Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Allegheny Technologies Earnings Conference Call. My name is Keisha, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I'd now like to hand the conference over to Mr. Dan Greenfield, Vice President of Investor Relations and Corporate Communications. Please proceed.

Thank you, Keisha. Good afternoon, and welcome to the Allegheny Technologies Earnings Conference Call for the Third Quarter 2011. This conference call is being broadcast on our website at www.atimetals.com. Members of the media have been invited to listen to this call. Participating in the call today are Rich Harshman, Chairman, President and Chief Executive Officer; and Dale Reid, Executive Vice President of Finance and Chief Financial Officer. All references to net income and earnings in this conference call mean net incomes and earnings attributable to ATI. After some initial comments, we will ask for questions. During the question-and-answer session, please limit yourself to 2 questions to be considerate of others on the line. Please note that all forward-looking statements this afternoon are subject to various assumptions and caveats as noted in the earnings release. Actual results may differ materially. Here is Rich Harshman.

Thanks, Dan, and thanks to everyone for joining today's call. Our third quarter and year-to-date 2011 results during a time of global economic uncertainty demonstrates the benefits of ATI's recent strategic investments and our focus on key global markets and high-value technologically differentiated products. In the aerospace market, the first Boeing 787 and 747-8 airplanes were recently delivered and the first rate increase for the 737 from 31.5 per month to 35 per month occurred last week. Demand from the oil and gas/chemical process industry remains strong, particularly from projects for deepwater, sour gas and unconventional sources such as shale oil and gas and oil sands deposits. Demand remains strong from the medical market for our titanium alloys used in implants and our niobium titanium alloys used in the latest technology MRI equipment. Demand is improving from the electrical energy market. On the negative side, weakness, uncertainty and caution best describe most domestic consumer and general industrial markets that drive demand for our standard stainless products. Comparing the third quarter 2011 to the third quarter 2010, sales were nearly 28% higher. Segment operating profit including inventory fair value adjustments associated with the Ladish acquisition increased 157%, and increased 177% excluding Ladish acquisition costs. For the 9 months 2011, sales were 31% higher than the comparable 2010 period. Segment operating profit, excluding Ladish acquisition costs, was $523 million or 13% of ATI's sales which was within our expected range. That is a 95% increase over the first 9 months of 2010. Net income, excluding special items, was $209 million, more than 3x higher than the first 9 months of 2010. And finally, direct international sales were 34% of ATI sales. Our order backlog is strong. Backlog in our High Performance Metals segment at the end of the third quarter was over…

[Operator Instructions] Your first question comes from the line of Timna Tanners with Bank of America Merrill Lynch.

Wanted to ask if you could talk to us a little bit about substitution opportunities that your customers might be considering in light of some of the recent declines in aluminum, copper, et cetera?

Well, I think, clearly, one of the opportunities that titanium has on the industrial side is with the desal market, which we've seen here this year and benefited from. I think there's been some speculation that maybe with copper having fallen in price that, that makes titanium less attractive, but from our perspective, this is a project-by-project decision. There are factors other than cost, believe it or not, that drive some of these decisions in terms of placing titanium in a particular desal project depending upon where it's located. Most of those projects are really government-focused outside the U.S. and they actually pay attention to life cycle costs and things like that as opposed to the initial upfront acquisition costs. So we actually see titanium moving into some applications in the industrial side where historically they had not been. Obviously, with -- titanium has been a major substitution factor in the aerospace market replacing aluminum on the 787 aluminum in some ways in the airframe on the 787 as well as the A350 extra wide body, and you're familiar with all the technical drivers behind that of why titanium was selected as opposed to aluminum. So I think customers across the alloys spectrum will continue to look at what is the best alloy to use for the selected application and the selected operating environment. And in some cases, we work with those customers in terms of helping them understand what their best alloy is, not only from a standpoint of the upfront acquisition costs, but also the fabrication ability and the life cycle costs. And that's quite frankly, one of the benefits of being very diversified in terms of the alloy systems that we make and not just being a single metal company.

Okay, great. And this is a follow-up then compared to the aluminum lithium alloys I've been hearing more about. Has that changed recently? Do you think it's gained more or less acceptance in the last 12 months as we've heard more about it?

