East Dubuque Nitrogen Partners (RNF) 10-Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

Or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File No. 001-35334

RENTECH NITROGEN PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

Delaware	45-2714747
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10877 Wilshire Boulevard, Suite 600

Los Angeles, California 90024

(Address of principal executive offices)

(310) 571-9800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 31, 2013, the registrant had 38,850,089 common units outstanding.

RENTECH NITROGEN PARTNERS, L.P.

Form 10-Q

Table of Contents

Part I — Financial Information
Item 1.	Financial Statements (unaudited):	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Consolidated Statement of Partners’ Capital	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
Part II — Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 6.	Exhibits	40
Signatures		41

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Balance Sheets

(Amounts in thousands)

	As of
	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets
Cash	$	85,321	$	55,799
Accounts receivable		23,945		9,705
Inventories		36,126		27,140
Prepaid expenses and other current assets		5,181		2,228
Other receivables, net		213		2,626
Total current assets		150,786		97,498
Property, plant and equipment, net		129,697		128,340
Construction in progress		113,372		61,147
Other assets
Goodwill		27,202		56,592
Intangible assets		23,463		26,185
Debt issuance costs		8,694		6,458
Other assets		363		425
Total other assets		59,722		89,660
Total assets	$	453,577	$	376,645
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable	$	12,459	$	15,144
Payable to general partner		3,287		4,247
Accrued liabilities		18,342		14,271
Deferred revenue		33,989		29,660
Credit facilities and term loan		—		7,750
Accrued interest		9,745		142
Asset retirement obligation		2,469		2,776
Other		—		290
Total current liabilities		80,291		74,280
Long-term liabilities
Notes		320,000		—
Credit facilities and term loan, net of current portion		—		185,540
Earn-out consideration		—		4,920
Other		2,919		2,501
Total long-term liabilities		322,919		192,961
Total liabilities		403,210		267,241
Commitments and contingencies(Note 9)
Partners’ Capital:
Common unitholders — 38,849 and 38,839 units issued and outstanding at September 30, 2013 and December 31, 2012, respectively		50,198		109,238
Accumulated other comprehensive income		169		166
General partner’s interest		—		—
Total partners’ capital		50,367		109,404
Total liabilities and partners’ capital	$	453,577	$	376,645

See Accompanying Notes to Consolidated Financial Statements.

3

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Operations

(Amounts in thousands, except per unit data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
Revenues	$	93,279		$	60,112		$	256,799		$	169,228
Cost of sales		76,459			25,077			177,412			65,975
Gross profit		16,820			35,035			79,387			103,253
Operating expenses
Selling, general and administrative expense		4,080			5,508			13,722			11,982
Depreciation and amortization		1,018			90			2,874			726
Loss on goodwill impairment		30,029			—			30,029			—
Other		28			237			36			284
Total operating expenses		35,155			5,835			46,661			12,992
Operating income (loss)		(18,335	)		29,200			32,726			90,261
Other income (expense), net
Interest expense		(3,996	)		(39	)		(9,725	)		(181	)
Loss on debt extinguishment		—			—			(6,001	)		—
Gain on fair value adjustment to earn-out consideration		309			—			4,920			—
Other expense, net		—			(313	)		(7	)		(632	)
Total other expenses, net		(3,687	)		(352	)		(10,813	)		(813	)
Income (loss) before income taxes		(22,022	)		28,848			21,913			89,448
Income tax expense		233			—			438			—
Net income (loss)	$	(22,255	)	$	28,848		$	21,475		$	89,448
Basic net income (loss) per common unit allocated to common unit holders	$	(0.57	)	$	0.75		$	0.54		$	2.34
Diluted net income (loss) per common unit allocated to common unit holders	$	(0.57	)	$	0.75		$	0.54		$	2.34
Weighted-average units used to compute net income (loss) per common unit:
Basic		38,849			38,260			38,843			38,254
Diluted		38,849			38,292			38,934			38,259

See Accompanying Notes to Consolidated Financial Statements.

4

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands)

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2013			2012		2013		2012
	(Unaudited)
Net income (loss)	$	(22,255	)	$	28,848	$	21,475	$	89,448
Other comprehensive income (loss):
Pension and postretirement plan adjustments		(5	)		—		3		—
Other comprehensive income (loss)		(5	)		—		3		—
Comprehensive income (loss)	$	(22,260	)	$	28,848	$	21,478	$	89,448

See Accompanying Notes to Consolidated Financial Statements.

5

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statement of Partners’ Capital

(Amounts in thousands)

	Number of Common Units		Common Unitholders			Accumulated Other Comprehensive Income		General Partner		Total Partners’ Capital
	(Unaudited)
Balance, December 31, 2012		38,839	$	109,238		$	166	$	—	$	109,404
Common units		10		—			—		—		—
Distributions to common unitholders – affiliates		—		(48,825	)		—		—		(48,825	)
Distributions to common unitholders – non-affiliates		—		(33,075	)		—		—		(33,075	)
Unit-based compensation expense		—		1,385			—		—		1,385
Net income		—		21,475			—		—		21,475
Other comprehensive income		—		—			3		—		3
Balance, September 30, 2013		38,849	$	50,198		$	169	$	—	$	50,367

See Accompanying Notes to Consolidated Financial Statements.

6

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Cash Flows

(Amounts in thousands)

	For the Nine Months Ended September 30,
	2013			2012
	(Unaudited)
Cash flows from operating activities
Net income	$	21,475		$	89,448
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,381			9,456
Utilization of spare parts		2,018			763
Write-down of inventory		7,334			—
Non-cash interest expense		734			173
Loss on goodwill impairment		30,029			—
Loss on debt extinguishment		6,001			—
(Gain) loss on interest rate swaps		(17	)		903
Unit-based compensation		1,385			2,271
Other		(140	)		57
Changes in operating assets and liabilities:
Accounts receivable		(14,240	)		1,242
Other receivables		2,413			6
Inventories		(16,204	)		(1,326	)
Deposits on gas contracts		—			2,807
Prepaid expenses and other current assets		(2,098	)		(379	)
Accounts payable		(4,294	)		1,489
Deferred revenue		4,329			5,584
Accrued interest		7,472			—
Accrued liabilities, accrued payroll and other		(7,338	)		2,712
Net cash provided by operating activities		51,240			115,206
Cash flows from investing activities
Purchase of property, plant, equipment and construction in progress		(56,500	)		(41,242	)
Other items		(94	)		(372	)
Net cash used in investing activities		(56,594	)		(41,614	)
Cash flows from financing activities
Proceeds from issuance of notes		320,000			—
Proceeds from credit facilities and term loan		15,600			26,990
Payments to retire credit facility		(205,015	)		—
Proceeds from bridge loan from parent		—			5,860
Payment of bridge loan to parent		—			(5,860	)
Payments on term loan		(3,875	)		—
Payment of debt issuance costs		(8,962	)		(2,793	)
Payments on notes payable for financed insurance premiums		—			(1,000	)
Payment of bridge loan fee to parent, net		—			(200	)
Payment of offering costs		(972	)		(245	)
Distributions to common unitholders – affiliates		(48,825	)		(51,848	)
Distributions to common unitholders – non-affiliates		(33,075	)		(33,845	)
Net cash provided by (used in) financing activities		34,876			(62,941	)
Increase in cash		29,522			10,651
Cash and cash equivalents, beginning of period		55,799			44,836
Cash and cash equivalents, end of period	$	85,321		$	55,487

The following effects of certain non-cash investing and financing activities were excluded from the statements of cash flows for the nine months ended September 30, 2013 and 2012:

	For the Nine Months Ended September 30,
	2013		2012
	(Unaudited)
Purchase of property, plant, equipment and construction in progress in accounts payable and accrued liabilities	$	13,957	$	5,438

See Accompanying Notes to Consolidated Financial Statements.

7

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements of Rentech Nitrogen Partners, L.P. (the “Partnership”) and its consolidated subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X, neither of which requires all of the information and footnotes required by GAAP for complete financial statements. Accordingly, the accompanying financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the Partnership’s financial position as of September 30, 2013, and the results of operations and cash flows for the periods presented. The accompanying consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other reporting period. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the calendar year ended December 31, 2012 filed with the Securities and Exchange Commission (the “SEC”) on March 18, 2013 (the “Annual Report”).

The Partnership’s assets consist primarily of all of the equity interests, directly or indirectly held by it, of Rentech Nitrogen, LLC (“RNLLC”), which owns a fertilizer facility in East Dubuque, Illinois (the “East Dubuque Facility”), and Rentech Nitrogen Pasadena, LLC (“RNPLLC”), which owns a fertilizer facility in Pasadena, Texas (the “Pasadena Facility”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair values of cash, receivables, deposits, other current assets, accounts payable, accrued liabilities and other current liabilities were assumed to approximate carrying values for these financial instruments since they are short term in nature or they are receivable or payable on demand. These items meet the definition of Level 1 financial instruments as defined in Note 4 – Fair Value.

Accounting guidance establishes accounting and reporting requirements for derivative instruments and hedging activities. This guidance requires recognition of all derivative instruments as assets or liabilities on the Partnership’s balance sheet and measurement of those instruments at fair value. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated as a hedge and if so, the type of hedge. The Partnership currently does not designate any of its derivatives as hedges for financial accounting purposes. Gains and losses on derivative instruments not designated as hedges are currently included in earnings and reported under cash from operating activities.

The final purchase price of the Agrifos Acquisition, as defined in Note 3– Agrifos Acquisition, and the allocation thereof will not be known until the final working capital and other adjustments are completed. The Partnership will finalize the accounting for the Agrifos Acquisition within one year of the acquisition date.

The Partnership has evaluated events occurring between September 30, 2013 and the date of these financial statements to ensure that such events are properly reflected in these statements.

Note 2 — Recent Accounting Pronouncements

In January 2013, the Financial Accounting Standards Board (the “FASB”) issued guidance that requires a company to disclose information about financial instruments that have been offset on the balance sheet or subject to an enforceable master netting agreement, irrespective of whether they have been offset, and related arrangements to enable users of a company’s financial statements to understand the effect of those arrangements on the company’s financial position. Companies will be required to provide both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities that are offset. This guidance is effective for interim and annual periods beginning on or after January 1, 2013 and requires retrospective application, and thus became effective for the Partnership’s interim period beginning on January 1, 2013. The adoption of this guidance did not have any impact on the Partnership’s consolidated financial position, results of operations or disclosures.

8

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

In February 2013, the FASB issued guidance requiring companies to disclose information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income. This guidance is effective for interim and annual periods beginning after December 15, 2012, and thus became effective for the Partnership’s interim period beginning on January 1, 2013. The adoption of this guidance did not have a material impact on the Partnership’s consolidated financial position, results of operations or disclosures.

Note 3 — Agrifos Acquisition

The Partnership adjusted the preliminary purchase price related to its acquisition on November 1, 2012 of Agrifos LLC (the “Agrifos Acquisition”). The adjusted preliminary purchase price consisted of the following (amounts in thousands):

Cash (through borrowings under the Second 2012 Credit Agreement) less working capital adjustments	$	136,308
Fair market value of 538,793 Common Units issued		20,000
Estimate of potential earn-out consideration(1)		4,920
Total adjusted preliminary purchase price	$	161,228

(1) The amount of earn-out consideration reflected in the table above reflects the Partnership’s estimate, as of November 1, 2012, of the amount of the earn-out consideration it will be required to pay pursuant to the Purchase Agreement, as defined in Note 4– Fair Value. The earn-out consideration will be measured at each reporting date with changes in its fair value recognized in the consolidated statements of operations. As of September 30, 2013, the fair value of the potential earn-out consideration was $0.

The Partnership’s adjusted preliminary purchase price allocation as of November 1, 2012 is as follows (amounts in thousands):

Cash	$	2,622
Accounts receivable		3,204
Inventories		30,373
Prepaid expenses and other current assets		566
Property, plant and equipment		68,688
Construction in progress		7,011
Intangible assets (Technology—$23,680 and Marketing Agreement—$3,088)		26,768
Goodwill		57,231
Other assets		73
Accounts payable		(10,638	)
Accrued liabilities		(6,640	)
Customer deposits		(13,301	)
Asset retirement obligation		(2,776	)
Other long-term liabilities		(1,953	)
Total adjusted preliminary purchase price	$	161,228

During the nine months ended September 30, 2013, the Partnership and the seller finalized the working capital adjustments which resulted in an increase in the preliminary purchase price of approximately $0.3 million. The working capital adjustments receivable was recorded separately from the purchase price allocation shown above. The finalization and recording of the cash receipt resulted in cash increasing by approximately $2.2 million and other receivables decreasing by approximately $2.5 million. During the nine months ended September 30, 2013, the Partnership recognized adjustments to the preliminary purchase price allocation with an increase in fair value to goodwill of approximately $0.6 million and accrued liabilities of approximately $0.3 million. The Partnership will finalize the accounting for the Agrifos Acquisition during the fourth quarter of 2013.

9

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Pro Forma Information

The unaudited pro forma information has been prepared as if the Agrifos Acquisition had taken place on January 1, 2012. The unaudited pro forma information is not necessarily indicative of the results that the Partnership would have achieved had the transactions actually taken place on January 1, 2012, and the unaudited pro forma information does not purport to be indicative of future financial operating results.

