Good day, and welcome everyone, to the Kaiser Aluminum Third Quarter 2008 Earnings Results Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Melinda Ellsworth, Vice President and Treasurer. Please go ahead, ma'am.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's Third Quarter 2008 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page on our Web site at www.kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me today our President, CEO and Chairman, Jack Hockema, Senior Vice President and Chief Financial Officer, Dan Rinkenberger and Chief Accounting Officer, Neal West. Jack and Dan will review the results and at the conclusion of our presentation, we will open the call for questions. Before we begin, I would like to remind the audience that the information contained in this presentation includes statements based on management's current expectations, estimates and projections that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the Company's anticipated financial and operating performance relate to future events and expectations and involve known and unknown risks and uncertainties. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the Company's earnings release for the quarter-ended September 30, 2008 and reports filed with the Securities and Exchange Commission. All information in this presentation is as of the date of the presentation. The Company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the Company's expectations. Non run-rate items to us are items that while they may recur from period to period are ones that particularly material to results. Two, impact cost as a result of external market factors and three, may not recur in future period if the same level of underlying performance were to occur. These are certainly part of our business and operating environment, but are worthy of being highlighted for the benefit of the users of our financial statements. Management's intent is to neutralize the fabricated product segment from fluctuations and underlying metal prices. We characterize metal products and LIFO charges as non-run rate items that eventually offset to a great extent over the course of a full year. Further, presentations including such items as net income or operating income before non-run rate or after adjustments are not intended to be and should not be relied on, in lieu of the comparable caption under Generally Accepted Accounting Principles to which it is reconciled. Such presentations are solely intended to provide greater clarity of the impact of certain material items on the GAAP measure and are not intended to imply such items should be excluded. I would now like to turn the call over to Jack Hockema. Jack?

Thanks, Melinda, and good afternoon, everyone. I will start with a brief assessment of the third quarter results and then turn the call over to Dan who will review the financial details. I will then share some thoughts on our outlook before opening the call for questions. As Melinda mentioned you may follow our discussion by viewing the slide presentation on our Web site at www.kaiseraluminum.com. Slide #5 provides highlights for the third quarter. Consolidated operating income was $30 million after adjustments for the Anglesey production outage and non-run rate items. As anticipated and discussed in last quarter's call reported results were negatively impacted by lower volume at Anglesey as the restart of the second pot line continued through the third quarter. There will be an additional impact on our fourth quarter results as Anglesey ramps up to full production as planned. As a reminder, we expect insurance settlements to ultimately cover these losses. Dan will provide additional context in his remarks. Results also included a $44 million mark-to-market loss on our hedging positions, primarily as a result of declining metal prices during the quarter. This is largely a reversal of significant mark-to-market hedging gains recorded in the first half of 2008. As a reminder, we manage our fabricated products business to be neutral to metal price and these mark-to-market gains and losses are non-cash, non-run rate items that fluctuate with metal prices. Overall, market trends and operating performance within the fabricated products segment were largely in line with our expectations for the quarter with continued strong demand for aerospace and defense products and with cost impacts from planned project work. During the quarter, we did experience lower distributor rod and bar shipments as a result of de-stocking and short-term market share erosion when we introduced the energy price surcharge. Our major investment programs are on schedule. We completed the final stage of our Trentwood heat treat plate expansion and it is performing as expected. The important Kalamazoo investment to address inefficiencies in our rod and bar value stream is also proceeding as planned. Lastly, we returned $28 million to shareholders through the repurchase of shares. Before discussing industry trends and implications for Kaiser, I will now turn the call over to Dan who will go into more detail regarding the quarterly results.