I don't think it's had any impact on the designs that are already in production on the 787 or the -- where titanium is being used on the 777 and the 747-8 and the A350 and the A380. I think longer-term, the alloy systems will -- the customers are going to look at what provides them the greatest value as they define it and that's the alloy system that will be chosen. And I think when you look at an airframe, even the all composite airframe, there's certainly room for aluminum lithium alloys as well as titanium alloys going forward and that's what we've seen and I expect that's what we'll continue to see.

Your next question comes from the line of Sal Tharani with Goldman, Sachs & Co.

Have you started negotiating the contracts for electrical steel for next year and any outlook on that?

Well, we have various long-term agreements in place that extend into next year, and in some cases, beyond next year. So each of them are really different and unique in terms of when they were negotiated a couple of years ago and how long they run. I think our perspective, if you look fundamentally at the demand drivers for grain-oriented electrical steel not only in the U.S. but globally, in the U.S. it's heavily driven by housing and industrial applications and replacement of infrastructure, which is still needed. I think that as we look at 2012, none of those demand drivers appear to be changing dramatically in 2012 compared to where we sit today.

So you expect the demand to be sort of more flattish?

Yes, I think -- I'd love to sit here and say, we expect strong growth. But I think realistically when you understand what's driving that market, I think it certainly looks more flattish to us.

Okay. And last question before I get back into the queue. How about any indication of what Boeing has been telling you in terms of their intake, order intake for titanium, not the build rate but the intake. Do you think that they will be purchasing higher amount than they purchased this year?

Well, I mean, we have a contract now that runs through 2018 so we know we have a pretty strong indication of what their take is because they're still at the minimum level. I think Boeing has said publicly in some public forums that they don't see -- given their inventory situation, they don't see a significant increase in the purchase of titanium in 2012 as it compares to 2011. And they would know far better than any supplier, quite frankly, so I would just take it at what Boeing has said publicly.

Okay. So it's just a matter of excess inventory in the supply chain [indiscernible]

I mean, they've been taken for several years as the 787 program has been 3.5 years -- delayed 3.5 years they've been taking the contractual minimum from their 3 major suppliers, of which ATI is one. So they do have an inventory build that has taken place and that's been talked about quite a bit. I do think that, as we said when we -- as I said today and as we said when we announced the extension, we look at the overall product mix and opportunities to provide more value-added product equally, if not in a greater way than just the pure volume because, Sal, you've heard us say many times that we would much rather sell a more value-added product form than an ingot. So I think we're very pleased with being a Boeing supplier and the 3-year extension through 2018, I think, works very well for ATI, it works well for Boeing and it's consistent with our strategy of growing with Boeing in a more value-added way.

Your next question comes from the line of Stephen Levenson with Stifel, Nicolaus. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Just following up on that question. Does that mean the actual weight of the titanium it sells to Boeing might be less but the revenue could be higher because you're doing more downstream product?

I think that's a fair comment. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Could you please break out the backlog between Legacy ATI and Ladish out of that $1.4 billion in high-performance?

More than half is Legacy ATI. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Okay, and the last one. Can you comment at all on lead times? The titanium and nickel.

Lead times haven't really moved dramatically. I think lead times for nickel alloys on the jet engine side are actually longer than they are for titanium, and it's been that way for most of this year. I think as we -- I think the supply chain is being very smart in terms of managing their inventories in an efficient way, so I don't think that we see -- periodically, we may see some pull ups, for example, that are very unique circumstances and we've seen that throughout 2011. And those are always hard to predict because all we have is the release schedule of what we're committed to deliver to, to the customers. And in some cases, they accelerate that and pull ahead for a variety of factors that, quite frankly, only they know. We haven't seen any pushouts, let me put it to you that way, in 2011. The only thing we've seen is pull forward. So that tells me that the inventories are pretty lean and as these production rate ramps continue to be elevated in a stair-step way, that you're going to see some significant demand increases as we head into and throughout 2012, and I would think that, that would lead to an extension of lead times.

Your next question comes from the line of Brian Yu with Citi.

