**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-Q**

| **For                the quarter ended June 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; June 30, 2007 (unaudited)                                                                                                             | 3                    |
|                                                                                                                                                                                                                                            |                 |
| Condensed                Consolidated Statements of Operations (unaudited) -  Three                months and six months ended June 30, 2006 (as adjusted);  Three                months and six months ended June 30, 2007 | 5                    |
|                                                                                                                                                                                                                                            |                 |
| Condensed                Consolidated Statements of Cash Flows (unaudited)–  Six                months ended June 30, 2006 (as adjusted);  Six                months ended June 30, 2007                              | 6                    |
|                                                                                                                                                                                                                                            |                 |
| Condensed                Consolidated Statement of Stockholders' Equity  and                Comprehensive Income -  Six months ended June 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                                               | 18                   |
|                                                                                                                                                                                                                                            |                 |
| Item                3.                     Quantitative and Qualitative Disclosures About Market Risk                                                                                                                  | 34                   |
|                                                                                                                                                                                                                                            |                 |
| Item                4.      Controls                and Procedures                                                                                                                                                     | 34                   |
|                                                                                                                                                                                                                                            |                 |
| **PART                II.OTHER INFORMATION**                                                                                                                                                                                                    |                 |
|                                                                                                                                                                                                                                            |                 |
| Item                1.                      Legal Proceedings                                                                                                                                                     | 35                   |
|                                                                                                                                                                                                                                            |                 |
| Item                1A.    Risk                Factors                                                                                                                                                                      | 35                   |
|                                                                                                                                                                                                                                            |                 |
| Item                4.               Submission                of Matters to a Vote of Security Holders                                                              | 35                   |
|                                                                                                                                                                                                                                            |                 |
| Item                6.                      Exhibits                                                                                                                                                              | 35                   |
|                                                                                                                                                                                                                                            |                 |
| Items                2, 3 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** |    |   | **June                30,**** 2007** |       |
|--------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|-------------------------------------------|------------|
|                                                                     |   |                                          |    |   | **(unaudited)**                           |       |
|                                                                     |   |                                          |    |   |                                      |       |
| Current                assets:                                           |   |                                          |    |   |                                      |       |
|   Accounts                receivable, net                      |   | $                                             | 31,661  |   |                                      | **$**      | **63,994** |   |
|   Inventories,                net                              |   |                                          | 61,343  |   |                                      | ** ** | **53,810** |   |
|   Restricted                investments                        |   |                                          | 1,067   |   |                                      | ** ** | **1,095** |   |
|   Deferred                income taxes                         |   |                                          | 12,571  |   |                                      | ** ** | **12,571** |   |
|   Legal                settlement receivable                   |   |                                          | -       |   |                                      | ** ** | **5,400** |   |
|   Prepaid                expenses and other                    |   |                                          | 3,516   |   |                                      | ** ** | **1,755** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
|     Total                current assets              |   |                                          | 110,158 |   |                                      | ** ** | **138,625** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
| Property,                plant and equipment:                            |   |                                          |    |   |                                      |       |   |   |
|   Land                                                         |   |                                          | 1,193   |   |                                      | ** ** | **1,369** |   |
|   Buildings                and improvements                    |   |                                          | 56,953  |   |                                      | ** ** | **61,132** |   |
|   Machinery                and equipment                       |   |                                          | 300,301 |   |                                      | ** ** | **315,183** |   |
|   Construction                in progress                      |   |                                          | 12,563  |   |                                      | ** ** | **6,004** |   |
|                                                                     |   |                                          | 371,010 |   |                                      | ** ** | **383,688** |   |
|   Less                accumulated depreciation                 |   |                                          | 282,315 |   |                                      | ** ** | **287,983** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
|     Net                property, plant and equipment |   |                                          | 88,695  |   |                                      | ** ** | **95,705** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
| Other                assets:                                             |   |                                          |    |   |                                      |       |   |   |
|   Restricted                investments                        |   |                                          | 6,079   |   |                                      | ** ** | **6,202** |   |
|   Pension                asset                                 |   |                                          | 557,279 |   |                                      | ** ** | **590,832** |   |
|   Other,                net                                    |   |                                          | 1,725   |   |                                      | ** ** | **1,737** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
|     Total                other assets                |   |                                          | 565,083 |   |                                      | ** ** | **598,771** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |
|     Total                assets                      |   | $                                             | 763,936 |   |                                      | **$**      | **833,101** |   |
|                                                                     |   |                                          |    |   |                                      |       |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS (CONTINUED)**

**(In      thousands)**

| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                     |   | **December                31,**** 2006** |    |   | **June                30,**** 2007** |       |
|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|-------------------------------------------|------------|
|                                                                                                        |   |                                          |    |   | **(unaudited)**                           |       |
|                                                                                                        |   |                                          |    |   |                                      |       |
| Current                liabilities:                                                                         |   |                                          |    |   |                                      |       |
|   Notes                payable and current maturities of  long-term                debt |   | $                                             | 43,699  |   |                                      | **$**      | **78,612** |   |
|   Accounts                payable                                                                 |   |                                          | 9,947   |   |                                      | ** ** | **9,361** |   |
|   Accrued                other postretirement benefit (OPEB) cost                                 |   |                                          | 4,157   |   |                                      | ** ** | **4,157** |   |
|   Other                accrued liabilities                                                        |   |                                          | 20,579  |   |                                      | ** ** | **17,682** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
|     Total                current liabilities                                            |   |                                          | 78,382  |   |                                      | ** ** | **109,812** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
| Noncurrent                liabilities:                                                                      |   |                                          |    |   |                                      |       |   |   |
|   Long-term                debt                                                                   |   |                                          | 32,749  |   |                                      | ** ** | **33,227** |   |
|   Accrued                OPEB cost                                                                |   |                                          | 31,005  |   |                                      | ** ** | **30,272** |   |
|   Deferred                income taxes                                                            |   |                                          | 197,712 |   |                                      | ** ** | **212,014** |   |
|   Other                                                                                           |   |                                          | 6,414   |   |                                      | ** ** | **6,357** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
|     Total                noncurrent liabilities                                         |   |                                          | 267,880 |   |                                      | ** ** | **281,870** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
| Liabilities                subject to compromise                                                            |   |                                          | 14,012  |   |                                      | ** ** | **13,956** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
| Stockholders'                equity:                                                                        |   |                                          |    |   |                                      |       |   |   |
|   Common                stock                                                                     |   |                                          | 100     |   |                                      | ** ** | **100** |   |
|   Additional                paid-in capital                                                       |   |                                          | 75,423  |   |                                      | ** ** | **75,423** |   |
|   Accumulated                other comprehensive income                                           |   |                                          | 278,399 |   |                                      | ** ** | **270,495** |   |
|   Retained                earnings                                                                |   |                                          | 49,740  |   |                                      | ** ** | **81,445** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
|     Total                stockholders' equity                                           |   |                                          | 403,662 |   |                                      | ** ** | **427,463** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |
|     Total                liabilities and stockholders’ equity                     |   | $                                             | 763,936 |   |                                      | **$**      | **833,101** |   |
|                                                                                                        |   |                                          |    |   |                                      |       |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

