• Results of Operations

• Liquidity and Capital Resources

• Contractual Obligations, Commercial Commitments, and Off-Balance-Sheet and Other Arrangements

• Critical Accounting Estimates

• New Accounting Pronouncements

We believe our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8. "Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2007.
Unless otherwise noted, this MD&A relates only to results from continuing operations. In the discussion of operating results below, certain items are referred to as non-run-rate items. For purposes of such discussion, non-run-rate items are items that, while they may recur from period to period, are
(i) particularly material to results, (ii) affect costs primarily as a result of external market factors, and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of the users of the financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from items such as fluctuations in underlying metal prices, natural gas prices, and currency exchange rates. Overview
We are a leading producer of fabricated aluminum products for aerospace / high strength, general engineering and custom automotive and industrial applications. In addition, we own a 49% interest in Anglesey Aluminium Limited ("Anglesey"), which owns and operates an aluminum smelter in Holyhead, Wales.

We have two reportable operating segments, Fabricated Products and Primary Aluminum, and a Corporate segment. The Fabricated Products segment is comprised of all of the operations within the fabricated aluminum products industry including our eleven fabrication facilities in North America at September 30, 2008. The Fabricated Products segment sells value-added products such as heat treat aluminum sheet and plate, extrusions and forgings which are used in a wide range of industrial applications, including aerospace, defense, automotive and general engineering end-use applications.
The Primary Aluminum segment produces commodity grade products as well as value-added products such as ingot and billet, for which we receive a premium over normal commodity market prices, and conducts hedging activities in respect of our exposure to primary aluminum price risk.
Changes in global, regional, or country-specific economic conditions can have a significant impact on overall demand for aluminum-intensive fabricated products in the markets in which we participate. Such changes in demand can directly affect our earnings by impacting the overall volume and mix of such products sold. During 2007 and the first nine months of 2008, the markets for aerospace and high strength products in which we participate were strong, resulting in higher shipments.
Changes in primary aluminum prices also affect our Primary Aluminum segment and expected earnings under any firm price fabricated products contracts to the extent that such metal price exposures are unhedged. However, the impacts of such changes are generally mitigated by primary aluminum hedges. Our operating results are also, albeit to a lesser degree, sensitive to changes in prices for power and natural gas and changes in certain foreign exchange rates. All of the foregoing have been subject to significant price fluctuations over recent years. For a discussion of our sensitivity to changes in market conditions, see Part I, Item 3. "Quantitative and Qualitative Disclosures About Market Risks" of this Report.
During the nine months ended September 30, 2008, the average London Metal Exchange ("LME") transaction price per pound of primary aluminum was $1.28. During the nine months ended September 30, 2007, the average LME transaction price per pound of primary aluminum was $1.23. The average LME price for the quarters ended September 30, 2008 and September 30, 2007 were $1.26 and $1.16, respectively. At October 31, 2008, the LME price was approximately $0.89 per pound.
Management Review of the Quarter Ended September 30, 2008 Highlights:
• Fabricated Products segment shipments of 135 million pounds, and Fabricated Products operating income of $19.5 million, with Fabricated Products net sales growth over the third quarter of 2007 of 6%;

• Consolidated net loss of $22.1 million, or $1.11 per diluted share, which includes $43.8 million of pre-tax, non-cash mark-to-market losses on our derivative positions as well as an adverse operating impact, estimated at approximately $20 million (pre-tax), of the outage at Anglesey that resulted from a fire at the smelter on June 12, 2008;

• Declaration of a dividend of $4.8 million, or $.24 per common share, to stockholders of record at the close of business on October 24, 2008, which will be paid on November 14, 2008;

• Repurchase of 572,700 shares of common stock at a weighted-average price of $49.05 per share; and

• Outstanding borrowings of $34.7 million and outstanding letters of credit of $10.0 million under the revolving credit facility at September 30, 2008 leaving $220.3 million available for additional borrowing and letters of credit.

Results of Operations
Consolidated Selected Operational and Financial Information The table below provides selected operational and financial information on a consolidated basis (in millions of dollars, except shipments and average sales prices).