Thanks, Jack. The consolidated financial highlights are shown on Slide #7. As Jack mentioned, third quarter consolidated operating income was $30 million after adjustments mainly related to two significant and unusual items. The first was a $44 million mark-to-market loss on our hedging positions due to declining metal prices and to a lesser degree, declining currency exchange rates and lower natural gas prices. You may recall that we had approximately $38 million of mark-to-market gains in the first half of 2008 which largely offset this quarterly loss in the year-to-date period. Mark-to-market gains and losses of course are non-cash and we do consider them non-run rate items. The second significant item was the impact of lower production at Anglesey due to the outage caused by the fire at the smelter on June 12th. Consistent with our message in our last earnings call, we estimated the impact of the outage in the third quarter was approximately $20 million. And as we said, we expect insurance settlements will ultimately cover these losses although the timing and the amount of the settlements do remain uncertain. These two significant items adversely impacted the quarter and resulted in a reported operating loss of $37 million and a net loss of $22 million. Adjusting for these and other non-run rate items, operating income would have been a positive $30 million and net income would have been a positive $16 million. Earnings per diluted share as reported of negative $1.11 for the quarter would have been a positive $0.77 per share when adjusted for these non-run rate items and the affect of the Anglesey outage. The effective tax rate was 43% year-to-date, but reflecting the impact of using our NOLs on U.S. taxable income, the pretax -- the cash tax rate was approximately 7%. Slide #8 covers…

Thanks, Dan. Dovetailing with Dan's comments, we felt it would be helpful to provide everyone with a broader perspective of the current economic environment and the potential impact on our operations. We have noted in the past that our served market segments are cyclic and the credit crisis has heightened the risk of a global recession. The chart on this Page #13 provides some perspective on market cycles related to our served market segments. In the early 1990's, the economic downturn was focused primarily on the building and construction markets and had a relatively minor impact on our served markets segments. In contrast during the long and deep U shaped 2001 through 2003 recession, demand for our served market segments declined approximately 30% and prices came under pressure. Compared to 2001 and to 2003, we are a very different Company and are much better positioned to deal with an economic downturn given our financial strength and enriched product mix and heat treat plate contracts that should help to mitigate the impact if we experience recessionary demand. Turning to Slide #14, we remain bullish regarding our core aerospace and defense applications, backlogs for commercial aircraft are strong and we expect robust build rates over the next few years. However, we also recognize that a deep and prolonged global recession could erode the order backlog for commercial aircraft. Demand for military aircraft applications is also expected to remain strong and we anticipate another year of historically strong armor plate demand although not at the record levels experienced in 2007 and 2008. Significant uncertainty surrounds the service center demand for general engineering products. We expect that the fourth quarter will be negatively impacted by normal holiday season weakness as well as by aggressive end of the year service center de-stocking. As such, we…

Thank you. (Operator instructions). And our first question today comes from Timna Tanners with UBS.

Hi, thanks for the really thorough overview. Good morning -- good afternoon, I should say.

Hi, Timna.

It's good morning for you guys, sorry. Wanted to just ask you to clarify and follow-up on two points that you mentioned. One is on the production for the fourth quarter from Trentwood. The local newspaper is reporting some layoff there. When Jack gave his summary, he talked about expectation that with the additional capacity could be at higher volumes than the third quarter. But also with some comments that given conditions it may or may not be as robust. Can you just clarify what your outlook is or what are the driving factors on your outlook for Trentwood?

Certainly. In relation to the layoffs and you'll recall we've been saying earlier in the year that we expected to be running at capacity or near capacity as we came into the fourth quarter. The world changed in September. And as we reflected on that situation, Trentwood had a number of temporary employees that had been in training for several weeks or even months gearing up for full capacity operations. And when the credit markets collapsed in September and the economic uncertainty was clear and distributors started very heavy de-stocking activities. It was clear that we would not be running at a near capacity rate in the fourth quarter. So plant management made the decision to remove those temporary employees. However, given that, I think Dan made a comment and we had it in our earnings release, we still expect that we will have record shipments in the fourth quarter. So -- aerospace and defense continue to be very strong going into our fourth quarter. And as I said, the potential risk and the downside is in service centers where I use the word “aggressive.” I would even qualify that, “very aggressive” de-stocking by distributors. It's not an unusual situation in the fourth quarter, because typically there is some dressing of the balance sheet in service centers. But given the uncertainty at this time, it's about the most dramatic de-stocking across the board that I have experienced in many, many years in the service center industry. That's really the uncertainty and even with that, we still believe that we are going to be at a record level in the fourth quarter.

Okay. That makes sense. So you would really qualify it as aggressive de-stocking that we're seeing by service centers and not so much anything in the underlying aerospace demand. Can you also comment a little bit maybe on the general engineering side and the MRAP side of demand or plate?