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

|                                                                |   | **Three                months ended**** June                30,** |    |   | **Six                months ended**** June                30,** |       |
|---------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------|------------|
|                                                                |   | **2006**                                                               |    |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                                                |   | **(as                adjusted)**                                       |    |   |                                                                 |       |   | **(as                adjusted)** |   |   |   |   |
|                                                                |   | **(unaudited)**                                                        |    |   | **(unaudited)**                                                      |       |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |
| Net                sales                                            |   | $                                                                      | 129,095 |   |                                                                 | **$**      | **122,665** |   |   | $ | 248,210 |   |   | **$** | **235,763** |   |
| Cost                of goods sold                                   |   |                                                                   | 120,304 |   |                                                                 | ** ** | **115,997** |   |   |   | 225,336 |   |   | ** ** | **222,728** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Gross                margin                             |   |                                                                   | 8,791   |   |                                                                 | ** ** | **6,668** |   |   |   | 22,874 |   |   | ** ** | **13,035** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Other                operating income (expense):                    |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Selling                expense                          |   |                                                                   | (1,687  | )      |                                                                 | ** ** | **(1,753** | **)** |   |   | (3,478 | ) |   | ** ** | **(3,431** | **)** |
|   General                and administrative expense       |   |                                                                   | (2,899  | )      |                                                                 | ** ** | **(3,010** | **)** |   |   | (5,657 | ) |   | ** ** | **(5,868** | **)** |
|   Defined                benefit pension credit           |   |                                                                   | 12,165  |   |                                                                 | ** ** | **20,379** |   |   |   | 24,326 |   |   | ** ** | **40,757** |   |
|   OPEB                credit                              |   |                                                                   | 2,100   |   |                                                                 | ** ** | **2,201** |   |   |   | 4,200 |   |   | ** ** | **4,401** |   |
|   Gain                on legal settlement                 |   |                                                                   | -       |   |                                                                 | ** ** | **5,400** |   |   |   | - |   |   | ** ** | **5,400** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|     Total                other operating income |   |                                                                   | 9,679   |   |                                                                 | ** ** | **23,217** |   |   |   | 19,391 |   |   | ** ** | **41,259** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                     |   |                                                                   | 18,470  |   |                                                                 | ** ** | **29,885** |   |   |   | 42,265 |   |   | ** ** | **54,294** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Nonoperating                income (expense):                       |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Corporate                income (expense)               |   |                                                                   | 205     |   |                                                                 | ** ** | **(787** | **)** |   |   | (65 | ) |   | ** ** | **(965** | **)** |
|   Interest                expense                         |   |                                                                   | (1,337  | )      |                                                                 | ** ** | **(1,792** | **)** |   |   | (2,539 | ) |   | ** ** | **(2,989** | **)** |
|   Interest                and other income                |   |                                                                   | 357     |   |                                                                 | ** ** | **354** |   |   |   | 359 |   |   | ** ** | **552** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|     Total                nonoperating expense   |   |                                                                   | (775    | )      |                                                                 | ** ** | **(2,225** | **)** |   |   | (2,245 | ) |   | ** ** | **(3,402** | **)** |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Income                before income taxes               |   |                                                                   | 17,695  |   |                                                                 | ** ** | **27,660** |   |   |   | 40,020 |   |   | ** ** | **50,892** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Provision                for income taxes                           |   |                                                                   | 4,278   |   |                                                                 | ** ** | **10,419** |   |   |   | 4,367 |   |   | ** ** | **19,187** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Net                income                               |   | $                                                                      | 13,417  |   |                                                                 | **$**      | **17,241** |   |   | $ | 35,653 |   |   | **$** | **31,705** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Basic                and diluted income per share                   |   | $                                                                      | 1.34    |   |                                                                 | **$**      | **1.72** |   |   | $ | 3.57 |   |   | **$** | **3.17** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| 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)**

|                                                                                                                                   |   | **Six                months ended****June                30,** |    |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|---------|
|                                                                                                                                   |   | **2006**                                                       |    |   | **2007** |   |
|                                                                                                                                   |   | **(as                adjusted)**                               |    |   |   |   |
|                                                                                                                                   |   | **(unaudited)**                                                |    |
|                                                                                                                                   |   |                                                           |    |   |   |   |
| Cash                flows from operating activities:                                                                                   |   |                                                           |    |   |   |   |
|   Net                income                                                                                                  |   | $                                                              | 35,653  |   |   | **$** | **31,705** |   |
|   Depreciation                and amortization                                                                               |   |                                                           | 7,699   |   |   | ** ** | **7,847** |   |
|   Deferred                income taxes                                                                                       |   |                                                           | 3,230   |   |   | ** ** | **19,085** |   |
|   Defined                benefit pension credit                                                                              |   |                                                           | (24,326 | ) |   | ** ** | **(40,757** | **)** |
|   OPEB                credit                                                                                                 |   |                                                           | (4,200  | ) |   | ** ** | **(4,401** | **)** |
|   OPEB                payments                                                                                               |   |                                                           | (1,999  | ) |   | ** ** | **(1,814** | **)** |
|   Reorganization                costs accrued                                                                                |   |                                                           | 337     |   |   | ** ** | **112** |   |
|   Reorganization                costs paid                                                                                   |   |                                                           | (3,397  | ) |   | ** ** | **(100** | **)** |
|   Other,                net                                                                                                  |   |                                                           | 421     |   |   | ** ** | **350** |   |
|   Change                in assets and liabilities (net of acquisition):                                                      |   |                                                           |    |   |   |   |   |   |
|     Accounts                receivable                                                                             |   |                                                           | (11,903 | ) |   | ** ** | **(32,417** | **)** |
|     Inventories                                                                                                    |   |                                                           | 11,521  |   |   | ** ** | **10,292** |   |
|     Accounts                payable                                                                                |   |                                                           | 729     |   |   | ** ** | **(587** | **)** |
|     Other,                net                                                                                      |   |                                                           | 2,649   |   |   | ** ** | **(6,648** | **)** |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
|       Net                cash provided by (used in) operating  activities                      |   |                                                           | 16,414  |   |   | ** ** | **(17,333** | **)** |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
| Cash                flows from investing activities:                                                                                   |   |                                                           |    |   |   |   |   |   |
|   Capital                expenditures                                                                                        |   |                                                           | (6,194  | ) |   | ** ** | **(11,317** | **)** |
|   Acquisition                of CaluMetals’ assets                                                                     |   | ** **                                                     | **-**   |   |   | ** ** | **(6,240** | **)** |
|   Collection                of notes receivable                                                                              |   |                                                           | 75      |   |   | ** ** | **-** |   |
|   Restricted                investments, net                                                                                 |   |                                                           | (2,356  | ) |   | ** ** | **(151** | **)** |
|   Other,                net                                                                                                  |   |                                                           | (58     | ) |   | ** ** | **646** |   |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
|       Net                cash used in investing activities                                               |   |                                                           | (8,533  | ) |   | ** ** | **(17,062** | **)** |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
| Cash                flows from financing activities:                                                                                   |   |                                                           |    |   |   |   |   |   |
|   Revolving                credit facilities, net                                                                            |   |                                                           | (5,427  | ) |   | ** ** | **44,710** |   |
|   Other                notes payable and long-term debt:                                                                     |   |                                                           |    |   |   |   |   |   |
|     Additions                                                                                                      |   |                                                           | 306     |   |   | ** ** | **4,065** |   |
|     Principal                payments                                                                              |   |                                                           | (2,745  | ) |   | ** ** | **(14,165** | **)** |
|   Deferred                financing costs paid                                                                               |   |                                                           | (15     | ) |   | ** ** | **(215** | **)** |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
|       Net                cash provided by (used in) financing activities                                 |   |                                                           | (7,881  | ) |   | ** ** | **34,395** |   |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
| 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                                                             |   | $                                                              | 2,139   |   |   | **$** | **2,793** |   |
|     Income                taxes, net                                                                               |   |                                                           | 343     |   |   | ** ** | **322** |   |
|                                                                                                                                   |   |                                                           |    |   |   |   |   |   |
|   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**

