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Rentech's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Now I would like to turn the call over to Hunt Ramsbottom, President and CEO of Rentech.

D. Hunt Ramsbottom

Good morning, everyone, and thank you for joining us today. We reported solid first quarter results, driven by strong fertilizer prices and high sales volume at Rentech Nitrogen. Strong demand for fertilizer was supported by the USDA's expectations of record corn plantings of nearly 96 million acres and tight inventories. The dry, warmer weather we experienced in March enabled farmers in our core market area to apply ammonium approximately 15 days earlier than the typical start of the spring application window on April 5.

We shipped unusually high volumes of ammonium in March, which shifted a significant portion of deliveries into the first quarter. In the second quarter, we'll still recognize revenues from some ammonium deliveries, but the quarter will be primarily composed of spring deliveries of UAN.

For the first quarter, average prices for delivered products rose significantly from last year. Ammonia at $673 per ton was 11% higher than last year and UAN at $327 per ton was 59% higher than last year. We locked in a significant portion of our spring book in the September, October window of last year, when pricing for deliveries was at a premium. We sold limited additional tonnage in late December through February when product prices were softer. We later completed the remainder of our spring product sales after prices depreciated as a result of relatively high corn prices and early spring application window and industry supply interruptions.

Results for the quarter also benefited from low natural gas prices, which led to gross margins of 59%, up significantly from 43% the same quarter last year. These positive business fundamentals in the first quarter led to strong cash generation, so our first cash distribution of $1.06 per unit was better than we had forecasted. The distribution covers cash generated during the period that began upon the close of our IPO on November 9 to March 31, 2012. That period included fall product deliveries and excluded the negative impact of the plant turnaround, which took place in the first 15.5 days of October 2011. The distribution is payable to unit holders of record as of May 8 and will be paid on May 15. The next distribution covering the second quarter will be paid on or about August 14.

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