- Annual Transition Report (10-KT)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the Fiscal Year Ended

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

For the Transition Period from October 1, 2011 to December 31, 2011

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)		(Zip Code)

Registrant’s telephone number, including area code: (310) 571-9800

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered
Common Units Representing Limited Partner Interests		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ . No x .

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ . No x .

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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):

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 June 30, 2011, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s common units were not publicly traded. The registrant’s common units began trading on the New York Stock Exchange on November 4, 2011.

As of March 15, 2012, the registrant had 38,250,000 common units outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None

TABLE OF CONTENTS


		Page
	PART I

ITEM 1.	Business		4
ITEM 1A.	Risk Factors		15
ITEM 1B.	Unresolved Staff Comments		38
ITEM 2.	Properties		38
ITEM 3.	Legal Proceedings		38
ITEM 4.	Mine Safety Disclosures		38

	PART II

ITEM 5.	Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Common Units		39
ITEM 6.	Selected Financial Data		40
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		42
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk		61
ITEM 8.	Financial Statements and Supplementary Data		63
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		84
ITEM 9A.	Controls and Procedures		84
ITEM 9B.	Other Information		84

	PART III

ITEM 10.	Directors, Executive Officers and Corporate Governance		85
ITEM 11.	Executive Compensation		90
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters		120
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		123
ITEM 14.	Principal Accounting Fees and Services		128

	PART IV

ITEM 15.	Exhibits and Financial Statement Schedules		129

Signatures.			134

FORWARD-LOOKING STATEMENTS

Certain statements and information included in this Transition Report on Form 10-K, or this report, and other reports or materials that we have filed or will file with the Securities and Exchange Commission, or the SEC, (as well as information included in oral statements or other written statements made or to be made by us or our management), contain or may contain “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 industry, 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, 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. Factors that could affect our results include the risk factors detailed in Part I—Item 1A “Risk Factors” and from time to time in our periodic reports and registration statements filed with the SEC. 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 subsidiary, unless the context otherwise requires or where otherwise indicated. References in this report to “Rentech” refer to Rentech, Inc. and its consolidated subsidiaries other than us, unless the context otherwise requires or where otherwise indicated. References to “RDC” refer to Rentech Development Corporation, which is a wholly owned subsidiary of Rentech, references to “RNHI” refer to Rentech Nitrogen Holdings, Inc., which is a wholly owned subsidiary of RDC, and references to “Rentech Nitrogen GP” and “our general partner” refer to Rentech Nitrogen GP, LLC, which is our general partner and a wholly owned subsidiary of RNHI. References to “our operating company” or “our subsidiary” refer to Rentech Nitrogen, LLC, or RNLLC, which was formerly known as Rentech Energy Midwest Corporation, or REMC.

PART I

ITEM 1. BUSINESS

Change in Fiscal Year End

On February 1, 2012, the board of directors of our general partner approved a change in our fiscal year end from September 30 to December 31. As a result of this change, we are filing this Transition Report on Form 10-K for the three-month transition period ended December 31, 2011. References to any of our fiscal years mean the fiscal year ending September 30 of that calendar year.

Overview

We are a Delaware limited partnership formed in July 2011 by Rentech, a publicly traded provider of clean energy solutions and nitrogen fertilizer, to own, operate and grow our nitrogen fertilizer business. Our nitrogen fertilizer facility, which is located in East Dubuque, Illinois, has been in operation since 1965, with infrequent unplanned shutdowns. We produce primarily anhydrous ammonia, or ammonia, and urea ammonium nitrate solution, or UAN, at our facility, using natural gas as our primary feedstock. Substantially all of our products are nitrogen-based.

Our core market consists of the area located within an estimated 200-mile radius of our facility. In most instances, our customers purchase our nitrogen products at our 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 facility, we do not incur shipping costs, in contrast to nitrogen fertilizer producers located outside of our core market that must incur transportation and storage costs to transport their products to, and sell their products in, our core market. In addition, we do not maintain a fleet of trucks and, unlike some of our major competitors, we do not maintain a fleet of rail cars because our customers generally are located close to our facility and prefer to be responsible for transportation. Having no need to maintain a fleet of trucks or rail cars lowers our fixed costs. The combination of our proximity to our customers and our storage capacity at our facility also allows for better timing of the pick-up and application of our 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 facility can produce up to approximately 830 tons of ammonia per day, with the capacity to upgrade up to approximately 450 tons of ammonia to produce up to approximately 1,100 tons of UAN per day. During the three months ended December 31, 2011 and the fiscal years ended September 30, 2011 and 2010, we produced approximately 63,000 tons, 273,000 tons and 267,000 tons, respectively, of ammonia, and approximately 68,000 tons, 312,000 tons and 287,000 tons, respectively, of UAN. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011 and 2010, ammonia and UAN combined accounted for approximately 96%, 91% and 89%, respectively, of our total gross profit. Our facility has the flexibility to vary our product mix significantly, which permits us to upgrade our ammonia production into varying amounts of UAN, nitric acid and liquid and granular urea each season, depending on market demand, pricing and storage availability.