We consider -- as we said, 2007, 2008 were record levels of armor plate demand. We do not expect it will be at those levels in 2009, but when we look at historic levels, we think 2009 will be the third most robust demand for armor plate in recent history at least. So we see good strong demand for armor plate in total, not all MRAP. There are a number of programs going on out there. But when we put all the programs together, we still believe we will see strong demand.

Okay. That's great. And then you made a comment earlier about some market share erosion with the energy surcharge. Can you give a little bit more detail on that?

Yes, that was primarily in rod and bar. You recall that we led with our chin on the energy price surcharge and as is in the case when you are making any dramatic change in pricing behavior, you have to be willing to take some shots. And so we hung in there with our energy price surcharge and while it cost us some share in the short-term, we are very pleased with the outcome in that we were pretty well across the board able to sustain our philosophy of energy price surcharges.

Okay. Great. And I guess the only other thing I was looking for is a little bit more context in terms of the inventories. What might have been the explanation for the greater amount? Is some of that in transit? Is some of that -- I think you gave a little bit more detail, but I just wanted some clarity there on what's sustainable or what might have been short-term in the inventory increase quarter-over-quarter?

Well, sure. The one item that clearly is the temporary item is the alumina inventory that I mentioned is for primary products. And at any point in time we are -- certain points in time we have alumina on the ship on its way to Anglesey that we've purchased to deliver to them. And that's what happened over the quarter end. So $12 million certainly is because of that. It's unusual snapshot effect. The other items are really within the fabricated products business. It was about $19 million of increase in the quarter and we probably would have -- if we hadn't seen the reduction in the shipments of rod and bar, would have been somewhat lower. So we had built it anticipating having shipments continue at normal rates through the third quarter and they didn't. And so now we are planning to reduce inventory to some degree in the fourth quarter, but exactly how much will be uncertain because we have to see what the business conditions really turn out to be.

Okay. Makes sense. Thanks a lot.

(Operator instructions) We will go next to Tony Rizzuto with Dahlman Rose.

Hi, gentlemen.

Good morning.

I was wondering if first of all we could talk a little bit about the heat treat product in terms of the contract structures. And -- maybe you can help me understand a little bit more in terms of roughly what percentage would be take or pay versus the mini-maxes?

Tony, we don't disclose the details of our contracts. But as we have characterized pretty consistently, we look at our book of business for heat treat plate in really two segments. We have roughly doubled the capacity at Trentwood and we still have -- so roughly half the business or the original, the old capacity of Trentwood is the traditional business that we've had for ever there, the light gauge plate and the service center business at Trentwood. That business has virtually no mini-max. A portion of it is contract; a significant portion is contracts in terms of price. But in terms of volume, there is essentially a zero safety net on that 50%. The other 50% is the new business, the heavy gauge plate and other new contracts that we've booked as part of the expansion. And those are a combination of min-maxes and take or pay type contracts with a very strong safety net on that new 50% of the product mix at Trentwood.

Okay. In terms of the min-max agreements, I would imagine are -- more of the customers now taking the minimum volumes, are you finding?

I think that depends customer to customer.

Alright. And what are the repercussions if a customer is going to take a minimum volume amount from you?

Well, again, the way we have characterized these is that when a customer has a min-max in contrast to a customer who has a take or pay, in essence, the min-max customer has an option on a portion of the capacity. And just like stocks or anything else, if you want an option, the option costs money. So we typically price a min-max contract which has an option on a portion of the capacity with different pricing parameters than we would for a customer who is willing to guarantee a firm volume over time.

Is that -- would a percentage -- is there any percentage of your heat treat business aero related, that is more spot oriented?

I'm sorry did you say aero related, Tony?

Yes.

There is some of that, but it's a relatively small volume of the aerospace that is spot price.

Alright. And I know this is not an easy question to try to answer, but in this uncertain environment, I wonder if you could help us understand a little bit in terms of how we should look at your capacity utilization maybe progressing in the fourth quarter into the early stages of '09 at Trentwood.

