   |
| Term      loans:                                     |   |                |   |   |   |   |   |   |
|   Wachovia                                 |   |                | 17,390 |   |   |   | 16,286 |   |
|   County                                   |   |                | 10,000 |   |   |   | 8,499 |   |
| Other                                                |   |                | 119    |   |   |   | 870 |   |
|                                                 |   |                |   |   |   |   |   |   |
|     Total      debt              |   |                | 76,448 |   |   |   | 91,577 |   |
|     Less      current maturities |   |                | 43,699 |   |   |   | 62,175 |   |
|                                                 |   |                |   |   |   |   |   |   |
|     Total      long-term debt    |   | $                   | 32,749 |   |   | $ | 29,402 |   |

----

----

| Year ending December 31, |   | Amount              |   |
|--------------------------|--------|---------------------|--------|
|                     |   | (In      thousands) |   |
|                     |   |                |   |
| 2008                     |   | $                   | 62,175 |   |
| 2009                     |   |                | 16,660 |   |
| 2010                     |   |                | 6,850  |   |
| 2011                     |   |                | 1,324  |   |
| 2012                     |   |                | 1,421  |   |
| 2013 and    thereafter   |   |                | 3,437  |   |
| Total                    |   | $                   | 91,867 |   |

----

|                                                                  |   | Years ended December 31, |    |
|-----------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                  |   | 2005                     |    |   | 2006 |   |   | 2007 |   |
|                                                                  |   | (In      thousands)      |    |
|                                                                  |   |                     |    |   |   |   |   |   |   |
|                                                                  |   |                     |    |   |   |   |   |   |   |
| Expected      tax provision, at statutory rate                        |   | $                        | 13,882  |   |   | $ | 26,175 |   |   | $ | 35,835 |   |
| U.S.      state income taxes, net                                     |   |                     | 2,265   |   |   |   | 2,432 |   |   |   | 2,444 |   |
| Deferred      tax asset valuation allowance                           |   |                     | (19,651 | ) |   |   | (10,675 | ) |   |   | - |   |
| Capitalized      reorganization costs                                 |   |                     | 3,608   |   |   |   | 237 |   |   |   | 67 |   |
| Release      of contingency reserve                                   |   |                     | -       |   |   |   | (1,011 | ) |   |   | - |   |
| Other,      net                                                       |   |                     | 326     |   |   |   | (103 | ) |   |   | (727 | ) |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes                                       |   | $                        | 430     |   |   | $ | 17,055 |   |   | $ | 37,619 |   |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes:                                      |   |                     |    |   |   |   |   |   |   |   |   |   |
|   Currently      payable (refundable):                      |   |                     |    |   |   |   |   |   |   |   |   |   |
|     U.S.      federal                             |   | $                        | 75      |   |   | $ | 273 |   |   | $ | (45 | ) |
|     U.S.      state                               |   |                     | 355     |   |   |   | (535 | ) |   |   |  190 |   |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
|      Net      currently payable (refundable) |   |                     | 430     |   |   |   | (262 | ) |   |   | 145 |   |
|   Deferred      income taxes, net                           |   |                     | -       |   |   |   | 17,317 |   |   |   | 37,474 |   |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes                                       |   | $                        | 430     |   |   | $ | 17,055 |   |   | $ | 37,619 |   |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Comprehensive      provision for income taxes      allocable to: |   |                     |    |   |   |   |   |   |   |   |   |   |
|    Net      income                                     |   | $                        | 430     |   |   | $ | 17,055 |   |   | $ | 37,619 |   |
|    Other      comprehensive income:                    |   |                     |    |   |   |   |   |   |   |   |   |   |
|       Pension      plans                |   |                     | -       |   |   |   | 133,947 |   |   |   | (34,626 | ) |
|       OPEB      plans                   |   |                     | -       |   |   |   | 33,877 |   |   |   | (3,315 | ) |
|                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
|                                                                  |   | $                        | -       |   |   | $ | 184,879 |   |   | $ | (322 | ) |