	For the Nine Months Ended September 30, 2012
	As Reported		Pro Forma Adjustments		Pro Forma
	(in thousands)
Revenues	$	169,228	$	119,916	$	289,144
Net income	$	89,448	$	(3,805)	$	85,643
Basic and diluted net income per common unit	$	2.34	$	(0.13)	$	2.21

Note 4 — Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Partnership makes certain assumptions it believes that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Partnership and its counterparties is incorporated in the valuation of assets and liabilities. The Partnership believes it uses valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Partnership classifies fair value balances based on the fair value hierarchy, defined as follows:

• Level 1— Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Partnership has the ability to access as of the reporting date.

• Level 2— Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

• Level 3— Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.

The following table presents the financial instruments that require fair value disclosure as of September 30, 2013.

	Fair Value						Carrying Value
	(in thousands)
	Level 1		Level 2		Level 3
Liabilities
Notes	$	319,002	$	—	$	—	$	320,000

10

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The following table presents the financial instruments that require fair value disclosure as of December 31, 2012.

	Fair Value						Carrying Value
	(in thousands)
	Level 1		Level 2		Level 3
Liabilities
Credit facilities and term loan	$	—	$	193,290	$	—	$	193,290
Interest rate swaps	$	—	$	929	$	—	$	929
Earn-out consideration	$	—	$	—	$	4,920	$	4,920

Notes

The Notes, as defined in Note 8– Debt, are deemed to be Level 1 financial instruments because there was an active market for such debt. The fair value of such debt had been determined based on market prices.

Credit Facilities and Term Loan

The credit facilities and term loan were deemed to be Level 2 financial instruments because the measurement was based on observable market data. The Partnership used part of the proceeds from the offering of the Notes to repay in full and terminate the Second 2012 Credit Agreement, as defined in Note 8– Debt, and related interest rate swaps.

Interest Rate Swaps

The interest rate swaps were deemed to be Level 2 financial instruments because the measurements were based on observable market data. The Partnership used a standard swap contract valuation method to value its interest rate derivatives, and the inputs it used for present value discounting included forward one-month and three-month LIBOR rates, risk-free interest rates and an estimate of credit risk. The change in fair value was recorded in other expense, net on the consolidated statement of operations. The realized loss represents the cash payments required under the interest rate swaps.

Net gain (loss) on interest rate swaps:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2013		2012			2013			2012
	(in thousands)
Realized loss	$	—	$	(4	)	$	(24	)	$	(4	)
Unrealized gain (loss)		—		(323	)		17			(903	)
Total net loss on interest rate swaps	$	—	$	(327	)	$	(7	)	$	(907	)

The Partnership paid approximately $912,000 to terminate the interest rate swaps as described above.

Earn-out Consideration

The earn-out consideration relates to potential additional consideration the Partnership may be required to pay under the Membership Interest Purchase Agreement (the “Purchase Agreement”) relating to the Agrifos Acquisition. The earn-out consideration is deemed to be a Level 3 financial instrument because the measurement is based on unobservable inputs. The fair value of earn-out consideration was determined based on the Partnership’s analysis of various scenarios involving the achievement of certain levels of Adjusted EBITDA, as defined in the Purchase Agreement, over a two year period. The scenarios, which included a weighted probability factor, involved assumptions relating to the market prices of the Partnership’s products and feedstocks, as well as product profitability and production. The earn-out consideration will be measured at each reporting date with changes in its fair value recognized in the consolidated statements of operations. For the three and nine months ended September 30, 2013, the fair value of the liability decreased by approximately $0.3 million and $4.9 million, respectively. At September 30, 2013, the fair value of the potential earn-out consideration relating to the Agrifos Acquisition was $0. The decrease in fair value was a result of lower than expected profitability in 2013 due primarily to unfavorable weather and increased Chinese exports, as well as a reduced outlook for longer-term profitability due to reduced levels of nitrogen fertilizer prices. Due to an unusually wet spring, there was a shortened planting season which resulted in lower ammonium sulfate revenues during the nine months ended September 30, 2013. In addition, significant volumes of urea were exported from China and this supply suppressed global urea and other nitrogen fertilizer prices.

11

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The levels within the fair value hierarchy at which the Partnership’s financial instruments have been evaluated have not changed for any of the Partnership’s financial instruments during the three and nine months ended September 30, 2013.

Note 5 — Inventories

Inventories consisted of the following:

	As of
	September 30, 2013		December 31, 2012
	(in thousands)
Finished goods	$	32,760	$	21,756
Raw materials		3,174		5,269
Other		192		115
Total inventory	$	36,126	$	27,140

During the three months ended September 30, 2013, the Partnership incurred an approximate $5.0 million write-down of ammonium sulfate inventory to market value due to lower market prices of ammonium sulfate, in accordance with accounting guidance. During the nine months ended September 30, 2013, the Partnership incurred an approximate $7.3 million write-down of ammonium sulfate, sulfur and sulfuric acid inventory to market value due primarily to lower market prices of ammonium sulfate, in accordance with accounting guidance.

Note 6 — Property, Plant and Equipment and Construction in Progress

Property, plant and equipment consisted of the following:

	As of
	September 30, 2013			December 31, 2012
	(in thousands)
Land and land improvements	$	22,370		$	22,386
Buildings and building improvements		22,838			22,149
Machinery and equipment		144,876			134,979
Furniture, fixtures and office equipment		232			232
Computer equipment and computer software		3,195			2,675
Vehicles		186			186
Conditional asset (asbestos removal)		210			210
		193,907			182,817
Less accumulated depreciation		(64,210	)		(54,477	)
Total property, plant and equipment, net	$	129,697		$	128,340

The construction in progress balance at September 30, 2013 of approximately $113.4 million, which includes $4.0 million of capitalized interest costs, represents primarily the costs associated with the ammonia production and storage capacity expansion project.

Note 7 — Goodwill

A reconciliation of the change in the carrying value of goodwill is as follows (in thousands):

Balance at December 31, 2012 – Pasadena	$	56,592
Increase attributable to Pasadena		639
Goodwill impairment – Pasadena		(30,029	)
Balance at September 30, 2013	$	27,202

The Partnership tests goodwill for impairment annually, or more often if an event or circumstances indicates an impairment may have occurred. The inventory impairment (see Note 5 – Inventories), negative gross margin and EBITDA in the three months ended September 30, 2013 and revised cash flow projections developed during the three months ended September 30, 2013 indicated that an impairment of the goodwill related to the Pasadena Facility was probable.

12

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Ammonium sulfate is the primary product of the Pasadena Facility. Results for the three and nine months ended September 30, 2013 and our projections of future cash flow from the production and sale of this product are worse than the results originally projected in late 2012, when the Partnership acquired Agrifos. The expected results and cash flows as of 2012 were utilized to allocate the purchase price of the Agrifos Acquisition, as described in Note 3 – Agrifos Acquisition. The primary cause of the reduction in the estimated fair value of the Pasadena reporting unit is the decline in the cash flow expected to be generated from the sale of ammonium sulfate, compared to the expectations at the time of the acquisition. A major cause of the lower expected cash flows is a decline in the level of prices, and expected prices, for nitrogen fertilizer caused by, among other things, lower corn prices, poor weather conditions for fertilizer application throughout the United States in 2013 and increased supply of urea from China.

Factors that affect cash flows include, but are not limited to, product prices; product sales volumes; feedstock prices and availability; labor, maintenance, and other operating costs; required capital expenditures, and plant productivity. The Pasadena Facility generated negative EBITDA during the three months ended September 30, 2013, and is expected to generate negative EBITDA in the three months ended December 31, 2013. EBITDA is currently expected to be positive in 2014, but the current projection is well below the projection at the time of the acquisition, and is based on current and projected levels of prices for the products of, and inputs for, the Pasadena Facility. Current and projected prices for the products and inputs are below the levels at the time of the acquisition, yielding expectations for lower variable dollar margins per ton of product, even though percentage margins are expected to be consistent with those at the time of the acquisition because the prices of ammonium sulfate and its major raw materials have dropped by similar percentages. Lower dollar variable margins provide fewer dollars per ton sold to cover the fixed costs of the facility, resulting in reduced expectations of cash generated by the facility in a lower-price environment. In addition, the Pasadena Facility’s production has been lower than expected due to plant outages, and costs have been higher than expected due to higher maintenance expense.

The analysis of the potential impairment of goodwill is a two step process. Step one of the impairment test consists of comparing the fair value of the reporting unit with the aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, step two must be performed to determine the amount, if any, of the goodwill impairment. Step one of the goodwill impairment test involves a high degree of judgement and consists of a comparison of the fair value of a reporting unit with its book value. The fair value of the Pasadena reporting unit is based upon various assumptions and is based on the discounted cash flows that the business can be expected to generate in the future (the “Income Approach”). The Income Approach valuation method requires the Company to make projections of revenue and operating costs over a multi-year period. Additionally, the Partnership made an estimate of a weighted average cost of capital that a market participant would use as a discount rate. Based upon its analysis of the value of the Pasadena reporting unit using the Income Approach, the Partnership believes it is probable that the Pasadena reporting unit had a carrying value in excess of its fair value at September 30, 2013. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy as defined in accounting guidance.

Step two of the goodwill impairment test consists of comparing the implied fair value of the reporting unit’s goodwill against the carrying value of the goodwill. Determining the implied fair value of goodwill requires the valuation of a reporting unit’s identifiable tangible and intangible assets and liabilities as if the reporting unit had been acquired in a business combination on the testing date, or September 30, 2013 in this case. The valuation of assets and liabilities in step two is performed only for purposes of assessing goodwill for impairment and the Partnership did not adjust the net book value of the assets and liabilities on its balance sheet other than goodwill as a result of this process. The estimated difference between fair value of the entire reporting unit as determined in step one and the net fair value of all identifiable assets and liabilities represents the implied fair value of goodwill. The goodwill impairment charge of $30.0 million is the difference between the $57.2 million carrying amount of goodwill and the $27.2 million implied value of goodwill upon the completion of step two.

Significant effort is required to determine the implied fair value of a reporting unit’s goodwill in step two of the goodwill impairment test and although the Partnership is unable to fully complete the process before filing this report, the $30.0 million impairment is its best estimate of the probable loss which will be finalized in the fourth quarter of 2013.

Note 8 — Debt

First and Second 2012 Credit Agreements

On February 28, 2012, RNLLC entered into a credit agreement (the “First 2012 Credit Agreement”). The First 2012 Credit Agreement consisted of (i) a $100.0 million multiple draw term loan, and (ii) a $35.0 million revolving facility.

On October 31, 2012, RNLLC, the Partnership, RNPLLC and certain subsidiaries of RNPLLC entered into a new credit agreement (the “Second 2012 Credit Agreement”). The Second 2012 Credit Agreement amended, restated and replaced the First 2012 Credit Agreement. The Second 2012 Credit Agreement consisted of (i) a $110.0 million multiple draw term loan to be used by the Partnership and its subsidiaries for expansion projects and general partnership purposes, (ii) a $155.0 million term loan to fund the Agrifos Acquisition and (iii) the $35.0 million revolving credit facility.

13

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Notes Offering

On April 12, 2013, the Partnership and Rentech Nitrogen Finance Corporation, a wholly-owned subsidiary of the Partnership (“Finance Corporation” and collectively with the Partnership, the “Issuers”), issued $320.0 million of 6.5% second lien senior secured notes due 2021 (the “Notes”) to qualified institutional buyers and non-U.S. persons in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended. The Notes bear interest at a rate of 6.5% per year, payable semi-annually in arrears with the first interest payment due on October 15, 2013. The Notes will mature on April 15, 2021, unless repurchased or redeemed earlier in accordance with their terms. The Partnership used part of the net proceeds from the offering to repay in full and terminate the Second 2012 Credit Agreement and related interest rate swaps, and intends to use the remaining proceeds to pay for expenditures related to its expansion projects and for general partnership purposes. The payoff of the Second 2012 Credit Agreement resulted in a loss on debt extinguishment, for the nine months ended September 30, 2013, of approximately $6.0 million.

The Notes are fully and unconditionally guaranteed, jointly and severally, by each of the Partnership’s existing domestic subsidiaries, other than Finance Corporation. In addition, the Notes and the guarantees thereof are collateralized by a second priority lien on substantially all of the Partnership’s and the guarantors’ assets, subject to permitted liens.

The Issuers may redeem some or all of the Notes at any time prior to April 15, 2016 at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus a “make whole” premium, and accrued and unpaid interest, if any, to the date of redemption. At any time prior to April 15, 2016, the Partnership may also, on any one or more occasions, redeem up to 35% of the aggregate principal amount of the Notes issued with the net proceeds of certain equity offerings at 106.5% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the date of redemption. On or after April 15, 2016, the Partnership may redeem some or all of the Notes at a premium that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date.

2013 Credit Agreement

On April 12, 2013, the Partnership and Finance Corporation (collectively the “Borrowers”) entered into a new credit agreement (the “2013 Credit Agreement”). The 2013 Credit Agreement consists of a $35.0 million senior secured revolving credit facility (the “Credit Facility”). The Borrowers may use the 2013 Credit Agreement to fund their working capital needs, to issue letters of credit and for other general partnership purposes. The 2013 Credit Agreement also includes a $10.0 million letter of credit sublimit. The commitment under the Credit Facility may be increased by up to $15.0 million upon the Borrowers’ request at the discretion of the lenders and subject to certain customary requirements.

