**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-Q**

| **For                the quarter ended September 30, 2007** | **Commission                file number 1-3919** |
|-------------------------------------------------------------|--------------------------------------------------|

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

| **Delaware**                                                                                |   | **37-0364250**                                                 |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|
| (State                or other jurisdiction 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** |
|------------------------------------------------------------------------------|-----------------------------------|
|                                                                         |                              |

**Indicate      by check mark:**

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**INDEX**

| **Part                I.      FINANCIAL                INFORMATION**                                                                                                                                                                              | ** Page ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|
|                                                                                                                                                                                                                                                                       |                 |
| Item                1.      Financial Statements                                                                                                                                                                                                  |                 |
|                                                                                                                                                                                                                                                                       |                 |
| Condensed                Consolidated Balance Sheets –  December                31, 2006; September 30, 2007 (unaudited)                                                                                                                                   | 3                    |
|                                                                                                                                                                                                                                                                       |                 |
| Condensed                Consolidated Statements of Operations (unaudited) -  Three                months and nine months ended September 30, 2006 (as                adjusted);  Three                months and nine months ended September 30, 2007 | 5                    |
|                                                                                                                                                                                                                                                                       |                 |
| Condensed                Consolidated Statements of Cash Flows (unaudited)–  Nine                months ended September 30, 2006 (as adjusted);  Nine                months ended September 30, 2007                                             | 6                    |
|                                                                                                                                                                                                                                                                       |                 |
| Condensed                Consolidated Statement of Stockholders' Equity  and                Comprehensive Income -  Nine months ended September 30, 2007                  (unaudited)                                                        | 7                    |
|                                                                                                                                                                                                                                                                       |                 |
| Notes                to Condensed Consolidated Financial Statements (unaudited)                                                                                                                                                                                            | 8                    |
|                                                                                                                                                                                                                                                                       |                 |
| Item                2.      Management's Discussion and Analysis of                Financial  Condition                and Results                of Operations                                                                         | 22                   |
|                                                                                                                                                                                                                                                                       |                 |
| Item                3.      Quantitative and Qualitative Disclosures                About Market Risk                                                                                                                                             | 37                   |
|                                                                                                                                                                                                                                                                       |                 |
| Item                4.      Controls and Procedures                                                                                                                                                                                               | 37                   |
|                                                                                                                                                                                                                                                                       |                 |
| **PART                II.  OTHER INFORMATION**                                                                                                                                                                                                                        |                 |
|                                                                                                                                                                                                                                                                       |                 |
| Item                1.      Legal Proceedings                                                                                                                                                                                                     | 38                   |
|                                                                                                                                                                                                                                                                       |                 |
| Item                1A.  Risk Factors                                                                                                                                                                                                                                 | 38                   |
|                                                                                                                                                                                                                                                                       |                 |
| Item                6.     Exhibits                                                                                                                                                                                                                    | 38                   |
|                                                                                                                                                                                                                                                                       |                 |
| Items                2, 3, 4 and 5 of Part II are omitted because there is no information                to                report.                                                                                                                                         |                 |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**(In      thousands)**

| **ASSETS**                                                               |   | **December                31,**** 2006** |    |   | **September                30,**** 2007** |       |
|--------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|------------------------------------------------|------------|
|                                                                     |   |                                          |    |   | **(unaudited)**                                |       |
|                                                                     |   |                                          |    |   |                                           |       |
| Current                assets:                                           |   |                                          |    |   |                                           |       |
|   Accounts                receivable, net                      |   | $                                             | 31,661  |   |                                           | **$**      | **45,767** |   |
|   Inventories,                net                              |   |                                          | 61,343  |   |                                           | ** ** | **60,375** |   |
|   Restricted                investments                        |   |                                          | 1,067   |   |                                           | ** ** | **1,111** |   |
|                   Deferred income taxes                        |   |                                          | 12,571  |   |                                           | ** ** | **12,571** |   |
|   Prepaid                expenses and other                    |   |                                          | 3,516   |   |                                           | ** ** | **2,595** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
|     Total                current assets              |   |                                          | 110,158 |   |                                           | ** ** | **122,419** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
| Property,                plant and equipment:                            |   |                                          |    |   |                                           |       |   |   |
|   Land                                                         |   |                                          | 1,193   |   |                                           | ** ** | **1,272** |   |
|   Buildings                and improvements                    |   |                                          | 56,953  |   |                                           | ** ** | **58,887** |   |
|   Machinery                and equipment                       |   |                                          | 300,301 |   |                                           | ** ** | **316,548** |   |
|   Construction                in progress                      |   |                                          | 12,563  |   |                                           | ** ** | **3,760** |   |
|                                                                     |   |                                          | 371,010 |   |                                           | ** ** | **380,467** |   |
|   Less                accumulated depreciation                 |   |                                          | 282,315 |   |                                           | ** ** | **287,206** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
|     Net                property, plant and equipment |   |                                          | 88,695  |   |                                           | ** ** | **93,261** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
| Other                assets:                                             |   |                                          |    |   |                                           |       |   |   |
|   Restricted                investments                        |   |                                          | 6,079   |   |                                           | ** ** | **2,226** |   |
|   Pension                asset                                 |   |                                          | 557,279 |   |                                           | ** ** | **607,610** |   |
|   Other,                net                                    |   |                                          | 1,725   |   |                                           | ** ** | **1,619** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
|     Total                other assets                |   |                                          | 565,083 |   |                                           | ** ** | **611,455** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |
|     Total                assets                      |   | $                                             | 763,936 |   |                                           | **$**      | **827,135** |   |
|                                                                     |   |                                          |    |   |                                           |       |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS (CONTINUED)**

**(In      thousands)**

| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                 |   | **December                31,**** 2006** |    |   | **September                30,**** 2007** |       |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|------------------------------------------------|------------|
|                                                                                    |   |                                          |    |   | **(unaudited)**                                |       |
|                                                                                    |   |                                          |    |   |                                           |       |
| Current                liabilities:                                                     |   |                                          |    |   |                                           |       |
|   Notes                payable and current maturities of long-term debt       |   | $                                             | 43,699  |   |                                           | **$**      | **61,830** |   |
|   Accounts                payable                                             |   |                                          | 9,947   |   |                                           | ** ** | **9,412** |   |
|   Accrued                other postretirement benefit (OPEB) cost             |   |                                          | 4,157   |   |                                           | ** ** | **4,157** |   |
|   Other                accrued liabilities                                    |   |                                          | 20,579  |   |                                           | ** ** | **18,594** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
|     Total                current liabilities                        |   |                                          | 78,382  |   |                                           | ** ** | **93,993** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
| Noncurrent                liabilities:                                                  |   |                                          |    |   |                                           |       |   |   |
|   Long-term                debt                                               |   |                                          | 32,749  |   |                                           | ** ** | **31,357** |   |
|   Accrued                OPEB cost                                            |   |                                          | 31,005  |   |                                           | ** ** | **29,829** |   |
|   Deferred                income taxes                                        |   |                                          | 197,712 |   |                                           | ** ** | **221,526** |   |
|   Other                                                                       |   |                                          | 6,414   |   |                                           | ** ** | **7,111** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
|     Total                noncurrent liabilities                     |   |                                          | 267,880 |   |                                           | ** ** | **289,823** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
| Liabilities                subject to compromise                                        |   |                                          | 14,012  |   |                                           | ** ** | **-** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
| Stockholders'                equity:                                                    |   |                                          |    |   |                                           |       |   |   |
|   Common                stock                                                 |   |                                          | 100     |   |                                           | ** ** | **100** |   |
|   Additional                paid-in capital                                   |   |                                          | 75,423  |   |                                           | ** ** | **75,423** |   |
|   Accumulated                other comprehensive income                       |   |                                          | 278,399 |   |                                           | ** ** | **266,545** |   |
|   Retained                earnings                                            |   |                                          | 49,740  |   |                                           | ** ** | **101,251** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
|     Total                stockholders' equity                       |   |                                          | 403,662 |   |                                           | ** ** | **443,319** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |
|     Total                liabilities and stockholders’ equity |   | $                                             | 763,936 |   |                                           | **$**      | **827,135** |   |
|                                                                                    |   |                                          |    |   |                                           |       |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In      thousands, except per share data)**