That's -- I think we can give you some parameters on that. Do you recall we had said in the first half we were running in the low 80s. I'm now going to speak in terms of capacity utilization as a percentage of the ultimate capacity which is what we now have in place. So in the first half we were running in the low 80s and we were slightly below that in the third quarter but we had heat treat 2 down for the entire third quarter. If we take the full nine months together we were still above 80% capacity utilization. We expect at this point we're looking at, at mid-80s -- again, there is uncertainty, we're still booking December, most of December. But we've got pretty good visibility at this point of the fourth quarter. We think we were going to be in the mid 80s. That's plus or minus a few points. But we believe we will be in the mid 80s in the fourth quarter even with what is very, very heavy de-stocking by distributors and what is going to be next year is a crap shoot. This economy is very, very uncertain, but again we believe we're going to be at relatively healthy capacity utilization levels going into next year.

I appreciate that. I thank you for that. Just a question. What -- I know we get some mix question in part. What is theoretical full capacity at rolling mill like Trentwood, given the maintenance and so on and so forth and roll changes, things of that nature?

I'm sorry, what's the question?

Well, the question would be what would be full capacity, would it be 95% given that -- ?

No, no, when we say -- we are fully capable of running a 100%. The number that we are giving is and is predicated on a certain -- on assumptions in terms of product mix and those kinds of things. But it takes all of that into account. So it's very practical for us to run at a 100%.

It did for quite a while at the earlier levels of --

Yes, if you recall, good point from Dan is, in the Phase I capacity when we made that expansion, we were running at 100% or even above 100% when we did that. So when we say 100% of capacity, that's fully what we would expect to be able to put through. If the orders were there, Pete Bunin would tell you that he can deliver 100% if that's -- that what we're stating is our capacity.

Alright. Thank you very much for clarifying that.

Our next question today comes from Tim Hayes with Davenport & Company. Timothy Hayes - Davenport & Company: Hello, gentlemen.

Hi, Tim. Timothy Hayes - Davenport & Company: Couple questions on the extrusions side. You mentioned in the slide that they were down year-over-year. Can you give some magnitude on how much? Is it a few percentage points from a year ago or was it, say, larger than 5%?

It was more than 5%. I don't have the number at my fingertips, but it was significant. Timothy Hayes - Davenport & Company: Was it greater than 10%?

Yes. Timothy Hayes - Davenport & Company: And then in terms of conversion prices for the industry, have they -- I'm guessing they have been slipping sequentially from Q2, is that correct?

Well, there is a -- interestingly, there is pressure on prices, but we've got another phenomenon that helped us a little bit in the third quarter. And that's the rapidly declining metal price, and typically, while we try to be perfectly matched when metal prices are declining, we try to be imperfectly matched in terms of prices going with metal. And so while there was pressure on prices, we were able to get a little bit of that back with lower metal prices. So in terms of total margin, we didn't see very much impact and had pretty robust margins in the third quarter. That's why I had a comment in the prepared remarks, we continue to see pressure on pricing and with the change in the -- the strengthening of the dollar, the change in currency exchange here, we are also beginning to see more and more foreign competition as well. And also as a consequence of what's developing now is a global recession. So we are seeing a lot more competitive pressure across the board, but it's not manifest itself to any significant degree yet in the numbers that we have reported. Timothy Hayes - Davenport & Company: Okay. And then a final question. What impact, if any, did you have from the Boeing strike?

The impact has been minimal if any from the Boeing strike, but obviously, Boeing has lost a couple months worth of production here. So in the whole pipeline -- and again we are so far back at the beginning of the pipeline that changes occur over time. So what we would expect is they have lost 10% to 15% of one year's production. We don't know what their production rates are going to be next year now as a consequence of the strike. But one could suspect over the next year or so there is 10% or 15% less metal that they will use than they otherwise would have. Timothy Hayes - Davenport & Company: Okay. Thank you. That's all my questions.

We will go next to Mark Parr with Keybanc Capital Markets.

Hey, Jack.

Hi, Mark.

How are you this afternoon? I guess it's still morning out there.

Yes, still morning here. Sun shining.

Well, sun shining here in Cleveland too. So at least we tied today. Can't say that very often. I had two questions for you. One, could you give us some color, not so much in the third quarter, but as you look at October and the last -- even the last several weeks. Are you seeing any loosening in your customers’ ability to get financing to fund just normal day-to-day transactions?