Borrowings under the 2013 Credit Agreement bear interest at a rate equal to an applicable margin plus, at the Borrowers’ option, either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the prime rate, (2) the federal funds rate plus 0.5% or (3) LIBOR for an interest period of three months plus 1.00% or (b) in the case of LIBOR borrowings, the offered rate per annum for deposits of dollars for the applicable interest period on the day that is two business days prior to the first day of such interest period. If the Borrowers maintain a secured leverage ratio of less than 1.75:1 for the last quarter reported to the lenders, then the applicable margin for borrowings under the 2013 Credit Agreement is 2.25% with respect to base rate borrowings and 3.25% with respect to LIBOR borrowings. If the Borrowers maintain a secured leverage ratio equal or greater than 1.75:1 for the last quarter reported to the lenders, then the applicable margin for borrowings under the 2013 Credit Agreement is 2.50% with respect to base rate borrowings and 3.50% with respect to LIBOR borrowings.

Additionally, the Borrowers are required to pay a fee to the lenders under the 2013 Credit Agreement on the average undrawn available portion of the Credit Facility at a rate equal to 0.50% per annum. The Borrowers must also pay a fee to the lenders under the 2013 Credit Agreement at a rate equal to the product of the average daily undrawn face amount of all letters of credit issued, guaranteed or supported by risk participation agreements multiplied by a per annum rate equal to the applicable margin with respect to LIBOR borrowings, plus all customary letter of credit fees on issued letters of credit.

All of the Partnership’s existing subsidiaries (other than Finance Corporation) guarantee, and certain of the Partnership’s future domestic subsidiaries will guarantee, the Partnership’s obligations pursuant to the 2013 Credit Agreement. The 2013 Credit Agreement, any hedging agreements issued by lenders under the 2013 Credit Agreement and the subsidiary guarantees are collateralized by the same collateral securing the Notes, which includes substantially all of the Partnership’s assets and all of the assets of its subsidiaries. After the occurrence and during the continuation of an event of default, proceeds of any collection, sale, foreclosure or other realization upon any collateral will be applied to repay obligations under the 2013 Credit Agreement and the subsidiary guarantees thereof to the extent secured by the collateral before any such proceeds are applied to repay obligations under the Notes, subject to a first lien cap (equal to the greater of $65 million or 20% of the Partnership’s consolidated net tangible assets (as defined in the Indenture governing the Notes), plus obligations in respect of the first-priority secured indebtedness and obligations under certain hedging agreements and cash management agreements).

14

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The 2013 Credit Agreement will terminate on April 12, 2018. Any amounts still outstanding at that time will be immediately due and payable. The Borrowers may voluntarily prepay their utilization and/or permanently cancel all or part of the available commitments under the 2013 Credit Agreement in a minimum amount of $5.0 million. Amounts repaid may be reborrowed. Borrowings under the 2013 Credit Agreement will be subject to mandatory prepayment under certain circumstances, with customary exceptions, from the proceeds of permitted dispositions of assets and from certain insurance and condemnation proceeds.

Note 9 — Commitments and Contingencies

Natural Gas Forward Purchase Contracts

The Partnership’s policy and practice are to enter into fixed-price forward purchase contracts for natural gas in conjunction with contracted product sales in order to substantially fix gross margin on those product sales contracts. The Partnership may also enter into a limited amount of additional fixed-price forward purchase contracts for natural gas in order to minimize monthly and seasonal gas price volatility. The Partnership occasionally enters into index-price contracts for the purchase of natural gas. The Partnership elects the normal purchase normal sale exemption for these derivative instruments. As such, the Partnership does not recognize the unrealized gains or losses related to these derivative instruments in its financial statements. The Partnership has entered into multiple natural gas forward purchase contracts for various delivery dates through March 31, 2014. Commitments for natural gas purchases consist of the following:

	As of
	September 30, 2013		December 31, 2012
	(in thousands, except weighted average rate)
MMBtus under fixed-price contracts		3,630		1,955
MMBtus under index-price contracts		—		143
Total MMBtus under contracts		3,630		2,098
Commitments to purchase natural gas	$	14,090	$	7,531
Weighted average rate per MMBtu based on the fixed rates and the indexes applicable to each contract	$	3.88	$	3.59

During October 2013, the Partnership entered into fixed-quantity forward purchase contracts at fixed and indexed prices for various delivery dates through March 31, 2014. The total MMBtus associated with these additional forward purchase contracts are approximately 0.7 million and the total amount of the purchase commitments are approximately $2.6 million, resulting in a weighted average rate per MMBtu of approximately $3.84 in these new commitments. The Partnership is required to make additional prepayments under these forward purchase contracts in the event that market prices fall below the purchase prices in the contracts.

Contractual Obligations

• On April 17, 2013, the Partnership entered into an engineering, procurement and construction contract (the “EPC Contract”) with Abeinsa Abener Teyma General Partnership (“Abeinsa”). The EPC Contract provides for Abeinsa to be the contractor on the Partnership’s power generation project at the Pasadena Facility. The value of the contract is approximately $25.0 million and the project is expected to be completed by the fourth quarter of 2014.

Litigation

The Partnership is party to litigation from time to time in the normal course of business. The Partnership accrues legal liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. In cases where the Partnership determines that it is not probable, but reasonably possible that it has a material obligation, it discloses such obligations and the possible loss or range of loss, if such estimate can be made. While the outcome of the Partnership’s current matters are not estimable or probable, the Partnership maintains insurance to cover certain actions and believes that resolution of its current litigation matters will not have a material adverse effect on the Partnership.

The Partnership’s business is subject to extensive and frequently changing federal, state and local, environmental, health and safety regulations governing a wide range of matters, including the emission of air pollutants, the release of hazardous substances into the environment, the treatment and discharge of waste water and the storage, handling, use and transportation of the Partnership’s fertilizer products, raw materials, and other substances that are part of our operations. These laws include the Clean Air Act (the “CAA”), the federal Water Pollution Control Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, and various other federal, state and local laws and regulations. The laws and regulations to which the Partnership is subject are complex, change frequently and have tended to become more stringent over time. The ultimate impact on the Partnership’s business of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that the Partnership’s operations may change over time and certain implementing regulations for laws, such as the CAA, have not yet been finalized, are under governmental or judicial review or are being revised. These laws and regulations could result in increased capital, operating and compliance costs.

15

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 10 — Partners’ Capital and Partnership Distributions

The Partnership’s policy is to distribute all of the cash available for distribution which it generates each quarter. Cash available for distribution for each quarter will be determined by the board of directors (the “Board”) of the Partnership’s general partner (the “General Partner”) following the end of each quarter. The Partnership expects that cash available for distribution for each quarter will generally equal the cash it generates during the quarter, less cash needed for maintenance capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs that the Board of the General Partner deems necessary or appropriate. The Partnership does not intend to maintain excess distribution coverage for the purpose of maintaining stability or growth in its quarterly distribution or otherwise to reserve cash for distributions, nor does it intend to incur debt to pay quarterly distributions. The Partnership has no legal obligation to pay distributions. Distributions are not required by the Partnership’s partnership agreement and the Partnership’s distribution policy is subject to change at any time at the discretion of the Board of the General Partner. Any distributions made by the Partnership to its unitholders will be done on a pro rata basis. At September 30, 2013, the Partnership had outstanding 155,750 unit-settled phantom units. Each phantom unit entitles the holder to payments in amounts equal to the amounts of any distributions made to an outstanding unit by the Partnership. Payments to outstanding phantom units are not subtracted from operating cash flow in the calculation of cash available for distribution, but the payments made to phantom unitholders are recorded as distributions for accounting purposes. For information on the declaration of cash distributions refer to Note 16– Subsequent Events.

On February 14, 2013, the Partnership made a cash distribution to its common unitholders and payments to holders of phantom units for the period October 1, 2012 through and including December 31, 2012 of $0.75 per unit, or approximately $29.2 million in the aggregate. On May 15, 2013, the Partnership made a cash distribution to its common unitholders and payments to holders of phantom units for the period January 1, 2013 through and including March 31, 2013 of $0.50 per unit, or approximately $19.5 million in the aggregate. On August 14, 2013, the Partnership made a cash distribution to its common unitholders and payments to holders of phantom units for the period April 1, 2013 through and including June 30, 2013 of $0.85 per unit, or approximately $33.2 million in the aggregate.

Shelf Registration Statement

On April 4, 2013, the Partnership and Finance Corporation filed a shelf registration statement with the SEC, which allows the Partnership or any selling securityholder, from time to time, in one or more offerings, to offer and sell up to $500.0 million in aggregate initial offering price of common units or debt securities. The debt securities may be issued by the Partnership and co-issued by Finance Corporation, and may be guaranteed by one or more of the Partnership’s subsidiaries. Each subsidiary guarantor of the debt securities would be exempt from reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) pursuant to Rule 12h-5 under the Exchange Act. The Partnership has no independent assets or operations, the guarantees of its subsidiary guarantors are joint and several and full and unconditional, subject to customary automatic release provisions. The Partnership’s subsidiaries other than its subsidiary guarantors are minor and there are no significant restrictions on the Partnership’s ability or the ability of any subsidiary guarantor to obtain funds from its subsidiaries.

Note 11 — Employee Benefit Plans

The Partnership made contributions of approximately $109,000 to its pension plans and payments to retirees of approximately $45,000 under its postretirement plan during the nine months ended September 30, 2013 and expects to contribute $0 to its pension plans and make payments to retirees of approximately $13,000 under its postretirement plan during the remainder of 2013.

The components of net periodic benefit cost are as follows:

	For the Three Months Ended September 30, 2013						For the Nine Months Ended September 30, 2013
	Pension			Post- retirement			Pension			Post- retirement
	(in thousands)
Service cost	$	34		$	11		$	103		$	33
Interest cost		49			11			146			32
Expected return on plan assets		(65	)		—			(195	)		—
Amortization of prior service cost		—			6			—			17
Amortization of net gain		(1	)		(4	)		(4	)		(11	)
Net periodic pension costs	$	17		$	24		$	50		$	71

16

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The Partnership had no defined benefit pension or postretirement benefit plans before the Agrifos Acquisition in November 2012.

Note 12 — Income Taxes

The Partnership and its subsidiaries are not directly subject to federal and state income taxes. Instead, their taxable income or loss is allocated to their individual partners or members. However, the Partnership and its subsidiaries are subject to Illinois replacement tax, Texas margin tax and California annual minimum franchise tax. For the three and nine months ended September 30, 2013, Illinois replacement tax of approximately $53,000 and $120,000, respectively, and Texas margin tax of approximately $180,000 and $318,000, respectively, were recorded.

Note 13 — Segment Information

The Partnership operates in two business segments, as described below.

• East Dubuque – The operations of the East Dubuque Facility, which produces primarily ammonia and urea ammonium nitrate solution (“UAN”).

• Pasadena – The operations of the Pasadena Facility, which produces primarily ammonium sulfate.

17

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The Partnership’s reportable operating segments have been determined in accordance with the Partnership’s internal management structure, which is organized based on operating activities. The Partnership evaluates performance based upon several factors, of which the primary financial measure is segment-operating income.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
	(in thousands)
Revenues
East Dubuque	$	50,572		$	60,112		$	146,838		$	169,228
Pasadena		42,707			—			109,961			—
Total revenues	$	93,279		$	60,112		$	256,799		$	169,228
Gross profit (loss)
East Dubuque	$	25,114		$	35,035		$	81,353		$	103,253
Pasadena		(8,294	)		—			(1,966	)		—
Total gross profit	$	16,820		$	35,035		$	79,387		$	103,253
Selling, general and administrative expense
East Dubuque	$	981		$	1,661		$	3,423		$	4,480
Pasadena		1,227			—			3,811			—
Total selling, general and administrative expense	$	2,208		$	1,661		$	7,234		$	4,480
Depreciation and amortization
East Dubuque	$	46		$	90		$	152		$	726
Pasadena		972			—			2,722			—
Total depreciation and amortization recorded in operating expenses	$	1,018		$	90		$	2,874		$	726
East Dubuque		1,666			3,589			6,348			8,730
Pasadena		1,702			—			3,159			—
Total depreciation and amortization recorded in cost of sales	$	3,368		$	3,589		$	9,507		$	8,730
Total depreciation and amortization	$	4,386		$	3,679		$	12,381		$	9,456
Other operating expenses
East Dubuque	$	28		$	237		$	36		$	284
Pasadena		30,029			—			30,029			—
Total other operating expenses	$	30,057		$	237		$	30,065		$	284
Operating income (loss)
East Dubuque	$	24,059		$	33,047		$	77,742		$	97,763
Pasadena		(40,522	)		—			(38,528	)		—
Total operating income (loss)	$	(16,463	)	$	33,047		$	39,214		$	97,763
Interest expense
East Dubuque	$	—		$	39		$	—		$	181
Pasadena		—			—			6			—
Total interest expense	$	—		$	39		$	6		$	181
Net income (loss)
East Dubuque	$	24,069		$	33,022		$	77,383		$	97,625
Pasadena		(40,765	)		—			(38,915	)		—
Total net income (loss)	$	(16,696	)	$	33,022		$	38,468		$	97,625
Reconciliation of segment net income (loss) to consolidated net income (loss):
Segment net income (loss)	$	(16,696	)	$	33,022		$	38,468		$	97,625
Partnership and unallocated expenses recorded as selling, general and administrative expenses		(1,872	)		(3,847	)		(6,488	)		(7,502	)
Partnership and unallocated income (expenses) recorded as other expense		309			—			(1,081	)		232
Unallocated interest expense and loss on interest rate swaps		(3,996	)		(327	)		(9,726	)		(907	)
Income tax benefit		—			—			302			—
Consolidated net income (loss)	$	(22,255	)	$	28,848		$	21,475		$	89,448

18

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

	As of September 30, 2013		As of December 31, 2012
	(in thousands)
Total assets
East Dubuque	$	178,091	$	125,100	��
Pasadena		180,065		191,279
Total assets	$	358,156	$	316,379
Reconciliation of segment total assets to consolidated total assets:
Segment total assets	$	358,156	$	316,379
Partnership and other		95,421		60,266
Consolidated total assets	$	453,577	$	376,645

Partnership and unallocated expenses represent costs that relate directly to the Partnership or to the Partnership and its subsidiaries but are not allocated to a segment. Partnership and unallocated expenses recorded in selling, general and administrative expenses consist primarily of services from Rentech, Inc. (“Rentech”) for executive, legal, finance, accounting, human resources, and investor relations support in accordance with the services agreement between the Partnership and Rentech, accounting and tax fees, legal fees, unit-based compensation, taxes, board expense and certain insurance costs. Partnership and unallocated expenses recorded in other expense represent primarily loss on debt extinguishment partially offset by gain on fair value adjustment to earn-out consideration. Unallocated interest expense represents primarily interest expense on the Notes.