The following data should be read in conjunction with our interim consolidated financial statements and the notes thereto contained elsewhere herein. See Note 16 of Notes to Consolidated Financial Statements included in

                                                  Quarter Ended                 Nine Months Ended
                                                  September 30,                   September 30,
                                               2008           2007            2008             2007
                                                          (In millions of dollars, except
                                                         shipments and average sales price)
Shipments (millions of pounds):
Fabricated Products                             135.3          135.2            435.6            413.1
Primary Aluminum                                 24.2           40.0             98.0            118.6

                                                159.5          175.2            533.6            531.7

Average Realized Third Party Sales Price
(per pound):
Fabricated Products(1)                        $  2.48        $  2.34        $    2.40        $    2.39
Primary Aluminum(2)                           $  1.42        $  1.26        $    1.41        $    1.34
Net Sales:
Fabricated Products                           $ 334.9        $ 316.2        $ 1,043.3        $   985.3
Primary Aluminum                                 34.3           50.5            138.4            158.7

Total Net Sales                               $ 369.2        $ 366.7        $ 1,181.7        $ 1,144.0
Segment Operating (Loss) Income:
Fabricated Products(3)(4)                     $  19.5        $  39.8        $   102.4        $   129.3
Primary Aluminum(5)                             (44.9 )         13.4              3.8             31.8
Corporate and Other                             (12.5 )        (10.6 )          (37.8 )          (35.8 )
Other Operating Benefits (Charges),
Net(6)                                            1.4            1.4              1.2             13.7

Total Operating (Loss) Income                 $ (36.5 )      $  44.0        $    69.6        $   139.0
Net (Loss) Income                             $ (22.1 )      $  24.8        $    39.8        $    76.6
Capital Expenditures, (net of change in
accounts payable)                             $  22.7        $  15.4        $    61.0        $    43.1

(1) Average realized prices for the Company's Fabricated Products segment are subject to fluctuations due to changes in product mix as well as underlying primary aluminum prices and are not necessarily indicative of changes in underlying profitability. See Part I,
Item 1.
"Business"
included in
our Annual
Report on Form
10-K for the
year ended
December 31,
2007.

(2) Average realized prices for the Company's Primary Aluminum segment exclude hedging revenues.

(3) Fabricated Products segment operating results for the quarter and nine month periods ended September 30, 2008 include a non-cash last-in, first-out
("LIFO") inventory charge of $.7 million and $31.3 million, respectively, and metal (losses)gains of approximately $(3.2) million and $23.7 million, respectively. Fabricated
Products
segment
operating
results for
the quarter
and nine month
periods ended
September 30,
2007 include a
non-cash LIFO
inventory
benefit of
$10.2 million
and
$8.2 million,
respectively,
and metal
losses of
approximately
$9.7 million
and
$6.5 million,
respectively.

(4) Fabricated Products segment includes non-cash mark-to-market gains (losses) on natural gas and foreign currency hedging activities totaling $(9.7) million and $.4 million in the quarters ended September 30, 2008 and 2007, respectively. Fabricated
Products
segment
includes
non-cash
mark-to-market
gains
(losses) on
natural gas
and foreign
currency
hedging
activities
totaling
$(5.2) million
and
$1.7 million
in the nine
months ended
September 30,
2008 and 2007,
respectively.
For further
discussion
regarding
mark-to-market
matters, see
Note 12 of
Notes to
Interim
Consolidated
Financial
Statements
included in

(5) Primary Aluminum segment includes non-cash mark-to-market gains (losses) on primary aluminum hedging activities totaling $(26.1) million and $6.4 million and on foreign currency derivatives totaling $(8.0) million and $(2.1) million for the quarters ended September 30, 2008 and 2007, respectively. Also included in the quarter and nine months ended September 30, 2008 were $20.1 million and $26.8 million of adverse impact from the Anglesey outage as a result of the fire on June 12, 2008. Primary
Aluminum
segment
includes
non-cash
mark-to-market
gains
(losses) on
primary
aluminum
hedging
activities
totaling
$5.7 million
and
$8.7 million
and on foreign
currency
derivatives
totaling
$(6.5) million
and $(5.2)
million for
the

nine months
ended
September 30,
2008 and 2007,
respectively.
For further
discussion
regarding
mark-to-market
matters, see
Note 12 of
Notes to
Interim
Consolidated
Financial
Statements
included in

(6) See Note 13 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1 of this Report for a discussion of the components of Other operating charges, net and the segment to which the items relate.