Our Initial Public Offering

On November 9, 2011, we completed our initial public offering of 15,000,000 common units representing limited partner interests at a public offering price of $20.00 per common unit. The public currently owns 39.2% of our outstanding common units and RNHI owns the remaining 60.8% of our common units. Rentech Nitrogen GP owns 100% of the non-economic general partner interest in us. At the closing of our initial public offering, RNHI contributed its member interests in REMC to us, and REMC converted into a limited liability company named Rentech Nitrogen, LLC, organized under the laws of the State of Delaware.

Organizational Structure

The following diagram depicts our organizational structure as of February 29, 2012 (all percentage ownership interests are 100% unless otherwise noted):

LOGO

Business

Our Facility

Our facility is located on approximately 210 acres in the northwest corner of Illinois on a 140-foot bluff above Mile Marker 573 on the Upper Mississippi River. Our facility produces ammonia, UAN, liquid and granular urea, nitric acid and food-grade carbon dioxide, or CO ₂ , using natural gas as our primary feedstock. Our facility operates continuously, except for planned shutdowns for maintenance and efficiency improvements and unplanned shutdowns, which are infrequent. Our facility can optimize its product mix according to changes in demand and pricing for its various products. Some of these products, such as UAN, are final products sold to customers, and others, including ammonia, are both final products and feedstocks for other final products, such as nitric acid, liquid urea, granular urea and CO ₂ .

The following table sets forth our facility’s current rated production capacity for the listed products in tons per day and tons per year, and our product storage capacity.


Product	Approximate Production Capacity		Product Storage Capacity
Product	Tons /Day	Tons /Year	Product Storage Capacity
Ammonia	830	302,950	40,000 tons (2 tanks); 15,000 tons ⁽¹⁾
UAN	1,100	401,500	80,000 tons (2 tanks)
Urea (liquid / granular)	400 /140	146,000 / 51,100	12,000 granular ton warehouse
Nitric acid	380	138,700	Limited capacity is not a factor
CO ₂ ⁽²⁾	650	237,250	1,900 tons

(1)

Represents 15,000 tons of space at the terminal of Agrium U.S.A., Inc., or Agrium, in Niota, Illinois where we have the right to store ammonia pursuant to our distribution agreement with Agrium. Our right to store ammonia at this terminal expires on June 30, 2016, but automatically renews for successive one year periods, unless we deliver a termination notice to Agrium with respect to such storage rights at least three months prior to an automatic renewal. Notwithstanding the foregoing, our right to use the storage space immediately terminates if the distribution agreement terminates in accordance with its terms. See “—Marketing and Distribution.”

(2)	In order to provide adequate space for the ammonia capacity expansion project, we expect to reduce our facility’s CO ₂ production capacity to 350 tons per day and 127,750 tons per year in March 2012. See “—Expansion Projects.”

The following table sets forth the amount of products produced by, and shipped from, our facility for the three months ended December 31, 2011 and 2010, and the fiscal years ended September 30, 2011, 2010 and 2009:


	For the Three Months Ended December 31,				Fiscal Years Ended September 30,
	2011		2010		2011		2010		2009
	(in thousands of tons)
Products Produced
Ammonia		63		75		273		267		267
UAN		68		86		312		287		274
Urea (liquid / granular)		34		43		155		145		162
Nitric acid		27		35		126		111		104
CO ₂		16		34		109		107		95
Products Shipped
Ammonia		55		44		125		153		126
UAN		65		79		315		294		267
Urea (liquid / granular)		7		7		29		32		36
Nitric acid		3		3		15		11		9
CO ₂		15		34		110		107		95

Expansion Projects

Since commencing operations in 1965, our facility has undergone various expansion projects that have increased production and product upgrade capabilities. The expansion project we completed in 1998 entailed the construction of a second nitric acid plant at our facility. This project added approximately 150 tons per day of nitric acid capacity to our facility, which, in turn, increased our facility’s UAN capacity from approximately 660 tons per day to approximately 1,100 tons per day.