Note 14 — Net Income (Loss) Per Common Unit

The Partnership’s net income (loss) is allocated wholly to the common unitholders since the General Partner has a non-economic interest.

Basic income (loss) per common unit is calculated by dividing net income (loss) by the weighted average number of common units outstanding for the period. Diluted net income (loss) per common unit is calculated by dividing net income (loss) by the weighted average number of common units outstanding plus the dilutive effect, calculated using the “treasury stock” method for the unvested phantom units. Phantom units are settled for common units upon vesting and are issued in tandem with distribution rights during the vesting period.

The following table sets forth the computation of basic and diluted net income (loss) per common unit (in thousands, except for per unit data).

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2013			2012		2013		2012
Numerator:
Net income (loss)	$	(22,255	)	$	28,848	$	21,475	$	89,448
Less: Income allocated to unvested units		—			—		326		—
Net income (loss) allocated to common unit holders	$	(22,255	)	$	28,848	$	21,149	$	89,448
Denominator:
Weighted average common units outstanding		38,849			38,260		38,843		38,254
Effect of dilutive units:
Phantom units		—			32		91		5
Diluted units outstanding		38,849			38,292		38,934		38,259
Basic net income (loss) per common unit	$	(0.57	)	$	0.75	$	0.54	$	2.34
Diluted net income (loss) per common unit	$	(0.57	)	$	0.75	$	0.54	$	2.34

19

RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

For the three months ended September 30, 2013 and 2012, 155,750 and 0 phantom units, respectively, were excluded from the calculation of diluted net income (loss) per common unit. For the nine months ended September 30, 2013 and 2012, 0 and 2,000 phantom units, respectively, were excluded from the calculation of diluted net income (loss) per common unit because their inclusion would have been anti-dilutive.

Note 15 — Related Parties

The Partnership, the General Partner and Rentech have entered into a services agreement, pursuant to which the Partnership and the General Partner obtain certain management and other services from Rentech. Under the services agreement, the Partnership, its subsidiaries and the General Partner are obligated to reimburse Rentech for (i) all costs, excluding share-based compensation, incurred by Rentech or its affiliates in connection with the employment of its employees who are seconded to the Partnership and who provide the Partnership services under the agreement on a full-time basis; (ii) a prorated share of costs, excluding share-based compensation, incurred by Rentech or its affiliates in connection with the employment of its employees, excluding seconded personnel, who provide the Partnership services under the agreement on a part-time basis, with such prorated share determined by Rentech on a commercially reasonable basis, based on the estimated percent of total working time that such personnel are engaged in performing services for the Partnership; (iii) a prorated share of certain administrative costs, in accordance with the agreement, including office costs, services by outside vendors, other general and administrative costs; and (iv) any taxes (other than income taxes, gross receipt taxes and similar taxes) incurred by Rentech or its affiliates for the services provided under the agreement. During the three months ended September 30, 2013 and 2012, Rentech, in accordance with the services agreement, billed the Partnership approximately $2.1 million and $2.7 million, respectively. During the nine months ended September 30, 2013 and 2012, Rentech, in accordance with the services agreement, billed the Partnership approximately $14.9 million and $8.9 million, respectively.

Note 16 — Subsequent Events

On October 24, 2013, the Partnership announced a cash distribution to its common unitholders for the period July 1, 2013 through and including September 30, 2013 of $0.27 per unit, which will result in total distributions in the amount of approximately $10.5 million, including payments to phantom unitholders. The cash distribution will be paid on November 14, 2013 to unitholders of record at the close of business on November 7, 2013. On October 28, 2013, the Partnership announced a change to its policy regarding the timing of the payments of its cash distributions. Distributions will be paid on or about 60 days, rather than the current practice of 45 days, after the end of each quarter.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition, results of operations and cash flows in conjunction with our consolidated financial statements and the related notes presented in this report and in our Annual Report.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “will,” “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our plans, our industry, our expected revenues, our future profitability, our expected capital expenditures (including for maintenance or expansion projects and environmental expenditures) and the impact of such expenditures on our performance, and our operating costs. These statements involve known and unknown risks, uncertainties and other factors, including the factors described under “Risk Factors” in our Annual Report and in “Part II—Item 1A. Risk Factors” in the quarterly report for the period ended March 31, 2013 filed with the SEC on May 9, 2013 that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things:

• our ability to make cash distributions on our common units;

• the volatile nature of our business, our ability to remain profitable and the variable nature of our cash distributions;

• our ability to recover the costs of our raw materials through sales of products that follow the purchase of such raw materials, considering the volatility in the prices of our products and raw materials;

• a decline in demand for crops such as corn, soybeans, potatoes, cotton, canola, alfalfa and wheat or their prices or the use of nitrogen fertilizer for agricultural purposes;

• adverse weather conditions, which can affect demand for, and delivery and production of, our products;

• any interruption in the supply, or rise in the price levels, of natural gas, ammonia, sulfur, and other essential raw materials;

• our dependence on our customers and distributors to transport goods purchased from us;

• our ability to identify and consummate acquisitions in related businesses, and the risk that any such acquisitions do not perform as anticipated;

• intense competition from other nitrogen fertilizer producers;

• planned or unplanned shutdowns, or any operational difficulties, at our facilities;

• our ability to obtain debt financing on acceptable terms or at all and the limitations on our business operations imposed by the terms of such indebtedness;

• any loss of Agrium Inc., or Agrium, as a distributor or customer of our nitrogen fertilizer products, loss of storage rights at Agrium’s terminal in Niota, Illinois or decline in sales of products through or to Agrium;

• any loss of Interoceanic Corporation, or IOC, as a distributor of our ammonium sulfate fertilizer products or decline in sales volume or sales price of products sold through IOC;

• potential operating hazards from accidents, fire, severe weather, floods or other natural disasters;

• our ability and the associated cost to comply with laws and regulations regarding employee and process safety;

• the risk associated with governmental policies affecting the agricultural industry;

• capital expenditures and potential liabilities arising from existing and proposed environmental laws and regulations, including those relating to climate change, alternative energy or fuel sources and the end-use and application of fertilizers;

• the conflicts of interest faced by our senior management team and our General Partner;

• limitations on the fiduciary duties owed by our General Partner which are included in the partnership agreement;

• the inability of our public unitholders to influence our operating decisions or elect our General Partner or the Board;

• changes in our treatment as a partnership for U.S. federal income or state tax purposes; and

• risks associated with the expansion and other projects at our facilities, including any disruption to operations at our facilities during construction and our ability to sell the incremental products resulting from such projects.

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You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs, forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

References in this report to “the Partnership,” “we,” “our,” “us” and like terms refer to Rentech Nitrogen Partners, L.P. and our subsidiaries, unless the context otherwise requires or where otherwise indicated. References in this report to “Rentech” refer to Rentech and its consolidated subsidiaries other than us, unless the context otherwise requires or where otherwise indicated. References to “our operating companies” refer to RNLLC and RNPLLC.

OVERVIEW

We are a Delaware limited partnership formed in July 2011 by Rentech, a company traded on the NASDAQ under the symbol “RTK”, to own, operate and expand our fertilizer business. We own and operate two fertilizer facilities: our East Dubuque Facility and our Pasadena Facility. Our East Dubuque Facility is located in East Dubuque, Illinois and produces primarily ammonia and UAN, using natural gas as the primary feedstock. Our Pasadena Facility, which we acquired in November 2012, is located in Pasadena, Texas, and produces ammonium sulfate, ammonium thiosulfate and sulfuric acid, using ammonia and sulfur as the facility’s primary feedstocks.

Our East Dubuque Facility is located in the center of the Mid Corn Belt, the largest market in the United States for direct application of nitrogen fertilizer products. The Mid Corn Belt includes the States of Illinois, Indiana, Iowa, Missouri, Nebraska and Ohio. The States of Illinois and Iowa have been the top two corn producing states in the United States for the last 20 years according to the United States Department of Agriculture. We consider the market for our East Dubuque Facility to be comprised of the States of Illinois, Iowa and Wisconsin.

Our East Dubuque Facility’s core market consists of the area located within an estimated 200-mile radius of the facility. In most instances, our customers take delivery of our nitrogen products at our East Dubuque Facility and then arrange and pay to transport them to their final destinations by truck. To the extent our products are picked up at our East Dubuque Facility, we do not incur any shipping costs, in contrast to nitrogen fertilizer producers located outside of the facility’s core market that must incur transportation and storage costs to transport their products to, and sell their products in, our market. In addition, our East Dubuque Facility does not maintain a fleet of trucks and, unlike some of our major competitors, our East Dubuque Facility does not maintain a fleet of rail cars because the facility’s customers generally are located close to the facility and prefer to be responsible for transportation. Having no need to maintain a fleet of trucks or rail cars lowers our East Dubuque Facility’s fixed costs. The combination of our East Dubuque Facility’s proximity to its customers and our storage capacity at the facility also allows for better timing of the pick-up and application of the facility’s products, as nitrogen fertilizer product shipments from more distant locations have a greater risk of missing the short periods of favorable weather conditions during which the application of nitrogen fertilizer may occur.

Our Pasadena Facility is the largest producer of synthetic ammonium sulfate and the third largest overall producer of ammonium sulfate in North America. We believe that our ammonium sulfate has several characteristics that distinguish it from competing products. In general, the ammonium sulfate that is available for sale in our industry is a byproduct of other processes and does not have certain characteristics valued by customers such as consistent size and durability. Our ammonium sulfate is sized to the specifications that we believe are preferred by customers because it may more easily be blended with other fertilizer products for more consistent application. We also believe that our ammonium sulfate has a longer shelf-life, is more stable and is more easily transported and stored than many competing products.

Our Pasadena Facility is located on the Houston Ship Channel with access to transportation at favorable prices. The facility has two deep-water docks and access to the Mississippi waterway system and key international waterways. The facility is also connected to key domestic railways which permit the efficient, cost-effective distribution of its products west of the Mississippi River. Our Pasadena Facility’s products are sold primarily through distributors to customers in the United States and in Brazil, and are applied to many types of crops including soybeans, potatoes, cotton, canola, alfalfa, corn and wheat.

Our Pasadena Facility purchases ammonia as a feedstock at contractual prices based on the monthly Tampa Index market, while our East Dubuque Facility sells similar quantities of ammonia at prevailing prices in the Mid Corn Belt, which are typically significantly higher than Tampa ammonia prices.

FACTORS AFFECTING COMPARABILITY OF FINANCIAL INFORMATION

Our historical results of operations for the periods presented may not be comparable with our results of operations for the subsequent periods for the reasons discussed below.

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RNPLLC Operations

The operations of RNPLLC, which owns the Pasadena Facility, are included in our historical results of operations only from the closing date of the Agrifos Acquisition, which was November 1, 2012. Our Pasadena Facility produces three products that we did not produce or sell before the Agrifos Acquisition: ammonium sulfate, ammonium thiosulfate and sulfuric acid. The Agrifos Acquisition also broadened the geographic area into which our products are sold. Upon the closing of the acquisition (i) general and administrative expenses as well as sales-related expenses increased due to the addition of RNPLLC’s operations, (ii) depreciation and amortization expenses increased due to the increase in fixed and intangible assets, which were recorded at fair value on the date of the Agrifos Acquisition, and (iii) interest expense increased due to the debt incurred to finance a significant portion of the purchase price for the Agrifos Acquisition. As a result, our results of operations for the periods prior to and after the closing date of the Agrifos Acquisition may not be comparable.