**Six      months ended June 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                                                       |   |                                  | -      |   |                      |   | -      |                                      |   |   | -                                         |   |   |            | -       |   |         |   | -      |              |   |   | 31,705 |   |   |   | 31,705 |   |   | $ | 31,705 |   |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                of actuarial (gains)   losses, net of tax |   |                                  | -      |   |                      |   | -      |                                      |   |   | -                                         |   |   |            | (4,870  | )      |         |   | 2,081  |              |   |   | - |   |   |   | (2,789 | ) |   |   | (2,789 | ) |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                of prior service cost (credit), net of tax     |   |                                  | -      |   |                      |   | -      |                                      |   |   | -                                         |   |   |            | 382     |   |         |   | (5,497 | )                 |   |   | - |   |   |   | (5,115 | ) |   |   | (5,115 | ) |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                – June 30, 2007                                    |   |                                  | 10,000 |   |                      | $      | 100    |                                      |   | $      | 75,423                                    |   |   | $               | 217,714 |   |         | $      | 52,781 |              |   | $ | 81,445 |   |   | $ | 427,463 |   |   |   |   |   |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                             |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   | $ | 23,801 |   |
|                                                                            |   |                                  |   |   |                      |   |   |                                      |   |   |                                      |   |   |            |    |   |         |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |

----

**KEYSTONE      CONSOLIDATED INDUSTRIES, INC.**

**AND      SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June      30, 2007**

**(unaudited)**

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

----

**Note      2 - Acquisition**

**Note      3 – 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; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Keystone                Wire Products (“KWP”), located in Sherman, Texas, manufactures and sells                fabricated wire products to agricultural, industrial, construction,                commercial, original equipment manufacturers and retail consumer                markets;                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**** June                30,** |    |   | **Six                months ended**** June                30,** |       |
|---------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------|------------|
|                                                                |   | **2006**                                                               |    |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                                                |   | **(as                adjusted)**                                       |    |   |                                                                 |       |   | **(as                adjusted)** |   |   |   |   |
|                                                                |   | **(In                thousands)**                                      |    |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |
| Net                sales:                                           |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |
|   KSW                                                     |   | $                                                                      | 118,805 |   |                                                                 | **$**      | **119,867** |   |   | $ | 236,485 |   |   | **$** | **232,484** |   |
|   EWP                                                     |   |                                                                   | 18,115  |   |                                                                 | ** ** | **15,093** |   |   |   | 30,733 |   |   | ** ** | **26,070** |   |
|   KWP                                                     |   |                                                                   | 4,883   |   |                                                                 | ** ** | **3,828** |   |   |   | 9,805 |   |   | ** ** | **7,434** |   |
|   Calumet                                                 |   |                                                                   | -       |   |                                                                 | ** ** | **1,315** |   |   |   | - |   |   | ** ** | **1,315** |   |
|   Elimination                of intersegment sales:       |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|     KSW                                         |   |                                                                   | (9,314  | )      |                                                                 | ** ** | **(13,613** | **)** |   |   | (21,904 | ) |   | ** ** | **(24,137** | **)** |
|     KWP                                         |   |                                                                   | (3,394  | )      |                                                                 | ** ** | **(3,825** | **)** |   |   | (6,909 | ) |   | ** ** | **(7,403** | **)** |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|      Total                net sales        |   | $                                                                      | 129,095 |   |                                                                 | **$**      | **122,665** |   |   | $ | 248,210 |   |   | **$** | **235,763** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Operating                income (loss):                             |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   KSW                                                     |   | $                                                                      | 794     |   |                                                                 | **$**      | **1,947** |   |   | $ | 8,884 |   |   | **$** | **2,913** |   |
|   EWP                                                     |   |                                                                   | 3,584   |   |                                                                 | ** ** | **2,499** |   |   |   | 4,495 |   |   | ** ** | **3,495** |   |
|   KWP                                                     |   |                                                                   | 106     |   |                                                                 | ** ** | **46** |   |   |   | 49 |   |   | ** ** | **88** |   |
|   Calumet                                                 |   |                                                                   | -       |   |                                                                 | ** ** | **(464** | **)** |   |   | - |   |   | ** ** | **(549** | **)** |
|   Pension                credit                           |   |                                                                   | 12,165  |   |                                                                 | ** ** | **20,379** |   |   |   | 24,326 |   |   | ** ** | **40,757** |   |
|   OPEB                credit                              |   |                                                                   | 2,100   |   |                                                                 | ** ** | **2,201** |   |   |   | 4,200 |   |   | ** ** | **4,401** |   |
|   Gain                on legal settlement                 |   |                                                                   | -       |   |                                                                 | ** ** | **5,400** |   |   |   | - |   |   | ** ** | **5,400** |   |
|   Allocation                differences (1)               |   |                                                                   | (279    | )      |                                                                 | ** ** | **(2,123** | **)** |   |   | 311 |   |   | ** ** | **(2,211** | **)** |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|      Total                operating income |   |                                                                   | 18,470  |   |                                                                 | ** ** | **29,885** |   |   |   | 42,265 |   |   | ** ** | **54,294** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Nonoperating                income (expense):                       |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Corporate                income (expense)               |   |                                                                   | 205     |   |                                                                 | ** ** | **(787** | **)** |   |   | (65 | ) |   | ** ** | **(965** | **)** |
|   Interest                expense                         |   |                                                                   | (1,337  | )      |                                                                 | ** ** | **(1,792** | **)** |   |   | (2,539 | ) |   | ** ** | **(2,989** | **)** |
|   Interest                and other income                |   |                                                                   | 357     |   |                                                                 | ** ** | **354** |   |   |   | 359 |   |   | ** ** | **552** |   |
|                                                                |   |                                                                   |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Income                before income taxes               |   | $                                                                      | 17,695  |   |                                                                 | **$**      | **27,660** |   |   | $ | 40,020 |   |   | **$** | **50,892** |   |

**Note      4 – Inventories, net:**

|                                                     |   | **December                31,**   |   |   | **June                30,** |       |
|----------------------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------|------------|
|                                                     |   | **2006**                          |   |   | **2007**                    |       |
|                                                     |   | **(In                thousands)** |   |
|                                                     |   |                              |   |   |                        |       |
|   Raw                materials                 |   | $                                 | 9,735  |   |                        | **$**      | **10,650** |   |
|   Work                in process               |   |                              | 25,391 |   |                        | ** ** | **18,032** |   |
|   Finished                products             |   |                              | 26,513 |   |                        | ** ** | **25,340** |   |
|   Supplies                                     |   |                              | 18,283 |   |                        | ** ** | **20,530** |   |
|                                                     |   |                              |   |   |                        |       |   |   |
|     Inventory                at FIFO |   |                              | 79,922 |   |                        | ** ** | **74,552** |   |
|     Less                LIFO reserve |   |                              | 18,579 |   |                        | ** ** | **20,742** |   |
|                                                     |   |                              |   |   |                        |       |   |   |
|       Total                |   | $                                 | 61,343 |   |                        | **$**      | **53,810** |   |
|                                                     |   |                              |   |   |                        |       |   |   |

----

**Note      5 - Notes payable and long-term debt:**

|                                                           |   | **December                31,**   |   |   | **June                30,** |       |
|----------------------------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------|------------|
|                                                           |   | **2006**                          |   |   | **2007**                    |       |
|                                                           |   | **(In                thousands)** |   |
|                                                           |   |                              |   |   |                        |       |
| Wachovia                revolving credit facility              |   | $                                 | 17,734 |   |                        | **$**      | **62,444** |   |
| 8%                Notes                                        |   |                              | 25,740 |   |                        | ** ** | **17,424** |   |
| UC                Note                                         |   |                              | 5,465  |   |                        | ** ** | **3,140** |   |
| Term                loans:                                     |   |                              |   |   |                        |       |   |   |
|   Wachovia                                           |   |                              | 17,390 |   |                        | ** ** | **18,952** |   |
|   County                                             |   |                              | 10,000 |   |                        | ** ** | **9,000** |   |
| Other                                                          |   |                              | 119    |   |                        | ** ** | **879** |   |
|                                                           |   |                              |   |   |                        |       |   |   |
|     Total                debt              |   |                              | 76,448 |   |                        | ** ** | **111,839** |   |
|     Less                current maturities |   |                              | 43,699 |   |                        | ** ** | **78,612** |   |
|                                                           |   |                              |   |   |                        |       |   |   |
|     Total                long-term debt    |   | $                                 | 32,749 |   |                        | **$**      | **33,227** |   |