We are pursuing some, and we intend to continue to evaluate additional, opportunities to increase our profitability by expanding our production capabilities and product offerings, including with the following expansion projects:

•

Urea Expansion and Diesel Exhaust Fluid Build-Out . We have commenced a project to increase our urea production capacity by approximately 13%, or 50 tons per day. The additional urea could be marketed as liquid urea or upgraded into UAN, both of which sell at a premium to ammonia per nutrient ton. As a part of this project, we have commenced the installation of mixing, storage and load-out equipment that would enable us to produce and sell diesel exhaust fluid, or DEF, from the urea produced at our facility. DEF is a urea-based chemical reactant that is intended to reduce nitrogen oxide emissions in the exhaust systems of certain diesel engines of trucks and off-road farm and construction equipment. As an industrial product, DEF would diversify our product mix and our potential customer base. We believe that there is an expanding market for DEF, with the potential for long-term off-take contracts on favorable terms. We expect the urea expansion and DEF build-out project to cost approximately $6.0 million to complete, and such project is being funded with a portion of the net proceeds from our initial public offering. We believe this expansion project could be completed by the end of 2012.

•

Ammonia Capacity Expansion Project . We have commenced construction of a project that is designed to increase ammonia production at our facility by approximately 70,000 tons annually, for sale or upgrade to additional products, and to increase our ammonia storage capacity by approximately 20,000 tons. This project is on a schedule that we expect will fit with planned downtime for our 2013 turnaround. Based on the engineering work completed to date, including Front End Engineering and Design, or FEED, our preliminary estimate is that this project could be completed by the end of 2013. We expect that this project could cost approximately $100 million to complete. We have entered into a credit agreement (referred to as the 2012 credit agreement), which provides for a $135.0 million senior secured credit facility, including a $100.0 million capital expenditures facility, or the capital expenditures facility. With the exception of FEED, which was funded using a portion of the net proceeds from our initial public offering, we intend to use borrowings under the capital expenditures facility to fund the ammonia capacity expansion project. For a more complete discussion of the 2012 credit agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources of Liquidity—Credit Agreements.”

Products

Our product sales are heavily weighted toward sales of ammonia and UAN, which together made up 80% or more of our total revenues for the three months ended December 31, 2011 and each of the fiscal years ended September 30, 2011, 2010 and 2009. A majority of our products are sold through our distribution agreement with Agrium as described below under “—Marketing and Distribution,” with the exception of CO ₂ , which we sell directly to customers in the food and beverage market at negotiated contract prices. Although ammonia and UAN may be used interchangeably in some cases, each has its own characteristics, and customer product preferences vary according to the crop planted, soil and weather conditions, regional farming practices, relative prices and the cost and availability of appropriate storage, transportation, handling and application equipment, each of which vary among these two products. During the three months ended December 31, 2011 and each of the fiscal years ended September 30, 2011, 2010 and 2009, we sold more than 90% of our nitrogen products to customers for agricultural uses, with the remaining portion being sold to customers for industrial uses.

Ammonia . We produce ammonia, the simplest form of nitrogen fertilizer and the feedstock for the production of other nitrogen fertilizers. Our ammonia processing unit has a current rated capacity of approximately 830 tons per day. Our ammonia product storage consists of two 20,000 ton tanks at our facility and 15,000 tons of leased storage in Niota, Illinois. Ammonia is used in the production of all other products produced by our facility, except CO ₂ .

UAN . UAN is a liquid fertilizer that has a slight ammonia odor, and, unlike ammonia, it does not need to be refrigerated or pressurized when transported or stored. Our facility has two UAN storage tanks with a combined capacity of 80,000 tons.

Urea . Our urea solution is sold in its liquid state, processed into granular urea through our urea granulation plant to create dry granular urea (46% nitrogen concentration) or upgraded into UAN. We assess market demand for each of these three end products and allocate our produced urea solution as appropriate. We sell liquid urea primarily to industrial customers in the power, ethanol and diesel emissions markets. Although we believe there is high demand for our granular urea in agricultural markets, we sell granular urea primarily to customers in specialty urea markets where the spherical and consistent size of the granules resulting from our “curtain granulation” technology generally command a premium price. Our facility has a 12,000 ton capacity bulk warehouse that can be used for dry bulk granular urea storage.

Nitric Acid . We produce nitric acid through two separate nitric acid plants at our facility. Nitric acid is either sold to third parties or used within our facility for the production of ammonium nitrate solution, as an intermediate from which UAN is produced. We believe that our facility currently has sufficient storage capacity available for efficient loading of nitric acid.

Carbon Dioxide . CO ₂ is a gaseous product that is co-manufactured with ammonia, with approximately 1.1 tons of CO ₂ produced per ton of ammonia produced. Our facility utilizes CO ₂ in its urea production and has developed a market for CO ₂ through conversion to a purified food grade liquid CO ₂ . Our facility has storage capacity for approximately 1,900 tons of CO ₂ . We have multiple CO ₂ sales agreements that allow for regular shipment of CO ₂ throughout the year, and our current storage capacity is sufficient to support our CO ₂ delivery commitments.