Expansion Projects

We have announced and commenced certain projects, including expansion of our production and storage capacity, and are evaluating other potential projects to expand the production capabilities at our facilities. We have incurred, and will continue to incur significant costs and expenses for the construction and development of such projects. The costs and expenses of the expansion projects we have announced will be paid from proceeds of the Notes that we issued in April 2013, which have significantly increased our interest expense. We also expect our depreciation expense to increase as additional assets related to the projects are placed into service. As a result, our results of operations for periods prior to, during and after the construction of any expansion project may not be comparable.

Acquisitions

One of our business strategies is to pursue acquisitions in related businesses. We are actively pursuing the acquisition of fertilizer assets that may benefit from our management and our partnership structure. If completed, acquisitions could have significant effects on our business, financial condition and results of operations. We have not entered into definitive agreements for any potential acquisitions, other than the completed Agrifos Acquisition, and we cannot assure you that we will enter into any definitive agreements on satisfactory terms, or at all. Costs associated with potential acquisitions are expensed as incurred, and could be significant.

FACTORS AFFECTING RESULTS OF OPERATIONS

Supply and Demand Factors

Our earnings and cash flow from operations are significantly affected by nitrogen fertilizer product prices, the prices of the inputs to our production processes, and the timing of product deliveries required by customers. The price at which we ultimately sell our nitrogen fertilizer products depends on numerous factors, including global and local supply and demand for nitrogen fertilizer products and global and local supply and demand for our key raw materials, many of which factors may be significantly affected by unpredictable weather patterns and the behavior of competitive suppliers.

Due to an unusually wet spring, there was a shortened planting season which resulted in lower ammonia and ammonium sulfate sales volumes during the nine months ended September 30, 2013, and higher levels of inventory at September 30, 2013. Ammonium sulfate prices have declined further than expected, and the illiquidity of the market has continued longer than we had expected. Few ammonium sulfate transactions are taking place in North America, and typically lower-priced export sales are conducted in a small number of large, vessel-sized transactions. Buying activity for ammonium sulfate in North America is anticipated to return during the fall season, as is typical for fertilizer products, but visibility into fall pricing is quite limited. During the nine months ended September 30, 2013, prices of UAN deliveries were negatively impacted by the short planting season because we were not able to sell as much product at in-season premium prices.

In addition, significant volumes of urea were exported from China and this supply suppressed global urea and other nitrogen fertilizer prices. Even with the shortened planting season, corn yields are expected to be significantly higher in 2013 compared to 2012; as a result, expectations are that corn acreage will be reduced in 2014 compared to 2013, causing fertilizer prices to decline. However, we believe the long-term nitrogen fundamentals remain strong. Several factors including favorable natural gas costs, population growth and farmer affordability of nitrogen contribute to a healthy outlook for nitrogen. Forecasters continue to believe that 90-plus million acres of corn are expected to be planted across the nation in the coming years, which should support good nitrogen demand.

Needed Repairs at East Dubuque Facility

A routine inspection at our East Dubuque Facility in late October 2013 identified the need to repair the foundation of one of the three existing syngas compressors, taking that compressor out of service. This unplanned repair will require the ammonia plant to run below the planned post-expansion capacity of 1,020 tons per day, at a rate of approximately 790 tons per day, until repairs are complete. The reduced production is not expected to affect 2013 sales already contracted for delivery, but forecasted spot sales are expected to be lower. Otherwise, our East Dubuque Facility is expected to operate at its expanded production rates during the rest of 2014. We expect that the cost of the repairs will not be more than $2.0 million, which we expect to fund from operating cash flow.

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Seasonality

Results of operations for the interim periods are not necessarily indicative of results to be expected for the year primarily due to the impact of seasonality on our sales. Our and our customers’ businesses are seasonal, based on planting, growing and harvesting cycles. The following table shows product tonnage (in thousands) shipped by our East Dubuque Facility by quarter for the nine months ended September 30, 2013 and for each quarter in the years ended December 31, 2012, 2011 and 2010.

	2013		2012		2011		2010
Quarter ended March 31		110		92		89		86
Quarter ended June 30		144		160		213		206
Quarter ended September 30		176		180		125		181
Quarter ended December 31		n/a		133		145		167
Total Tons Shipped		430		565		572		640

We typically ship the highest volume of tons from our East Dubuque Facility during the spring planting season, which occurs during the quarter ending June 30 of each year, and the next highest volume of tons after the fall harvest during the quarter ending December 31 of each year. However, as reflected in the table above, the seasonal patterns may change substantially from year-to-year due to various circumstances, including timing of or changes in the weather. These seasonal increases and decreases in demand also can cause fluctuations in sales prices. In mild winter seasons with warmer weather, early planting may shift significant ammonia sales into the quarter ending March 31. Wet or cold weather during the normal spring application season can delay deliveries that would normally occur in the spring. Weather conditions can also affect the mix of demand for our products at various times in the year, as certain conditions favor the application of ammonia, while other conditions favor the application of UAN solution.

As a result of the seasonality of shipments and sales, we experience significant fluctuations in our East Dubuque Facility’s revenues, income and net working capital levels from quarter to quarter. Weather conditions can significantly impact quarterly results by affecting the timing and amount of product deliveries. Our receivables and deferred revenues are seasonal and relatively unpredictable. Significant amounts of our East Dubuque Facility’s products are typically sold for later shipment under product prepayment contracts, and the timing of these sales and the amount of down payment as a percentage of the total contract price may vary with market conditions. The variation in the timing of these sales and contract terms may add to the seasonality of our cash flows and working capital.

Since our Pasadena Facility has been producing and selling its current products only since 2011, we have much less experience with the seasonal patterns for its products than we do for our East Dubuque Facility. However, we have observed significant seasonality and effects of weather on the timing of deliveries for its products. International sales from this facility partially offset this seasonal impact on its total revenues. Prices for ammonium sulfate and ammonium thiosulfate normally reach their highest in the spring, decrease in the summer, and increase again in the fall. We adjust the sales prices of these products seasonally in order to facilitate distribution of the products throughout the year. We operate the ammonium sulfate plant at our Pasadena Facility throughout the year to the extent that there is available storage capacity for this product. We have 60,000 tons of storage capacity for ammonium sulfate at the facility, and an arrangement with IOC that permits us to store 32,000 tons of ammonium sulfate at IOC-controlled terminals, and temporary storage capacity on barges or rail cars as product is moved from our Pasadena Facility to IOC-controlled terminals. We manage the storage capacity by distributing the product through IOC to customers in both domestic and offshore markets throughout the year. If storage capacity becomes insufficient, we would be forced to cease production of the product until such capacity becomes available. Our Pasadena Facility’s fertilizer products are sold both on the spot market for immediate delivery and, to a much lesser extent, under product prepayment contracts for future delivery at fixed prices. The amount of products we sell under product prepayment contracts is highly variable. The following table shows product tonnage (in thousands) shipped by our Pasadena Facility by quarter for the nine months ended September 30, 2013.

	2013
Quarter ended March 31		110
Quarter ended June 30		178
Quarter ended September 30		202
Quarter ended December 31		n/a
Total Tons Shipped		490

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Revenues

We generate revenue primarily from sales of nitrogen fertilizer products. We generate revenue from sales of nitrogen fertilizer products manufactured at our East Dubuque Facility and used primarily in corn production. Our East Dubuque Facility produces ammonia, UAN, liquid and granular urea, nitric acid and carbon dioxide, or CO_2,using natural gas as a feedstock. We also generate revenue from sales of nitrogen fertilizer products manufactured at our Pasadena Facility and used in the production of corn, soybeans, potatoes, cotton, canola, alfalfa and wheat. Our Pasadena Facility produces ammonium sulfate, sulfuric acid and ammonium thiosulfate. We sell substantially all of our products from our Pasadena Facility to distributors, and we do not have direct contact with the distributors’ customers, which are located primarily in the United States and Brazil. All revenues from our Pasadena Facility are from sales to United States-based distributors. Revenues for our fertilizer products are seasonal based on the planting, growing and harvesting cycles of customers utilizing nitrogen fertilizer.

Cost of Sales

The most significant elements of cost of sales are natural gas for our East Dubuque Facility; ammonia, sulfur and sulfuric acid for our Pasadena Facility; labor; and depreciation.

Operating Expenses

Operating expenses primarily consist of selling, general and administrative expense and depreciation expense. Selling, general and administrative expense mainly consists of direct and allocated legal expenses; payroll expenses relating to treasury, accounting, marketing and human resources; and expenses for maintaining our corporate offices.

CRITICAL ACCOUNTING POLICIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. The most significant estimates and judgments relate to: revenue recognition, inventories, the valuation of long-lived assets and intangible assets, recoverability of goodwill and the acquisition method of accounting. Actual amounts could differ significantly from these estimates. There has been no material change to our critical accounting policies and estimates from the information provided in our Annual Report.

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SELECTED FINANCIAL DATA

The following table includes selected summary financial data for the three and nine months ended September 30, 2013 and 2012. The operations of our Pasadena Facility are included effective November 1, 2012. The data below should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this report. The data below is in thousands, except for per unit data and on-stream factors.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
STATEMENTS OF OPERATIONS DATA
Revenues	$	93,279		$	60,112		$	256,799		$	169,228
Cost of sales	$	76,459		$	25,077		$	177,412		$	65,975
Gross profit	$	16,820		$	35,035		$	79,387		$	103,253
Operating income (loss)	$	(18,335	)	$	29,200		$	32,726		$	90,261
Other expense, net	$	3,687		$	352		$	10,813		$	813
Income (loss) before income taxes	$	(22,022	)	$	28,848		$	21,913		$	89,448
Income tax expense	$	233		$	—		$	438		$	—
Net income (loss)	$	(22,255	)	$	28,848		$	21,475		$	89,448
Net income (loss) per common unit – Basic	$	(0.57	)	$	0.75		$	0.54		$	2.34
Net income (loss) per common unit – Diluted	$	(0.57	)	$	0.75		$	0.54		$	2.34
Weighted-average units used to compute net income (loss) per common unit:
Basic		38,849			38,260			38,843			38,254
Diluted		38,849			38,292			38,934			38,259
FINANCIAL AND OTHER DATA
Adjusted EBITDA(1)	$	16,080		$	32,879		$	75,136		$	99,717
Cash available for distribution, per unit(1)	$	0.27		$	0.85		$	1.62		$	2.55
KEY OPERATING DATA
Products sold (tons):
Ammonia(2)		24			31			76			101
UAN(2)		117			110			237			236
Ammonium sulfate(3)		162			—			330			—
Products pricing (dollars per ton):
Ammonia(2)	$	530		$	620		$	675		$	666
UAN(2)	$	269		$	295		$	299		$	332
Ammonium sulfate(3)	$	238		$	—		$	269		$	—
Production (tons):
Ammonia(2)		77			76			227			231
UAN(2)		86			77			236			238
Ammonium sulfate(3)		122			—			374			—
Natural gas used in production(2):
Volume (MMBtu)		2,754			2,824			8,238			8,422
Pricing ($ per MMBtu)	$	4.16		$	3.18		$	4.17		$	3.51
Natural gas in cost of sales(2):
Volume (MMBtu)		2,873			3,092			7,290			7,960
Pricing ($ per MMBtu)	$	4.29		$	3.14		$	4.15		$	3.63
On-stream factors(4):
Ammonia(2)		100.0	%		100.0	%		100.0	%		100.0	%
UAN(2)		100.0	%		100.0	%		99.3	%		100.0	%
Ammonium sulfate(3) (5)		79.8	%		—			81.8	%		—

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	As of September 30, 2013		As of December 31, 2012
BALANCE SHEET DATA
Cash and cash equivalents	$	85,321	$	55,799
Working capital	$	70,495	$	23,218
Construction in progress	$	113,372	$	61,147
Total assets	$	453,577	$	376,645
Credit facilities and term loan	$	—	$	193,290
Notes	$	320,000	$	—
Total long-term liabilities	$	322,919	$	192,961
Total partners’ capital	$	50,367	$	109,404

(1) Adjusted EBITDA is defined as net income (loss) plus interest expense and other financing costs, loss on goodwill impairment, loss on debt extinguishment, loss on interest rate swaps, income tax expense and depreciation and amortization, net of gain in fair value adjustment to earn-out consideration. We calculate cash available for distribution as used in this table as Adjusted EBITDA plus non-cash compensation expense and distribution of cash reserves, less the sum of maintenance capital expenditures not funded by financing proceeds, net interest expense and other debt service. Adjusted EBITDA and cash available for distribution are used as supplemental financial measures by management and by external users of our financial statements, such as investors and commercial banks, to assess:

• the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; and

• our operating performance and return on invested capital compared to those of other publicly traded limited partnerships and other public companies, without regard to financing methods and capital structure.

Adjusted EBITDA and cash available for distribution should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and cash available for distribution may have material limitations as performance measures because they exclude items that are necessary elements of our costs and operations. In addition, Adjusted EBITDA and cash available for distribution presented by other companies may not be comparable to our presentation, since each company may define these terms differently.