First question is just kind of clarification on the guidance and when you're calling for margins consistent with year-to-date, is that as reported or would that be adjusted for the Ladish inventory charges?

That's as reported.

As reported. Okay. And then the second one is, can you comment on the differences in utilization rates that you're seeing with your facilities between the nickel and titanium side, you saw your competitors are adding nickel capacity and nickel alloy capacity and you've got it on your side, too?

Yes, well, we have it. And they're adding. So I'd rather have it, especially when it takes you a long time to add capacity, and it does. I think we're very pleased with the decisions that we made in the last 2 to 3 years to have that capacity as the rate ramp starts. So I think when we look at, do we have available capacity for titanium and nickel and specialty alloys? The answer is yes, we do. And that's a good thing because we expect to be shipping more products in 2012 than we are today. We expect to be shipping more product in 2013 than in 2012, and we have that capacity. And therefore, that earnings leverage readily available as opposed to having to wait and sit out. I commented on PAM IV, which is now melting and operating so we will -- we typically don't put in a PAM IV just for standard grade because it's really targeted for the premium rotating quality in high-end medical markets but that qualification takes a little while so that capacity is available to meet the current needs and the growing needs in industrial as well as standard non-premium applications, so we now have that up and running. And we'll melt and we are melting using that furnace well. We still work to the qualification on the premium side. We have -- I think we've talked before about we have 2 new ESR remelt furnaces that we are in the process of installing because we have been constrained throughout most of 2011 on ESR remelt capacity from not only the aerospace market but the oil and gas and CPI markets as well. And we have 2 new ESRs that are in the process of being installed in one of our facilities here in Western Pennsylvania that will be up and running by mid-2012. So hope that answers your question.

Do you have like a rough percentage of where you're at from a utilization rate standpoint for the titanium versus the nickel? I mean, we talked about your primary nickel mill versus like remelt and its titanium.

I think, rough, we're in the low 80s, low 80%. In some cases we're at a higher utilization than that if you look at specific pieces of equipment. For example, on PAM I and PAM III, we're basically operating at capacity. On the electron beam titanium melt facility, we're operating pretty close to capacity. We have DAR capacity. We now have PAM IV that brings on additional capacity that won't be -- we don't expect to be operating at capacity until we get into the 2013 timeframe ramp.

Your next question comes from the line of Chris Olin with Cleveland Research.

Rich, I know you mentioned a little bit about it earlier in your comments, but I was just curious if you could give me some more details on the titanium 425 sheet, exactly where we stand? Are you shipping much volume of this product? What would be the headwind? Anything that you can help further understand this market.

I think we're shipping some volume. I wouldn't characterize it as something that is -- we'd like to be shipping more volume of it, quite frankly, because we think it's a great product. Part of the challenge was a new alloy that's especially targeted to primarily the aerospace market is it takes a while to get specified and qualified. So part of that process is obviously working with the customer base and their supply chain of helping them understand what the benefits are of ATI 425, which we think -- still believe are considerable especially in the cold working area and cold rolling area, and working with them on applications that are quicker applications to get on already established platforms and that just takes time, quite frankly. I don't sense any issues where the customers are saying "This alloy doesn't make sense to them for certain applications." I think the excitement level is still there. It's just a methodical process. And that's what we're going through. So I think there are some applications that are closer to a firm contractual relationship with more meaningful production quantities and when we get to that point and it's material, we'll let you and the investing public know.

One of the main end markets you've been watching in terms of the penetration was defense and some of the contracts that could have been up for bidding. Has that changed with all the budgets getting -- going under greater scrutiny now or is that just a lengthy process as well?