|                                                                                      |   | **Three                months ended**** September                30,** |    |   | **Nine                months ended**** September                30,** |       |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------|------------|
|                                                                                      |   | **2006**                                                                    |    |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                                                      |   | **(as                adjusted)**                                            |    |   |                                                                       |       |   | **(as                adjusted)** |   |   |   |   |
|                                                                                      |   | **(unaudited)**                                                             |    |   | **(unaudited)**                                                            |       |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |
| Net                sales                                                                  |   | $                                                                           | 105,212 |   |                                                                       | **$**      | **103,358** |   |   | $ | 353,422 |   |   | **$** | **339,121** |   |
| Cost                of goods sold                                                         |   |                                                                        | 96,875  |   |                                                                       | ** ** | **96,923** |   |   |   | 322,211 |   |   | ** ** | **319,651** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Gross                margin                                                   |   |                                                                        | 8,337   |   |                                                                       | ** ** | **6,435** |   |   |   | 31,211 |   |   | ** ** | **19,470** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Other                operating income (expense):                                          |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Selling                expense                                                |   |                                                                        | (1,680  | )      |                                                                       | ** ** | **(1,601** | **)** |   |   | (5,158 | ) |   | ** ** | **(5,032** | **)** |
|   General                and administrative expense                             |   |                                                                        | (3,489  | )      |                                                                       | ** ** | **(3,532** | **)** |   |   | (8,875 | ) |   | ** ** | **(10,253** | **)** |
|   Defined                benefit pension credit                                 |   |                                                                        | 12,161  |   |                                                                       | ** ** | **20,379** |   |   |   | 36,487 |   |   | ** ** | **61,136** |   |
|   OPEB                credit                                                    |   |                                                                        | 2,100   |   |                                                                       | ** ** | **2,201** |   |   |   | 6,300 |   |   | ** ** | **6,602** |   |
|   Gain                on legal settlement                                       |   |                                                                        | -       |   |                                                                       | ** ** | **-** |   |   |   | - |   |   | ** ** | **5,400** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|       Total                other operating income           |   |                                                                        | 9,092   |   |                                                                       | ** ** | **17,447** |   |   |   | 28,754 |   |   | ** ** | **57,853** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                                           |   |                                                                        | 17,429  |   |                                                                       | ** ** | **23,882** |   |   |   | 59,965 |   |   | ** ** | **77,323** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Nonoperating                income (expense):                                             |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Interest                expense                                               |   |                                                                        | (1,189  | )      |                                                                       | ** ** | **(1,630** | **)** |   |   | (3,728 | ) |   | ** ** | **(4,619** | **)** |
|   Interest                and other income (expense)                            |   |                                                                        | (294    | )      |                                                                       | ** ** | **447** |   |   |   | 65 |   |   | ** ** | **999** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|       Total                nonoperating expense             |   |                                                                        | (1,483  | )      |                                                                       | ** ** | **(1,183** | **)** |   |   | (3,663 | ) |   | ** ** | **(3,620** | **)** |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Income                before income taxes and  reorganization items |   |                                                                        | 15,946  |   |                                                                       | ** ** | **22,699** |   |   |   | 56,302 |   |   | ** ** | **73,703** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Reorganization                items:                                          |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|     Reorganization                costs                               |   |                                                                        | (270    | )      |                                                                       | ** ** | **(3** | **)** |   |   | (606 | ) |   | ** ** | **(115** | **)** |
|     Gain                on cancellation of debt                       |   |                                                                        | -       |   |                                                                       | ** ** | **9,031** |   |   |   | - |   |   | ** ** | **9,031** |   |
|       Total                reorganization items             |   |                                                                        | (270    | )      |                                                                       | ** ** | **9,028** |   |   |   | (606 | ) |   | ** ** | **8,916** |   |
|                                                                            |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|     Income                before income taxes                         |   |                                                                        | 15,676  |   |                                                                       | ** ** | **31,727** |   |   |   | 55,696 |   |   | ** ** | **82,619** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Provision                for income taxes                                                 |   |                                                                        | 6,220   |   |                                                                       | ** ** | **11,921** |   |   |   | 10,587 |   |   | ** ** | **31,108** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Net                income                                                     |   | $                                                                           | 9,456   |   |                                                                       | **$**      | **19,806** |   |   | $ | 45,109 |   |   | **$** | **51,511** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Basic                and diluted income per share                                         |   | $                                                                           | 0.95    |   |                                                                       | **$**      | **1.98** |   |   | $ | 4.51 |   |   | **$** | **5.15** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Basic                and diluted shares outstanding                                       |   |                                                                        | 10,000  |   |                                                                       | ** ** | **10,000** |   |   |   | 10,000 |   |   | ** ** | **10,000** |   |
|                                                                                      |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In      thousands)**

|                                                                                                                 |   | **Nine                months ended****September                30,** |    |
|----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|---------|
|                                                                                                                 |   | **2006**                                                             |    |   | **2007** |   |
|                                                                                                                 |   | **(as                adjusted)**                                     |    |   |   |   |
|                                                                                                                 |   | **(unaudited)**                                                      |    |
|                                                                                                                 |   |                                                                 |    |   |   |   |
| Cash                flows from operating activities:                                                                 |   |                                                                 |    |   |   |   |
|   Net                income                                                                                |   | $                                                                    | 45,109  |   |   | **$** | **51,511** |   |
|   Depreciation                and amortization                                                             |   |                                                                 | 11,354  |   |   | ** ** | **11,591** |   |
|   Deferred                income taxes                                                                     |   |                                                                 | 9,372   |   |   | ** ** | **30,990** |   |
|   Defined                benefit pension credit                                                            |   |                                                                 | (36,487 | ) |   | ** ** | **(61,136** | **)** |
|   OPEB                credit                                                                               |   |                                                                 | (6,300  | ) |   | ** ** | **(6,602** | **)** |
|   OPEB                payments                                                                             |   |                                                                 | (2,920  | ) |   | ** ** | **(2,799** | **)** |
|   Gain                on cancellation of debt                                                              |   |                                                                 | -       |   |   | ** ** | **(9,031** | **)** |
|   Payment                to SWC pre-petition creditors                                                     |   |                                                                 | -       |   |   | ** ** | **(3,680** | **)** |
|   Reorganization                costs accrued                                                              |   |                                                                 | 606     |   |   | ** ** | **115** |   |
|   Reorganization                costs paid                                                                 |   |                                                                 | (3,484  | ) |   | ** ** | **(107** | **)** |
|   Impairment                of long-lived assets                                                           |   |                                                                 | 529     |   |   | ** ** | **-** |   |
|   Other,                net                                                                                |   |                                                                 | 928     |   |   | ** ** | **800** |   |
|   Change                in assets and liabilities (net of acquisition):                                    |   |                                                                 |    |   |   |   |   |   |
|     Accounts                receivable                                                           |   |                                                                 | (5,292  | ) |   | ** ** | **(14,124** | **)** |
|     Inventories                                                                                  |   |                                                                 | 4,421   |   |   | ** ** | **3,727** |   |
|     Accounts                payable                                                              |   |                                                                 | 1,982   |   |   | ** ** | **(535** | **)** |
|     Other,                net                                                                    |   |                                                                 | 2,246   |   |   | ** ** | **(1,602** | **)** |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
|       Net                cash provided by (used in) operating activities               |   |                                                                 | 22,064  |   |   | ** ** | **(882** | **)** |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
| Cash                flows from investing activities:                                                                 |   |                                                                 |    |   |   |   |   |   |
|   Capital                expenditures                                                                      |   |                                                                 | (9,645  | ) |   | ** ** | **(13,204** | **)** |
|   Acquisition                of CaluMetals’ assets                                                   |   | ** **                                                           | **-**   |   |   | ** ** | **(6,240** | **)** |
|   Collection                of notes receivable                                                            |   |                                                                 | 75      |   |   | ** ** | **-** |   |
|   Restricted                investments, net                                                               |   |                                                                 | (1,272  | ) |   | ** ** | **3,809** |   |
|   Other,                net                                                                                |   |                                                                 | (48     | ) |   | ** ** | **781** |   |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
|       Net                cash used in investing activities                             |   |                                                                 | (10,890 | ) |   | ** ** | **(14,854** | **)** |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
| Cash                flows from financing activities:                                                                 |   |                                                                 |    |   |   |   |   |   |
|   Revolving                credit facilities, net                                                          |   |                                                                 | (7,309  | ) |   | ** ** | **28,066** |   |
|   Other                notes payable and long-term debt:                                                   |   |                                                                 |    |   |   |   |   |   |
|     Additions                                                                                    |   |                                                                 | 468     |   |   | ** ** | **4,065** |   |
|     Principal                payments                                                            |   |                                                                 | (4,310  | ) |   | ** ** | **(16,173** | **)** |
|   Deferred                financing costs paid                                                             |   |                                                                 | (23     | ) |   | ** ** | **(222** | **)** |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
|       Net                cash provided by (used in) financing activities               |   |                                                                 | (11,174 | ) |   | ** ** | **15,736** |   |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
| Net                change in cash and cash equivalents                                                               |   |                                                                 | -       |   |   | ** ** | **-** |   |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
| Cash                and cash equivalents, beginning of period                                                        |   |                                                                 | -       |   |   | ** ** | **-** |   |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
| Cash                and cash equivalents, end of period                                                              |   | $                                                                    | -       |   |   | **$** | **-** |   |
|                                                                                                                 |   |                                                                 |    |   |   |   |   |   |
| Supplemental                disclosures:  Cash                paid for:                                    |   |                                                                 |    |   |   |   |   |   |
|     Interest,                net of amount capitalized                                           |   | $                                                                    | 3,115   |   |   | **$** | **4,221** |   |
|     Income                taxes, net                                                             |   |                                                                 | 365     |   |   | ** ** | **332** |   |
|   Non-cash                issuance of debt for acquisition of                CaluMetals’ assets |   |                                                                 | -       |   |   | ** ** | **781** |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**