Marketing and Distribution

In 2006, we entered into a distribution agreement with Agrium under which a majority of our products, including ammonia and UAN, are sold. Pursuant to the distribution agreement, Agrium is obligated to use its commercially reasonable efforts to promote the sale of, and to solicit and secure orders from its customers for, nitrogen fertilizer products comprising ammonia, liquid and granular urea, UAN, nitric acid and other nitrogen-based products manufactured at our facility. Under the distribution agreement, Agrium bears the credit risk on products sold through Agrium pursuant to the agreement. The distribution agreement has a term that ends in April 2016, but automatically renews for subsequent one-year periods, unless either party delivers a termination notice to the other party at least three months prior to an automatic renewal.

During the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, we sold 80% or more of the nitrogen fertilizer products produced at our facility through Agrium pursuant to the distribution agreement, and sold the remaining amounts directly to customers. Our management pre-approves price, quantity and other terms for each sale through Agrium, and we pay Agrium only a commission for its services. Our rights under the distribution agreement include the right to store specified amounts of our ammonia for a monthly fee at Agrium’s ammonia terminal in Niota, Illinois, which serves as another location where our ammonia is sold. Our right to store ammonia at Agrium’s terminal expires on June 30, 2016, but automatically renews for successive one year periods, unless we deliver a termination notice to Agrium with respect to such storage rights at least three months prior to an automatic renewal. Notwithstanding the foregoing, our right to use the storage space immediately terminates if the distribution agreement terminates in accordance with its terms. Outside of the distribution agreement, we also sell our CO ₂ directly to customers on a contract-by-contract basis.

Under the distribution agreement, we pay commissions to Agrium not to exceed $5 million during each contract year on applicable gross sales during the first 10 years of the agreement. The commission rate was 2% during the first year of the agreement and increased by 1% on each anniversary date of the agreement up to the current rate of 5%, which is the maximum allowable rate under the distribution agreement during the first 10 years of the agreement. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, the effective commission rate associated with sales under the distribution agreement was 2.6%, 4.3%, 4.2% and 2.3%, respectively.

Transportation

In most instances, our customers purchase our nitrogen products freight on board, or FOB, at our facility, and then arrange and pay to transport them to their final destinations by truck according to customary practice in our market. Similarly, under the distribution agreement, neither we nor Agrium is responsible for transportation, and customers that purchase our products through Agrium purchase such products FOB at our facility. When products are purchased FOB at our facility, the customer is responsible for all costs for and bears all risks associated with the transportation of products from our facility.

In certain limited cases, we transport our products by barge or rail, and are responsible for the associated transportation costs. We own a barge dock on the Mississippi River, and we deliver some of our products to customers by barge. We also ship some of our products by barge to our leased storage facility in Niota, Illinois, another location from which our customers may pick up our products by truck. We also own a rail spur that connects to the Burlington Northern Santa Fe Railway, and the Canadian National Railway Company or its predecessors have provided rail service to our facility since 1966.

We believe that having the option to transport our nitrogen products by barge or rail provides us with the flexibility to sell our products to locations that cannot readily be reached by truck. However, transportation by truck generally is not subject to many of the risks and costs associated with transportation by barge or rail. Barge transportation from the Gulf Coast frequently is constrained by unpredictable conditions and limited equipment and storage infrastructure on the Mississippi River. Lock closures on the Upper Mississippi River can be caused by a variety of conditions, including inclement weather or surface conditions, and can unexpectedly delay barge transportation. In addition, in the United States, there are only two towing companies that transport ammonia by barge and only 32 active barges available for ammonia transport, which we believe is only sufficient to transport the current level of produced ammonia. Ammonia storage sites and terminals served by barge on the Mississippi River are controlled primarily by CF Industries Holdings, Inc., or CF Industries, Koch Industries, Inc., or Koch, and Agrium. Because ownership of storage sites and terminals is limited to these competitors, other competitors who rely on barge transportation could encounter storage limitations associated with the seasonal Mississippi River closure that occurs annually from mid-November to early March. Railroads also charge premium prices to ship certain toxic inhalation hazard, or TIH, chemicals, including ammonia, due in part to additional liability insurance costs incurred by the railroads. We believe that railroads are taking other actions, such as requiring indemnification from their customers for liabilities relating to TIH chemicals, to shift the risks they face from shipping TIH chemicals to their customers, which may make transportation of ammonia by rail more costly or less feasible.

Customers

We sell a majority of our nitrogen products to customers located in our core market. We sold over 90% of our nitrogen products to customers for agricultural uses during the three months ended December 31, 2011 and each of the fiscal years ended September 30, 2011, 2010 and 2009. Given the nature of our business, and consistent with industry practice, we generally do not have long-term minimum sales contracts for fertilizer products with any of our customers.