Mark, this is Dan. I will go ahead and answer that. We really haven't seen a material change in the payment practices of our customers and we feel pretty good about the customer base that we have as it is we think a relatively blue chip customer base. That said and I understand your concern because it's our concern as well, things have changed quite a bit and we are very cautious and we're looking very closely at our customer base to make sure that we don't see early signs of any changes. So we are at a monitoring phase but a very close monitoring phase. At this point we haven't seen any changes.

Okay. I appreciate that. And I was -- the purpose of my question was just kind of see if you have seen any improvements in credit availability but -- ?

In terms of credit availability?

Yes.

Our ability to borrow and I guess other peoples as well?

Yes.

Okay. So that's at least it's not getting any worse at this point from what you can tell, relative to where we were three weeks or four weeks ago when the OIS spread was over 300 basis points.

And everything was in grid -- basically everything was in total grid lock, yes.

Okay. The other question I had was, I'm wondering if you look at your product portfolio -- and this is a broad based question, but how much of the products that you manufacture are widely used in China?

Very little, Mark.

Okay.

Most of what we manufacture that would end up in China, there are some aerospace applications where they are fabricating for western manufacturers, and there is some that goes into semiconductor type operations, general engineering plate that goes for vacuum chambers and other semiconductor applications.

Things that you are making, would it be fair to say that other aluminum processing businesses in China are producing similar types of products that what you produce?

No.

Okay.

No, the barriers to entry on these products are extremely high. So there -- I'm talking now about heat treat plate primarily.

Right.

Some of the more general extruded products, sure, they would be producing those in China.

Okay. And what -- again, just remind me, how -- what proportion of your sales would those general extruded products be?

Well, we have a pie chart in the appendix. Somebody will tell me what page it is here in a minute.

Okay. I will take a look at it. That's alright.

It's slide #22. It doesn't break it out as extrusions, but the way to look at it is there is a big aerospace and high strength products and those are extrusions and sheet and plate and those are very high intellectual property products with high barriers to entry. And then there is another big segment that represents general engineering and a significant portion of that as well represents pretty sophisticated products where some manufacturers can meet those conditions but there are some products in there that have special applications and take intellectual property where there will be barriers to entry.

Okay. I appreciate that. Congratulations on the progress and let's hope we can get to a point where we can start talking about guidance again one of these days soon.

Yes. That would be wonderful.

Have a good week. Thank you.

Thanks, Mark.

We will take a follow-up from Anthony Rizzuto with Dahlman Rose.

Thank you very much. Jack, you mentioned about the competitive environment and then you talked about material coming in from offshore. Are you seeing that more in the general engineering plate area?

Yes, that is -- it's general engineering plate and it's also in some of our general engineering cold finish extrusions.

Are there any particular origins of where that material is coming from?

The plate is South Africa and Eastern Europe and cold finish comes from Eastern Europe and some of the cold finish comes from Asia as well.

You also mentioned that you had been benefiting when the dollar was at a lower level. What was the percentage of your exports in the fab area in the last quarter?

I don't have that number at my finger tips, but in terms of the exports that we have, the bulk of it would be aerospace products going to Western Europe and some going to Asia for fabrication for the major air frame manufacturers. That's the predominant portion. There is a small portion of automotive extrusions that are now going to Western Europe as well.

Okay. Just a question on the Boeing 787. Most of you -- the way I understand is most of the -- gentlemen most of the demand for the alumina heat treat is really the work force programs that have been out there, the 737, the extended range, the airbus A-320, certainly the A-380. The 787, while a large aircraft and certainly more fuel-efficient and so on and so forth, really not as big a heat treat plate user. Could you just refresh my memory? I want to make sure I understand this correctly, if you look at the various models, you are really seeing a slowing down across the board is what you are saying.

Well, let me go to the 787. First, you made a comment that the usage of heat treat plate or at least what I thought you said is the usage of heat treat plate on the 787 is not as much as a single aisle which in fact is not correct. The usage that we expect are the heat treat plate consumed to manufacture a 787, while it will be less than the typical twin aisle, it's still a significantly more than a single aisle. And we don't have it in this slide deck. But you can look on our Web site and I'm sure you have it, Tony. We have a chart where we talk about the amount of plate consumed per aircraft as a bubble chart and it shows the weight of an aircraft on the X axis and it shows the amount of plate consumed on the Y axis. And it shows a single aisle which would be representative of the 737 and the A-380 and then it shows a twin aisle which we don't identify, but in fact it's our estimate of what a 787 would consume. And if you look at the size of that bubble, I don't remember exactly but is probably two times to three times what a single aisle would consume. And then was that the thrust of your question?