**AND      COMPREHENSIVE INCOME**

**Nine      months ended September 30, 2007**

**(In      thousands)**

|                                                                           |   | ** Common                stock** |   |   | **Additional****paid-in** |   |   | **Accumulated****other****comprehensive** |   |   | **Accumulated****other****comprehensive** |   |   | **Retained**    |    |   |         |   |   | **Comprehensive** |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|---------------------------|--------|--------|-------------------------------------------|--------|--------|-------------------------------------------|--------|--------|-----------------|---------|--------|--------------|--------|--------|-------------------|--------|
|                                                                           |   | **Shares**                            |   |   | **Amount**                |   |   | **capital**                               |   |   | **income-pension**                        |   |   | **income-OPEB** |    |   | **earnings** |   |   | **Total**         |   |   | **income** |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   | **(unaudited)**                           |   |   |            |    |   |         |   |   |              |   |   |   |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |
| Balance                – December 31, 2006                               |   |                                  | 10,000 |   |                      | $      | 100    |                                      |   | $      | 75,423                                    |   |   | $               | 222,202 |   |         | $      | 56,197 |              |   | $ | 49,740 |   |   | $ | 403,662 |   |   |   |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                      |   |                                  | -      |   |                      |   | -      |                                      |   |   | -                                         |   |   |            | -       |   |         |   | -      |              |   |   | 51,511 |   |   |   | 51,511 |   |   | $ | 51,511 |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                of actuarial(gains)   losses, net of tax |   |                                  | -      |   |                      |   | -      |                                      |   |   | -                                         |   |   |            | (7,304  | )      |         |   | 3,121  |              |   |   | - |   |   |   | (4,183 | ) |   |   | (4,183 | ) |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                of prior service cost (credit), net of tax    |   |                                  | -      |   |                      |   | -      |                                      |   |   | -                                         |   |   |            | 573     |   |         |   | (8,244 | )                 |   |   | - |   |   |   | (7,671 | ) |   |   | (7,671 | ) |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                – September 30, 2007                              |   |                                  | 10,000 |   |                      | $      | 100    |                                      |   | $      | 75,423                                    |   |   | $               | 215,471 |   |         | $      | 51,074 |              |   | $ | 101,251 |   |   | $ | 443,319 |   |   |   |   |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   | $ | 39,657 |   |
|                                                                           |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**September      30, 2007**

**(unaudited)**

**Note      1 – Organization and basis of presentation:**

*Reclassification      of Corporate Expenses.*

----

|                                                                  |   | **Three                months ended September 30, 2006** |   |
|-----------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
|                                                                  |   | **(In                thousands)**                        |   |
|                                                                  |   | **As                Previously Reported in 10-Q**   |   |   | **OPEB                Reclass** |   |   | **Change                in Maintenance Accounting** |   |   | **Corporate                Expense Reclass** |   |   | **As                Currently Reported** |   |
|                                                                  |   |                                                     |   |   | **Increase/(Decrease)** |   |   |   |   |
|                                                                  |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold                                     |   | $                                                        | 96,017 |   |   | $ | 1,450 |   |   | $ | (592 | ) |   | $ | - |   |   | **$** | **96,875** |   |
| Gross                margin                                           |   |                                                     | 9,195  |   |   |   | (1,450 | ) |   |   | 592 |   |   |   | - |   |   | ** ** | **8,337** |   |
|                                                                  |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                expense                                        |   |                                                     | 1,665  |   |   |   | 15 |   |   |   | - |   |   |   | - |   |   | ** ** | **1,680** |   |
| General                and administrative                expense |   |                                                     | 2,645  |   |   |   | 29 |   |   |   | - |   |   |   | 815 |   |   | ** ** | **3,489** |   |
| OPEB                credit                                            |   |                                                     | -      |   |   |   | 2,100 |   |   |   | - |   |   |   | - |   |   | ** ** | **2,100** |   |
| Total                operating costs                                  |   |                                                     | (7,851 | ) |   |   | (2,056 | ) |   |   | - |   |   |   | 815 |   |   | ** ** | **(9,092** | **)** |
|                                                                  |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                       |   |                                                     | 17,046 |   |   |   | 606 |   |   |   | 592 |   |   |   | (815 | ) |   | ** ** | **17,429** |   |
|                                                                  |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                expense                                      |   |                                                     | 209    |   |   |   | 606 |   |   |   | - |   |   |   | (815 | ) |   | ** ** | **-** |   |
| Total                nonoperating  expense                  |   |                                                     | 1,692  |   |   |   | 606 |   |   |   | - |   |   |   | (815 | ) |   | ** ** | **1,483** |   |
|                                                                  |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                before income taxes                        |   |                                                     | 15,084 |   |   |   | - |   |   |   | 592 |   |   |   | - |   |   | ** ** | **15,676** |   |
| Provision                for income  taxes                  |   |                                                     | 5,990  |   |   |   | - |   |   |   | 230 |   |   |   | - |   |   | ** ** | **6,220** |   |
| Net                income                                             |   |                                                     | 9,094  |   |   |   | - |   |   |   | 362 |   |   |   | - |   |   | ** ** | **9,456** |   |

|                                                                  |   | **Nine                months ended September 30, 2006** |    |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------|---------|
|                                                                  |   | **(In                thousands)**                       |    |
|                                                                  |   | **As                Previously Reported in 10-Q**  |    |   | **OPEB                Reclass** |   |   | **Change                in Maintenance Accounting** |   |   | **Corporate                Expense Reclass** |   |   | **As                Currently Reported** |   |
|                                                                  |   |                                                    |    |   | **Increase/(Decrease)** |   |   |   |   |
|                                                                  |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of goods sold                                     |   | $                                                       | 319,914 |   |   | $ | 4,350 |   |   | $ | (2,053 | ) |   | $ | - |   |   | **$** | **322,211** |   |
| Gross                margin                                           |   |                                                    | 33,508  |   |   |   | (4,350 | ) |   |   | 2,053 |   |   |   | - |   |   | ** ** | **31,211** |   |
|                                                                  |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                expense                                        |   |                                                    | 5,113   |   |   |   | 45 |   |   |   | - |   |   |   | - |   |   | ** ** | **5,158** |   |
| General                and administrative                expense |   |                                                    | 8,243   |   |   |   | 87 |   |   |   | - |   |   |   | 545 |   |   | ** ** | **8,875** |   |
| OPEB                credit                                            |   |                                                    | -       |   |   |   | 6,300 |   |   |   | - |   |   |   | - |   |   | ** ** | **6,300** |   |
| Total                operating costs                                  |   |                                                    | (23,131 | ) |   |   | (6,168 | ) |   |   | - |   |   |   | 545 |   |   | ** ** | **(28,754** | **)** |
|                                                                  |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                       |   |                                                    | 56,639  |   |   |   | 1,818 |   |   |   | 2,053 |   |   |   | (545 | ) |   | ** ** | **59,965** |   |
|                                                                  |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                expense                                      |   |                                                    | (1,273  | ) |   |   | 1,818 |   |   |   | - |   |   |   | (545 | ) |   | ** ** | **-** |   |
| Total                nonoperating expense                        |   |                                                    | 2,390   |   |   |   | 1,818 |   |   |   | - |   |   |   | (545 | ) |   | ** ** | **3,663** |   |
|                                                                  |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                before income taxes                        |   |                                                    | 53,643  |   |   |   | - |   |   |   | 2,053 |   |   |   | - |   |   | ** ** | **55,696** |   |
| Provision                for income taxes                        |   |                                                    | 9,790   |   |   |   | - |   |   |   | 797 |   |   |   | - |   |   | ** ** | **10,587** |   |
| Net                income                                             |   |                                                    | 43,853  |   |   |   | - |   |   |   | 1,256 |   |   |   | - |   |   | ** ** | **45,109** |   |