In the aggregate, our top five ammonia customers represented approximately 54%, 46%, 52% and 49%, respectively, of our ammonia sales for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, and our top five UAN customers represented approximately 53%, 50%, 60% and 60%, respectively, of our UAN sales for these periods. In addition, Twin States, Inc., or Twin States, accounted for approximately 7%, 6%, 10% and 11%, respectively, of our total product sales for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009. Growmark, Inc., or Growmark, accounted for approximately 20%, 7%, 8% and 11%, respectively, of our total product sales for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, approximately 1%, 3%, 7% and 0%, respectively, of our total product sales were to Agrium as a direct customer (rather than a distributor) and approximately 7%, 15%, 11% and 5%, respectively, of our total product sales were to Crop Production Services, Inc., or CPS, a controlled affiliate of Agrium.

Seasonality and Volatility

The fertilizer business is seasonal, based upon the planting, growing and harvesting cycles. Inventories must be accumulated to allow for customer shipments during the spring and fall fertilizer application seasons, which requires significant storage capacity. The accumulation of inventory to be available for seasonal sales requires us to maintain significant working capital. This seasonality generally results in higher fertilizer prices during peak periods, with prices normally reaching their highest point in the spring, decreasing in the summer, and increasing again in the fall. Fertilizer products are sold both on the spot market for immediate delivery and under product prepayment contracts for future delivery at fixed prices. The terms of the product prepayment contracts, including the percentage of the purchase price paid as a down payment, can vary from season to season. Variations in the proportion of product sold through forward sales and variations in the terms of the product prepayment contracts can increase the seasonal volatility of our cash flows and cause changes in the patterns of seasonal volatility from year-to-year. The cash from product prepayment contracts is included in our operating cash flow in the quarter in which the cash is received, while revenue related to product prepayment contracts is recognized when products are picked-up or delivered and the customer takes title. As a result, the cash received from product prepayment contracts increases our operating cash flow in the quarter in which the cash is received, but may effectively reduce our operating cash flow in a subsequent quarter if the cash was received in a quarter prior to the one in which the revenue is recorded. See Part II—Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosure About Market Risk.”

Another seasonal factor affecting our industry is the effect of weather-related conditions on ability to transport products by barge on the Upper Mississippi River. During portions of the winter, the Upper Mississippi River cannot be used for transport due to lock closures, which could preclude the transportation of nitrogen products by barge during this period and may increase transportation costs. However, only approximately 2.3% and 0.0% of the ammonia and UAN tonnage, respectively, that we sold during the three months ended December 31, 2011, and 4.4% and 3.7% of the ammonia and UAN tonnage, respectively, that we sold during the three-year period ended September 30, 2011 were transported from our facility by barge.

The following table shows total tons of our products shipped for each quarter presented below:


	For the Three Months Ended December 31,		For the Fiscal Years Ended September 30,
	2011		2011		2010		2009
	(in thousands of tons)
Ammonia
Quarter ended December 31		55		44		45		44
Quarter ended March 31				20		22		5
Quarter ended June 30				43		51		67
Quarter ended September 30				18		35		10
UAN


	For the Three Months Ended December 31,		For the Fiscal Years Ended September 30,
	2011		2011		2010		2009
	(in thousands of tons)
Quarter ended December 31		65		79		57		42
Quarter ended March 31				30		25		28
Quarter ended June 30				129		112		93
Quarter ended September 30				77		100		104
Other Nitrogen Products
Quarter ended December 31		10		10		7		11
Quarter ended March 31				12		14		11
Quarter ended June 30				15		12		15
Quarter ended September 30				7		10		8
CO ₂
Quarter ended December 31		15		34		15		18
Quarter ended March 31				27		24		22
Quarter ended June 30				26		32		28
Quarter ended September 30				23		36		27

Total Tons Shipped		145		594		597		533

We typically ship the highest volume of tons during the spring planting season, which occurs during the quarter ending June 30, and the next highest volume of tons after the fall harvest during the quarter ending December 31. 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 more mild winter seasons with warmer weather, early planting may shift significant ammonia sales into the quarter ending March 31.