Yes, for the most part. And then I had a question to on the non-aero and the other loan products initiatives and the Kalamazoo plan. Clearly, that was more cost driven, not volume driven, more efficiencies than cost. Now with the transport -- the ground transport market taking a step downward, are there facilities now as you are further evaluating that, are there some facilities that might be vulnerable or that you might see may need some closure -- areas that you might have to rationalize?

We are taking a step back as I'm sure everyone is in this environment and looking at the entire situation and how severe this auto and general downturn might be. It's possible that there could be some rationalization -- temporary rationalization, depending on how this whole thing unfolds. But it's premature for us to make that kind of a forecast. Certainly, we are looking at those kinds of things and continuously evaluating the environment.

Hopefully, we will get some clarification and things will normalize. Hopefully, sooner rather than later. I appreciate your comments.

Well, Tony, let me just make another comment. I made it to our group in here in some of our prep sessions. But -- the fourth quarter for me is a quarter where typically I ignore it and that's especially true here because there are generally lots of things going on at the end of the year with the holidays. But there is another factor here and that is - I have mentioned this a couple of times. When you look at the supply chain, we are at virtually at the very beginning of the supply chain. And 50% of what we do goes to service centers and 50% goes direct, but then our service centers are also supplying to end users or intermediate users. And what happens whenever you get an economic downturn and the fear that's out there, you see everyone pulling in their horns and what happens is dramatic de-stocking. And that backs up to the distributor. So not only are they de-stocking on their own, but their customers are also going through some de-stocking as they see reduced demand and our OEMs are doing the same thing. And that's why when you look at the demand chart that I had on one slide there, it ended up where I think for the country or for industry, it was a V shaped or even a W recession, for us it was a U. And the reason is we get slammed immediately with artificially high reductions in our demand because there is that severe de-stocking through the whole system. So that's a critical factor that we are seeing right now, but we think that what we are seeing is hopefully the worse of it because of this very, very dramatic de-stocking. And we hope we're going to see better things when we get into the first and second quarter here.

Thanks very much, Jack. Appreciate your insights.

And we will go next to Meryl Witmer with Eagle Capital.

Hi. On Slide #8, you talk about the $7 million in manufacturing costs -- you talked about it a little. But that is could you go into that a little bit more?

Sure, Meryl. During the quarter, actually, we had outages that were planned for some equipment repairs, not only at Trentwood, repairs exceed, there are more like upgrades, but several of our plants. And when we have that happen, then you have to kind of work around the fact that you are trying to continue production even though you have capacity down. And you end up doing a lot of work that's relatively inefficient. And so that impacts things like rework on products or additional people you have to throw at the manufacturing process. And so we talked about manufacturing costs being higher. And it's largely because we were trying to work around the facilities that had shutdowns going on.

Okay. Thanks. So you can actually quantify those types of numbers?

Well, it's difficult to, but we – it's a good estimate. It's very difficult to really measure it perfectly. But please do consider it as our best estimate.

Okay. So if you didn't have to do all those things and you had the same sales level that you had, your best guess is you would have made $7 million more?

That's a -- that's our best estimate --

Right. I know I understand it's an estimate. Thank you. That's really helpful. And then on the energy, the $5 million energy for freight and currency, I know you have hedges for the fourth quarter and after that. And energy prices have obviously come down. I'm assuming freight is coming down, but maybe it isn't. Will you get any benefit from lower natural gas prices in the fourth quarter versus the third?

In the fourth quarter we do have quite a bit of our energy already hedged and a portion of our first quarter is also hedged and those hedges are at a higher gas prices than the current spot. So we are not going to get as much benefit as we would otherwise expect if we were not in our, having our hedge positions in place.

Right. But -- relative to where say, -- I don't know when you put the hedges on where things were in the third quarter, is it approximately at the same levels as the third quarter or lower than that?