The table below reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to net income (loss) for the three and nine months ended September 30, 2013 and 2012.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(in thousands)
Net income (loss)	$	(22,255	)	$	28,848	$	21,475		$	89,448
Add:
Net interest expense		3,996			25		9,725			138
Loss on goodwill impairment		30,029			—		30,029			—
Loss on debt extinguishment		—			—		6,001			—
Gain on fair value adjustment to earn-out consideration		(309	)		—		(4,920	)		—
Loss on interest rate swaps		—			327		7			907
Income tax expense		233			—		438			—
Depreciation and amortization		4,386			3,679		12,381			9,456
Other		—			—		—			(232	)
Adjusted EBITDA	$	16,080		$	32,879	$	75,136		$	99,717

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The table below reconciles cash available for distribution to Adjusted EBITDA, both of which are non-GAAP financial measures, for the three months ended September 30, 2013.

	(in thousands, except per unit data)
Adjusted EBITDA	$	16,080
Plus: Non-cash compensation expense		233
Less: Maintenance capital expenditures (a)		(2,199	)
Less: Net interest expense and debt service		(3,996	)
Plus: Distribution of cash reserves for working capital		371
Cash available for distribution	$	10,489
Cash available for distribution, per unit	$	0.27
Common units outstanding		38,849

(a) Excludes approximately $2.2 million of maintenance capital expenditures at our Pasadena Facility funded by debt.

(2) Key operating data for the East Dubuque Facility.

(3) Key operating data for the Pasadena Facility.

(4) The respective on-stream factors for the ammonia, UAN and ammonium sulfate plant equal the total days the applicable plant operated in any given period, divided by the total days in that period.

(5) The ammonium sulfate plant is typically out of service for 12 to 14 hours per week for regular maintenance.

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Business Segments

We operate in two business segments, as described below. The operations of the Pasadena Facility are included in our historical results of operations only from the date of the closing of the Agrifos Acquisition, which was November 1, 2012.

• East Dubuque – The operations of the East Dubuque Facility, which produces primarily ammonia and UAN.

• Pasadena – The operations of the Pasadena Facility, which produces primarily ammonium sulfate.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
	(in thousands)
Revenues:
East Dubuque	$	50,572		$	60,112		$	146,838		$	169,228
Pasadena		42,707			—			109,961			—
Total revenues	$	93,279		$	60,112		$	256,799		$	169,228
Gross profit (loss):
East Dubuque	$	25,114		$	35,035		$	81,353		$	103,253
Pasadena		(8,294	)		—			(1,966	)		—
Total gross profit	$	16,820		$	35,035		$	79,387		$	103,253
Operating income (loss):
East Dubuque	$	24,059		$	33,047		$	77,742		$	97,763
Pasadena		(40,522	)		—			(38,528	)		—
Total operating income (loss)	$	(16,463	)	$	33,047		$	39,214		$	97,763
Net income (loss):
East Dubuque	$	24,069		$	33,022		$	77,383		$	97,625
Pasadena		(40,765	)		—			(38,915	)		—
Total net income (loss)	$	(16,696	)	$	33,022		$	38,468		$	97,625
Reconciliation of segment net income (loss) to consolidated net income (loss):
Segment net income (loss)	$	(16,696	)	$	33,022		$	38,468		$	97,625
Partnership and unallocated expenses recorded as selling, general and administrative expenses		(1,872	)		(3,847	)		(6,488	)		(7,502	)
Partnership and unallocated expenses recorded as other expense		309			—			(1,081	)		232
Unallocated interest expense and loss on interest rate swaps		(3,996	)		(327	)		(9,726	)		(907	)
Income tax benefit		—			—			302			—
Consolidated net income (loss)	$	(22,255	)	$	28,848		$	21,475		$	89,448

Partnership and unallocated expenses represent costs that relate directly to the Partnership or to the Partnership and its subsidiaries but are not allocated to a segment. Partnership and unallocated expenses recorded in selling, general and administrative expenses consist primarily of unit-based compensation expense, services from Rentech for executive, legal, finance, accounting, human resources, and investor relations support in accordance with the services agreement, audit and tax fees, legal fees, certain insurance costs and board expenses. The decrease in partnership and unallocated expenses recorded as selling, general and administrative expenses between the three months ended September 30, 2013 and 2012 was primarily due to a decrease in business development expenses of approximately $1.6 million and unit-based compensation of approximately $0.9 million, partially offset by an increase of approximately $0.3 million in accounting and consulting fees. The decrease in partnership and unallocated expenses recorded as selling, general and administrative expenses between the nine months ended September 30, 2013 and 2012 was primarily due to decreases in business development expenses of approximately $1.3 million and unit-based compensation of approximately $0.9 million, partially offset by increases in various professional services fees of approximately $0.6 million and debt related fees of approximately $0.2 million. The increase in partnership and unallocated income recorded as other expense, net between the three months ended September 30, 2013 and 2012 was due to gain on fair value adjustment to earn-out consideration of approximately $0.3 million. The increase in partnership and unallocated expenses recorded as other expense between the nine months ended September 30, 2013 and 2012 was primarily due to loss on debt extinguishment of approximately $6.0 million partially offset by gain on fair value adjustment to earn-out consideration of approximately $4.9 million. Unallocated interest expense represents primarily interest expense on the Notes.

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East Dubuque

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012:

Revenues

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Revenues:
Product shipments	$	50,572	$	60,070	$	146,765	$	169,112
Other		—		42		73		116
Total revenues	$	50,572	$	60,112	$	146,838	$	169,228

	For the Three Months Ended September 30, 2013				For the Three Months Ended September 30, 2012
	Tons		Revenue		Tons		Revenue
	(in thousands)
Product shipments:
Ammonia		24	$	12,543		31	$	19,237
UAN		117		31,472		110		32,609
Urea (liquid and granular)		11		4,681		10		5,864
CO2		21		714		25		854
Nitric acid		3		1,162		4		1,506
Other		N/A		—		N/A		42
Total		176	$	50,572		180	$	60,112

	For the Nine Months Ended September 30, 2013				For the Nine Months Ended September 30, 2012
	Tons		Revenue		Tons		Revenue
	(in thousands)
Product shipments:
Ammonia		76	$	51,033		101	$	67,195
UAN		237		70,985		236		78,559
Urea (liquid and granular)		37		18,117		29		17,622
CO2		68		2,338		55		1,817
Nitric acid		12		4,292		11		3,919
Other		N/A		73		N/A		116
Total		430	$	146,838		432	$	169,228

We generate revenue in our East Dubuque segment primarily from sales of nitrogen fertilizer products manufactured at our East Dubuque Facility and used primarily in corn production. Our East Dubuque Facility produces ammonia, UAN, liquid and granular urea, nitric acid and CO₂ using natural gas as a feedstock. Revenues are seasonal based on the planting, growing, and harvesting cycles of customers utilizing nitrogen fertilizer.

Revenues were approximately $50.6 million for the three months ended September 30, 2013 compared to approximately $60.1 million for the three months ended September 30, 2012. The decrease was primarily the result of a decrease in ammonia, UAN and urea sales prices and ammonia sales volume, partially offset by an increase in UAN sales volume. Revenues were approximately $146.8 million for the nine months ended September 30, 2013 compared to approximately $169.2 million for the nine months ended September 30, 2012. The decrease was primarily the result of a decrease in UAN and urea sales prices and ammonia sales volume.

Ammonia sales volume decreased during the three months ended September 30, 2013 as compared to the three months ended September 30, 2012 due to lower demand. The Midwestern region of the United States experienced wet weather during the spring 2013 planting season, which limited opportunities for farmers to apply fertilizer. We also retained additional inventory during the three month period ended September 30, 2013 to meet the anticipated demand for the fall 2013 ammonia application season and to offset reduced production resulting from our scheduled plant turnaround in October 2013. Expectations that fertilizer prices may fall, as described below, also negatively impacted demand as customers waited longer than they did in 2012 to make purchasing decisions. Deliveries of UAN were higher than expected, shifting expected revenue from the fourth quarter of 2013 to the third quarter of 2013.

30

The average sales prices per ton for the three months ended September 30, 2013 as compared with those of the three months ended September 30, 2012 were lower by approximately 14% and 9% for ammonia and UAN, respectively. These two products comprised approximately 87% and 86% of the product sales for the three months ended September 30, 2013 and 2012, respectively. The average sales prices per ton for the nine months ended September 30, 2013 as compared with those of the nine months ended September 30, 2012 were higher by approximately 1% for ammonia and lower by approximately 10% for UAN. These two products comprised approximately 83% and 86% of the product sales for the nine months ended September 30, 2013 and 2012, respectively. The decrease in sales prices for ammonia for the three months ended September 30, 2013 and for UAN for the three and nine months ended September 30, 2013 as compared to 2012 was due to weather. The drought in the Midwestern region of the United States during the spring and summer of 2012 created expectations of poor corn yields and anticipated increases in acreage dedicated to corn in 2013; as a result, fertilizer prices remained high throughout 2012. Even with the shortened planting season due to a wet spring, corn yields are expected to be significantly higher in 2013 compared to 2012; as a result, expectations are that corn acreage will be reduced in 2014 compared to 2013, causing fertilizer prices to decline. Sales prices for ammonia for the nine months ended September 30, 2013 as compared to 2012 were higher as a result of some high-priced, fall 2012 ammonia product prepayment contracts being extended into and fulfilled during the first quarter of 2013.

Cost of Sales

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Total cost of sales	$	25,458	$	25,077	$	65,485	$	65,975

Cost of sales was approximately $25.5 million for the three months ended September 30, 2013, compared to approximately $25.1 million for the three months ended September 30, 2012. While cost of sales remained fairly flat between periods, natural gas in cost of sales was approximately $2.6 million higher in 2013 than in 2012 due to higher market prices for natural gas, partially offset by a decrease in depreciation expense of approximately $1.9 million primarily due to certain assets having become fully depreciated. Natural gas and labor costs comprised approximately 49% and 15%, respectively, of cost of sales on product shipments for the three months ended September 30, 2013, and approximately 39% and 14%, respectively, for the three months ended September 30, 2012.

Cost of sales was approximately $65.5 million for the nine months ended September 30, 2013, compared to approximately $66.0 million for the nine months ended September 30, 2012. While cost of sales remained fairly flat between periods, depreciation expense in cost of sales was approximately $2.4 million lower, primarily due to certain assets having become fully depreciated in 2013, partially offset by an increase in the cost of natural gas of approximately $1.4 million due to higher market prices for natural gas. The higher costs were partially offset by production efficiencies relating to UAN. Natural gas and labor costs comprised approximately 46% and 15%, respectively, of cost of sales on product shipments for the nine months ended September 30, 2013, and approximately 44% and 14%, respectively, for the nine months ended September 30, 2012.

Gross Profit

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Total gross profit	$	25,114	$	35,035	$	81,353	$	103,253

31

Gross profit was approximately $25.1 million for the three months ended September 30, 2013 compared to approximately $35.0 million for the three months ended September 30, 2012. Gross profit margin was 50% for the three months ended September 30, 2013 as compared to 58% for the three months ended September 30, 2012. Gross profit margin can vary significantly from period to period due to changes in the prices of nitrogen fertilizer and natural gas, both of which are commodities. The prices of these commodities can vary significantly from period to period and do not always move in the same direction. In addition, there are certain fixed costs of operating our East Dubuque Facility that are recorded in cost of sales and whose impact on gross profit and gross margins varies as product sales volumes vary seasonally. The decrease in gross profit margin during the three months ended September 30, 2013 was primarily due to lower sales volumes and higher natural gas costs, partially offset by lower depreciation expense.

Gross profit was approximately $81.4 million for the nine months ended September 30, 2013 compared to approximately $103.3 million for the nine months ended September 30, 2012. Gross profit margin was 55% for the nine months ended September 30, 2013 as compared to 61% for the nine months ended September 30, 2012. The decrease in gross profit margin during the nine months ended September 30, 2013 was primarily due to lower ammonia sales volume and higher natural gas costs, partially offset by lower depreciation expense.

Operating Expenses

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Operating expenses:
Selling, general and administrative	$	981	$	1,661	$	3,423	$	4,480
Depreciation and amortization		46		90		152		726
Loss (gain) on disposal of property, plant and equipment		28		237		36		284
Total operating expenses	$	1,055	$	1,988	$	3,611	$	5,490

Selling, General and Administrative Expenses.Selling, general and administrative expenses were approximately $1.0 million for the three months ended September 30, 2013, compared to approximately $1.7 million for the three months ended September 30, 2012. The decrease was primarily due to decreases in various professional services fees of approximately $0.4 million and in unused credit facility fees of approximately $0.2 million. Selling, general and administrative expenses were approximately $3.4 million for the nine months ended September 30, 2013, compared to approximately $4.5 million for the nine months ended September 30, 2012. The decrease was primarily due to decreases in unused credit facility fees for the First 2012 Credit Agreement of approximately $0.5 million and decreases in legal expenses of approximately $0.3 million.

Depreciation and Amortization. Depreciation expense included in operating expense was approximately $0.2 million for the nine months ended September 30, 2013 compared to approximately $0.7 million for the nine months ended September 30, 2012. This decrease was primarily due to the acceleration of depreciation in 2012 on an asset that was dismantled as part of the ammonia production and storage capacity expansion project and certain software becoming fully depreciated. A portion of depreciation expense is associated with assets supporting general and administrative functions and is recorded in operating expense. The majority of depreciation expense incurred is a manufacturing cost and is distributed between cost of sales and finished goods inventory, based on product volumes.