Raw Materials

The principal raw material used to produce nitrogen fertilizer products is natural gas. We historically have purchased natural gas in the spot market, through the use of forward purchase contracts, or a combination of both. We use forward purchase contracts to lock in pricing for a portion of our facility’s natural gas requirements. These forward purchase contracts are generally either fixed-price or index-priced, short term in nature and for a fixed supply quantity. Our policy is to purchase natural gas under fixed-price forward contracts to produce the products that have been sold under product prepayment contracts for later delivery, effectively fixing a substantial portion of the gross margin on pre-sold product. We are able to purchase natural gas at competitive prices due to our connection to the Northern Natural Gas interstate pipeline system which is within one mile of our facility. The pipeline is connected to Nicor Inc.’s distribution system at the Chicago Citygate receipt point from which natural gas is transported to our facility. Though we do not purchase natural gas for the purpose of resale, we occasionally sell natural gas when contracted quantities received exceed production requirements and storage capacities. The location of our receipt point has allowed us to obtain relatively favorable natural gas prices for our excess natural gas using the Chicago Citygate price point created by the stable residential demand for the commodity in the city of Chicago, Illinois. During the two years ended December 31, 2011, the average price of natural gas on this index exceeded that of the Inside FERC Northern Natural Gas Ventura and Demarcation Indices, which are used to determine the prices for the natural gas we purchase. Natural gas purchased and used in production was approximately 2.3 billion cubic feet, 10.3 billion cubic feet, 9.9 billion cubic feet, 10.1 billion cubic feet in the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, respectively.

Changes in the levels of natural gas prices and market prices of nitrogen-based products can materially affect our financial position and results of operations. Natural gas prices in the United States have experienced significant fluctuations over the last few years, increasing substantially in 2008 and subsequently declining to lower levels in 2009, 2010, and 2011. The price changes have been driven by several factors, including changes in the demand for natural gas from industrial users, which is affected, in part, by the general conditions of the United States economy, and other factors. Several recent discoveries of large natural gas deposits in North America, combined with advances in technology for natural gas production also have caused large increases in the estimates of available natural gas reserves and production in the United States, contributing to significant reductions in the market price of natural gas. One major factor in the recent decrease in natural gas prices has been the use of technologies, including hydraulic fracturing and horizontal drilling, that have substantially increased the amount of natural gas produced in the United States. Hydraulic fracturing is the process of fracturing the underground formation with water, sand and chemicals under high pressure to recover natural gas from

coalbeds and shale gas formations that otherwise may have been inaccessible. Horizontal drilling involves drilling a well from the surface to a subsurface location and then proceeding horizontally, which typically exposes significantly more reservoir rock to the well bore and thus results in greater potential natural gas recovery than traditional vertical drilling. Seasonal fluctuations in natural gas prices exist within each year resulting from various supply and demand factors, including, but not limited to, the severity of winter weather and its effect on consumer and industrial demand for heating, the severity of summer weather and its effect on industrial demand by utilities for electrical generation, and hurricane activity in the Gulf of Mexico.

Competition

We compete with a number of domestic and foreign producers of nitrogen fertilizer products, many of which are larger than we are and have significantly greater financial and other resources than we do. We believe that customers for nitrogen fertilizer products make purchasing decisions principally on the delivered price and availability of the product at the critical application times. Our facility’s proximity to our customers provides us with a competitive advantage over producers located further away from our customers. The nitrogen fertilizer facilities closest to our facility are located in Fort Dodge, Iowa, Creston, Iowa and Port Neal, Iowa, approximately 190 miles, 275 miles and 300 miles, respectively, from our facility, and in Lima, Ohio, approximately 350 miles to the east of our facility. Our physical location in the center of the Mid Corn Belt provides us with a strategic placement and transportation cost advantage, compared to other producers who must ship their products over greater distances to our market area. The combination of our proximity to our customers and our storage capacity at our facility also allows our customers to better time the pick-up and application of our products, as deliveries from more distant locations have a greater risk of missing the short periods of favorable weather conditions during which the application of nitrogen fertilizer and planting may occur. However, other producers of nitrogen fertilizer products are contemplating the construction of new nitrogen fertilizer facilities in North America, including in the Mid Corn Belt. If a new nitrogen fertilizer facility is completed in our core market, it could benefit from the same competitive advantage associated with the location of our facility. As a result, the completion of such a facility could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions to our unitholders.

We plan to continue to operate our facility with natural gas as our primary feedstock. Competitors may have access to cheaper natural gas or other feedstocks that could provide them with a cost advantage. Depending on its magnitude, the amount of this cost advantage could offset the savings we may experience on transportation and storage costs as a result of our location. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, our average prices for natural gas were $4.71 per one million British thermal units, or MMBtu, $4.76 per MMBtu, $4.95 per MMBtu and $5.67 per MMBtu, respectively.

Environmental Matters

Our business is subject to extensive and frequently changing federal, state and local, environmental, health and safety regulations governing the emission and release of hazardous substances into the environment, the treatment and discharge of waste water and the storage, handling, use and transportation of our nitrogen fertilizer products. These laws include the Clean Air Act, or the CAA, the federal Water Pollution Control Act, or the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the Toxic Substances Control Act, and various other federal, state and local laws and regulations. These laws, their underlying regulatory requirements and the enforcement thereof impact us by imposing:

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restrictions on operations or the need to install enhanced or additional controls;

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the need to obtain and comply with permits and authorizations;

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liability for the investigation and remediation of contaminated soil and groundwater at current and former facilities (if any) and off-site waste disposal locations; and

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specifications for the products we market, primarily ammonia and UAN.