Summary. We reported a net loss of $22.1 million for the quarter ended September 30, 2008 compared to net income of $24.8 million for the quarter ended September 30, 2007. For the nine months ended September 30, 2008, we reported net income of $39.8 million compared to net income of $76.6 million for the nine months ended September 30, 2007. Both quarters and nine month periods include a number of non-run-rate items that are more fully explained in the sections below.
Our operating income (loss) for the quarter ended September 30, 2008 decreased to $(36.5) million compared to $44.0 million for the quarter ended September 30, 2007. Included in the operating income (loss) for the quarter ended September 30, 2008 was $43.8 million of unrealized mark-to-market losses on our derivative positions as a result of the decrease in metal prices, natural gas prices, and foreign currency exchange rates during the quarter as well as a number of other items discussed in the "Segment information" section below. Our operating income for the nine months ended September 30, 2008 decreased by 50% to $69.6 million compared to the nine months ended September 30, 2007. The decrease in operating income is more fully explained in the "Segment information" section below.
Net Sales. We reported Net sales in the quarter ended September 30, 2008 of $369.2 million compared to $366.7 million in the quarter ended September 30, 2007. As more fully discussed below, the increase in revenues during the quarter ended September 30, 2008 is primarily the result of a 6% increase in our Fabricated Products segment pricing as well as a 13% increase in Primary Aluminum segment pricing partially offset by a 40% reduction in Primary Aluminum segment shipments. For the nine months ended September 30, 2008, we reported Net sales of $1,181.7 million compared to $1,144.0 million in the nine months ended September 30, 2007. As more fully discussed below, the increase in revenues in the nine months ended September 30, 2008 is primarily the result of a 5% increase in shipments from our Fabricated Products segment as well as a 5% increase in Primary Aluminum segment pricing offset by a 17% reduction in Primary Aluminum segment shipments. Increases or decreases in primary aluminum market prices do not necessarily directly translate to increased or decreased profitability because (a) a substantial portion of the business conducted by the Fabricated Products segment passes primary aluminum price changes directly onto customers and (b) our hedging activities limit our risk of losses as well as gains from primary metal price changes.
Cost of Products Sold Excluding Depreciation. Cost of products sold, excluding depreciation for the quarter ended September 30, 2008 totaled $383.7 million, or 104% of Net sales, compared to $303.3 million, or 83% of Net sales, in the quarter ended September 30, 2007. The increase in Cost of products sold as a percentage of net sales in the quarter ended September 30, 2008 was primarily the result of $43.8 million of unrealized mark-to-market losses on derivative positions discussed above. Cost of products sold excluding depreciation for the nine months ended September 30, 2008 totaled $1,044.2 million, or 88% of Net sales, compared to $954.4 million, or 83% of Net sales, in the nine months ended September 30, 2007. The increase in Cost of products sold as a percentage of Net sales in the nine months ended September 30, 2008 was primarily the result of increases in energy, freight, currency exchange, major maintenance expense, and other manufacturing costs.
Depreciation and Amortization. Depreciation and amortization for the quarter ended September 30, 2008 was $3.6 million compared to $3.0 million for the quarter ended September 30, 2007. Depreciation and amortization for the nine months ended September 30, 2008 was $10.8 million compared to $8.3 million for the nine months ended September 30, 2007. Higher depreciation expense was the result of Construction in progress being placed into production throughout the second half of 2007 and the nine months in 2008 primarily in relation to the expansion of our Trentwood facility in Spokane, Washington.
Selling, Administrative, Research and Development, and General. Selling, administrative, research and development, and general expense totaled $19.8 million in the quarter ended September 30, 2008 compared to $17.8 million in the quarter ended September 30, 2007. For the nine months ended September 30, 2008, Selling, administrative, research and development, and general expense totaled $58.3 million compared to $56.0 million in the nine months ended September 30, 2007.

Other Operating (Benefits) Charges, Net. Included within Other operating (benefits) charges, net (in millions of dollars) for the quarters and nine months ended September 30, 2008, and 2007 were the following:

                                                       Quarter                         Nine Months
                                                 Ended September 30,               Ended September 30,
                                                2008              2007            2008              2007
Reimbursement of amounts paid in
connection with sale of Company's
interest in and related to Queensland
Alumina Limited - Corporate:
AMT (1)                                       $       -          $     -        $       -          $  (7.2 )
Professional fees                                     -                -                -             (1.1 )
Bad debt recoveries relating to
pre-emergence writeoffs - Corporate                (1.6 )              -             (1.6 )              -
Pension Benefit Guaranty Corporation -
Corporate (2)                                         -                -                -             (1.3 )
Non-cash benefit resulting from
settlement of a $5.0 claim by purchaser
of the Gramercy, Louisiana alumina
refinery and the Company's interest in
Kaiser Jamaica Bauxite Company for
payment of $.1 - Corporate                            -                -                -             (4.9 )
Post-emergence chapter 11-related items
- Corporate (3)                                      .2               .5               .4              2.5
Resolution of contingencies relating to
sale of property prior to
emergence - Corporate (4)                             -             (1.6 )              -             (1.6 )
Non-cash charge related to additional
share based compensation recorded by
Anglesey - Primary Aluminum (Note 3)                  -                -                -                -
Other                                                 -              (.3 )              -              (.1 )

                                              $    (1.4 )        $  (1.4 )      $    (1.2 )        $ (13.7 )

(1) See Note 9 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

(2) See Note 12 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

(3) Post-emergence chapter 11-related items include primarily professional fees and expenses incurred after emergence which related directly to the Company's reorganization.