----

|                                                                                        |   |  December 31,  |        |
|---------------------------------------------------------------------------------------------|--------|---------------------|-------------|
|                                                                                        |   | 2006                |        |   | 2007 |   |
|                                                                                        |   | Assets              |        |   | Liabilities |   |   | Assets |   |   | Liabilities |   |
|                                                                                        |   | (In      thousands) |        |
|                                                                                        |   |                |        |   |   |   |   |   |   |   |   |   |
| Tax      effect of temporary differences relating to:                                       |   |                |        |   |   |   |   |   |   |   |   |   |
|   Inventories                                                                     |   | $                   | 4,919       |   |   | $ | - |   |   | $ | 4,492 |   |   | $ | - |   |
|   Property      and equipment                                                     |   |                | -           |   |   |   | (12,654 | ) |   |   | - |   |   |   | (12,389 | ) |
|   Pension      asset                                                              |   |                | -           |   |   |   | (209,593 | ) |   |   | - |   |   |   | (205,222 | ) |
|   Accrued      OPEB cost                                                          |   |                | 12,869      |   |   |   | - |   |   |   | 11,775 |   |   |   | - |   |
|   Accrued      liabilities                                                        |   |                | 9,256       |   |   |   | - |   |   |   | 6,207 |   |   |   | - |   |
|   Other      deductible differences                                               |   |                | 4,211       |   |   |   | - |   |   |   | 2,010 |   |   |   | - |   |
|   Net      operating loss carryforwards                                           |   |                | 333         |   |   |   | - |   |   |   | 2,457 |   |   |   | - |   |
|   Alternative      minimum tax and other credit carryforwards                |   |                |  5,518 |   |   |   |  - |   |   |   |  5,997 |   |   |   |  - |   |
|                                                                                        |   |                |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Gross      deferred tax assets / (liabilities)                 |   |                | 37,106      |   |   |   | (222,247 | ) |   |   | 32,938 |   |   |   | (217,611 | ) |
|     Reclassification,      principally netting by tax jurisdiction |   |                | (37,106     | ) |   |   |  37,106 |   |   |   | (32,938 | ) |   |   |  32,938 |   |
|                                                                                        |   |                |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Net      deferred tax asset / (liability)                           |   |                | -           |   |   |   | (185,141 | )  |   |   | - |   |   |   | (184,673 | )  |
|     Less      current deferred tax asset                                |   |                | -           |   |   |   | 12,571 |   |   |   | - |   |   |   | 10,055 |   |
|                                                                                        |   |                |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Noncurrent      net deferred tax (liability)                        |   | $                   | -           |   |   | $ | (197,712 | ) |   | $ | - |   |   | $ | (194,728 | ) |

|                                                                                                                                                                                                                                  |   | Years ended December 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                                                                                                                                                                  |   | 2005                     |    |   | 2006 |   |   | 2007 |   |
|                                                                                                                                                                                                                                  |   | (In      thousands)      |    |
|                                                                                                                                                                                                                                  |   |                     |    |   |   |   |   |   |   |
| Increase      (decrease) in valuation allowance:                                                                                                                                                                                      |   |                     |    |   |   |   |   |   |   |
|    Increase      in certain deductible temporary differences which the Company      believes do not meet the      "more- likely-      than-not"recognition      criteria: |   |                     |    |   |   |   |   |   |   |
|       Recognized      in net income                                                                                                                                                                     |   | $                        | (19,651 | ) |   | $ | (10,675 | ) |   | $ | - |   |
|                                                                                                                                                                                                                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                  |   | $                        | (19,651 | ) |   | $ | (10,675 | ) |   | $ | - |   |

----

|                   |   | PensionBenefits     |    |   | OtherBenefits |   |
|------------------------|--------|---------------------|---------|--------|---------------|--------|
|                   |   | (In      thousands) |    |
|                   |   |                |    |   |          |   |
| 2008                   |   | $                   | 27,980  |   |          | $      | 4,482 |   |
| 2009                   |   |                | 27,870  |   |          |   | 2,585 |   |
| 2010                   |   |                | 27,820  |   |          |   | 2,525 |   |
| 2011                   |   |                | 28,000  |   |          |   | 2,471 |   |
| 2012                   |   |                | 28,130  |   |          |   | 2,419 |   |
| 2013      – 2017 |   |                | 142,190 |   |          |   | 11,476 |   |

