Production costs increased $26.2 million, or 15 percent, in the second quarter and $29.4 million in the six-month period compared to the corresponding periods of 2011. Production volume increased 20 percent and 11 percent in the three- and six-month periods, respectively, as USEC purchased supplemental power during 2012 from the Tennessee Valley Authority (TVA) that had been deferred from 2011 due to regional flood conditions. The average cost per megawatt hour decreased 1 percent in the first half of 2012 compared to the corresponding period of 2011, reflecting lower TVA fuel cost adjustments, partially offset by the fixed, annual increase in the TVA contract price. The unit production cost declined 3 percent in the six-month period reflecting the lower impact of fixed costs on increased production volumes.
We purchase approximately 5.5 million SWU per year under the Megatons to Megawatts program, and the purchase costs for the SWU component of LEU under the program declined $4.1 million in the six-month period compared to the corresponding period of 2011, reflecting reduced volume due to the timing of deliveries, partially offset by a 2 percent increase in the market-based unit purchase cost.
Cost of sales for contract services was $33.6 million in the six-month period, a decrease of $78.4 million over the same period last year, reflecting the transition of contract services work at the Portsmouth site to DOE’s decontamination and decommissioning contractor.
The gross profit for the second quarter was $12.3 million compared to $33.2 million in the same quarter last year. In the six-month period, the gross profit was $51.1 million compared to $47.1 million in the same period of 2011. The gross profit margin for the six-month period of 2012 period was 5.5 percent compared to 5.6 percent in the same period of 2011. Gross profit for the LEU segment increased $2.3 million in the six-month period due to higher SWU unit gross profits and sales volumes, partially offset by lower uranium sales volumes. Gross profit for the contract services segment increased $1.7 million in the 2012 six-month period reflecting increased gross profit for NAC.
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