(4) See Note 14 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

Interest Expense. Interest expense was $.3 million and $.8 million in the quarter and nine months ended September 30, 2008, respectively, compared with $1.0 million and $2.2 million in the quarter and nine months ended September 30, 2007, respectively. The decrease is primarily the result of the repayment of our term loan during the fourth quarter of 2007.
Other Income (Expense), Net. Other income (expense), net was $(.2) million and $1.0 million in the quarter and nine months ended September 30, 2008, respectively, compared to $1.8 million and $4.1 million in the quarter and nine months ended September 30, 2007. The decreases were primarily related to lower interest income as a result of declining interest rates as well as a decrease in interest earning principal balance.
Income Taxes Benefit(Provision). The income tax provision for the nine months ended September 30, 2008 was $30.0 million, with an effective tax rate of 43%. The effective tax rates for the nine months ended September 30, 2007 was approximately 46%. The reduction in the effective tax rate is primarily the result of a reduction in the statutory tax rate for 2008 in the United Kingdom, a reduction in the statutory tax rate in Canada, and a favorable geographical distribution of income in 2008 as compared to 2007.
The effective tax rate of 43% for the nine months ended September 30, 2008 was impacted by several factors including:
• The Company's equity in income before income taxes of Anglesey is treated as a reduction (increase) in Cost of products sold excluding depreciation. The income tax effects of the Company's equity in income are included in the tax provision. This resulted in $1.6 million being included in the income tax provision, increasing the effective tax rate by approximately 2.3%.

• Unrecognized tax benefits, including interest and penalties, increased the income tax provision by $1.8 million and the effective tax rate by approximately 2.6%.

• The foreign currency impact on unrecognized tax benefits, interest and penalties resulted in a $1.4 million currency translation adjustment that was recorded in Accumulated other comprehensive income.

• Changes in the United Kingdom and Canadian income tax rates and the geographical distribution of income, which reflected the effects of the Anglesey transformer fire.

Derivatives
In conducting our business, we use various instruments, including forward contracts and options, to manage the risks arising from fluctuations in aluminum prices, energy prices and exchange rates. We have historically entered into derivative transactions from time to time to limit our economic (i.e. cash) exposure resulting from (1) our anticipated sales of primary aluminum and fabricated aluminum products, net of expected purchase costs for items that fluctuate with aluminum prices, (2) the energy price risk from fluctuating prices for natural gas used in our production process, and (3) foreign currency requirements with respect to our cash commitments for equipment purchases and with respect to our foreign subsidiaries and affiliate. As our hedging activities are generally designed to lock-in a specified price or range of prices, realized gains or losses on the derivative contracts utilized in the hedging activities generally offset at least a portion of any losses or gains, respectively, on the transactions being hedged at the time the transaction occurs. However, due to mark-to-market accounting, during the life of the derivative contract, significant unrealized, non-cash gains and losses may be recorded in the income statement as a reduction or increase in Cost of products sold, excluding depreciation. From time to time, the Company may modify the terms of the derivative contracts based on operational needs.
We use hedging transactions (derivative instruments) to lock-in a specified price or range of prices for certain products which we sell or consume in our production process, such as primary aluminum and natural gas, and to mitigate our exposure to changes in foreign currency exchange rates. The fair value of our derivatives recorded on the Consolidated Balance Sheets at September 30, 2008 and December 31, 2007 was a net asset of $14.6 million and $20.6 million, respectively. The primary reason for the decrease in the net asset was the effect of a decrease in natural gas prices and the fluctuation in foreign currency exchange rates on hedging positions in place at September 30, 2008, partially offset by increases in metal prices compared to December 31, 2007. These changes resulted in the recognition of $6.0 million of unrealized mark-to-market losses on derivatives for the nine months ended September 30, 2008, which we consider to be a non-run-rate item (see Note 12 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. "Financial Statement" of this Report).
Segment Information
Our continuing operations are organized and managed by product type and include two operating segments and a Corporate segment. The accounting policies of the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8. "Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended December 31, 2007. Segment results are evaluated internally by us before any allocation of Corporate overhead and without any charge for income taxes, interest expense, or Other operating charges, net.

Fabricated Products
   The table below provides selected operational and financial information (in
millions of dollars except shipments and average sales prices) for our
Fabricated Products segment:

                                                          Quarter                            Nine Months
                                                    Ended September 30,                  Ended September 30,
. . .