----

|                                                                      |   | Pension Benefits    |     |   |  Other Benefits  |   |
|---------------------------------------------------------------------------|--------|---------------------|----------|--------|----------------------------|--------|
|                                                                      |   | 2006                |     |   | 2007                       |   |   | 2006 |   |   | 2007 |   |
|                                                                      |   | (In      thousands) |     |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |
| Change      in projected benefit obligations      ("PBO"):           |   |                |     |   |                       |   |   |   |   |   |   |   |
|   Balance      at beginning of the year                         |   | $                   | 392,216  |   |                       | $      | 376,884 |   |   | $ | 38,705 |   |   | $ | 35,162 |   |
|   Service      cost                                             |   |                | 3,569    |   |                       |   | 3,724 |   |   |   | 247 |   |   |   | 204 |   |
|   Interest      cost                                            |   |                | 21,041   |   |                       |   | 21,893 |   |   |   | 1,972 |   |   |   | 1,892 |   |
|   Plan      amendment                                           |   |                | 4,790    |   |                       |   | 78 |   |   |   | - |   |   |   | - |   |
|   Actuarial      gains                                          |   |                | (17,174  | )      |                       |   | (5,817 | ) |   |   | (1,831 | ) |   |   | (1,809 | ) |
|   Benefits      paid                                            |   |                | (27,558  | )      |                       |   | (27,742 | ) |   |   |  (3,931 | ) |   |   | (3,800 | ) |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Balance at end of the      year                                           |   | $                   | 376,884  |   |                       | $      | 369,020 |   |   | $ | 35,162 |   |   | $ | 31,649 |   |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Change      in plan assets:                                               |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|   Fair      value at beginning of the year                      |   | $                   | 701,221  |   |                       | $      | 934,163 |   |   | $ | - |   |   | $ |  - |   |
|   Actual      return on plan assets                             |   |                | 260,500  |   |                       |   | 8,255 |   |   |   | - |   |   |   | - |   |
|   Employer      contributions                                   |   |                | -        |   |                       |   | - |   |   |   | 3,931 |   |   |   | 3,800 |   |
|   Benefits      paid                                            |   |                | (27,558  | )      |                       |   | (27,742 | ) |   |   | (3,931 | ) |   |   | (3,800 | ) |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Fair value at end of the      year                                        |   | $                   | 934,163  |   |                       | $      | 914,676 |   |   | $ |  - |   |   | $ | - |   |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Funded      status                                                        |   | $                   | 557,279  |   |                       | $      | 545,656 |   |   | $ | (35,162 | ) |   | $ | (31,649 | ) |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Amounts      recognized in the  Consolidated Balance Sheets:         |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Pension      asset                                                        |   | $                   | 557,279  |   |                       | $      | 545,656 |   |   | $ | - |   |   | $ | - |   |
|    Accrued      OPEB costs:                                |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|      Current                                     |   |                | -        |   |                       |   | - |   |   |   | (4,157 | ) |   |   | (4,482 | ) |
|      Noncurrent                                  |   |                | -        |   |                       |   | - |   |   |   | (31,005 | ) |   |   | (27,167 | ) |
|                                                                      |   |                | 557,279  |   |                       |   | 545,656 |   |   |   | (35,162 | ) |   |   | (31,649 | ) |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|   Accumulated      other comprehensive income:             |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Actuarial losses      (gains)                                             |   |                | (369,853 | )      |                       |   | (276,637 | ) |   |   | 114,020 |   |   |   | 105,187 |   |
| Prior service cost      (credit)                                          |   |                | 13,704   |   |                       |   | 12,553 |   |   |   | (204,092 | ) |   |   | (186,446 | ) |
|                                                                      |   |                | (356,149 | )      |                       |   | (264,084 | ) |   |   | (90,072 | ) |   |   | (81,259 | ) |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|  Total                                                               |   | $                   | 201,130  |   |                       | $      | 281,572 |   |   | $ | (125,234 | ) |   | $ | (112,908 | ) |
|                                                                      |   |                |     |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Accumulated      benefit obligations (“ABO”) of pension plans |   | $                   | 372,247  |   |                       | $      | 364,021 |   |   |   |   |   |   |   |   |   |