----

**Note      2 - Acquisition**

**Note      3 – Gain on cancellation of debt:**

** **

----

**Note      4– Business Segment Information:**

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

| ·   | 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 Note                2. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                |   | **Three                months ended**** September                30,** |    |   | **Nine                months ended**** September                30,** |       |
|---------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------|------------|
|                                                                |   | **2006**                                                                    |    |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                                |   | **(as                adjusted)**                                            |    |   |                                                                       |       |   | **(as                adjusted)** |   |   |   |   |
|                                                                |   | **(In                thousands)**                                           |    |
| Net                sales:                                           |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |
|   KSW                                                     |   | $                                                                           | 98,578  |   |                                                                       | **$**      | **96,592** |   |   | $ | 332,767 |   |   | **$** | **323,377** |   |
|   EWP                                                     |   |                                                                        | 16,496  |   |                                                                       | ** ** | **14,806** |   |   |   | 47,229 |   |   | ** ** | **40,876** |   |
|   Calumet                                                 |   |                                                                        | -       |   |                                                                       | ** ** | **1,646** |   |   |   | - |   |   | ** ** | **2,961** |   |
|   Elimination                of intersegment sales:       |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|     KSW                                         |   |                                                                        | (9,862  | )      |                                                                       | ** ** | **(9,686** | **)** |   |   | (26,574 | ) |   | ** ** | **(28,093** | **)** |
|                                                                |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|      Total                net sales        |   | $                                                                           | 105,212 |   |                                                                       | **$**      | **103,358** |   |   | $ | 353,422 |   |   | **$** | **339,121** |   |
|                                                                |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Operating                income (loss):                             |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   KSW                                                     |   | $                                                                           | 1,672   |   |                                                                       | **$**      | **577** |   |   | $ | 10,604 |   |   | **$** | **3,578** |   |
|   EWP                                                     |   |                                                                        | 3,592   |   |                                                                       | ** ** | **2,292** |   |   |   | 8,086 |   |   | ** ** | **5,787** |   |
|   Calumet                                                 |   |                                                                        | -       |   |                                                                       | ** ** | **(799** | **)** |   |   | - |   |   | ** ** | **(1,348** | **)** |
|   Pension                credit                           |   |                                                                        | 12,161  |   |                                                                       | ** ** | **20,379** |   |   |   | 36,487 |   |   | ** ** | **61,136** |   |
|   OPEB                credit                              |   |                                                                        | 2,100   |   |                                                                       | ** ** | **2,201** |   |   |   | 6,300 |   |   | ** ** | **6,602** |   |
|   Gain                on legal settlement                 |   |                                                                        | -       |   |                                                                       | ** ** | **-** |   |   |   | - |   |   | ** ** | **5,400** |   |
|   Other                (1)                                |   |                                                                        | (2,096  | )      |                                                                       | ** ** | **(768** | **)** |   |   | (1,512 | ) |   | ** ** | **(3,832** | **)** |
|                                                                |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|      Total                operating income |   |                                                                        | 17,429  |   |                                                                       | ** ** | **23,882** |   |   |   | 59,965 |   |   | ** ** | **77,323** |   |
|                                                                |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Nonoperating                income (expense):                       |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Interest                expense                         |   |                                                                        | (1,189  | )      |                                                                       | ** ** | **(1,630** | **)** |   |   | (3,728 | ) |   | ** ** | **(4,619** | **)** |
|   Interest                and other income (expense)      |   |                                                                        | (294    | )      |                                                                       | ** ** | **447** |   |   |   | 65 |   |   | ** ** | **999** |   |
|   Reorganization                costs                     |   |                                                                        | (270    | )      |                                                                       | ** ** | **(3** | **)** |   |   | (606 | ) |   | ** ** | **(115** | **)** |
|   Gain                on cancellation of debt             |   |                                                                        | -       |   |                                                                       | ** ** | **9,031** |   |   |   | - |   |   | ** ** | **9,031** |   |
|                                                                |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Income                before income taxes               |   | $                                                                           | 15,676  |   |                                                                       | **$**      | **31,727** |   |   | $ | 55,696 |   |   | **$** | **82,619** |   |

----

|                                                              |   | **Years                ended December 31,** |    |
|-------------------------------------------------------------------|--------|---------------------------------------------|---------|
|                                                              |   | **2004**                                    |    |   | **2005** |   |   | **2006** |   |
|                                                              |   | **(In                thousands)**           |    |
|                                                              |   |                                        |    |   |   |   |   |   |   |
| Net                sales:                                         |   |                                        |    |   |   |   |   |   |   |
|   KSW                                                   |   | $                                           | 345,218 |   |   | $ | 338,903 |   |   | **$** | **412,866** |   |
|   EWP                                                   |   |                                        | 58,982  |   |   |   | 62,777 |   |   | ** ** | **58,748** |   |
|   Elimination                of intersegment sales:     |   |                                        |    |   |   |   |   |   |   |   |   |   |
|     KSW                                       |   |                                        | (39,914 | ) |   |   | (34,135 | ) |   | ** ** | **(31,074** | **)** |
|     Other                                     |   |                                        | 49      |   |   |   | - |   |   | ** ** | **-** |   |
|                                                              |   |                                        |    |   |   |   |   |   |   |   |   |   |
|      Total                net sales      |   | $                                           | 364,335 |   |   | $ | 367,545 |   |   | **$** | **440,540** |   |
|                                                              |   |                                        |    |   |   |   |   |   |   |   |   |   |
| Operating                income (loss):                           |   |                                        |    |   |   |   |   |   |   |   |   |   |
|   KSW                                                   |   | $                                           | 34,294  |   |   | $ | 8,284 |   |   | **$** | **6,558** |   |
|   EWP                                                   |   |                                        | 10,816  |   |   |   | 9,699 |   |   | ** ** | **9,464** |   |
|   Defined                benefit pension credit         |   |                                        | 6,752   |   |   |   | 11,710 |   |   | ** ** | **55,978** |   |
|   OPEB                credit (expense)                  |   |                                        | (20,909 | ) |   |   | (8,885 | ) |   | ** ** | **8,297** |   |
|   Other(1)                                              |   |                                        | (4,751  | ) |   |   | (615 | ) |   | ** ** | **(547** | **)** |
|                                                              |   |                                        |    |   |   |   |   |   |   |   |   |   |
|     Total                operating income (2) |   |                                        | 26,202  |   |   |   | 20,193 |   |   | ** ** | **79,750** |   |
|                                                              |   |                                        |    |   |   |   |   |   |   |   |   |   |
| Nonoperating                income (expense):                     |   |                                        |    |   |   |   |   |   |   |   |   |   |
|   Interest                expense                       |   |                                        | (3,705  | ) |   |   | (3,992 | ) |   | ** ** | **(4,720** | **)** |
|   Interest                income                        |   |                                        | 132     |   |   |   | 266 |   |   | ** ** | **361** |   |
|   Gain                on legal settlement               |   |                                        | 5,284   |   |   |   | - |   |   | ** ** | **-** |   |
|   Other                income, net                      |   |                                        | 684     |   |   |   | 993 |   |   | ** ** | **75** |   |
|   Reorganization                costs                   |   |                                        | (11,158 | ) |   |   | (10,308 | ) |   | ** ** | **(679** | **)** |
|   Gain                on cancellation of debt           |   |                                        | -       |   |   |   | 32,510 |   |   | ** ** | **-** |   |
|                                                              |   |                                        |    |   |   |   |   |   |   |   |   |   |
|   Income                before income taxes             |   | $                                           | 17,439  |   |   | $ | 39,662 |   |   | **$** | **74,787** |   |

----

|                          |   | **December                31,**   |    |
|-------------------------------|--------|-----------------------------------|---------|
|                          |   | **2004**                          |    |   | **2005** |   |   | **2006** |   |
|                          |   | **(In                thousands)** |    |
| Total                assets:  |   |                              |    |   |   |   |   |   |   |
|   KSW               |   | $                                 | 154,718 |   |   | $ | 183,910 |   |   | **$** | **162,439** |   |
|   EWP               |   |                              | 26,708  |   |   |   | 22,750 |   |   | ** ** | **19,381** |   |
|   Corporate         |   |                              | 141,856 |   |   |   | 151,704 |   |   | ** ** | **582,116** |   |
|                          |   |                              |    |   |   |   |   |   |   |   |   |   |
|     Total |   | $                                 | 323,282 |   |   | $ | 358,364 |   |   | **$** | **763,936** |   |
|                          |   |                              |    |   |   |   |   |   |   |   |   |   |

|                                          |   |                                        |   |
|-----------------------------------------------|--------|---------------------------------------------|--------|
|                                          |   | **Years                ended December 31,** |   |
|                                          |   | **2004**                                    |   |   | **2005** |   |   | **2006** |   |
|                                          |   | **(In                thousands)**           |   |
| Depreciation                and amortization: |   |                                        |   |   |   |   |   |   |   |
|   KSW                               |   | $                                           | 14,589 |   |   | $ | 14,619 |   |   | **$** | **13,897** |   |
|   EWP                               |   |                                        | 1,037  |   |   |   | 1,034 |   |   | ** ** | **1,040** |   |
|   Corporate                         |   |                                        | 186    |   |   |   | 92 |   |   | ** ** | **285** |   |
|                                          |   |                                        |   |   |   |   |   |   |   |   |   |   |
|     Total                 |   | $                                           | 15,812 |   |   | $ | 15,745 |   |   | **$** | **15,222** |   |
|                                          |   |                                        |   |   |   |   |   |   |   |   |   |   |
| Capital                expenditures:          |   |                                        |   |   |   |   |   |   |   |   |   |   |
|   KSW                               |   | $                                           | 4,804  |   |   | $ | 9,571 |   |   | **$** | **12,290** |   |
|   EWP                               |   |                                        | 274    |   |   |   | 201 |   |   | ** ** | **6,388** |   |
|   Corporate                         |   |                                        | 2      |   |   |   | - |   |   | ** ** | **61** |   |
|                                          |   |                                        |   |   |   |   |   |   |   |   |   |   |
|     Total                 |   | $                                           | 5,080  |   |   | $ | 9,772 |   |   | **$** | **18,739** |   |
|                                          |   |                                        |   |   |   |   |   |   |   |   |   |   |

**Note      5 – Inventories, net:**

|                                                     |   | **December                31,**   |   |   | **September                30,** |       |
|----------------------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------|------------|
|                                                     |   | **2006**                          |   |   | **2007**                         |       |
|                                                     |   | **(In                thousands)** |   |
|                                                     |   |                              |   |   |                             |       |
|   Raw                materials                 |   | $                                 | 9,735  |   |                             | **$**      | **12,519** |   |
|   Work                in process               |   |                              | 25,391 |   |                             | ** ** | **25,091** |   |
|   Finished                products             |   |                              | 26,513 |   |                             | ** ** | **23,942** |   |
|   Supplies                                     |   |                              | 18,283 |   |                             | ** ** | **20,901** |   |
|                                                     |   |                              |   |   |                             |       |   |   |
|     Inventory                at FIFO |   |                              | 79,922 |   |                             | ** ** | **82,453** |   |
|     Less                LIFO reserve |   |                              | 18,579 |   |                             | ** ** | **22,078** |   |
|                                                     |   |                              |   |   |                             |       |   |   |
|       Total                |   | $                                 | 61,343 |   |                             | **$**      | **60,375** |   |