**Note      6 - Environmental matters and other commitments and      contingencies:**

**.**

----

|                                                             |   | **Six                months ended**** June                30,** |       |
|------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|
|                                                             |   | **(In                thousands)**                                    |       |
|                                                             |   |                                                                 |       |
| Balance                at December 31, 2006                      |   | **$**                                                                | **13,252** |   |
|   Expense                                              |   | ** **                                                           | **-**      |   |
|   Payments                                             |   | ** **                                                           | **(80**    | **)** |
|                                                             |   |                                                                 |       |   |
| Balance                at June 30, 2007                          |   | **$**                                                                | **13,172** |   |
|                                                             |   |                                                                 |       |   |
| Amounts                classified at June 30, 2007 as:           |   |                                                                 |       |   |
|   Current                accrued environmental cost    |   | **$**                                                                | **218**    |   |
|   Noncurrent                accrued environmental cost |   | ** **                                                           | **4,521**  |   |
|   Liabilities                subject to compromise     |   | ** **                                                           | **8,433**  |   |
|                                                             |   |                                                                 |       |   |
| Total                                                            |   | **$**                                                                | **13,172** |   |

----

*Environmental      liabilities subject to compromise at June 30, 2007*

*Open      sites at June 30, 2007 that are no longer subject to      compromise*

----

*Other      current litigation*

----

**Note      7 - Other accrued liabilities:**

|                                                                  |   | **December                31,**   |   |   | **June                30,** |       |
|-----------------------------------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------|------------|
|                                                                  |   | **2006**                          |   |   | **2007**                    |       |
|                                                                  |   | **(In                thousands)** |   |
| Current:                                                              |   |                              |   |   |                        |       |
|   Employee                benefits                          |   | $                                 | 10,714 |   |                        | **$**      | **9,072** |   |
|   Self                insurance                             |   |                              | 5,492  |   |                        | ** ** | **4,093** |   |
|   Pre-petition                unsecured creditor settlement |   |                              | 985    |   |                        | ** ** | **982** |   |
|   Environmental                                             |   |                              | 250    |   |                        | ** ** | **218** |   |
|   Other                                                     |   |                              | 3,138  |   |                        | ** ** | **3,317** |   |
|                                                                  |   |                              |   |   |                        |       |   |   |
| Total                                                                 |   | $                                 | 20,579 |   |                        | **$**      | **17,682** |   |
|                                                                  |   |                              |   |   |                        |       |   |   |
| Noncurrent:                                                           |   |                              |   |   |                        |       |   |   |
|   Environmental                                             |   | $                                 | 4,521  |   |                        | **$**      | **4,521** |   |
|   Workers                compensation                       |   |                              | 1,785  |   |                        | ** ** | **1,714** |   |
|   Other                                                     |   |                              | 108    |   |                        | ** ** | **122** |   |
|                                                                  |   |                              |   |   |                        |       |   |   |
| Total                                                                 |   | $                                 | 6,414  |   |                        | **$**      | **6,357** |   |

**Note      8 – Liabilities subject to compromise:**

|                                            |   | **December                31,**   |   |   | **June                30,** |       |
|-------------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------|------------|
|                                            |   | **2006**                          |   |   | **2007**                    |       |
|                                            |   | **(In                thousands)** |   |
|                                            |   |                              |   |
| Environmental                                   |   | $                                 | 8,481  |   |                        | **$**      | **8,433** |   |
| Accounts                payable                 |   |                              | 789    |   |                        | ** ** | **789** |   |
| Disposition                of former facilities |   |                              | 442    |   |                        | ** ** | **468** |   |
| Other                                           |   |                              | 4,300  |   |                        | ** ** | **4,266** |   |
|                                            |   |                              |   |   |                        |       |   |   |
| Total                                           |   | $                                 | 14,012 |   |                        | **$**      | **13,956** |   |

**Note      9 – Employee benefit plans:**

|                                                                                             |   | **Three                months ended****                 June 30,** |    |   | **Six                months ended**** June                30,** |       |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------|------------|
|                                                                                             |   | **2006**                                                                |    |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                                                                             |   | **(In                thousands)**                                       |    |
| Service                cost                                                                      |   | $                                                                       | 959     |   |                                                                 | **$**      | **969** |   |   | $ | 1,918 |   |   | **$** | **1,938** |   |
| Interest                cost                                                                     |   |                                                                    | 5,106   |   |                                                                 | ** ** | **5,267** |   |   |   | 10,212 |   |   | ** ** | **10,534** |   |
| Expected                return on plan assets                                                    |   |                                                                    | (16,863 | )      |                                                                 | ** ** | **(23,013** | **)** |   |   | (33,726 | ) |   | ** ** | **(46,025** | **)** |
| Amortization                of accumulated other  comprehensive                income: |   |                                                                    |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Prior                service cost                                                    |   |                                                                    | 227     |   |                                                                 | ** ** | **306** |   |   |   | 454 |   |   | ** ** | **612** |   |
|   Actuarial                gains                                                       |   |                                                                    | (1,594  | )      |                                                                 | ** ** | **(3,908** | **)** |   |   | (3,184 | ) |   | ** ** | **(7,816** | **)** |
|                                                                                             |   |                                                                    |    |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                            |   | $                                                                       | (12,165 | )      |                                                                 | **$**      | **(20,379** | **)** |   | $ | (24,326 | ) |   | **$** | **(40,757** | **)** |

----

|                                                                                             |   | **Three                months ended**** June                30,** |   |   | **Six                months ended**** June                30,** |       |
|--------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------|------------|
|                                                                                             |   | **2006**                                                               |   |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                                                                             |   | **(In                thousands)**                                      |   |
|                                                                                             |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |
| Service                cost                                                                      |   | $                                                                      | 63     |   |                                                                 | **$**      | **60** |   |   | $ | 126 |   |   | **$** | **121** |   |
| Interest                cost                                                                     |   |                                                                   | 495    |   |                                                                 | ** ** | **480** |   |   |   | 990 |   |   | ** ** | **960** |   |
| Expected                return on plan assets                                                    |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Amortization                of accumulated other  comprehensive                income: |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Prior                service credit                                                  |   |                                                                   | (4,327 | )      |                                                                 | ** ** | **(4,411** | **)** |   |   | (8,654 | ) |   | ** ** | **(8,822** | **)** |
|   Actuarial                losses                                                      |   |                                                                   | 1,669  |   |                                                                 | ** ** | **1,670** |   |   |   | 3,338 |   |   | ** ** | **3,340** |   |
|                                                                                             |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                            |   | $                                                                      | (2,100 | )      |                                                                 | **$**      | **(2,201** | **)** |   | $ | (4,200 | ) |   | **$** | **(4,401** | **)** |

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

|                                                     |   | **Six                months ended**** June                30,** |    |
|----------------------------------------------------------|--------|----------------------------------------------------------------------|---------|
|                                                     |   | **2006**                                                             |    |   | **2007** |   |
|                                                     |   | **(as                adjusted)**                                     |    |   |   |   |
|                                                     |   | **(In                thousands)**                                    |    |
|                                                     |   |                                                                 |    |   |   |   |
| Expected                tax provision, at statutory rate |   | $                                                                    | 14,007  |   |   | **$** | **17,811** |   |
| U.S.                state income taxes, net              |   |                                                                 | 1,388   |   |   | ** ** | **1,345** |   |
| Deferred                tax asset valuation allowance    |   |                                                                 | (10,675 | ) |   | ** ** | **-** |   |
| Other,                net                                |   |                                                                 | (353    | ) |   | ** ** | **31** |   |
|                                                     |   |                                                                 |    |   |   |   |   |   |
| Provision                for income taxes                |   | $                                                                    | 4,367   |   |   | **$** | **19,187** |   |
|                                                     |   |                                                                 |    |   |   |   |   |   |