I can't remember exactly the levels. I don't believe it's going to be a material reduction in what we have realized in the third quarter versus what we will see on the fourth quarter. The exact numbers, I don't have on the tip of my tongue.

So I don't mean to be mean. I am just trying to get the numbers. Did you hedge at the wrong moment or was this a hedge that was put on much earlier and -- ?

Well, I think the world looked a lot different when we're back six months ago when we needed to understand what was happening in an environment where gas prices were significantly increasing. And so we needed to put in protection for what could have been even worse gas prices. So yes, there is a dramatic drop and who was anticipating, the one (inaudible) was anticipating that we're going to have gas prices where they are today.

Just to comment to follow-up on that, we don't really bet on what the energy prices are. We have a rigorous program that amounts to a dollar cost averaging type of a program. And we buy more heavily ahead of time for the winter strip and for the hurricane season which are the two periods in time and we happen to be in the winter strip now in the fourth quarter. So those are the two periods in time when natural gas prices are extremely volatile. So we have a program over time to try to smooth those out. And in this case we were buying at a period when the forward prices were relatively high and now they have come down precipitously. But there are years when it goes the other way.

So then with things down, I don't know where forward prices are, but now that prices are down, do you then still buy forward? In other words for me it would be a good idea if you --

Yes, we do. Yes, we have a program that we follow to lay in -- to in essence reduce the volatility of those costs. And it depends on the period of the year, whether the high volatility or low volatility periods of the year, how much we buy at a time and when we buy it.

Okay. And then on the freight costs, are you seeing would you expect any benefit in the fourth quarter and say, first quarter?

Yes, we would expect those to improve both international freight which has been onerous here, and that's starting to loosen up. The overseas cost as well as a portion of the truck freight cost is tied directly to diesel fuel prices.

Right. And then do you do much by rail?

Not much.

Not very much.

Not much. Okay. Great. Thank you.

We will go next to Dan Whalen of Dahlman Rose.

Yes, just a quick follow-up to Tony's question earlier on the Kalamazoo project and just I guess generally speaking on the lower value added capacity. If we were to try to take a look at what the shipping costs were relative to the production costs, just to get a better handle of how much cost saving potential there is in this Kalamazoo project, is there an order of magnitude? Is shipping maybe comparable to a third of the production costs or -- just so we get a better sense? I think a lot of the Kalamazoo was to get a more closely situated to the end clients.

Well, a portion of was to -- is to get it closer to the end users. Another piece of it was to get an efficient remelt in conjunction with the extrusion plant because in today's manufacturing process we are casting billet at other locations and shipping those to the extrusion plants as well. So there is significant logistic costs that we are removing with the Kalamazoo strategy. But it's also a world-class manufacturing facility that will be a low-cost producer from that standpoint as well. And just quantifying it, when we announced $91 million of investments, it was a handful of investments, but the predominant investment was Kalamazoo. I forget now the EBITDA multiple numbers, but we said it was going to be a $20 to $30 million EBITDA incremental benefit from that $91 million and again the bulk of that is Kalamazoo.

Is there a rough estimate? If we tried to take shipping costs relative to production costs that we can try and get our arms around?

We don't have that in this room at our fingertips. We know what that is but --

Maybe we can follow up after the call.

Well, first, we need to share it with everybody, if we have to talk about it after the call.

I think there is a chart in one of our presentations where we showed the magnitude of change as a result of Kalamazoo, pluses and minuses on some of those items we were just discussing. So I think we can go back and reference that.

Okay. Thank you.

Just an additional item, you can get a sense of freight -- I take that back -- I was going to say our energy surcharge. I won't tell you that. I take it back.

And that does conclude the question-and-answer session today. Mr. Hockema, I'd like to turn the conference back over to you for closing remarks.

Thank you. I would like to reiterate some important points from the call here. The long-term fundamentals of our business do remain positive. We are well-positioned in our markets and our growth and efficiency initiatives will further strengthen the Company's competitive position. In the near-term we face unprecedented economic uncertainty and continue to take actions to respond to the changing market conditions and to maintain our competitive and financial strength. Thanks for joining us today. And we look forward to updating you again on the fourth quarter call.

This does conclude today's conference ladies and gentlemen. Again, we appreciate your participation today. And you may disconnect at any time.