----

**Note      6 - Notes payable and long-term debt:**

|                                                           |   | **December                31,**   |   |   | **September                30,** |       |
|----------------------------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------|------------|
|                                                           |   | **2006**                          |   |   | **2007**                         |       |
|                                                           |   | **(In                thousands)** |   |
|                                                           |   |                              |   |   |                             |       |
| Wachovia                revolving credit facility              |   | $                                 | 17,734 |   |                             | **$**      | **45,801** |   |
| 8%                Notes                                        |   |                              | 25,740 |   |                             | ** ** | **17,160** |   |
| UC                Note                                         |   |                              | 5,465  |   |                             | ** ** | **2,748** |   |
| Term                loans:                                     |   |                              |   |   |                             |       |   |   |
|   Wachovia                                           |   |                              | 17,390 |   |                             | ** ** | **17,619** |   |
|   County                                             |   |                              | 10,000 |   |                             | ** ** | **9,000** |   |
| Other                                                          |   |                              | 119    |   |                             | ** ** | **859** |   |
|                                                           |   |                              |   |   |                             |       |   |   |
|     Total                debt              |   |                              | 76,448 |   |                             | ** ** | **93,187** |   |
|     Less                current maturities |   |                              | 43,699 |   |                             | ** ** | **61,830** |   |
|                                                           |   |                              |   |   |                             |       |   |   |
|     Total                long-term debt    |   | $                                 | 32,749 |   |                             | **$**      | **31,357** |   |

**Note      7 - Environmental matters and other commitments and      contingencies:**

**.**

----

|                                                             |   | **Nine                months ended****September                30 ,2007** |       |
|------------------------------------------------------------------|--------|---------------------------------------------------------------------------|------------|
|                                                             |   | **(In                thousands)**                                         |       |
|                                                             |   |                                                                      |       |
| Balance                at December 31, 2006                      |   | **$**                                                                     | **13,252** |   |
|   Expense                                              |   | ** **                                                                | **-**      |   |
|   Payments                                             |   | ** **                                                                | **(3,177** | **)** |
|   Cancellation                of debt                  |   | ** **                                                                | **(4,682** | **)** |
|                                                             |   |                                                                      |       |   |
| Balance                at September 30, 2007                     |   | **$**                                                                     | **5,393**  |   |
|                                                             |   |                                                                      |       |   |
| Amounts                classified at September 30, 2007 as:      |   |                                                                      |       |   |
|   Current                accrued environmental cost    |   | **$**                                                                     | **226**    |   |
|   Noncurrent                accrued environmental cost |   | ** **                                                                | **5,167**  |   |
|                                                             |   |                                                                      |       |   |
| Total                                                            |   | **$**                                                                     | **5,393**  |   |

*Sites      discharged as a result of bankruptcy proceedings in the third quarter of      2007*

----

*Open      sites at September 30, 2007*

----

*Other      current litigation*

----

**Note      8 - Other accrued liabilities:**

|                                                                  |   | **December                31,**   |   |   | **September                30,** |       |
|-----------------------------------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------|------------|
|                                                                  |   | **2006**                          |   |   | **2007**                         |       |
|                                                                  |   | **(In                thousands)** |   |
| Current:                                                              |   |                              |   |   |                             |       |
|   Employee                benefits                          |   | $                                 | 10,714 |   |                             | **$**      | **9,880** |   |
|   Self                insurance                             |   |                              | 5,492  |   |                             | ** ** | **3,740** |   |
|   Pre-petition                unsecured creditor settlement |   |                              | 985    |   |                             | ** ** | **982** |   |
|   Environmental                                             |   |                              | 250    |   |                             | ** ** | **226** |   |
|   Other                                                     |   |                              | 3,138  |   |                             | ** ** | **3,766** |   |
|                                                                  |   |                              |   |   |                             |       |   |   |
| Total                                                                 |   | $                                 | 20,579 |   |                             | **$**      | **18,594** |   |
|                                                                  |   |                              |   |   |                             |       |   |   |
| Noncurrent:                                                           |   |                              |   |   |                             |       |   |   |
|   Environmental                                             |   | $                                 | 4,521  |   |                             | **$**      | **5,167** |   |
|   Workers                compensation                       |   |                              | 1,785  |   |                             | ** ** | **1,822** |   |
|   Other                                                     |   |                              | 108    |   |                             | ** ** | **122** |   |
|                                                                  |   |                              |   |   |                             |       |   |   |
| Total                                                                 |   | $                                 | 6,414  |   |                             | **$**      | **7,111** |   |

**Note      9 – Employee benefit plans:**

|                                                                                             |   | **Three                months ended****                 September 30,** |    |   | **Nine                months ended**** September                30,** |       |
|--------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------|------------|
|                                                                                             |   | **2006**                                                                     |    |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                                                             |   | **(In                thousands)**                                            |    |
| Service                cost                                                                      |   | $                                                                            | 959     |   |                                                                       | **$**      | **969** |   |   | $ | 2,877 |   |   | **$** | **2,907** |   |
| Interest                cost                                                                     |   |                                                                         | 5,106   |   |                                                                       | ** ** | **5,267** |   |   |   | 15,318 |   |   | ** ** | **15,801** |   |
| Expected                return on plan assets                                                    |   |                                                                         | (16,863 | )      |                                                                       | ** ** | **(23,013** | **)** |   |   | (50,589 | ) |   | ** ** | **(69,038** | **)** |
| Amortization                of accumulated other  comprehensive                income: |   |                                                                         |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Prior                service cost                                                    |   |                                                                         | 227     |   |                                                                       | ** ** | **306** |   |   |   | 681 |   |   | ** ** | **918** |   |
|   Actuarial                gains                                                       |   |                                                                         | (1,590  | )      |                                                                       | ** ** | **(3,908** | **)** |   |   | (4,774 | ) |   | ** ** | **(11,724** | **)** |
|                                                                                             |   |                                                                         |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                            |   | $                                                                            | (12,161 | )      |                                                                       | **$**      | **(20,379** | **)** |   | $ | (36,487 | ) |   | **$** | **(61,136** | **)** |

|                                                                                       |   | **Three                months ended**** September                30,** |   |   | **Nine                months ended**** September                30,** |       |
|--------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|------------|
|                                                                                       |   | **2006**                                                                    |   |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                                                       |   | **(In                thousands)**                                           |   |
|                                                                                       |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |
| Service                cost                                                                |   | $                                                                           | 63     |   |                                                                       | **$**      | **60** |   |   | $ | 189 |   |   | **$** | **181** |   |
| Interest                cost                                                               |   |                                                                        | 495    |   |                                                                       | ** ** | **480** |   |   |   | 1,485 |   |   | ** ** | **1,440** |   |
| Amortization                of accumulated other comprehensive                income: |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Prior                service credit                                            |   |                                                                        | (4,327 | )      |                                                                       | ** ** | **(4,411** | **)** |   |   | (12,981 | ) |   | ** ** | **(13,233** | **)** |
|   Actuarial                losses                                                |   |                                                                        | 1,669  |   |                                                                       | ** ** | **1,670** |   |   |   | 5,007 |   |   | ** ** | **5,010** |   |
|                                                                                       |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                      |   | $                                                                           | (2,100 | )      |                                                                       | **$**      | **(2,201** | **)** |   | $ | (6,300 | ) |   | **$** | **(6,602** | **)** |

----

**Note      10 – Provision for income taxes:**

|                                                     |   | **Nine                months ended**** September                30,** |    |
|----------------------------------------------------------|--------|----------------------------------------------------------------------------|---------|
|                                                     |   | **2006**                                                                   |    |   | **2007** |   |
|                                                     |   | **(as                adjusted)**                                           |    |   |   |   |
|                                                     |   | **(In                thousands)**                                          |    |
|                                                     |   |                                                                       |    |   |   |   |
| Expected                tax provision, at statutory rate |   | $                                                                          | 19,494  |   |   | **$** | **28,917** |   |
| U.S.                state income taxes, net              |   |                                                                       | 2,044   |   |   | ** ** | **2,174** |   |
| Deferred                tax asset valuation allowance    |   |                                                                       | (10,675 | ) |   | ** ** | **-** |   |
| Other,                net                                |   |                                                                       | (276    | ) |   | ** ** | **17** |   |
|                                                     |   |                                                                       |    |   |   |   |   |   |
| Provision                for income taxes                |   | $                                                                          | 10,587  |   |   | **$** | **31,108** |   |

**Note      11 – Recent Accounting Pronouncements:**

*Uncertain      Tax Positions*
**.  **
*Accounting for Uncertain Tax Positions*
*Accounting for Income      Taxes*

*Planned      Major Maintenance Activities*
** - **
*Accounting for Planned Major Maintenance      Activities*

----

*Fair      Value Option. *
*The Fair Value Option for Financial Assets and Financial      Liabilities*