Yes, that's a great question, Chris. I think that it'd be disingenuous to me to say that it's the same as it was 1, 1.5 years ago given the budget on certainly in Washington. I think that -- we were at the AUSA show a couple of weeks ago in Washington DC and had some meetings with DOD personnel, and there is still a very strong interest in ATI 425 alloy plate for some armor applications because of the ability to cold form it in very unique radiuses, or radii, I guess it would be, that eliminate well. And they also have very good antiballistic characteristics. So I mean, those actions continue and the excitement level is still there. We're also working with governments outside the U.S and in Europe, for example, on armor applications where there's tests being conducted from a ballistic standpoint and the results are very good and very favorable. I think that the uncertainty really exists on a programmatic basis, right, which programs are going to move forward, which ones are going to get funded, and until the super committee really comes up with a solution, there's tremendous uncertainty as to what approach is going to happen on the defense funding side. So there's a lot of blocking and tackling going on right now in terms of us working with customers for ATI 425 as well as some of our high hard steels in armor applications. I still think that's -- there are significant opportunities there. We have started up our fabrication components business just outside of Chicago that really is facilitized to make some of the fabrications out of that plate targeted specifically to some of the armor market, and there's a lot of interest there. And we've actually won some contracts there to make some fabricated components out of those products. So we're going to keep moving forward because we think that the product itself is good and provides value to the customer. It's -- right now, it's really more of an uncertainty in Washington in terms of which one of the projects move forward.

Your next question comes from the line of Michael Gambardella with JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: I just wanted to follow back on this aircraft, the aerospace business in terms of the inventory that's in the supply chain. And so if we expect the production schedule on some of these big aircraft builds by Boeing to start they say to pickup by the end of the year and accelerate into 2012. You mentioned that from a titanium perspective, Boeing is going to just hit their minimum again, so they clearly have enough for 2012 probably into 2013. But could you talk about the rest of the supply chain for aerospace outside the titanium and how much inventory you think is in there and how long of a lag before you start to feel kind of a meaningful pickup in demand to catch up with the inventories there?

Yes, well I think outside of titanium on the airframe, I mean, I think we've seen very meaningful pickup in demand this year. I mean, it's impossible to grow aerospace and defense and most of that is aerospace, right? Let's be frank. Both of that is aerospace. About 46% or 47% year-over-year without seeing that pick-up. So we -- and that didn't come from the Boeing contract because Boeing has been taking the minimum. So all of that is really from the other alloy systems going into the airframe as -- which is nickel and specialty alloys, et cetera, and the jet engine market. So we have seen that, really, this year and we'll continue to see that given the rate ramps that are forecasted and committed to publicly by both Boeing and Airbus assuming all the fundamentals from a macro standpoint stay intact, that we'll see that continuing in 2012 and 2013, and quite frankly, in 2014. So I think the demand growth from the jet engine side has been there. I don't -- we've been saying consistently this year and we'll say it again today that I don't think that there is a significant inventory build that has happened in the jet engine supply chain. I think that that supply chain looks pretty well in balanced and to the extent that there's any -- what you're not seeing may be that you would be seeing at this point in time is a building of a safety stock, if you will, which historically, I think, has existed in the supply chain to be prudent because of the complexity of the supply chain, and therefore, interruptions that can happen in that supply chain. And I think there, it's just the overall cautious approach that everybody is taking, that they're all supporting the announced production, and therefore, the demand is coming from the airframers. It's just that little bit of extra -- there's no sense that now is the right time to do that. I think that that's likely to happen, quite frankly, in 2012 as some of the economic uncertainty in the U.S. and Europe hopefully begins to fade away and the ramps that are being discussed by both the OEMs on the airframer side actually take place and are demonstrated and that's when I think you'll see it. But make no mistake, we've seen the growth this year, we wouldn't achieved the 46% revenue increase. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: And then just moving over to the stainless side of the business on the Flat-Rolled Products division. Usually when you build a brand-new stainless plant, it's a pretty big slug of capacity relative to the size of the market where it's located and -- what impact is the Thyssenkrupp plant having on stainless, on the commodity stainless business? And how do you see that playing out in 2012?