**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*

----

**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 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**** June                30,** |    |   | **Six                months ended**** June                30,** |       |
|                                                               |   | **2006**                                                               |    |   | **2007**                                                             |       |        | **2006** |   |   | **2007** |   |
|                                                               |   | **(In                thousands)**                                      |    |
| Operating                income as reported                        |   | $                                                                      | 18,470  |   |                                                                 | **$**      | **29,885**  |     |   | $      | 42,265   |   |   | **$** | **54,294** |   |
|   Defined                benefit pension credit          |   |                                                                   | (12,165 | )      |                                                                 | ** ** | **(20,379** | **)**    |   |   | (24,326  | )      |   | ** ** | **(40,757** | **)** |
|   OPEB                credit                             |   |                                                                   | (2,100  | )      |                                                                 | ** ** | **(2,201**  | **)**    |   |   | (4,200   | )      |   | ** ** | **(4,401** | **)** |
| Operating                income before pension and  OPEB |   | $                                                                      | 4,205   |   |                                                                 | **$**      | **7,305**   |     |   | $      | 13,739   |   |   | **$** | **9,136** |   |

| ·   | legal                settlement with a former insurance carrier of $5.4                million; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | higher                product selling prices; |
|--------------------|-----------------------------------------------|

| ·   | lower                shipment volumes of billets primarily resulting from exceptional                shipment                volumes in 2006 due to competitor labor disputes and equipment issues                and                the use of more of our billets internally at                Calumet; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                shipment volumes of welded wire reinforcement due to a decline in                the                construction of new homes; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                shipment volumes of industrial wire due, in part, to lower market                demand                as a result of both increased imported finished products that adversely                affected our customers’ sales volumes and our increased selling                prices; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increased                costs for ferrous scrap; |
|--------------------|---------------------------------------------------|

| ·   | increased                costs for zinc; |
|--------------------|------------------------------------------|

| ·   | increased                costs for electricity due to deregulation on January 1, 2007, following                a                ten year rate freeze in Illinois (where our largest manufacturing                facility                is located); and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increased                costs for natural gas. |
|--------------------|-------------------------------------------------|

----

| ·   | lower                shipment volumes of billets primarily due to exceptional shipment                volumes                in 2006 as described above and the use of more of our billets internally                at Calumet; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                shipment volumes of welded wire reinforcement due to a decline in                the                construction of new homes; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                shipment volumes of wire rod primarily due to unusually cold weather                which                impeded our ability to ship by barge during the first quarter of                2007 and                exceptionally high demand during 2006 due to competitor production                problems that were resolved during the fourth quarter of 2006, partially                offset by lower quantities of import product available for sale and                higher                prices for import product; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increased                costs for ferrous scrap; |
|--------------------|---------------------------------------------------|

| ·   | increased                costs for electricity due to deregulation as described                above; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | increased                costs for zinc; |
|--------------------|------------------------------------------|

| ·   | higher                product selling prices primarily in reaction to our increased costs                for                ferrous scrap; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                costs for natural gas; and |
|--------------------|-------------------------------------------------|

| ·   | the                legal settlement with a former insurance carrier of $5.4                million. |
|--------------------|-----------------------------------------------------------------------------------------------------|

|                                                 |   | **Three                months ended**** June                30,** |      |   | **Six                months ended**** June                30,** |       |
|------------------------------------------------------|--------|------------------------------------------------------------------------|-----------|--------|----------------------------------------------------------------------|------------|
|                                                 |   | **2006**                                                               |      |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                                 |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |
|                                                 |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |
| Sales                volume (000 tons):              |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |
|   Fabricated                wire products  |   |                                                                   | 33        |   |                                                                 | ** ** | **30** |   |   |   | 67 |   |   | ** ** | **64** |   |
|   Welded                wire reinforcement |   |                                                                   | 21        |   |                                                                 | ** ** | **16** |   |   |   | 36 |   |   | ** ** | **29** |   |
|   Nails                                    |   |                                                                   | 6         |   |                                                                 |       | (1)  |   |   |   | 11 |   |   | ** ** | **1** |   |
|   Industrial                wire           |   |                                                                   | 21        |   |                                                                 | ** ** | **16** |   |   |   | 39 |   |   | ** ** | **38** |   |
|   Coiled                rebar              |   |                                                                   | (1)  |   |                                                                 | ** ** | **2** |   |   |   | - |   |   | ** ** | **8** |   |
|   Bars                and shapes           |   |                                                                   | -         |   |                                                                 | ** ** | **2** |   |   |   | - |   |   | ** ** | **2** |   |
|   Wire                rod                  |   |                                                                   | 103       |   |                                                                 | ** ** | **105** |   |   |   | 206 |   |   | ** ** | **191** |   |
|   Billets                                  |   |                                                                   | 17        |   |                                                                 | ** ** | **-** |   |   |   | 27 |   |   | ** ** | **-** |   |
|     Total                        |   |                                                                   | 201       |   |                                                                 | ** ** | **171** |   |   |   | 386 |   |   | ** ** | **333** |   |
|                                                 |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Per-ton                selling prices:               |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Fabricated                wire products  |   | $                                                                      | 1,050     |   |                                                                 | **$**      | **1,079** |   |   | $ | 1,039 |   |   | **$** | **1,073** |   |
|   Welded                wire reinforcement |   |                                                                   | 845       |   |                                                                 | ** ** | **907** |   |   |   | 858 |   |   | ** ** | **895** |   |
|   Nails                                    |   |                                                                   | 710       |   |                                                                 | ** ** | **943** |   |   |   | 704 |   |   | ** ** | **787** |   |
|   Industrial                wire           |   |                                                                   | 707       |   |                                                                 | ** ** | **771** |   |   |   | 712 |   |   | ** ** | **749** |   |
|   Coiled                rebar              |   |                                                                   | 548       |   |                                                                 | ** ** | **619** |   |   |   | 548 |   |   | ** ** | **550** |   |
|   Bars                and shapes           |   |                                                                   | -         |   |                                                                 | ** ** | **726** |   |   |   | - |   |   | ** ** | **726** |   |
|   Wire                rod                  |   |                                                                   | 490       |   |                                                                 | ** ** | **562** |   |   |   | 490 |   |   | ** ** | **542** |   |
|   Billets                                  |   |                                                                   | 378       |   |                                                                 | ** ** | **-** |   |   |   | 366 |   |   | ** ** | **132** |   |
|   All                products              |   |                                                                   | 638       |   |                                                                 | ** ** | **707** |   |   |   | 639 |   |   | ** ** | **701** |   |

----

*Outlook      for 2007*

| ·   | lower                shipment volume due to a 52-week year in 2007 as compared to a 53-week                year in 2006, the decision to discontinue our nail business and the                use of                a higher percentage of our billets and wire rod in our downstream                businesses, partially offset by increased shipment volumes of fabricated                wire products; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | increased                overall per-ton selling price (although not enough to offset increases                in                our production costs for the entire                year); |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | higher                ferrous scrap costs; |
|--------------------|--------------------------------------------|

| ·   | increased                energy costs as a result of deregulation as described                above; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | lower                conversion costs as a result of the rod mill reheat furnace overhaul                during the fourth quarter of 2006; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | higher                depreciation expense related to the expansion project at EWP and                the new                reheat furnace at KSW; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | lower                costs as a result of the relocation of KWP’s industrial wire manufacturing                operations to KSW and the discontinuance of nail                operations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | higher                defined benefit pension credit in                2007; |
|--------------------|------------------------------------------------------------------------------|

| ·   | increased                interest expense in 2007 due, in part, to the additional financing                obtained for the Calumet acquisition and the County Term Loan amendment;                and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                provision for income taxes that more approximates the statutory rate                in                2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