**Note      12 – Subsequent Event:**

----

**ITEM 2.  MANAGEMENT'S DISCUSSION AND        ANALYSIS OF FINANCIAL CONDITION AND RESULTS        OF OPERATIONS **

| ·   | 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 political                conditions, |
|--------------------|---------------------------------------------------------------------------------|

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

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

| ·   | The                impact of pricing and production                decisions, |
|--------------------|-------------------------------------------------------------------------------|

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

| ·   | Government                regulations and possible changes                therein, |
|--------------------|------------------------------------------------------------------------------------|

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

| ·   | The                ultimate resolution of pending                litigation, |
|--------------------|------------------------------------------------------------------------------|

| ·   | 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, |
|--------------------|------------------------------------------------------------------------------------|

| ·   | Any                possible future litigation, and |
|--------------------|----------------------------------------------------|

| ·   | Other                risks and uncertainties as discussed in this Quarterly Report and                the 2006                Annual Report, including, without limitation, the section referenced                above. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**RESULTS      OF OPERATIONS**

**Business      Overview**

**Recent      Developments**

----

**Results      of Operations**

|                                                            |   | **Three                months ended**** September                30,** |    |   | **Nine                months ended**** September                30,** |       |
|-----------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------|------------|
|                                                            |   | **2006**                                                                    |    |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                            |   | **(In                thousands)**                                           |    |
| Income                before income taxes                       |   | $                                                                           | 15,676  |   |                                                                       | **$**      | **31,727** |   |   | $ | 55,696 |   |   | **$** | **82,619** |   |
|   Adjustments:                                        |   |                                                                        |    |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|    Defined                benefit pension credit |   |                                                                        | (12,161 | )      |                                                                       | ** ** | **(20,379** | **)** |   |   | (36,487 | ) |   | ** ** | **(61,136** | **)** |
|    OPEB                credit                    |   |                                                                        | (2,100  | )      |                                                                       | ** ** | **(2,201** | **)** |   |   | (6,300 | ) |   | ** ** | **(6,602** | **)** |
|    Gain                on legal settlement       |   |                                                                        | -       |   |                                                                       | ** ** | **-** |   |   |   | - |   |   | ** ** | **(5,400** | **)** |
|    Gain                on cancellation of debt   |   |                                                                        | -       |   |                                                                       | ** ** | **(9,031** | **)** |   |   | - |   |   | ** ** | **(9,031** | **)** |
|    Reorganization                costs           |   |                                                                        | 270     |   |                                                                       | ** ** | **3** |   |   |   | 606 |   |   | ** ** | **115** |   |
| Income                before income taxes and other items       |   | $                                                                           | 1,685   |   |                                                                       | **$**      | **119** |   |   | $ | 13,515 |   |   | **$** | **565** |   |

|                                                               |   | **Three                months ended**** September                30,** |    |   | **Nine                months ended**** September                30,** |       |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------|------------|
|                                                               |   | **2006**                                                                    |    |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                               |   | **(In                thousands)**                                           |    |
| Operating                income as reported(1)                     |   | $                                                                           | 17,429  |   |                                                                       | **$**      | **23,882** |   |   | $ | 59,965 |   |   | **$** | **77,323** |   |
|   Defined                benefit pension credit          |   |                                                                        | (12,161 | )      |                                                                       | ** ** | **(20,379** | **)** |   |   | (36,487 | ) |   | ** ** | **(61,136** | **)** |
|   OPEB                credit                             |   |                                                                        | (2,100  | )      |                                                                       | ** ** | **(2,201** | **)** |   |   | (6,300 | ) |   | ** ** | **(6,602** | **)** |
| Operating                income before pension and  OPEB |   | $                                                                           | 3,168   |   |                                                                       | **$**      | **1,302** |   |   | $ | 17,178 |   |   | **$** | **9,585** |   |

----

|                                                 |   | **Three                months ended**** September                30,** |   |   | **Nine                months ended**** September                30,** |       |
|------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|------------|
|                                                 |   | **2006**                                                                    |   |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                                 |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |
|                                                 |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |
| Sales                volume(000 tons):               |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |
|   Fabricated                wire products  |   |                                                                        | 24     |   |                                                                       | ** ** | **20** |   |   |   | 90 |   |   | ** ** | **85** |   |
|   Welded                wire reinforcement |   |                                                                        | 19     |   |                                                                       | ** ** | **16** |   |   |   | 55 |   |   | ** ** | **45** |   |
|   Nails                                    |   |                                                                        | 3      |   |                                                                       |       |   | (1) |   |   | 15 |   |   | ** ** | **1** |   |
|   Industrial                wire           |   |                                                                        | 20     |   |                                                                       | ** ** | **14** |   |   |   | 59 |   |   | ** ** | **52** |   |
|   Coiled                rebar              |   |                                                                        |   | (1)    |                                                                       | ** ** | **3** |   |   |   |   | (1) |   | ** ** | **11** |   |
|   Bars                and shapes           |   |                                                                        | -      |   |                                                                       | ** ** | **3** |   |   |   | - |   |   | ** ** | **4** |   |
|   Wire                rod                  |   |                                                                        | 85     |   |                                                                       | ** ** | **91** |   |   |   | 291 |   |   | ** ** | **282** |   |
|   Billets                                  |   |                                                                        | 5      |   |                                                                       | ** ** | **-** |   |   |   | 32 |   |   | ** ** |   | **(1)** |
|     Total                        |   |                                                                        | 156    |   |                                                                       | ** ** | **147** |   |   |   | 542 |   |   | ** ** | **480** |   |
|                                                 |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Average                per-ton selling prices:       |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Fabricated                wire products  |   | $                                                                           | 1,014  |   |                                                                       | **$**      | **1,109** |   |   | $ | 1,033 |   |   | **$** | **1,082** |   |
|   Welded                wire reinforcement |   |                                                                        | 880    |   |                                                                       | ** ** | **912** |   |   |   | 865 |   |   | ** ** | **901** |   |
|   Nails                                    |   |                                                                        | 714    |   |                                                                       | ** ** | **1,076** |   |   |   | 706 |   |   | ** ** | **816** |   |
|   Industrial                wire           |   |                                                                        | 741    |   |                                                                       | ** ** | **785** |   |   |   | 722 |   |   | ** ** | **758** |   |
|   Coiled                rebar              |   |                                                                        | 589    |   |                                                                       | ** ** | **584** |   |   |   | 559 |   |   | ** ** | **561** |   |
|   Bars                and shapes           |   |                                                                        | -      |   |                                                                       | ** ** | **621** |   |   |   | - |   |   | ** ** | **664** |   |
|   Wire                rod                  |   |                                                                        | 523    |   |                                                                       | ** ** | **555** |   |   |   | 500 |   |   | ** ** | **546** |   |
|   Billets                                  |   |                                                                        | 307    |   |                                                                       | ** ** | **-** |   |   |   | 357 |   |   | ** ** | **132** |   |
|   All                products              |   |                                                                        | 667    |   |                                                                       | ** ** | **695** |   |   |   | 647 |   |   | ** ** | **699** |   |