Yes, well, I mean, it's -- right now, I think it's more narrowly focused on certain sizes and certain gauges. So I don't think it's really all that disruptive at this point. I mean is there's some disruption happening because you have a new, significant manufacturing capability in the U.S. and some producers might be taking the position that they have to be more aggressive on pricing, I don't know. I think when you look at Thyssenkrupp specifically, what they've said the investment here will do is really displace or replace the imports that they're bringing in from all over the world in a non-cost-efficient way, right? So it probably improves their cost position. Is it going to make a meaningful difference in their position in the marketplace in the U.S.? I don't believe so, no. So I think, we look at the U.S. market today the same as we have consistently over the past 3 to 5 to 6 years. We are selling commodity stainless sheet in Europe in a bigger way than we have in the past and that's -- we view the European market as a good market for us. So I don't think that it's all that disruptive at this point, I mean, or if it ever will be, quite frankly. I think the bigger issue is the weakness in demand fundamentally. I mean, I couldn't tell you that the -- I don't think that the new surcharge formula, for example, has had much of any impact on the buying behavior. I think over the long-term, that surcharge formula is -- makes sense for the market and that's why we did it. And so -- but I don't think that that's having any impact today. I think the fundamentals today are -- the end market demand is really very weak. By any historical standards, base pricing is really very low, actually the lowest ever for standard gauge service center-type sheet, and quite frankly, is it a price that is unsustainable for any producer to earn an acceptable return on capital employed. So I think that as the market and as the U.S. economy begins to recover, albeit modestly in 2012, which is our expectation, the inventory and the supply chain is not expensive, I can tell you that. There's a lot of hand to mouth going on. The mills have reasonable amounts of ready coil, but not excessive. And as the demand recovers, I think you'll see the market recover.

Your next question comes from the line of Kuni Chen with CRT Capital Group.

Just -- can you comment for us on contracts, bunch pricing for next year? And what the indications have been coming off the ITA?

Well, no. Not specifically other than -- I can tell you the expectation of the sponge producers is that the prices will be up. They won't be flatter. They won't be down.

Good. Would it be double-digits?

They'll be up, and it won't be a minor increase.

Okay, fair enough. And then just on the Flat-Rolled side, can you -- should we expect a similar LIFO benefit in the upcoming quarter? What we would be thinking as far as the moving parts and...

How we do LIFO, I mean, we basically project to what we think the LIFO reserve change for the full year is going to be based upon our current estimates of where we think costs are going to be for the average of the fourth quarter to get a current year index. And then we do -- so we do that every quarter based upon all the information that is available, some of which comes from some of you folks on the phone here in terms of what you're thinking. And then we correct the year-to-date amounts. So for example, the third quarter had a higher pick up in Flat-Rolled Products because we were projecting a different year-end estimate, and we had to be booked to 75% of that full year benefit by the end of the third quarter. So if all the estimates remain the same, then basically take the total year LIFO change that we booked year-to-date through the third quarter, divide it by 3 and you get that number for the fourth quarter. So right now, where we sit today, we would expect -- you were talking specifically about Flat-Rolled, right?

Correct.

We would expect a Flat-Rolled -- a benefit, a LIFO benefit in the Flat-Rolled segment of about $10 million. And for total ATI, we would have a benefit of about one -- a little over $1 million in the fourth quarter.

Your next question comes from the line of Dave Martin with Deutsche Bank.

I was wondering, Rich, if you can give us a little more color on the desal project development going on around the world. I think in the past, there was some optimism, some of these projects would come up in the second half of the year or in the coming quarter, so can you give us an update there? And secondly, if you could scale this opportunity also?

I think there's still, from a large desal project standpoint, about 3 or 4 globally that are very active at various stages of project development and quotation. There's one that could be described as imminent. Imminent could mean this week, next month, January, February, March, something like that, but it's within that timeframe. And then the other 3 or 4 are follow-up behind that. So I think as we look at those projects and we keep very close tabs on them, obviously, they're all outside the U.S. so we have people that are working with the fabricators and we know who the players are and we're involved in quoting them, primarily through our Uniti joint venture as it pertains to titanium. We think that the projects are certainly real. The need is there, and it's real. Do macro economic events have some impact on the timing of them? Yes, in some cases, they do. So -- but there's 1 or 2 that are more likely to impact 2012, and the other 2 are more likely to impact 2013. So I think we're still, I would say, pretty bullish on desal opportunities for titanium.

Okay, great. And secondly, I just wanted a little color on the exotics. I think, back in July you had said that you expected a very good second half for that product and your volumes were actually down very modestly. Just quarter-over-quarter, could you explain?