----

**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; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Keystone                Wire Products (“KWP”), located in Sherman, Texas, manufactures and sells                fabricated wire products to agricultural, industrial, construction,                commercial, original equipment manufacturers and retail consumer                markets;                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** |       |       | **KWP** |   |       | **Calumet** |   |   | **Allocation****differences(1)** |      |   | **Total** |       |
|----------------------------------------------------------------------------------------------------|--------|-----------------------------------|-------------|--------|---------|------------|------------|---------|--------|------------|-------------|--------|--------|----------------------------------|-----------|--------|-----------|------------|
|                                                                                               |   | **(In                thousands)** |        |
| Three                months ended June 30, 2006:                                                   |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |
|  Net                sales                                                                     |   | $                                 | 118,805     |   |    | $          | 18,115     |    |   | $          | 4,883       |   |   | $                                | -         |   |      | $          | (12,708 | ) |   | $ | 129,095 |   |
|  Cost                of goods sold                                                            |   |                              | 114,711     |   |    |       | 13,408     |    |   |       | 4,624       |   |   |                             | -         |   |      |       | (12,439 | ) |   |   | 120,304 |   |
|    Gross                margin                                                      |   |                              | 4,094       |   |    |       | 4,707      |    |   |       | 259         |   |   |                             | -         |   |      |       | (269 | ) |   |   | 8,791 |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
|  Selling                and administrative                expense                        |   |                              | (3,300      | )      |    |       | (1,123     | )       |   |       | (153        | )      |   |                             | -         |   |      |       | (10 | ) |   |   | (4,586 | ) |
|  Operating                income (loss) before                pension/OPEB                    |   | $                                 | 794         |   |    | $          | 3,584      |    |   | $          | 106         |   |   | $                                | -         |   |      | $          | (279 | ) |   | $ | 4,205 |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| **Three                months ended June 30, 2007:**                                               |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| ** Net                sales**                                                                 |   | **$**                             | **119,867** |   |    | **$**      | **15,093** |    |   | **$**      | **3,828**   |   |   | **$**                            | **1,315** |   |      | **$**      | **(17,438** | **)** |   | **$** | **122,665** |   |
| ** Cost                of goods sold**                                                        |   | ** **                        | **114,397** |   |    | ** ** | **11,640** |    |   | ** ** | **3,693**   |   |   | ** **                       | **1,601** |   |      | ** ** | **(15,334** | **)** |   | ** ** | **115,997** |   |
| **   Gross                margin**                                                  |   | ** **                        | **5,470**   |   |    | ** ** | **3,453**  |    |   | ** ** | **135**     |   |   | ** **                       | **(286**  | **)**  |      | ** ** | **(2,104** | **)** |   | ** ** | **6,668** |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| ** Selling                and****  administrative                expense**          |   | ** **                        | **(3,523**  | **)**  |    | ** ** | **(954**   | **)**   |   | ** ** | **(89**     | **)**  |   | ** **                       | **(178**  | **)**  |      | ** ** | **(19** | **)** |   | ** ** | **(4,763** | **)** |
| ** Gain                on legal settlement**                                                  |   | ** **                        | **-**       |   |    | ** ** | **-**      |    |   | ** ** | **-**       |   |   | ** **                       | **-**     |   |      | ** ** | **5,400** |   |   | ** ** | **5,400** |   |
| ** Operating                income (loss)****  before                pension/OPEB** |   | **$**                             | **1,947**   |   |    | **$**      | **2,499**  |    |   | **$**      | **46**      |   |   | **$**                            | **(464**  | **)**  |      | **$**      | **3,277** |   |   | **$** | **7,305** |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| Six                months ended June 30, 2006:                                                     |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
|  Net                sales                                                                     |   | $                                 | 236,485     |   |    | $          | 30,733     |    |   | $          | 9,805       |   |   | $                                | -         |   |      | $          | (28,813 | ) |   | $ | 248,210 |   |
|  Cost                of goods sold                                                            |   |                              | 220,917     |   |    |       | 24,132     |    |   |       | 9,427       |   |   |                             | -         |   |      |       | (29,140 | ) |   |   | 225,336 |   |
|    Gross                margin                                                      |   |                              | 15,568      |   |    |       | 6,601      |    |   |       | 378         |   |   |                             | -         |   |      |       | 327 |   |   |   | 22,874 |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
|  Selling                and administrative                expense                        |   |                              | (6,684      | )      |    |       | (2,106     | )       |   |       | (329        | )      |   |                             | -         |   |      |       | (16 | ) |   |   | (9,135 | ) |
|  Operating                income before                pension/OPEB                           |   | $                                 | 8,884       |   |    | $          | 4,495      |    |   | $          | 49          |   |   | $                                | -         |   |      | $          | 311 |   |   | $ | 13,739 |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| **Six                months ended June 30, 2007:**                                                 |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| ** Net                sales**                                                                 |   | **$**                             | **232,484** |   |    | **$**      | **26,070** |    |   | **$**      | **7,434**   |   |   | **$**                            | **1,315** |   |      | **$**      | **(31,540** | **)** |   | **$** | **235,763** |   |
| ** Cost                of goods sold**                                                        |   | ** **                        | **222,518** |   |    | ** ** | **20,768** |    |   | ** ** | **7,148**   |   |   | ** **                       | **1,677** |   |      | ** ** | **(29,383** | **)** |   | ** ** | **222,728** |   |
| **   Gross                margin**                                                  |   | ** **                        | **9,966**   |   |    | ** ** | **5,302**  |    |   | ** ** | **286**     |   |   | ** **                       | **(362**  | **)**  |      | ** ** | **(2,157** | **)** |   | ** ** | **13,035** |   |
|                                                                                               |   |                              |        |   |    |       |       |    |   |       |        |   |   |                             |      |   |      |       |   |   |   |   |   |   |
| ** Selling                and****  administrative                expense**          |   | ** **                        | **(7,053**  | **)**  |    | ** ** | **(1,807** | **)**   |   | ** ** | **(198**    | **)**  |   | ** **                       | **(187**  | **)**  |      | ** ** | **(54** | **)** |   | ** ** | **(9,299** | **)** |
| ** Gain                on legal settlement**                                                  |   | ** **                        | **-**       |   |    | ** ** | **-**      |    |   | ** ** | **-**       |   |   | ** **                       | **-**     |   |      | ** ** | **5,400** |   |   | ** ** | **5,400** |   |
| ** Operating                income (loss)****  before                pension/OPEB** |   | **$**                             | **2,913**   |   |    | **$**      | **3,495**  |    |   | **$**      | **88**      |   |   | **$**                            | **(549**  | **)**  |      | **$**      | **3,189** |   |   | **$** | **9,136** |   |

----

*Keystone      Steel & Wire*

|                                                                                   |   | **Three                months ended June 30,** |    |
|----------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                                                   |   | **2006**                                       |    |   | **%                of****sales** |   |   | **2007** |   |   | **%                of****Sales** |   |
|                                                                                   |   | **($                in thousands)**            |    |
|                                                                                   |   |                                           |    |   |   |   |   |   |   |   |   |   |
| Net                sales                                                               |   | $                                              | 118,805 |   |   |   | 100.0 | % |   | **$** | **119,867** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                                      |   |                                           | 114,711 |   |   |   | 96.6 |   |   | ** ** | **114,397** |   |   | ** ** | **95.4** |   |
|   Gross                margin                                                |   |                                           | 4,094   |   |   |   | 3.4 |   |   | ** ** | **5,470** |   |   | ** ** | **4.6** |   |
|                                                                                   |   |                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                                      |   |                                           | (3,300  | ) |   |   | (2.8 | ) |   | ** ** | **(3,523** | **)** |   | ** ** | **(3.0** | **)** |
|   Operating                income before    pension/OPEB |   | $                                              | 794     |   |   |   | 0.6 | % |   | **$** | **1,947** |   |   | ** ** | **1.6** | **%** |

|                                                                                   |   | **Six                months ended June 30,** |    |
|----------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                   |   | **2006**                                     |    |   | **%                of****sales** |   |   | **2007** |   |   | **%                of****Sales** |   |
|                                                                                   |   | **($                in thousands)**          |    |
|                                                                                   |   |                                         |    |   |   |   |   |   |   |   |   |   |
| Net                sales                                                               |   | $                                            | 236,485 |   |   |   | 100.0 | % |   | **$** | **232,484** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                                      |   |                                         | 220,917 |   |   |   | 93.4 |   |   | ** ** | **222,518** |   |   | ** ** | **95.7** |   |
|   Gross                margin                                                |   |                                         | 15,568  |   |   |   | 6.6 |   |   | ** ** | **9,966** |   |   | ** ** | **4.3** |   |
|                                                                                   |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                                      |   |                                         | (6,684  | ) |   |   | (2.8 | ) |   | ** ** | **(7,053** | **)** |   | ** ** | **(3.0** | **)** |
|   Operating                income before    pension/OPEB |   | $                                            | 8,884   |   |   |   | 3.8 | % |   | **$** | **2,913** |   |   | ** ** | **1.3** | **%** |