**(1)**

** **

----

**Segment      Operating Results:**

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

| ·   | 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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                         |   | **KSW**                           |        |   | **EWP** |       |       | **Calumet** |   |       | **Other                (1)** |   |   | **Total**  |        |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------|-------------|--------|---------|------------|------------|-------------|--------|------------|------------------------------|--------|--------|------------|-------------|
|                                                                                         |   | **(In                thousands)** |        |
| Three                months ended September 30, 2006:                                        |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |
|  Net                sales                                                               |   | $                                 | 98,578      |   |    | $          | 16,496     |        |   | $          | -                            |   |   | $          | (9,862      | ) |   | $ | 105,212 |   |
|  Cost                of goods sold                                                      |   |                              | 93,576      |   |    |       | 11,910     |        |   |       | -                            |   |   |       | (8,611      | ) |   |   | 96,875 |   |
|    Gross                margin                                                |   |                              | 5,002       |   |    |       | 4,586      |        |   |       | -                            |   |   |       | (1,251      | ) |   |   | 8,337 |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
|  Selling                and  administrative                expense            |   |                              | (3,330      | )      |    |       | (994       | )           |   |       | -                            |   |   |       | (845        | ) |   |   | (5,169 | ) |
|  Operating                income before                pension/OPEB                |   | $                                 | 1,672       |   |    | $          | 3,592      |        |   | $          | -                            |   |   | $          | (2,096      | ) |   | $ | 3,168 |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| **Three                months ended September 30, 2007:**                                    |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| ** Net                sales**                                                           |   | **$**                             | **96,592**  |   |    | **$**      | **14,806** |        |   | **$**      | **1,646**                    |   |   | **$**      | **(9,686**  | **)** |   | **$** | **103,358** |   |
| ** Cost                of goods sold**                                                  |   | ** **                        | **92,560**  |   |    | ** ** | **11,551** |        |   | ** ** | **2,330**                    |   |   | ** ** | **(9,518**  | **)** |   | ** ** | **96,923** |   |
| **   Gross                margin**                                            |   | ** **                        | **4,032**   |   |    | ** ** | **3,255**  |        |   | ** ** | **(684**                     | **)**  |   | ** ** | **(168**    | **)** |   | ** ** | **6,435** |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| ** Selling                and**** administrative                expense**          |   | ** **                        | **(3,455**  | **)**  |    | ** ** | **(963**   | **)**       |   | ** ** | **(115**                     | **)**  |   | ** ** | **(600**    | **)** |   | ** ** | **(5,133** | **)** |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| ** Operating                income**** before                pension/OPEB**        |   | **$**                             | **577**     |   |    | **$**      | **2,292**  |        |   | **$**      | **(799**                     | **)**  |   | **$**      | **(768**    | **)** |   | **$** | **1,302** |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| Nine                months ended September 30, 2006:                                         |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
|  Net                sales                                                               |   | $                                 | 332,767     |   |    | $          | 47,229     |        |   | $          | -                            |   |   | $          | (26,574     | ) |   | $ | 353,422 |   |
|  Cost                of goods sold                                                      |   |                              | 311,819     |   |    |       | 36,043     |        |   |       | -                            |   |   |       | (25,651     | ) |   |   | 322,211 |   |
|    Gross                margin                                                |   |                              | 20,948      |   |    |       | 11,186     |        |   |       | -                            |   |   |       | (923        | ) |   |   | 31,211 |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
|  Selling                and administrative                expense                       |   |                              | (10,344     | )      |    |       | (3,100     | )           |   |       | -                            |   |   |       | (589        | ) |   |   | (14,033 | ) |
|  Operating                income before                pension/OPEB                |   | $                                 | 10,604      |   |    | $          | 8,086      |        |   | $          | -                            |   |   | $          | (1,512      | ) |   | $ | 17,178 |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| **Nine                months ended September 30, 2007:**                                     |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| ** Net                sales**                                                           |   | **$**                             | **323,377** |   |    | **$**      | **40,876** |        |   | **$**      | **2,961**                    |   |   | **$**      | **(28,093** | **)** |   | **$** | **339,121** |   |
| ** Cost                of goods sold**                                                  |   | ** **                        | **309,093** |   |    | ** ** | **32,319** |        |   | ** ** | **4,007**                    |   |   | ** ** | **(25,768** | **)** |   | ** ** | **319,651** |   |
| **   Gross                margin**                                            |   | ** **                        | **14,284**  |   |    | ** ** | **8,557**  |        |   | ** ** | **(1,046**                   | **)**  |   | ** ** | **(2,325**  | **)** |   | ** ** | **19,470** |   |
|                                                                                         |   |                              |        |   |    |       |       |        |   |       |                         |   |   |       |        |   |   |   |   |   |
| ** Selling                and**** administrative                expense**          |   | ** **                        | **(10,706** | **)**  |    | ** ** | **(2,770** | **)**       |   | ** ** | **(302**                     | **)**  |   | ** ** | **(1,507**  | **)** |   | ** ** | **(15,285** | **)** |
| ** Gain                on legal settlement**                                            |   | ** **                        | **-**       |   |    | ** ** | **-**      |        |   | ** ** | **-**                        |   |   | ** ** | **5,400**   |   |   | ** ** | **5,400** |   |
| ** Operating                income (loss)**** before                pension/OPEB** |   | **$**                             | **3,578**   |   |    | **$**      | **5,787**  |        |   | **$**      | **(1,348**                   | **)**  |   | **$**      | **1,568**   |   |   | **$** | **9,585** |   |

----

*Keystone      Steel & Wire*

|                                                                       |   | **Three                months ended September 30,** |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                       |   | **2006**                                            |   |   | **%                of****sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                       |   | **($                in thousands)**                 |   |
|                                                                       |   |                                                |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                                   |   | $                                                   | 98,578 |   |   |   | 100.0 | % |   | **$** | **96,592** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                          |   |                                                | 93,576 |   |   |   | 94.9 |   |   | ** ** | **92,560** |   |   | ** ** | **95.8** |   |
|   Gross                margin                                    |   |                                                | 5,002  |   |   |   | 5.1 |   |   | ** ** | **4,032** |   |   | ** ** | **4.2** |   |
|                                                                       |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                          |   |                                                | (3,330 | ) |   |   | (3.4 | ) |   | ** ** | **(3,455** | **)** |   | ** ** | **(3.6** | **)** |
|   Operating                income before  pension/OPEB |   | $                                                   | 1,672  |   |   |   | 1.7 | % |   | **$** | **577** |   |   | ** ** | **0.6** | **%** |

|                                                                       |   | **Nine                months ended September 30,** |    |
|----------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                       |   | **2006**                                           |    |   | **%                of****sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                       |   | **($                in thousands)**                |    |
|                                                                       |   |                                               |    |   |   |   |   |   |   |   |   |   |
| Net                sales                                                   |   | $                                                  | 332,767 |   |   |   | 100.0 | % |   | **$** | **323,377** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                          |   |                                               | 311,819 |   |   |   | 93.7 |   |   | ** ** | **309,093** |   |   | ** ** | **95.6** |   |
|   Gross                margin                                    |   |                                               | 20,948  |   |   |   | 6.3 |   |   | ** ** | **14,284** |   |   | ** ** | **4.4** |   |
|                                                                       |   |                                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                          |   |                                               | (10,344 | ) |   |   | (3.1 | ) |   | ** ** | **(10,706** | **)** |   | ** ** | **(3.3** | **)** |
|   Operating                income before  pension/OPEB |   | $                                                  | 10,604  |   |   |   | 3.2 | % |   | **$** | **3,578** |   |   | ** ** | **1.1** | **%** |

----

|                                                                                    |   | **Three                months ended**** September                30,** |   |   | **Nine                months ended**** September                30,** |       |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|------------|
|                                                                                    |   | **2006**                                                                    |   |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
| Sales                volume(000 tons):                                                  |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |
|   Fabricated                wire products                                     |   |                                                                        | 24     |   |                                                                       | ** ** | **20** |   |   |   | 90 |   |   | ** ** | **85** |   |
|   Nails                                                                       |   |                                                                        | 3      |   |                                                                       |       |   | (1) |   |   | 15 |   |   | ** ** | **1** |   |
|   Industrial                wire                                              |   |                                                                        | 20     |   |                                                                       | ** ** | **14** |   |   |   | 59 |   |   | ** ** | **52** |   |
|   Coiled                rebar                                                 |   |                                                                        |   | (1)    |                                                                       | ** ** | **3** |   |   |   |   | (1) |   | ** ** | **11** |   |
|   Wire                rod                                                     |   |                                                                        | 99     |   |                                                                       | ** ** | **106** |   |   |   | 341 |   |   | ** ** | **327** |   |
|   Billets                                                                     |   |                                                                        | 12     |   |                                                                       | ** ** | **3** |   |   |   | 39 |   |   | ** ** | **10** |   |
|      Total                                                     |   |                                                                        | 158    |   |                                                                       | ** ** | **146** |   |   |   | 544 |   |   | ** ** | **486** |   |
| **(1)**Less than 1,000 tons.                                                            |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Average                per-ton selling prices:                                          |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
|   Fabricated                wire products                                     |   | $                                                                           | 1,014  |   |                                                                       | **$**      | **1,110** |   |   | $ | 1,033 |   |   | **$** | **1,082** |   |
|   Nails                                                                       |   |                                                                        | 714    |   |                                                                       | ** ** | **1,076** |   |   |   | 706 |   |   | ** ** | **816** |   |
|   Industrial                wire                                              |   |                                                                        | 741    |   |                                                                       | ** ** | **785** |   |   |   | 722 |   |   | ** ** | **758** |   |
|   Coiled                rebar                                                 |   |                                                                        | 589    |   |                                                                       | ** ** | **584** |   |   |   | 559 |   |   | ** ** | **561** |   |
|   Wire                rod                                                     |   |                                                                        | 517    |   |                                                                       | ** ** | **551** |   |   |   | 495 |   |   | ** ** | **542** |   |
|   Billets                                                                     |   |                                                                        | 375    |   |                                                                       | ** ** | **430** |   |   |   | 369 |   |   | ** ** | **452** |   |
|   All                products                                                 |   |                                                                        | 614    |   |                                                                       | ** ** | **649** |   |   |   | 606 |   |   | ** ** | **658** |   |
|                                                                                    |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Average                per-ton ferrous  scrap                purchase cost    |   | $                                                                           | 216    |   |                                                                       | **$**      | **233** |   |   | $ | 211 |   |   | **$** | **237** |   |
|                                                                                    |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Average                electricity  cost                per kilowatt hour (2) |   | $                                                                           | 0.04   |   |                                                                       | **$**      | **0.04** |   |   | $ | 0.04 |   |   | **$** | **0.05** |   |
|                                                                                    |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Average                natural gas  cost                per therm (2)         |   | $                                                                           | 0.68   |   |                                                                       | **$**      | **0.76** |   |   | $ | 0.80 |   |   | **$** | **0.77** |   |

