Research and development (R&D) expenses incurred in the alternative energy segment during the three months ended September 30, 2012 were $5.6 million, down from $10.2 million for the comparable period in the prior year. The decrease in R&D expenses resulted primarily from reductions in costs related to the Rentech-ClearFuels gasifier of approximately $11.4 million and a reduction in sales and use taxes related to the Product Demonstration Unit (PDU) of $1.5 million, which were partially offset by lower reimbursements from the U.S. Department of Energy (DOE) of costs related to the gasifier of approximately $7.0 million.
Rentech Nitrogen’s bi-annual turnaround occurred during the three months ended September 30, 2011, which reduced production and affected the timing of product shipments. With fewer tons available for sale last year, Rentech Nitrogen secured a larger percentage of sales for delivery in the fourth quarter of 2011, which resulted in reduced deliveries in the third quarter of last year. The warm, dry weather during the second quarter of 2012 reduced UAN sales volume, resulting in additional product available for delivery in the third quarter of 2012.
Rentech Nitrogen’s natural gas hedging strategy resulted in average natural gas costs of $3.14 per MMBtu for the third quarter of 2012, compared to $4.74 per MMBtu for the prior-year period. Lower natural gas costs combined with strong product prices contributed to gross margins of 58% in the current period, up significantly from 33% for the same quarter last year.
Nine months ended September 30, 2012Consolidated revenues for the nine months ended September 30, 2012 were $169.5 million, compared to $137.0 million for the comparable period last year. Revenues were derived almost entirely from sales of nitrogen fertilizer products through Rentech Nitrogen. Consolidated operating income for the nine months ended September 30, 2012 was $52.6 million, compared to an operating loss of $37.4 million for the comparable period last year. During the nine months ended September 30, 2011, Rentech reported a $58.7 million loss due to impairments for the Company’s abandoned alternative energy projects and extinguished a liability of $7.9 million related to its previously abandoned coal-to-liquids conversion project at its fertilizer plant.