----

|                                                                              |   | **Three                months ended**** June                30,** |            |   | **Six                months ended**** June                30,** |       |
|-----------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|-----------------|--------|----------------------------------------------------------------------|------------|
|                                                                              |   | **2006**                                                               |            |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
| Sales                volume (000 tons):                                           |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |
|   Fabricated                wire products                               |   |                                                                   | 32              |   |                                                                 | ** ** | **30** |   |   |   | 66 |   |   | ** ** | **64** |   |
|   Nails                                                                 |   |                                                                   | 6               |   |                                                                 |       | (1)   |   |   |   | 11 |   |   | ** ** | **1** |   |
|   Industrial                wire                                        |   |                                                                   | 19              |   |                                                                 | ** ** | **19** |   |   |   | 36 |   |   | ** ** | **45** |   |
|   Coiled                rebar                                           |   |                                                                   | (1)   |   |                                                                 | ** ** | **2** |   |   |   | (1)   |   |   | ** ** | **8** |   |
|   Wire                rod                                               |   |                                                                   | 123             |   |                                                                 | ** ** | **121** |   |   |   | 253 |   |   | ** ** | **221** |   |
|   Billets                                                               |   |                                                                   | 17              |   |                                                                 | ** ** | **6** |   |   |   | 27 |   |   | ** ** | **6** |   |
|      Total                                               |   |                                                                   | 197             |   |                                                                 | ** ** | **178** |   |   |   | 393 |   |   | ** ** | **345** |   |
| (1)Less                than                1,000 tons.                            |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Per-ton                selling prices:                                            |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Fabricated                wire products                               |   | $                                                                      | 1,050           |   |                                                                 | **$**      | **1,077** |   |   | $ | 1,039 |   |   | **$** | **1,073** |   |
|   Nails                                                                 |   |                                                                   | 710             |   |                                                                 | ** ** | **943** |   |   |   | 704 |   |   | ** ** | **787** |   |
|   Industrial                wire                                        |   |                                                                   | 707             |   |                                                                 | ** ** | **843** |   |   |   | 714 |   |   | ** ** | **766** |   |
|   Coiled                rebar                                           |   |                                                                   | 548             |   |                                                                 | ** ** | **619** |   |   |   | 548 |   |   | ** ** | **550** |   |
|   Wire                rod                                               |   |                                                                   | 485             |   |                                                                 | ** ** | **548** |   |   |   | 484 |   |   | ** ** | **538** |   |
|   Billets                                                               |   |                                                                   | 378             |   |                                                                 | ** ** | **471** |   |   |   | 366 |   |   | ** ** | **463** |   |
|   All                products                                           |   |                                                                   | 597             |   |                                                                 | ** ** | **667** |   |   |   | 596 |   |   | ** ** | **667** |   |
|                                                                              |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Average                per-ton ferrous scrap                purchase cost    |   | $                                                                      | 210             |   |                                                                 | **$**      | **253** |   |   | $ | 208 |   |   | **$** | **239** |   |
|                                                                              |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Average                electricity cost                per kilowatt hour (2) |   | $                                                                      | 0.04            |   |                                                                 | **$**      | **0.05** |   |   | $ | 0.04 |   |   | **$** | **0.05** |   |
|                                                                              |   |                                                                   |            |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Average                natural gas cost                per therm (2)         |   | $                                                                      | 0.69            |   |                                                                 | **$**      | **0.77** |   |   | $ | 0.84 |   |   | **$** | **0.77** |   |

----

*Engineered      Wire Products*

|                                                                 |   | **Three                months ended June 30,** |   |
|----------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                 |   | **2006**                                       |   |   | **%                of sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                 |   | **($                in thousands)**            |   |
|                                                                 |   |                                           |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                             |   | $                                              | 18,115 |   |   |   | 100.0 | % |   | **$** | **15,093** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                    |   |                                           | 13,408 |   |   |   | 74.0 |   |   | ** ** | **11,640** |   |   | ** ** | **77.1** |   |
|   Gross                margin                              |   |                                           | 4,707  |   |   |   | 26.0 |   |   | ** ** | **3,453** |   |   | ** ** | **22.9** |   |
|                                                                 |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                    |   |                                           | (1,123 | ) |   |   | (6.2 | ) |   | ** ** | **(954** | **)** |   | ** ** | **(6.3** | **)** |
|   Operating                income before pension/OPEB |   | $                                              | 3,584  |   |   |   | 19.8 | % |   | **$** | **2,499** |   |   | ** ** | **16.6** | **%** |

|                                                                 |   | **Six                months ended June 30,** |   |
|----------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                 |   | **2006**                                     |   |   | **%                of sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                 |   | **($                in thousands)**          |   |
|                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                             |   | $                                            | 30,733 |   |   |   | 100.0 | % |   | **$** | **26,070** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                    |   |                                         | 24,132 |   |   |   | 78.5 |   |   | ** ** | **20,768** |   |   | ** ** | **79.7** |   |
|   Gross                margin                              |   |                                         | 6,601  |   |   |   | 21.5 |   |   | ** ** | **5,302** |   |   | ** ** | **20.3** |   |
|                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                    |   |                                         | (2,106 | ) |   |   | (6.9 | ) |   | ** ** | **(1,807** | **)** |   | ** ** | **(6.9** | **)** |
|   Operating                income before pension/OPEB |   | $                                            | 4,495  |   |   |   | 14.6 | % |   | **$** | **3,495** |   |   | ** ** | **13.4** | **%** |

|                                                                                               |   | **Three                months ended**** June                30,** |   |   | **Six                months ended**** June                30,** |       |
|----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------|------------|
|                                                                                               |   | **2006**                                                               |   |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                                                                               |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |
| Sales                volume (000 tons) –  Welded                wire reinforcement |   |                                                                   | 21     |   |                                                                 | ** ** | **16** |   |   |   | 36 |   |   | ** ** | **29** |   |
|                                                                                               |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Per-ton                selling prices –  Welded                wire reinforcement  |   | $                                                                      | 845    |   |                                                                 | **$**      | **907** |   |   | $ | 858 |   |   | **$** | **895** |   |
|                                                                                               |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Average                per-ton wire rod  purchase                cost                    |   | $                                                                      | 498    |   |                                                                 | **$**      | **551** |   |   | $ | 495 |   |   | **$** | **535** |   |