----

|                                                                                                    |   | Year ended December      31, 2007 |   |
|---------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                                    |   | Pension Benefits                       |   |   | Other Benefits |   |
|                                                                                                    |   | (In      thousands)                    |   |
| Changes      in plan assets and benefit obligations recognized      in other comprehensive income: |   |                                   |   |   |   |   |
| Net      actuarial loss (gain) arising during the year                                                  |   | $                                      | 77,978 |   |   | $ | (1,809 | ) |
| Plan      amendment                                                                                     |   |                                   | 78     |   |   |   |   |   |
| Amortization      of unrecognized:                                                                      |   |                                   |   |   |   |   |   |   |
|     Net      actuarial losses (gains)                                               |   |                                   | 15,238 |   |   |   | (7,024 | ) |
|     Prior service (credit)      cost                                      |   |                                   | (1,229 | ) |   |   | 17,646 |   |
|                                                                                                    |   |                                   |   |   |   |   |   |   |
|     Total                                                                           |   | $                                      | 92,065 |   |   | $ | 8,813 |   |

|                                          |   | Pension Benefits    |    |   | Other Benefits |   |
|-----------------------------------------------|--------|---------------------|---------|--------|----------------|--------|
|                                          |   | 2005                |    |   | 2006           |   |   | 2007 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
|                                          |   | (In      thousands) |    |
|                                          |   |                |    |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service      cost                             |   | $                   | 3,798   |   |           | $      | 3,569 |   |   | $ | 3,724 |   |   | $ | 2,056 |   |   | $ | 247 |   |   | $ | 204 |   |
| Interest      cost                            |   |                | 21,499  |   |           |   | 21,041 |   |   |   | 21,893 |   |   |   | 8,785 |   |   |   | 1,972 |   |   |   | 1,892 |   |
| Expected      return on plan assets           |   |                | (41,037 | )      |           |   | (73,152 | ) |   |   | (92,051 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization      of:                         |   |                |    |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Prior      service cost (credit)  |   |                | 926     |   |           |   | 1,126 |   |   |   | 1,229 |   |   |   | (8,003 | ) |   |   | (17,645 | ) |   |   | (17,646 | ) |
|   Net      actuarial losses (gains) |   |                | 3,104   |   |           |   | (8,562 | ) |   |   | (15,238 | ) |   |   | 6,047 |   |   |   | 7,129 |   |   |   | 7,024 |   |
|                                          |   |                |    |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      benefit cost (credit)              |   | $                   | (11,710 | )      |           | $      | (55,978 | ) |   | $ | (80,443 | ) |   | $ | 8,885 |   |   | $ | (8,297 | ) |   | $ | (8,526 | ) |
|                                          |   |                |    |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                               |   | Pension Benefits |   |   | Other Benefits |   |
|------------------------------------|--------|------------------|--------|--------|----------------|--------|
|                               |   | 2006             |   |   | 2007           |   |   | 2006 |   |   | 2007 |   |
|                               |   |             |   |   |           |   |   |   |   |   |   |   |
| Discount      rate                 |   |             | 5.8    | %      |           |   | 6.3 | % |   |   | 5.8 | % |   |   | 6.3 | % |
| Rate      of compensation increase |   |             | 3.0    | %      |           |   | 3.0 | % |   |   | - |   |   |   | - |   |

|                                |   | Pension Benefits |   |   | Other Benefits |   |
|-------------------------------------|--------|------------------|--------|--------|----------------|--------|
|                                |   | 2005             |   |   | 2006           |   |   | 2007 |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |
|                                |   |             |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount      rate                  |   |             | 5.7    | %      |           |   | 6.0 | % |   |   | 5.8 | % |   |   | 5.5 | % |   |   | 5.5 | % |   |   | 5.8 | % |
| Expected      return on plan assets |   |             | 10.0   | %      |           |   | 10.0 | % |   |   | 10.0 | % |   |   | - |   |   |   | - |   |   |   | - |   |
| Rate      of compensation increase  |   |             | 3.0    | %      |           |   | 3.0 | % |   |   | 3.0 | % |   |   | - |   |   |   | - |   |   |   | - |   |