Operating Income

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
	(in thousands)
Total operating income	$	24,059	$	33,047	$	77,742	$	97,763

Operating income was approximately $24.1 million for the three months ended September 30, 2013 compared to approximately $33.0 million for the three months ended September 30, 2012. Operating income was approximately $77.7 million for the nine months ended September 30, 2013 compared to approximately $97.8 million for the nine months ended September 30, 2012. The decreases were primarily due to lower revenues and higher cost of sales as a percentage of revenues partially offset by lower selling, general and administrative expenses and depreciation and amortization expense as described above.

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Pasadena

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013:

The operations of the Pasadena Facility are included in our historical results of operations only from the closing date of the Agrifos Acquisition, which was November 1, 2012.

Revenues

	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2013		2013
	(in thousands)
Total revenues	$	42,707	$	109,961

	For the Three Months Ended September 30, 2013				For the Nine Months Ended September 30, 2013
	Tons		Revenue		Tons		Revenue
	(in thousands)
Revenues:
Ammonium sulfate		162	$	38,609		330	$	88,784
Sulfuric acid		39		3,347		119		11,240
Ammonium thiosulfate		1		322		41		7,883
Other		—		429		—		2,054
Total revenues		202	$	42,707		490	$	109,961

We generate revenue primarily from sales of nitrogen fertilizer products manufactured at our Pasadena Facility and used in the production of corn, soybeans, potatoes, cotton, canola, alfalfa and wheat. The facility produces ammonium sulfate, sulfuric acid and ammonium thiosulfate. Due to an unusually wet spring, there was an abbreviated planting season which resulted in a lower than expected volume of ammonium sulfate being sold during the three months ended June 30, 2013. Also, during the nine months ended September 30, 2013 significant volumes of urea were exported from China and this supply suppressed global urea and other nitrogen fertilizer prices. Our Pasadena Facility also experienced several relatively small disruptions in production that, in the aggregate, contributed to lower production during the nine months ended September 30, 2013. The sales volume for ammonium sulfate picked up during the three months ended September 30, 2013, but the sales price for ammonium sulfate has significantly worsened and still remains low.

Cost of Sales

	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2013		2013
	(in thousands)
Total cost of sales	$	51,001	$	111,927

Cost of sales primarily consists of expenses for ammonia, sulfur, labor and depreciation. Ammonia and sulfur collectively comprised approximately 55% of cost of sales for the three months ended September 30, 2013 while labor costs comprised approximately 8% of such cost of sales. Depreciation expense included in cost of sales was approximately $1.7 million. During the three months ended September 30, 2013, we incurred a write-down of ammonium sulfate inventory to market value of approximately $5.0 million due to lower market prices of ammonium sulfate, in accordance with accounting guidance, and higher cost of sales as a result of several relatively small disruptions in production.

Ammonia and sulfur collectively comprised approximately 55% of cost of sales for the nine months ended September 30, 2013 while labor costs comprised approximately 7% of such cost of sales. Depreciation expense included in cost of sales was approximately $3.2 million. During the nine months ended September 30, 2013, we incurred a write-down of ammonium sulfate, sulfur and sulfuric acid inventory to market value of approximately $7.3 million due primarily to lower market prices of ammonium sulfate, in accordance with accounting guidance.

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Gross Loss

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013			2013
	(in thousands)
Total gross loss	$	(8,294	)	$	(1,966	)

Gross loss margin for the three and nine months ended September 30, 2013 was 19% and 2%, respectively. Gross loss is due to lower ammonium sulfate sale prices and the write-down of inventory, as described above. Similar to our East Dubuque Facility, gross profit margin can vary significantly from period to period due to changes in the prices of nitrogen fertilizer, ammonia and sulfur, which are commodities. The prices of these commodities can vary significantly from period to period and do not always move in the same direction. In addition, there are certain fixed costs of operating our Pasadena Facility that are recorded in cost of sales and whose impact on gross profit and gross margins varies as product sales volumes vary seasonally. Moreover, forward sales contracts have not developed for ammonium sulfate to the extent that they have for other nitrogen fertilizer products, so it is not possible to lock product prices and input prices at the same time, as has been our practice for a portion of the sales of the most important products of our East Dubuque Facility. Since input prices for ammonium sulfate are typically fixed several months before the corresponding product price, margins may be compressed during a declining commodity market.

Operating Expenses

	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2013		2013
	(in thousands)
Operating expenses:
Selling, general and administrative	$	1,227	$	3,811
Depreciation and amortization		972		2,722
Loss on goodwill impairment		30,029		30,029
Total operating expense	$	32,228	$	36,562

Operating expenses were primarily comprised of selling, general and administrative expense and depreciation expense.

Selling, General and Administrative Expenses.These expenses are for general administrative purposes at our Pasadena Facility, such as general management salaries and travel, legal, consulting, information technology, and banking fees. Selling, general and administrative expenses for the three and nine months ended September 30, 2013 included approximately $0.2 million and $0.6 million, respectively, in integration related expenses.

Depreciation and Amortization. This amount represents amortization of the intangible assets. The depreciation expense relating to fixed assets is a manufacturing cost which is distributed between cost of sales and finished goods inventory, based on product volumes.

Loss on Goodwill Impairment. This amount represents goodwill impairment relating to the Agrifos Acquisition.

Operating Loss

	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2013			2013
	(in thousands)
Total operating loss	$	(40,522	)	$	(38,528	)

34

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity have historically been cash from operations, borrowing, and proceeds of our initial public offering. We expect to fund our operating needs, including expansion and maintenance capital expenditures, including to repair the foundation of one of our syngas compressors, from operating cash flow and cash on hand, including the remaining proceeds from the offering of the Notes. We believe that our current and expected sources of liquidity will be adequate to fund these operating needs and the capital expenditures for projects that we have announced, for at least the next 12 months. It is possible that our operating cash flow could be negative in an individual quarter, in which case we expect to be able to fund our operations with cash on hand or temporary drawing on our Credit Facility. With the remaining proceeds from the offering of the Notes, we intend to fund all of the remaining costs of the following projects: our ammonia production and storage capacity expansion project and our urea expansion project at our East Dubuque Facility; and our ammonium sulfate debottlenecking and production capacity project, the replacement of our sulfuric acid converter, and our power generation project at our Pasadena Facility. If we decide to undertake projects in addition to those listed here, we would need to draw on our Credit Facility and/or raise additional capital, depending on the total costs of such projects.

Distributions

We intend to distribute to our unitholders all of the cash available for distribution we generate each quarter, which could materially impact our liquidity and limit our ability to grow and make acquisitions. Cash available for distribution for each quarter will be determined by the Board of our General Partner following the end of such quarter. We expect that cash available for distribution for each quarter will generally be calculated as the cash we generate during the quarter, less cash needed for maintenance capital expenditures not funded by capital proceeds, debt service and other contractual obligations. The Board may exercise its discretion to increase or decrease cash distributions compared to such calculation, which would have the effect of decreasing or increasing our cash reserves for future operating or capital needs as deemed appropriate for our projected liquidity needs by the Board of our General Partner. As a result of our quarterly distributions, our liquidity will be significantly affected, and we expect to finance substantially all of our growth externally, either with commercial bank borrowings or by debt issuances or additional issuances of equity. However, our partnership agreement does not require us to pay cash distributions on a quarterly or other basis, and we may change our distribution policy at any time and from time to time. On August 14, 2013, we made a cash distribution to our common unitholders and payments to holders of phantom units for the period April 1, 2013 through and including June 30, 2013 of $0.85 per unit or approximately $33.2 million in the aggregate.

On October 24, 2013, we announced a cash distribution to our common unitholders and payments to holders of phantom units for the period July 1, 2013 through and including September 30, 2013 of $0.27 per unit or approximately $10.5 million in the aggregate. The cash distribution will be paid on November 14, 2013 to unitholders of record at the close of business on November 7, 2013.

Shelf Registration Statement, Notes and Credit Agreement

On April 4, 2013, we filed a shelf registration statement with the SEC, which allows us from time to time, in one or more offerings, to offer and sell up to $500.0 million in aggregate initial offering price of common units or debt securities. Capital markets have experienced periods of extreme uncertainty in the recent past, and access to those markets may become difficult. If we need to access capital markets, we cannot assure you that we will be able to do so on acceptable terms, or at all. This report shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

On April 12, 2013, we issued the Notes and entered into the 2013 Credit Agreement. For a description of the terms of the Notes and the 2013 Credit Agreement, see Note 8– Debt to the consolidated financial statements included in this report.

Capital Expenditures

We divide our capital expenditures into two categories: maintenance and expansion. Maintenance capital expenditures include those for improving, replacing or adding to our assets, as well as expenditures for the acquisition, construction or development of new assets to maintain our operating capacity, or to comply with environmental, health, safety or other regulations. Maintenance capital expenditures that are required to comply with regulations may also improve the output, efficiency or reliability of our facility. Expansion capital expenditures are those incurred for acquisitions or capital improvements that we expect will increase our operating capacity or operating income over the long term.

Our maintenance capital expenditures for our East Dubuque Facility totaled approximately $5.6 million and $5.4 million in the nine months ended September 30, 2013 and 2012, respectively. Our maintenance capital expenditures funded from operating cash flow for our East Dubuque Facility, including to repair the foundation of one of our syngas compressors, are expected to be approximately $9.7 million for the year ending December 31, 2013. Our expansion capital expenditures for our East Dubuque Facility totaled approximately $36.3 million and $40.2 million in the nine months ended September 30, 2013 and 2012, respectively. Our expansion capital expenditures for our East Dubuque Facility are expected to be approximately $53.0 million for the year ending December 31, 2013 and are expected to be related to our ammonia production and storage capacity expansion project and our urea expansion project.

35

Our maintenance capital expenditures for our Pasadena Facility totaled approximately $4.6 million in the nine months ended September 30, 2013. Our maintenance capital expenditures for our Pasadena Facility are expected to be approximately $10.5 million for the year ending December 31, 2013 of which approximately $8.5 million is expected to be funded by proceeds from the offering of the Notes and approximately $2.0 million is expected to be funded from operating cash flow. The amount funded from proceeds of the offering of the Notes includes a portion of the expected cost to replace the sulfuric acid converter. During the third quarter of 2013, we started this project and intend to complete it during 2014 for an estimated total cost of approximately $17.0 million, with approximately 20% of that cost to be expended in 2013. Our expansion capital expenditures for our Pasadena Facility totaled approximately $16.9 million in the nine months ended September 30, 2013. Our expansion capital expenditures for our Pasadena Facility are expected to be approximately $23.7 million for the year ending December 31, 2013 for expenditures related to the ammonium sulfate debottlenecking and production capacity project and the power generation project. These projects are expected to cost $6 million and $32 million, respectively, to be expended during 2013 and 2014.

36

CASH FLOWS

The following table summarizes our Consolidated Statements of Cash Flows:

	For the Nine Months Ended September 30,
	2013			2012
	(in thousands)
Net cash provided by (used in):
Operating activities	$	51,240		$	115,206
Investing activities		(56,594	)		(41,614	)
Financing activities		34,876			(62,941	)
Net increase in cash and cash equivalents	$	29,522		$	10,651

Operating Activities

Revenues were approximately $256.8 million for the nine months ended September 30, 2013 compared to approximately $169.2 million for the nine months ended September 30, 2012. The increase in revenue for the nine months ended September 30, 2013 was primarily due to the Agrifos Acquisition. Deferred revenue increased approximately $4.3 million during the nine months ended September 30, 2013, versus an increase of approximately $5.6 million during the nine months ended September 30, 2012. The increase for the nine months ended September 30, 2013 was attributable to our Pasadena Facility, and the increase for the nine months ended September 30, 2012 was attributable to our East Dubuque Facility. The increase during both periods was due to timing of receiving cash.

Net cash provided by operating activities for the nine months ended September 30, 2013 was approximately $51.2 million. We had net income of $21.5 million for the nine months ended September 30, 2013. For the nine months ended September 30, 2013, we had a loss on goodwill impairment of approximately $30.0 million relating to the Agrifos Acquisition. Accounts receivable increased by approximately $14.2 million during the nine months ended September 30, 2013 which was primarily attributable to our East Dubuque Facility. Accounts receivable increased due to significantly higher sales during the third quarter of 2013 as compared to the fourth quarter of 2012.This higher volume of sales is due to a combination of having fewer summer 2013 product prepayment contracts and an unscheduled plant outage at the end of 2012 which limited the amount of inventory available for sales during the fourth quarter of 2012. Inventories increased by approximately $16.2 million during this period, which was due to lower sales volumes at our East Dubuque Facility and our Pasadena Facility and higher natural gas prices at our East Dubuque Facility.

Net cash provided by operating activities for the nine months ended September 30, 2012 was approximately $115.2 million. We had net income of $89.4 million for the nine months ended September 30, 2012. Accounts receivable decreased by approximately $1.2 million during the nine months ended September 30, 2012. Inventories increased by approximately $1.3 million. The decrease in accounts receivable and the increase in inventories were due to normal seasonality.