----

*Keystone      Wire Products*

|                                                                 |   | **Three                months ended June 30,** |   |
|----------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                 |   | **2006**                                       |   |   | **%                of sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                 |   | **($                in thousands)**            |   |
|                                                                 |   |                                           |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                             |   | $                                              | 4,883  |   |   |   | 100.0 | % |   | **$** | **3,828** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                    |   |                                           | 4,624  |   |   |   | 94.7 |   |   | ** ** | **3,693** |   |   | ** ** | **96.5** |   |
|   Gross                margin                              |   |                                           | 259    |   |   |   | 5.3 |   |   | ** ** | **135** |   |   | ** ** | **3.5** |   |
|                                                                 |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                    |   |                                           | (153   | ) |   |   | (3.1 | ) |   | ** ** | **(89** | **)** |   | ** ** | **(2.3** | **)** |
|   Operating                income before pension/OPEB |   | $                                              | 106    |   |   |   | 2.2 | % |   | **$** | **46** |   |   | ** ** | **1.2** | **%** |

|                                                                 |   | **Six                months ended June 30,** |   |
|----------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                 |   | **2006**                                     |   |   | **%                of sales** |   |   | **2007** |   |   | **%                of****sales** |   |
|                                                                 |   | **($                in thousands)**          |   |
|                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                             |   | $                                            | 9,805  |   |   |   | 100.0 | % |   | **$** | **7,434** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                    |   |                                         | 9,427  |   |   |   | 96.1 |   |   | ** ** | **7,148** |   |   | ** ** | **96.2** |   |
|   Gross                margin                              |   |                                         | 378    |   |   |   | 3.9 |   |   | ** ** | **286** |   |   | ** ** | **3.8** |   |
|                                                                 |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                    |   |                                         | (329   | ) |   |   | (3.4 | ) |   | ** ** | **(198** | **)** |   | ** ** | **(2.6** | **)** |
|   Operating                income before pension/OPEB |   | $                                            | 49     |   |   |   | 0.5 | % |   | **$** | **88** |   |   | ** ** | **1.2** | **%** |

|                                                |   | **Three                months ended**** June                30,** |   |   | **Six                months ended**** June                30,** |       |
|-----------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------|------------|
|                                                |   | **2006**                                                               |   |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
| Sales                volume (000 tons):             |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |
|   Fabricated                wire products |   |                                                                   | 3      |   |                                                                 | ** ** | **2** |   |   |   | 7 |   |   | ** ** | **5** |   |
|   Industrial                wire          |   |                                                                   | 2      |   |                                                                 | ** ** | **-** |   |   |   | 4 |   |   | ** ** | **-** |   |
|      Total                 |   |                                                                   | 5      |   |                                                                 | ** ** | **2** |   |   |   | 11 |   |   | ** ** | **5** |   |
|                                                |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Per-ton                selling prices:              |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|   Fabricated                wire products |   | $                                                                      | 1,001  |   |                                                                 | **$**      | **1,852** |   |   | $ | 1,013 |   |   | **$** | **1,461** |   |
|   Industrial                wire          |   |                                                                   | 700    |   |                                                                 | ** ** | **-** |   |   |   | 684 |   |   | ** ** | **-** |   |

----

*Calumet*

|                                                               |   | **Three                months ended**** June                30,** |      |   | **Six                months ended**** June                30,** |       |
|--------------------------------------------------------------------|--------|------------------------------------------------------------------------|-----------|--------|----------------------------------------------------------------------|------------|
|                                                               |   | **2007**                                                               |      |   | **%                of sales**                                        |       |   | **2007** |   |   | **%                of****sales** |   |
|                                                               |   | **($                in thousands)**                                    |      |
|                                                               |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |
| Net                sales                                           |   | **$**                                                                  | **1,315** |   |                                                                 | ** ** | **100.0** | **%** |   | **$** | **1,315** |   |   | ** ** | **100.0** | **%** |
| Cost                of goods sold                                  |   | ** **                                                             | **1,601** |   |                                                                 | ** ** | **121.7** |   |   | ** ** | **1,677** |   |   | ** ** | **127.5** |   |
|   Gross                margin                            |   | ** **                                                             | **(286**  | **)**  |                                                                 | ** ** | **(21.7** | **)** |   | ** ** | **(362** | **)** |   | ** ** | **(27.5** | **)** |
|                                                               |   |                                                                   |      |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Selling                and administrative expense                  |   | ** **                                                             | **(178**  | **)**  |                                                                 | ** ** | **(13.5** | **)** |   | ** ** | **(187** | **)** |   | ** ** | **(14.2** | **)** |
|   Operating                loss before pension/OPEB |   | **$**                                                                  | **(464**  | **)**  |                                                                 | ** ** | **(35.2** | **)%** |   | **$** | **(549** | **)** |   | ** ** | **(41.7** | **)%** |

|                                                                    |   | **Three                months ended****June                30, 2007** |    |   | **Six                months ended****June                30, 2007** |       |
|-------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|---------|--------|---------------------------------------------------------------------|------------|
|                                                                    |   |                                                                  |    |   |                                                                |       |
| Sales                volume (000 tons):                                 |   |                                                                  |    |   |                                                                |       |
|   Bars                and shapes                              |   | ** **                                                            | **2**   |   |                                                                | ** ** | **2** |   |
|                                                                    |   |                                                                  |    |   |                                                                |       |   |   |
| Per-ton                selling prices:                                  |   |                                                                  |    |   |                                                                |       |   |   |
|   Bars                and shapes                              |   | **$**                                                                 | **726** |   |                                                                | **$**      | **726** |   |
|                                                                    |   |                                                                  |    |   |                                                                |       |   |   |
| Average                per-ton billet purchase                cost |   | **$**                                                                 | **465** |   |                                                                | **$**      | **465** |   |

----

**Pension      Credits**

**Gain      on Legal Settlement**

**Corporate      Expense**

**Interest      Expense**

|                                           |   | **Three                months ended**** June                30,** |   |   | **Six                months ended**** June                30,** |       |
|------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------|------------|
|                                           |   | **2006**                                                               |   |   | **2007**                                                             |       |   | **2006** |   |   | **2007** |   |
|                                           |   | **($                in thousands)**                                    |   |
|                                           |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |
| Average                debt balance            |   | $                                                                      | 98,093 |   |                                                                 | **$**      | **108,239** |   |   | $ | 96,683 |   |   | **$** | **98,700** |   |
|                                           |   |                                                                   |   |   |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Weighted                average interest rates |   |                                                                   | 5.3    | %      |                                                                 | ** ** | **6.5** | **%** |   |   | 5.1 | % |   | ** ** | **5.9** | **%** |

**Provision      for Income Taxes**

----

**LIQUIDITY      AND CAPITAL RESOURCES**

**Working      Capital and Borrowing Availability**

|                                     |   | **December                31,**   |   |   | **June                30,** |       |
|------------------------------------------|--------|-----------------------------------|--------|--------|-----------------------------|------------|
|                                     |   | **2006**                          |   |   | **2007**                    |       |
|                                     |   | **(In                thousands)** |   |
|                                     |   |                              |   |   |                        |       |
| Working                capital           |   | $                                 | 31,776 |   |                        | **$**      | **28,813** |   |
| Revolving                credit facility |   |                              | 17,734 |   |                        | ** ** | **62,444** |   |
|                                     |   |                              |   |   |                        |       |   |   |
| Borrowing                availability    |   |                              | 23,697 |   |                        | ** ** | **9,738** |   |

**Historical      Cash Flows**

*Operating      Activities*

| ·   | lower                operating income before pension/OPEB in 2007 of $4.6                million; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | lower                reorganization costs of $3.3 million paid in                2007; |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | higher                net cash used due to relative changes in our accounts receivable                in 2007                of $20.5 million primarily due to a significant increase in wire                rod sales                at the end of June 2007 as compared to the end of June 2006, extended                payment terms for certain customers and 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 a significant increase in accounts                receivable during the first half of each year);                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**

**Legal      Settlement**

----

**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      4.   **
**Submission of Matters to a Vote of Security      Holders**

**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:  August                  14, 2007  | By:/s/                  Bert E. Downing, Jr.                              Bert                  E. Downing, Jr.Vice                  President, Chief Financial Officer,  Corporate                  Controller and Treasurer |
|---------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----