----

|                                |   | Years ended December 31, |   |
|-------------------------------------|--------|--------------------------|--------|
|                                |   | 2005                     |   |   | 2006 |   |   | 2007 |   |
|                                |   | (In      thousands)      |   |
|                                |   |                     |   |   |   |   |   |   |   |
| Balance      at beginning of period |   | $                        | 19,432 |   |   | $ | 15,412 |   |   | $ | 13,252 |   |
| Expense                             |   |                     | -      |   |   |   | - |   |   |   | - |   |
| Payments,      net                  |   |                     | (3,152 | ) |   |   | (2,160 | ) |   |   | (3,288 | ) |
| Cancellation      of debt           |   |                     | (868   | ) |   |   | - |   |   |   | (4,682 | ) |
|                                |   |                     |   |   |   |   |   |   |   |   |   |   |
| Balance      at end of period       |   | $                        | 15,412 |   |   | $ | 13,252 |   |   | $ | 5,282 |   |

----

|                                              |   | Years ended December 31, |   |
|---------------------------------------------------|--------|--------------------------|--------|
|                                              |   | 2006                     |   |   | 2007 |   |
|                                              |   | (In      thousands)      |   |
|                                              |   |                     |   |   |   |   |
| Other      accrued liabilities – current    |   | $                        | 250    |   |   | $ | 217 |   |
| Other      accrued liabilities – noncurrent |   |                     | 4,521  |   |   |   | 5,065 |   |
| Liabilities      subject to compromise            |   |                     | 8,481  |   |   |   | - |   |
|                                              |   |                     |   |   |   |   |   |   |
| Total                                             |   | $                        | 13,252 |   |   | $ | 5,282 |   |

----

----

|        |   | Lease commitment    |   |
|-------------|--------|---------------------|--------|
|        |   | (In      thousands) |   |
|        |   |                |   |
| 2008        |   | $                   | 578    |   |
| 2009        |   |                | 488    |   |
| 2010        |   |                | 133    |   |
| 2011        |   |                | 56     |   |
| 2012        |   |                | 2      |   |
|  Total |   | $                   | 1,257  |   |

----

|                       |     KSW         |   |     EWP          |   |     Calumet          |
|----------------------------|------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------------------|
|                       | %      of Segments’ Sales          |
|                       |                                     |   |                                           |   |                                               |
| Ten      largest customers | 50%                                      |   | 51%                                            |   | 65%                                                |
|                       |                                     |   |                                           |   |                                               |
| Customers      > 10%    | 15%(1)                                   |   | 11%                                            |   | 23%                                                |

|                                                        |   |  December 31,  |   |
|-------------------------------------------------------------|--------|--------------------------|--------|
|                                                        |   | 2006                     |   |   | 2007 |   |
|                                                        |   | (In      thousands)      |   |
| Current:                                                    |   |                     |   |   |   |   |
|   Employee      benefits                          |   | $                        | 10,714 |   |   | $ | 10,881 |   |
|   Self      insurance                             |   |                     | 5,492  |   |   |   | 3,755 |   |
|   Pre-petition      unsecured creditor settlement |   |                     | 985    |   |   |   | - |   |
|   Environmental                                   |   |                     | 250    |   |   |   | 217 |   |
|   Other                                           |   |                     | 3,138  |   |   |   | 4,744 |   |
|                                                        |   |                     |   |   |   |   |   |   |
| Total                                                       |   | $                        | 20,579 |   |   | $ | 19,597 |   |
|                                                        |   |                     |   |   |   |   |   |   |
| Noncurrent:                                                 |   |                     |   |   |   |   |   |   |
|   Environmental                                   |   | $                        | 4,521  |   |   | $ | 5,065 |   |
|   Workers      compensation payments              |   |                     | 1,785  |   |   |   | 1,494 |   |
|   Other                                           |   |                     | 108    |   |   |   | 141 |   |
|                                                        |   |                     |   |   |   |   |   |   |
| Total                                                       |   | $                        | 6,414  |   |   | $ | 6,700 |   |