Investing Activities

Net cash used in investing activities was approximately $56.6 million and $41.6 million, respectively, for the nine months ended September 30, 2013 and 2012. Net cash used in investing activities for the nine months ended September 30, 2013 was primarily related to the ammonia production and storage capacity expansion project at our East Dubuque Facility, and the ammonium sulfate debottlenecking and production capacity project, the power generation project and the replacement of the sulfuric acid converter at our Pasadena Facility. Net cash used in investing activities for the nine months ended September 30, 2012 was due to various expansion projects at our East Dubuque Facility, including the ammonia production and storage capacity expansion project.

Financing Activities

Net cash provided by (used in) financing activities was approximately $34.9 million and ($62.9 million), respectively, for the nine months ended September 30, 2013 and 2012. During the nine months ended September 30, 2013, we issued the Notes for $320.0 million and paid off the Second 2012 Credit Agreement in the amount of approximately $205.0 million. We also made distributions of approximately $81.9 million. During the nine months ended September 30, 2012, RNLLC entered into the First 2012 Credit Agreement and borrowed approximately $27.0 million. We also made distributions of approximately $85.7 million.

37

CONTRACTUAL OBLIGATIONS

We have entered into various contractual obligations as detailed in the Annual Report. During the normal course of business between January 1, 2013 and the date of this report, the amount of our contractual obligations changed, as we made scheduled payments and entered into new contracts. During such period, the following material changes occurred to our contractual obligations:

• On April 12, 2013, we issued the Notes and entered into the 2013 Credit Agreement. We used part of the net proceeds from the offering of the Notes to repay in full and terminate the Second 2012 Credit Agreement. As of the date of this report, there are no outstanding borrowings under the 2013 Credit Agreement.

• Our obligations under natural gas forward purchase contracts increased by approximately $6.6 million to approximately $14.1 million. As of September 30, 2013, the natural gas forward purchase contracts included delivery dates through March 31, 2014. During October 2013, we entered into additional fixed quantity forward purchase contracts at fixed and indexed prices for various delivery dates through March 31, 2014. The total MMBtus associated with these additional forward purchase contracts are approximately 0.7 million and the total amount of the purchase commitments are approximately $2.6 million, resulting in a weighted average rate per MMBtu of $3.84. We are required to make additional prepayments under these forward purchase contracts in the event that market prices fall below the purchase prices in the contracts.

• Purchase obligations increased by approximately $19.5 million to approximately $37.9 million as measured by the total amount of open purchase orders. The increase is primarily due to the ammonia production and storage capacity expansion project at our East Dubuque Facility and the power generation project at our Pasadena Facility.

• On April 17, 2013, we entered into the EPC Contract with Abeinsa. The EPC Contract provides for Abeinsa to be the contractor on our power generation project at our Pasadena Facility. The value of the contract is approximately $25.0 million and the project is expected to be completed by the fourth quarter of 2014.

OFF-BALANCE SHEET ARRANGEMENTS

We have no material off-balance sheet arrangements.

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Note 2 to the consolidated financial statements, “Recent Accounting Pronouncements,” included in Part I of this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. We may be exposed to interest rate risks related to the 2013 Credit Agreement. Borrowings under the 2013 Credit Agreement bear interest at a rate equal to an applicable margin plus, at our option, either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the prime rate, (2) the federal funds rate plus 0.5% or (3) LIBOR for an interest period of three months plus 1.00% or (b) in the case of LIBOR borrowings, the offered rate per annum for deposits of dollars for the applicable interest period on the day that is two business days prior to the first day of such interest period. If we maintain a secured leverage ratio of less than 1.75:1 for the last quarter reported to the lenders, then the applicable margin for borrowings under the 2013 Credit Agreement is 2.25% with respect to base rate borrowings and 3.25% with respect to LIBOR borrowings. If we maintain a secured leverage ratio equal or greater than 1.75:1 for the last quarter reported to the lenders, then the applicable margin for borrowings under the 2013 Credit Agreement is 2.50% with respect to base rate borrowings and 3.50% with respect to LIBOR borrowings. As of the date of this report, we had no outstanding borrowings under the 2013 Credit Agreement. Assuming the entire $35.0 million was outstanding under the 2013 Credit Agreement, an increase or decrease of 100 basis points in the LIBOR rates would result in an increase or decrease in annual interest expense of approximately $0.4 million.

Commodity Price Risk.Our East Dubuque Facility is exposed to significant market risk due to potential changes in prices for fertilizer products and natural gas. Natural gas is the primary raw material used in the production of various nitrogen-based products manufactured at our East Dubuque Facility. Market prices of nitrogen-based products are affected by changes in the prices of commodities such as corn and natural gas as well as by supply and demand and other factors. Currently, we purchase natural gas for use in our East Dubuque Facility on the spot market, and through short-term, fixed supply, fixed price and index price purchase contracts. Natural gas prices have fluctuated during the last several years, increasing substantially in 2008 and subsequently declining to the current lower levels. A hypothetical increase of $0.10 per MMBtu of natural gas would increase the cost to produce one ton of ammonia by approximately $3.50.

In the normal course of business, we currently produce nitrogen-based fertilizer products throughout the year to supply the needs of our East Dubuque Facility’s customers during the high-delivery-volume spring and fall seasons. The value of fertilizer product inventory is subject to market risk due to fluctuations in the relevant commodity prices. We believe that market prices of nitrogen products are affected by changes in grain prices and demand, natural gas prices and other factors.

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We enter into fixed-price product prepayment contracts committing our East Dubuque Facility’s customers to purchase our nitrogen fertilizer products at a later date. To a lesser extent, we also enter into product prepayment contracts for our Pasadena Facility’s products. By using fixed-price forward contracts, we purchase approximately enough natural gas to manufacture the products that have been sold by our East Dubuque Facility under product prepayment contracts for later delivery. We believe that entering into such fixed-price contracts for natural gas and product prepayment contracts effectively allows us to fix most of the gross margin on pre-sold product and mitigate risk of increasing market prices of natural gas or decreasing market prices of nitrogen products. However, this practice also subjects us to the risk that we may have locked in margins at levels lower than those that might be available if, in periods following these contract dates, natural gas prices were to fall, or nitrogen fertilizer commodity prices were to increase. In addition, we occasionally make forward purchases of natural gas that are not directly linked to specific product prepayment contracts. To the extent we make such purchases, we may be unable to benefit from lower natural gas prices in subsequent periods.

Our Pasadena Facility is exposed to significant market risk due to potential changes in prices for fertilizer products, and for ammonia, sulfuric acid and sulfur. Ammonia and sulfuric acid are the primary raw materials used in the production of ammonium sulfate which is the primary product manufactured at our Pasadena Facility. Sulfur is the primary raw material used in the production of sulfuric acid, which our Pasadena Facility produces for both internal consumption in the production of ammonium sulfate and for sales to third parties. During the nine months ended September 30, 2013, approximately 85% of the sulfuric acid used in our Pasadena Facility’s production of ammonium sulfate was produced at our Pasadena Facility. We purchase a substantial portion of our ammonia and sulfur for use in our Pasadena Facility for prices based on market indices. The market price of ammonium sulfate is affected by changes in the prices of commodities such as soybeans, potatoes, cotton, canola, alfalfa, corn, wheat, ammonia and sulfur as well as by supply and demand for ammonium sulfate and other nitrogen fertilizers, and by other factors such as the price of its other inputs. The margins on the sale of ammonium sulfate fertilizer products are relatively low. If our costs to produce ammonium sulfate fertilizer products increase and the prices at which we sell these products do not correspondingly increase, our profits from the sale of these products may decrease and we may suffer losses on these sales. If the price of our products falls rapidly, we may not be able to recover the costs of our raw materials inventory that was purchased at an earlier time when commodity prices were at higher levels. A hypothetical increase of $10.00 per ton of ammonia would increase the cost to produce one ton of ammonium sulfate by approximately $2.50. A hypothetical increase of $10.00 per ton of sulfur would also increase the cost to produce one ton of ammonium sulfate by approximately $2.50.

Our Pasadena Facility purchases ammonia as a feedstock at contractual prices based on a published Tampa, Florida market index, while our East Dubuque Facility sells similar quantities of ammonia at prevailing prices in the Mid Corn Belt, which are typically significantly higher than Tampa ammonia prices. Because we both buy and sell similar quantities of ammonia, we believe that our consolidated exposure to the fluctuations in ammonia prices is lower than is the exposure to ammonia prices of either of our facilities considered alone.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. We have established and currently maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our general partner’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our General Partner’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our General Partner’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2013.

Changes in Internal Control over Financial Reporting. There were no significant changes in our internal control over financial reporting during the quarter ended September 30, 2013 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On November 1, 2012, the Agrifos Acquisition closed. We are currently in the process of integrating RNPLLC’s operations, processes, and internal controls.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A description of the legal proceedings to which the Partnership and its subsidiary are a party is contained in Note 9 to the consolidated financial statements, “Commitments and Contingencies,” included in Part I of this report.

ITEM 1A. RISK FACTORS

In September 2013, Rentech Nitrogen Holdings, Inc. (“RNHI”), an indirect wholly owned subsidiary of Rentech, obtained a new revolving loan facility (“Revolving Loan”) by entering into a credit agreement (the “RNHI Credit Agreement”) and Rentech borrowed $50.0 million under such facility. As a result of the RNHI Credit Agreement, we are subject to risks relating to the RNHI Credit Agreement, some of which are discussed below and others of which are described generally in our other periodic and current reports filed with the SEC, including in “Part I – Item 1A. Risk Factors” of the Annual Report and “Part II – Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 filed with the SEC on May 9, 2013 (the “Quarterly Report”). The risks described in the Annual Report, the Quarterly Report and this report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business and cash flow. The risk factors set forth below update, and should be read together with, the risk factors disclosed in “Part I – Item IA. Risk Factors” of the Annual Report and “Part II – Item 1A. Risk Factors” of the Quarterly Report.

An event of default under the RNHI Credit Agreement, a failure to meet market price tests included therein or Rentech’s default of certain obligations under Rentech’s guaranty for such credit facility could trigger an acceleration under the RNHI Credit Agreement and a sale of our common units owned by RNHI, or the Underlying Equity, thus reducing Rentech’s ownership of our units.

The RNHI Credit Agreement contains customary mandatory prepayment events and events of default, including defaults by Rentech and RNHI. An event of default under the RNHI Credit Agreement or Rentech’s default of certain obligations under Rentech’s guaranty for such credit facility could trigger an acceleration under the RNHI Credit Agreement and a foreclosure and sale of the Underlying Equity. Such foreclosure and sale would likely result in the change of ownership of our common units.

In addition, RNHI’s obligations under the RNHI Credit Agreement and, correspondingly, Rentech’s obligations under the guaranty may be triggered by a substantial drop in the market price of our common units. The market price for our common units has fluctuated in the past and could fluctuate substantially in the future. Numerous factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2012 and our subsequent Quarterly Reports on Form 10-Q, and the volatility of the stock market generally, could cause a significant decline in the market price of our common units, which could trigger an acceleration under the RNHI Credit Agreement and a foreclosure and sale of the Underlying Equity. RNHI would cease to own any of our common units so foreclosed upon and sold and, as a result, Rentech would lose a corresponding portion, which could be substantial, of Rentech’s ownership interest in us. The occurrence of any such events could result in a decline, which could be substantial, in the market price of our common units.

We have recorded goodwill impairment charges and recorded write-downs of finished goods and raw material inventories with respect to our Pasadena Facility, and we could be required to record additional material impairment charges and write-downs in the future.

We recently lowered our profitability expectations for the Pasadena Facility primarily due to lower projected market prices for ammonium sulfate. As a result, during the nine months ended September 30, 2013, we recorded a goodwill impairment charge of approximately $30.0 million relating to the Agrifos Acquisition, we lowered the fair value of the potential earn-out consideration we may be required to pay in connection with the Agrifos Acquisition to zero and we incurred an approximate $7.3 million write-down of ammonium sulfate, sulfur and sulfuric acid inventory. For further information, see Notes 4, 5 and 7 to the consolidated financial statements included in Part I of this report.

The future profitability of our Pasadena Facility will be significantly affected by, among other things, nitrogen fertilizer product prices and the prices of the inputs to its production processes. It is possible that adverse changes to supply and demand factors relating to the Pasadena Facility’s nitrogen fertilizer products could require us to lower our expectations for the profitability of the facility in the future. If this were to occur, we could be required to record additional material impairment charges and write-downs, which could have a material adverse effect on our results of operations, the trading price of our common unit and our reputation.

ITEM 6. EXHIBITS.

Exhibit Index

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101	The following financial information from the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statement of Partners’ Capital, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements (Unaudited), detailed tagged.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RENTECH NITROGEN PARTNERS, L.P. BY: RENTECH NITROGEN GP, LLC, ITS GENERAL PARTNER
Dated: November 7, 2013	/s/ D. Hunt Ramsbottom
	D. Hunt Ramsbottom,
	Chief Executive Officer and Director of Rentech Nitrogen GP, LLC
Dated: November 7, 2013	/s/ Dan J. Cohrs
	Dan J. Cohrs
	Chief Financial Officer of Rentech Nitrogen GP, LLC

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