The forward-looking statements in this call are made as of August 10 th, 2012. And Rentech does not undertake to revise or update these forward-looking statements except to the extent that it is required to do so under applicable law.In addition, today’s presentation includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures including reconciliations to the most directly comparable GAAP financial measures are included in our 2012 second quarter earnings press release that is available on our website. Now I would like to turn the call over to Hunt Ramsbottom, President and CEO of Rentech. Hunt Ramsbottom Good morning everyone, and thank you for joining us today. We reported solid second quarter results and increased guidance for the year for our nitrogen segment. We generated consolidated net income of $.04 per share driven by strong fertilizer product prices, lower prices for natural gas, and reduced R&D expenses in the alternative energy segment. Rentech Nitrogen generated strong cash flow resulting in second quarter cash distributions of $1.17 per unit. Average prices for delivered products were up significantly from last year. Ammonia at $695 per ton was 9% higher. And UAN at $378 per ton was 21% higher than last year. Higher product prices and relatively low natural gas prices by historical standards contributed to gross margins of 65%, up significantly from 50% in the same quarter last year. The weather this spring, which was warmer than usual enabled farmers to apply ammonia about 15 days earlier than they usually do. This shifted significant ammonia deliveries and revenues from the second quarter into the first quarter. The high ammonia usage reduced the demand for UAN this spring. In addition, the hot dry weather resulted in poor soil and crop conditions, which led to reduced UAN application. As the drought continued and damaged the corn crop, it became evident that yields and therefore ending inventories would be significantly lower than the early projections for the year. This prompted buyers to enter the market in last June for UAN purchases for the third and fourth quarter deliveries in preparation for the spring, 2013 season.
The drought has now affected most of the nation’s corn crop with only 23% of the corn crop in good to excellent condition. This number could continue downward as the dry weather persists. Any rains from this point forward will offer little benefit to this year’s corn crop.This morning, the USDA significantly reduced its yields estimates for corn to 123.4 bushels per acre in its’ August WASDE report reflecting lower yields, lower harvested acreage, and lower ending stocks. As the last three drought years of 1983, 88, and 1991, it took two full years of corn crops to return to normalized inventory levels. Based on these historical precedents, many believe it will take multiple years to bring ending corn stocks back above the billion bushel mark. So corn prices should be strong while stocks are below normal levels. Corn prices have soared over recent weeks with 2012 corn above $8 per bushel, up 45% from mid-May when the USDA first published its corn crop estimates for the year. As we look forward, 2013 corn prices are strong hovering in the mid-$6 range. Nitrogen usage and prices have historically increased following a drought due to the expectation of higher plantings to replenish stocks in a response to higher corn prices. These pricing patterns held through as ammonia and UAN prices marched steadily higher as the drought progressively impacted the corn crop over the last few months. We’ve seen pre-paid sales follow deliveries of ammonia rise from $600 per ton in early May to posted prices of $770 per ton today. While UAN prices increased from $290 per ton in late June to posted prices of $370 per ton today. Read the rest of this transcript for free on seekingalpha.com