The increase in gross margin reflects lower revenues more than offset by lower product purchases. See "Targa Resources Partners – Review of Segment Performance" for additional information regarding changes in the Partnership's gross margins. The increase in operating expenses reflects expansion and acquisition activities.
The increase in depreciation and amortization expenses is attributable to the impact of new assets placed in service as well as assets associated with business acquisitions.
General and administrative expenses increased due to higher compensation and benefits.
Other operating (income) expense reflects a $15.4 million loss due to a write-off of the Partnership's investment in the Yscloskey joint venture processing plant in Southeastern Louisiana. Following Hurricane Isaac, the joint venture owners elected not to restart the plant. Additionally, other operating (income) expense includes $3.6 million in costs associated with the clean-up and repairs necessitated by Hurricane Isaac at the Partnership's Coastal Straddle plants.
The increase in interest expense was the result of higher borrowings ($22.3 million) offset by a lower effective interest rate ($3.0 million) and higher capitalized interest ($10.2 million) attributable to major expansion capital projects.
Operations at the Partnership's non-operated equity investment, GCF, were impacted by the planned shutdown of operations that started during the second quarter and completed in the third quarter of 2012. The planned shutdown was associated with GCF's 43 MBbl/d capacity expansion. The facility's operations were also hampered by start-up issues associated with the expansion. This resulted in lower equity earnings from this equity investment for 2012 compared to 2011.
Losses on a debt redemption and an early debt extinguishment during 2012 are largely attributable to premiums and write-off of debt issue costs in connection with the redemption of the Partnership's 8¼% Notes and the amendment to the TRP Revolver.
The mark-to-market loss in 2011 was attributable to interest rate swaps that were de-designated during the second quarter of that year. Consequently, we discontinued hedge accounting on those swaps, and changes in fair value and cash settlements were recorded as mark-to-market loss. We terminated all of our interest rate swaps in September 2011, and therefore no comparable loss was recognized in 2012.