Well, volumes were down but revenues and margins were up, quite frankly. So the volume there -- that's a product that product mix really does mean something, but not only in terms of product form but also in terms of alloy system. And we're still looking at a very strong second half, we had a good third quarter within that. Our expectations from the standpoint of the exotic alloys business, both in terms of revenues and margins, the expectation for them is that the fourth quarter is -- we expect it to be just as good.

Yes, okay. So looking at the realized price increase, that's not just the commodity pass-through?

No, no. I mean, there are so many different products in there that we -- there's titanium alloys in there. There's zirconium. There's different zirconium alloys. There's niobium-titanium alloys. There's niobium. There's hafnium. I mean, it all depends upon what you're shipping in terms of what the poundage is and what the average price is. That's a business that I look at in 2011. It's had a very good year, and we have high hopes for that business going forward.

[Operator Instructions] Your next question comes from the line of Mark Parr with KeyBanc.

I had a question just on the -- trying to model 2012, looking at base price opportunities, I mean, if you look at your Flat-Rolled and then look down at high-performance, I mean, where would you see the greatest opportunity for base price realizations in the first half of '12. And if you could give us any color on magnitude of potential upside, that would be really helpful as well.

Yes. Well, I mean, I think that -- I think just given the nature of the markets, right? And the barriers to entry that there's probably more upside in the high-value products than there is in the Flat-Rolled Products, certainly the more heavily commodity Flat-Rolled Products in 2012. Having said that, I go back to the point that I made about the base prices for standard grade sheet today are at levels that I really don't believe are sustainable for anybody.

Yes, they're relatively low, aren't they?

Yes, they're historically low. I mean, they're actually lower than they were at the trough of 2003 which was a really bad market. So I just think that it's a function of unusually weak demand that exists and the uncertainty of the economy and some of that uncertainty clears up as we head into 2012 which I think is the consensus view that everybody has and we share that, that you'll see some base price improvement there. So...

So that assumes you get a Frenchman and a German woman to come together in Brussels, right?

Well, that would probably help. But I think as a percentage increase, you probably have a higher percentage increase on the stainless side than you might but -- and there's certainly more volume there. So I think the leverage is there as -- the earnings leverage is there as that market improves.

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research.

I want to ask my question in a way where I don't want you to violate any confidentiality agreement you might have signed with the customers. I'm sure you wouldn't. So I'm not -- I don't want you to tell me what the customer might have told you about next month, but your opinion as to learning curve where Boeing said, for example, on their call this morning at 10:30, you may have heard, that the first 787 is being assembled in South Carolina for delivery next year. 1 year from now and 2 years from now, how many ship sets do you think they might train those new workers into -- at the second assembly location? Your opinion, if you want to venture.

Look, I have -- Boeing is a very good company and they've had their challenges on the 787 development which is always the case on any new revolutionary product. I think that they are in a much better position than I to know their workforce and to know the approach they're taking and if they say that they're going to do a certain thing, I think at this stage of that program and everything they've been through, I would -- I would bet with Boeing.

Do you think they can produce as much as the new plant as they do the historic Everett location?

I'm not sure that they've said that. I did not listen to their call.

They didn't say much, Rich. That's why I'm asking.

I didn't listen to their call this morning, so I don't know. But from what I've heard them say, I don't think that they've said that they intend to have an equal weighting between South Carolina and Washington. I thought that there would be a heavier weighting to the Washington facility, but I just go back and if -- I think that they're going to say what they believe they can make happen and I think that despite the challenges of the 787 program, I think historically, they've been pretty good at delivering.

When do you think is the climax of the commodity customers' inventory liquidations, the holidays?

Are you talking about stainless now?

All your businesses, but mostly Flat-Rolled, yes.

Yes. I think that -- I don't think that they're going through any significant inventory reductions, quite frankly. I think their inventories are really pretty lean. As demand and consumption continues to decline, which it has throughout this year, they have continued to draw down inventories on the sheer volume side because they're matching up with what the demand is. So -- but I don't think that they're liquidating inventory because they're trying to necessarily just to cut it. I think they're managing their inventories in line with what the end market demand is. So as that end market demand begins to improve, and I believe it will, I wouldn't expect that to happen on Christmas Day, but I think as we head into 2012 and the general economic conditions begin to improve, I think that will happen. And then you'll see, because inventories are so lean, you're going to see a fairly significant increase in demand from companies like us.

