Question-and-Answer Session
Operator
(Operator Instructions) We'll take our first question from Tony Rizzuto with Bear Stearns.
Tony Rizzuto - Bear Stearns
Hi, Jack and Joe. How are you guys doing?
Jack Hockema
Good, great. Thanks, Tony.
Tony Rizzuto - Bear Stearns
Good. Regarding your commentary, guys, on the aerospace and defense related applications increasing at a slower rate than anticipated, is this due to the carryover of the A380 or other factors?
Jack Hockema
I would say it's primarily the A380 delays.
Tony Rizzuto - Bear Stearns
Are you seeing in any way, Jack, anything related to potential delays and, certainly the six- month delay in the 787 program?
Jack Hockema
We've not seen anything tangible. Obviously, in terms of total demand, it'll have some impact, but we don't anticipate it's anywhere near the magnitude of the A380.
Tony Rizzuto - Bear Stearns
In regards to the planned production interruption you're talking about for mid- '08 when you come on with the Phase III construction, can you give us an idea of the magnitude of the impact on the heat-treat? You mentioned for the full-year you're going to get 95%.
Jack Hockema
Yeah.
Tony Rizzuto - Bear Stearns
So can you be a little bit more specific perhaps in terms of quantifying the impact?
Jack Hockema
Yeah, I would model it, if I were you folks, I'd model it in the 90% to 95% range during the first three quarters and we think it'll be relatively consistent quarter-to-quarter. So it'll be ramping up in the first quarter, then we'll have the production interruptions in the second and the third quarter, and then operating in the 95% to 100% range in the fourth quarter.
So it's not huge, a huge step down in the first three quarters from that 95% rate but it'll be slightly below that.
Tony Rizzuto - Bear Stearns
Now, also in regards to Trentwood, is it fair to assume that there are going to be higher incremental margins once you've gone beyond these costs related to the expansion? Would it be fair to say that there'll be higher incremental margins on the remaining two phases? I'm wondering how you're doing on the certification process with the thicker gauge plate?
Jack Hockema
We're doing well on the certification process. Some is actually already certified, but it's a lengthy, elaborate process that we go through. But the certifications are going very well and we expect to be fully certified on everything by the end of the first quarter. The other question was related to margins.
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