Our operations require numerous permits and authorizations. Failure to comply with these permits or environmental laws generally could result in substantial fines, penalties or other sanctions, court orders to install pollution-control equipment, permit revocations and facility shutdowns. In addition, environmental, health and safety laws may impose joint and several liability, without regard to fault, for cleanup costs on potentially responsible parties who have released or disposed of hazardous substances into the environment. We may experience delays in obtaining or be unable to obtain required permits, which may delay or interrupt our operations and limit our growth and revenue. Private parties, including the owners of properties adjacent to other facilities where our wastes are taken for

disposal, also may have the right to pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental laws and regulations or for personal injury or property or natural resource damages. In addition, the risk of accidental spills or releases could expose us to significant liabilities that could have a material adverse effect on our business, financial condition or results of operations. During the three months ended December 31, 2011 and the fiscal years ended September 30, 2011 and 2010, we made $0.5 million, $5.6 million and $1.3 million, respectively, of environmental, health and safety-related capital expenditures.

The laws and regulations to which we are subject are complex, change frequently and have tended to become more stringent over time. The ultimate impact on our business of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that our 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.

Our facility has experienced some level of regulatory scrutiny in the past, and we may be subject to further regulatory inspections, future requests for investigation or assertions of liability relating to environmental issues. In the future, we could incur material liabilities or costs related to environmental matters, and these environmental liabilities or costs (including fines or other sanctions) could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

The principal environmental regulations and risks associated with our business are outlined below. We believe that we are in material compliance with all of these environmental regulations.

The Federal Clean Air Act . The CAA and its implementing regulations, as well as the corresponding state laws and regulations that regulate emissions of pollutants into the air, affect us through the CAA’s permitting requirements and emission control requirements relating to specific air pollutants, as well as the requirement to maintain a risk management program to help prevent accidental releases of certain substances. Some or all of the standards promulgated pursuant to the CAA, or any future promulgations of standards, may require the installation of controls or changes to our facility in order to comply. If new controls or changes to operations are needed, the costs could be significant. In addition, failure to comply with the requirements of the CAA and its implementing regulations could result in fines, penalties or other sanctions.

The regulation of air emissions under the CAA requires that we obtain various construction and operating permits, including a Title V air permit issued by the Illinois Environmental Protection Agency, or IEPA, and incur capital expenditures for the installation of certain air pollution control devices at our operations. Various regulations specific to our operations have been implemented, such as National Emission Standard for Hazardous Air Pollutants, New Source Performance Standards and New Source Review. We have incurred, and expect to continue to incur, substantial capital expenditures to maintain compliance with these and other air emission regulations that have been promulgated or may be promulgated or revised in the future, including in connection with the following projects that are designed to comply with our emission limits and requirements of our Title V CAA permit:

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Clark Lean Burn Project . We retrofitted three of our 5,500 horsepower Clark compressor engines, which compress the synthesis gas at our facility, with improved combustion control systems and combustion chambers designed to reduce the generation of nitrogen oxides and other pollutants at the source. We completed this project in October 2011.

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Nitric Acid Plant Selective Catalytic Reduction Converter Project . We installed a selective catalytic reduction, or SCR, converter on one of our nitric acid plants as part of a negotiated agreement with the federal Environmental Protection Agency, or the EPA, to resolve alleged violations of the Clear Air Act relating to this plant. The post-installation nitrogen oxide emissions limit represents an 80% decrease from the pre-installation nitrogen oxide emissions limit. Assuming an 80% reduction in nitrogen oxide emissions and the amount of nitric acid produced at the relevant nitric acid plant in 2010, the SCR converter would reduce nitrogen oxide emissions by approximately 88 tons per year. We completed this project in October 2011.

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N ₂ O Catalytic Converter Project . In July 2011, we began operating what we believe is the first tertiary N ₂ O catalytic converter in the United States on one of our nitric acid plants. This converter is designed to convert approximately 90%, and as of February 15, 2012 was converting approximately 97%, of the N ₂ O generated in our production of nitric acid into nitrogen and oxygen at that one plant. Assuming this conversion rate and the amount of nitric acid produced at the relevant nitric acid plant in 2010, we expect the converter to reduce N ₂ O emissions at our facility by over 450 tons per year. This converter also will monitor and record its effect on reducing N ₂ O emissions and we expect to be awarded corresponding emission reduction credits for any such reduction. If we do not need the credits, we believe that we could list the credits on an active registry, such as the Climate Registry maintained by the Climate Action Reserve, and sell the credits for a profit. We have entered into a five-year agreement to supply emission reduction credits with the first delivery of emission reduction credits scheduled to take place on April 15, 2012.