Your next question comes from the line of Andrew Chang with Wellington.

On the high-performance side, if I just adjust for some inventory charges and stuff, I guess I'm following margins sequentially to close to 20% from close to 25% before. Is that because of Ladish having lower margin or is there anything else that's structural?

I think, that there's -- I mean, there's probably 2 things there, Andrew. I think one of them is that historically when you look at the -- you remember you're selling a forging now that in some cases could be a $40,000 or $50,000 or $60,000 or $70,000 forging. So the margins, as a percent of revenue, may be different than selling a mill product. So I think over time, those things will become clear and straighten themselves out. I think the other issue is that as you have seen some reduction in the cost of nickel, for example, the cycle time for our nickel alloy products are such that you could have higher-cost nickel units flowing through cost of sales matching up against a lower surcharge because the surcharges done on a quarter lag and our inventory turns are less than 4x a year. So that means you have some higher cost raw materials flowing through that are out of sync with the surcharge mechanism in a falling market. So that has an impact as well.

And on the new Boeing contract, would you be able to give some color on how does the contract compare with your previous one on minimum volume or minimum -- profitability on a minimum volume whether there was any?

Well, I can't because we have a confidentiality agreement on that. I will tell you this. We look at it from the standpoint of -- and we've said this many times that we're not obsessively focused on volume. We're obsessively focused on earnings. And as I look at 2012, I don't have any different earnings expectations out of that contract today than I did before the expansion.

And your final question will come from the line of Gautam Khanna with Cowen and Company.

Yes, perhaps for Dale at the beginning here -- just to understand the LIFO in the quarter. It looks like -- is it fair to interpret that relative to Q2's expectation for LIFO your end inventory, it was a $17 million variance in the quarter that was recognized so about a $0.10 positive. Is that fair?

Yes, Gautam, that is fair. I mean, basically, if you looked at where we would be on year-to-date basis coming out of June, you would have thought that we would have been booking to basically a LIFO charge on an overall ATI basis of around $4.4 billion and an overall basis we actually did a booking like $12 billion, $12.5 billion.

Yes, but if I could just add one color to that. I don't think you can look at LIFO in isolation because, I mean, quite frankly, with the following surcharge versus some of the higher-cost material that flows through in cost of goods sold, you have a margin deterioration on the FIFO side and since that inventory is valued in LIFO, you're getting that benefit on the LIFO side that offsets some of that. So I don't think you -- because when you look at it just one side of that way you're ignoring the other side as well. So --

I agree. I'm just thinking relative to Q2's expectation into Q3. But I agree with your general point, absolutely. Also, Dale, on the tax rate, it's a little bit below 33%. What should we be thinking for modeling purposes going forward, not just Q4 but 2012?

Yes, I mean, right now, we don't see any significant onetime discrete items affecting Q4 or 2012. Obviously, we'll take a hard look at that as we get close to the end of the quarter but right now, we don't have anything really on our radar that we're looking at here necessarily.

So 35% or 32.7% or whatever it was this quarter?

We'll be looking at it more from year-to-date basis.

Year-to-date basis, okay. And then lastly, just to clarify, Rich, on your comments on Boeing and the extension. When you're talking about dollars necessarily not changing mix, maybe improving, this is X Ladish, correct?

Yes, yes, it's X Ladish.

So you're saying apples-to-apples?

Apples-to-apples, right.

You don't think there'll be any decline year-to-year?

In margins.

So overall profit dollars.

That's correct, that's right.

And that's all the time we have today for the question-and-answer session. I would now like to hand the conference back over to Rich Harshman for any closing remarks.

Thanks, everybody, for joining us on the call today, and thank you for your continuing interest in ATI.

Thank you, Rich. Thanks to all of the listeners for joining us today. That concludes our conference call.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect your lines. Good day.