Question-and-Answer Session
Operator
(Operator's Instructions) The first question comes from Michael Rehaut from JP Morgan.
Michael Rehaut - JP Morgan
Hi. Good morning, everyone. First question just on gypsum wallboard pricing — as I guess you might expect, last quarter you left us announcing that you had another 10% price increase. Obviously, demand really didn't move much sequentially, I was wondering if you could just walk us through kind of what occurred throughout the quarter that obviously it appears that not only did you not get the increase, but there was some slippage in price, and if you've made any announcements or adjustments with regards to the fourth quarter?
James S. Metcalf
Yes, Michael. Just to reiterate, our pricing philosophy, as I said in my prepared comments, has not changed. As you know, we have been raising prices over the last — really since January of 2008, but realistically our whole philosophy is balancing price and volume to maximize our profitability. Pertaining to the fourth quarter, we don't give forecasts so I can't comment on that, but just to kind of walk you through to answer your questions.
We rescinded our increase that we talked about last quarter and what we saw in the general market is lower input cost, particularly energy, which we felt it moved market pricing down and we made some selective adjustments with our customers.
Michael Rehaut - JP Morgan
So just to followup to that, in terms of the lower input costs, this is something that you expect to benefit as you move into next year. Can you give us a sense of what you're thinking about in terms of if you expect to continue to pass these savings along, given the softer demand environment, and how much might you retain versus pass along? Because excluding the charges, the US Gypsum company did about -15 million loss in the second quarter and -20 million in the third, so it still seems like you're operating at an even slightly worse operating loss. So I was wondering just some more insight in terms of again number one, how you're balancing perhaps incremental savings in natural gas going forward and number two, your striving to get back to positive profits?
James S. Metcalf
Well as we look — and again, we don't give pricing forecasts on the next year, but as we've said in previous calls, our hedges roll off and at the beginning of the year we will be about 28% hedged, in January. As you know we're north of 85% hedged at over $9 gas. So from a cost perspective, that will give us some flexibility from a cost side, but again back to pricing, we have a value proposition to our customers . We're going to continue to get price increases and attempt to get price increases in this market as we have the last 18 months.
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