----

*Engineered      Wire Products*

|                                                                       |   | **Three                months ended September 30,** |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                       |   | **2006**                                            |   |   | **%                of sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                       |   | **($                in thousands)**                 |   |
|                                                                       |   |                                                |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                                   |   | $                                                   | 16,496 |   |   |   | 100.0 | % |   | **$** | **14,806** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                          |   |                                                | 11,910 |   |   |   | 72.2 |   |   | ** ** | **11,551** |   |   | ** ** | **78.0** |   |
|   Gross                margin                                    |   |                                                | 4,586  |   |   |   | 27.8 |   |   | ** ** | **3,255** |   |   | ** ** | **22.0** |   |
|                                                                       |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                          |   |                                                | (994   | ) |   |   | (6.0 | ) |   | ** ** | **(963** | **)** |   | ** ** | **(6.5** | **)** |
|   Operating                income before  pension/OPEB |   | $                                                   | 3,592  |   |   |   | 21.8 | % |   | **$** | **2,292** |   |   | ** ** | **15.5** | **%** |

|                                                                       |   | **Nine                months ended September 30,** |   |
|----------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                       |   | **2006**                                           |   |   | **%                of sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                       |   | **($                in thousands)**                |   |
|                                                                       |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                                   |   | $                                                  | 47,229 |   |   |   | 100.0 | % |   | **$** | **40,876** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                          |   |                                               | 36,043 |   |   |   | 76.3 |   |   | ** ** | **32,319** |   |   | ** ** | **79.1** |   |
|   Gross                margin                                    |   |                                               | 11,186 |   |   |   | 23.7 |   |   | ** ** | **8,557** |   |   | ** ** | **20.9** |   |
|                                                                       |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                          |   |                                               | (3,100 | ) |   |   | (6.6 | ) |   | ** ** | **(2,770** | **)** |   | ** ** | **(6.7** | **)** |
|   Operating                income before  pension/OPEB |   | $                                                  | 8,086  |   |   |   | 17.1 | % |   | **$** | **5,787** |   |   | ** ** | **14.2** | **%** |

----

|                                                                          |   | **Three                  months ended**** September                  30,** |   |   | **Nine                  months ended**** September                  30,** |       |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------|------------|
|                                                                          |   | **2006**                                                                        |   |   | **2007**                                                                       |       |   | **2006** |   |   | **2007** |   |
|                                                                          |   |                                                                            |   |   |                                                                           |       |   |   |   |   |   |   |
| Sales                  volume (000 tons):                                     |   |                                                                            |   |   |                                                                           |       |   |   |   |   |   |   |
|   Welded                  wire reinforcement                        |   |                                                                            | 19     |   |                                                                           | ** ** | **16** |   |   |   | 55 |   |   | ** ** | **45** |   |
|                                                                          |   |                                                                            |   |   |                                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Average                  per-ton selling prices:                              |   |                                                                            |   |   |                                                                           |       |   |   |   |   |   |   |   |   |   |   |
|   Welded                  wire reinforcement                        |   | $                                                                               | 880    |   |                                                                           | **$**      | **912** |   |   | $ | 865 |   |   | **$** | **901** |   |
|                                                                          |   |                                                                            |   |   |                                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Average                  per-ton wire rod purchase                  cost |   | $                                                                               | 515    |   |                                                                           | **$**      | **560** |   |   | $ | 501 |   |   | **$** | **543** |   |

*Calumet*

|                                                               |   | **Three                months ended**** September                30,** |      |   | **Nine                months ended**** September                30,** |       |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|-----------|--------|----------------------------------------------------------------------------|------------|
|                                                               |   | **2007**                                                                    |      |   | **%                of sales**                                              |       |   | **2007** |   |   | **%                of****sales** |   |
|                                                               |   | **($                in thousands)**                                         |      |
|                                                               |   |                                                                        |      |   |                                                                       |       |   |   |   |   |   |   |
| Net                sales                                           |   | **$**                                                                       | **1,646** |   |                                                                       | ** ** | **100.0** | **%** |   | **$** | **2,961** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                  |   | ** **                                                                  | **2,330** |   |                                                                       | ** ** | **141.5** |   |   | ** ** | **4,007** |   |   | ** ** | **135.3** |   |
|   Gross                margin                            |   | ** **                                                                  | **(684**  | **)**  |                                                                       | ** ** | **(41.5** | **)** |   | ** ** | **(1,046** | **)** |   | ** ** | **(35.3** | **)** |
|                                                               |   |                                                                        |      |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                  |   | ** **                                                                  | **(115**  | **)**  |                                                                       | ** ** | **(7.0** | **)** |   | ** ** | **(302** | **)** |   | ** ** | **(10.2** | **)** |
|   Operating                loss before pension/OPEB |   | **$**                                                                       | **(799**  | **)**  |                                                                       | ** ** | **(48.5** | **)%** |   | **$** | **(1,348** | **)** |   | ** ** | **(45.5** | **)%** |

|                                                                    |   | **Three                months ended****September                30, 2007** |    |   | **Nine                months ended****September                30, 2007** |       |
|-------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|---------|--------|---------------------------------------------------------------------------|------------|
|                                                                    |   |                                                                       |    |   |                                                                      |       |
| Sales                volume(000 tons):                                  |   |                                                                       |    |   |                                                                      |       |
|   Bars                and shapes                              |   | ** **                                                                 | **3**   |   |                                                                      | ** ** | **4** |   |
|                                                                    |   |                                                                       |    |   |                                                                      |       |   |   |
| Average                per-ton selling prices:                          |   |                                                                       |    |   |                                                                      |       |   |   |
|   Bars                and shapes                              |   | **$**                                                                      | **621** |   |                                                                      | **$**      | **664** |   |
|                                                                    |   |                                                                       |    |   |                                                                      |       |   |   |
| Average                per-ton billet purchase                cost |   | **$**                                                                      | **412** |   |                                                                      | **$**      | **433** |   |

----

**General      and Administrative Expense**

**Pension      Credits**

**Gain      on Legal Settlement**

**Interest      Expense**

|                                           |   | **Three                months ended**** September                30,** |   |   | **Nine                months ended**** September                30,** |       |
|------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------|------------|
|                                           |   | **2006**                                                                    |   |   | **2007**                                                                   |       |   | **2006** |   |   | **2007** |   |
|                                           |   | **($                in thousands)**                                         |   |
|                                           |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |
| Average                debt balance            |   | $                                                                           | 87,046 |   |                                                                       | **$**      | **98,405** |   |   | $ | 93,436 |   |   | **$** | **98,601** |   |
|                                           |   |                                                                        |   |   |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Weighted                average interest rates |   |                                                                        | 5.2    | %      |                                                                       | ** ** | **6.9** | **%** |   |   | 5.2 | % |   | ** ** | **6.2** | **%** |

**Gain      on Cancellation of Debt**

----

**Provision      for Income Taxes**

**LIQUIDITY      AND CAPITAL RESOURCES**

**Working      Capital and Borrowing Availability**

|                                     |   | **December                31,**   |   |   | **September                30,** |       |
|------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------|------------|
|                                     |   | **2006**                          |   |   | **2007**                         |       |
|                                     |   | **(In                thousands)** |   |
|                                     |   |                              |   |   |                             |       |
| Working                capital           |   | $                                 | 31,776 |   |                             | **$**      | **28,426** |   |
| Revolving                credit facility |   |                              | 17,734 |   |                             | ** ** | **45,801** |   |
|                                     |   |                              |   |   |                             |       |   |   |
| Borrowing                availability    |   |                              | 23,697 |   |                             | ** ** | **12,898** |   |

----

**Historical      Cash Flows**

*Operating      Activities*

| ·   | lower                operating income before pension/OPEB in 2007 of $7.6                million; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | lower                reorganization costs of $3.4 million paid in                2007; |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | higher                net cash used due to relative changes in our accounts receivable                in 2007                of $8.8 million primarily due to an abnormally high accounts receivable                balance at December 31, 2005 as a result of exceptional demand during                the                third and fourth quarters of 2005 (the seasonality of our business                generally results in lower accounts receivable at the end of each                year); |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | payment                to SWC’s pre-petition creditors of $3.7 million in 2007;                and |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | cash                proceeds of $4.0 million in 2006 for an insurance settlement that                was                recorded as a liability subject to                compromise. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Investing      Activities*

*Financing      Activities*

----

**Commitments      and Contingencies**

**Pension      and Other Postretirement Obligations**

**County      Term Loan Amendment**

**Income      Taxes**

**Off-balance      Sheet Financing Arrangements**

----

**Liquidity      Outlook**

----

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

**ITEM      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET      RISK**

**ITEM      4.  CONTROLS AND PROCEDURES**

*Evaluation      of Disclosure Controls and Procedures*

*Internal      Control Over Financial Reporting*

*Changes      in Internal Control Over Financial Reporting*

----

**PART      II.  OTHER INFORMATION**

**ITEM      1. Legal Proceedings.**

**ITEM      1A. Risk Factors.**

**ITEM      6. Exhibits.**

| (a) | We                have retained a signed original of any exhibit listed below that                contains                signatures, and we will provide any such exhibit to the Commission                or its                staff upon request.  The following exhibit is included                herein: |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Certification. |
|--------|------|----------------|

|   | 31.2 | Certification. |
|--------|------|----------------|

|   | 32.1 | Certification. |
|--------|------|----------------|

----

**SIGNATURES**

| Date:  November                13, 2007  | By:/s/                Bert E. Downing,                Jr.                                                                                                               Bert                E. Downing, Jr.Vice                President, Chief Financial Officer,Corporate                Controller and Treasurer |
|---------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----