----

|                                       |   | Shares of common      stock |    |
|--------------------------------------------|--------|-----------------------------|---------|
|                                       |   | Issued                      |    |   | Treasury |   |   | Outstanding |   |
|                                       |   | (In      thousands)         |    |
|                                       |   |                        |    |   |   |   |   |   |   |
| Balance      at December 31, 2004          |   |                        | 10,068  |   |   |   | - |   |   |   | 10,068 |   |
|                                       |   |                        |    |   |   |   |   |   |   |   |   |   |
| Cancellation      of common stock (1)      |   |                        | (10,068 | ) |   |   | - |   |   |   | (10,068 | ) |
| Issuance      of common stock (1)          |   |                        | 10,000  |   |   |   |  - |   |   |   | 10,000 |   |
|                                       |   |                        |    |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2005 and 2006 |   |                        | 10,000  |   |   |   | - |   |   |   | 10,000 |   |
|                                       |   |                        |    |   |   |   |   |   |   |   |   |   |
| Treasure      stock acquired (1)           |   |                        | -       |   |   |   | (398 | ) |   |   | (398 | ) |
|                                       |   |                        |    |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007          |   |                        | 10,000  |   |   |   |  (398 | ) |   |   |  9,602 |   |

|                                                                         |   | Years ended December 31, |         |
|------------------------------------------------------------------------------|--------|--------------------------|--------------|
|                                                                         |   | 2005                     |         |   | 2006 |   |   | 2007 |   |
|                                                                         |   | (In      thousands)      |         |
|                                                                         |   |                     |         |   |   |   |   |   |   |
| Numerator:                                                                   |   |                     |         |   |   |   |   |   |   |
|   Net      income                                                  |   | $                        | 39,232       |   |   | $ | 57,732 |   |   | $ | 64,765 |   |
|                                                                         |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Cancellation      of Series A Preferred Stock                    |   |                     | 2,112        |   |   |   | - |   |   |   | - |   |
|   Basic      and diluted net income                                |   | $                        | 41,344       |   |   | $ | 57,732 |   |   | $ | 64,765 |   |
|                                                                         |   |                     |         |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                     |         |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                 |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Average      common shares outstanding                           |   |                     | 10,046       |   |   |   | 10,000 |   |   |   | 10,000 |   |
|   Dilutive      effect of Series A  Preferred      Stock |   |                     |  11,983 |   |   |   |  - |   |   |   |  - |   |
|                                                                         |   |                     |         |   |   |   |   |   |   |   |   |   |
|   Diluted      shares                                              |   |                     | 22,029       |   |   |   | 10,000 |   |   |   | 10,000 |   |

----

----

----

----

|                                                    |   | March 31,                                  |    |   | June 30, |   |    | September 30, |   |   | December 31, |   |
|---------------------------------------------------------|--------|--------------------------------------------|---------|--------|----------|--------|---------|---------------|--------|--------|--------------|--------|
|                                                    |   | (In      thousands, except per share data) |    |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |
| Year      ended December 31, 2006:                      |   |                                       |    |   |     |   |    |          |   |   |         |   |
|   Net      sales                              |   | $                                          | 119,115 |   |     | $      | 129,095 |          |   | $      | 105,212      |   |   | $ | 87,118 |   |
|   Gross      profit                           |   |                                       | 14,083  |   |     |   | 8,791   |          |   |   | 8,337        |   |   |   | 3,610 |   |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |
|   Net      income                             |   | $                                          | 22,236  |   |     | $      | 13,417  |          |   | $      | 9,456        |   |   | $ | 12,623 |   |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |
|   Basic      and diluted net income per share |   | $                                          | 2.22    |   |     | $      | 1.34    |          |   | $      | .95          |   |   | $ | 1.26 |   |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |
| Year      ended December 31, 2007:                      |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |
|   Net      sales                              |   | $                                          | 113,098 |   |     | $      | 122,665 |          |   | $      | 103,358      |   |   | $ | 112,057 |   |
|   Gross      profit                           |   |                                       | 6,367   |   |     |   | 6,668   |          |   |   | 6,435        |   |   |   | 3,800 |   |
|   Gain      on legal settlement               |   |                                       | -       |   |     |   | 5,400   |          |   |   | -            |   |   |   | - |   |
|   Gain      on cancellation of debt           |   |                                       | -       |   |     |   | -       |          |   |   | 9,031        |   |   |   | 1,043 |   |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |
|   Net      income                             |   | $                                          | 14,464  |   |     | $      | 17,241  |          |   | $      | 19,806       |   |   | $ | 13,254 |   |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |
|   Basic      and diluted net income per share |   | $                                          | 1.45    |   |     | $      | 1.72    |          |   | $      | 1.98         |   |   | $ | 1.33 |   |
|                                                    |   |                                       |    |   |     |   |    |          |   |   |         |   |   |   |   |   |

----

----