Release Reporting . The release of hazardous substances or extremely hazardous substances into the environment is subject to release reporting requirements under federal and state environmental laws, including the Emergency Planning and Community Right-to-Know Act. We occasionally experience minor releases of hazardous or extremely hazardous substances from our equipment. We report such releases to the EPA, the IEPA and other relevant state and local agencies as required by applicable laws and regulations. If we fail to properly report a release, or if the release violates the law or our permits, it could cause us to become the subject of a governmental enforcement action or third-party claims. Government enforcement or third-party claims relating to releases of hazardous or extremely hazardous substances could result in significant expenditures and liability.

Clean Water Act. The Clean Water Act and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. The Clean Water Act and regulations implemented thereunder also prohibit the discharge of dredge and fill material into regulated waters, including wetlands, unless authorized by an appropriately issued permit. In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. Spill prevention, control and countermeasure requirements of federal laws require appropriate containment berms and similar structures to help prevent the contamination of navigable waters by a petroleum hydrocarbon tank spill, rupture or leak. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.

GHG Emissions . Currently, various legislative and regulatory measures to address greenhouse gas, or GHG, emissions (including CO ₂ , methane and nitrous oxides) are in various phases of discussion or implementation. At the federal legislative level, Congress has previously considered legislation requiring a mandatory reduction of GHG emissions. Although Congressional passage of such legislation does not appear likely at this time, it could be adopted at a future date. It is also possible that Congress may pass alternative climate change bills that do not mandate a nationwide cap-and-trade program and instead focus on promoting renewable energy and energy efficiency.

In the absence of congressional legislation curbing GHG emissions, the EPA is moving ahead administratively under its CAA authority. In October 2009, the EPA finalized a rule requiring certain large emitters of GHGs to inventory and report their GHG emissions to the EPA. In accordance with the rule, we monitor our GHG emissions from our facility and began reporting the emissions to the EPA annually beginning in September 2011. On December 7, 2009, the EPA finalized its “endangerment finding” that GHG emissions, including CO ₂ , pose a threat to human health and welfare. The finding allows the EPA to regulate GHG emissions as air pollutants under the CAA. In May 2010, the EPA finalized the “Greenhouse Gas Tailoring Rule,” which establishes new GHG emissions thresholds that determine when stationary sources, such as our facility, must obtain permits under the Prevention of Significant Deterioration, or PSD, and Title V programs of the CAA. The permitting requirements of the PSD program apply only to newly constructed or modified major sources. Obtaining a PSD permit requires a source to install best available control technology, or BACT, for those regulated pollutants that are emitted in certain quantities. Phase I of the Greenhouse Gas Tailoring Rule, which became effective on January 2, 2011, requires projects already triggering PSD permitting that are also increasing GHG emissions by more than 75,000 tons per year to comply with BACT rules for their GHG emissions. Phase II of the Greenhouse Gas Tailoring Rule, which became effective on July 1, 2011, requires preconstruction permits using BACT for new projects that emit 100,000 tons of GHG emissions per year or existing facilities that make major modifications increasing GHG emissions by more than 75,000 tons per year. The ongoing ammonia capacity expansion project at our facility did not trigger the need to install BACT because actual construction commenced prior to July 1, 2011 and is not considered a major modification with respect to criteria pollutants. However, a future major modification to our facility may require us to install BACT and potentially require us to obtain other CAA permits for our GHG emissions at our facility. The EPA’s endangerment finding, the Greenhouse Gas Tailoring Rule and certain other GHG emission rules have been challenged and will likely be subject to extensive litigation. In addition, a number of Congressional bills to overturn the endangerment finding and bar the EPA from regulating GHG emissions, or at least to defer such action by the EPA under the CAA, have been proposed, although President Obama has announced his intention to veto any such bills if passed.

In addition to federal regulations, a number of states have adopted regional GHG initiatives to reduce CO ₂ and other GHG emissions. In 2007, a group of Midwest states formed the Midwestern Greenhouse Gas Reduction Accord, which calls for the development of a cap-and-trade system to control GHG emissions and for the inventory of such emissions. However, the individual states that have signed on to the accord must adopt laws or regulations implementing the trading scheme before it becomes effective, and the timing and specific requirements of any such laws or regulations in Illinois are uncertain at this time.

The implementation of additional EPA regulations and/or the passage of federal or state climate change legislation will likely result in increased costs to (i) operate and maintain our facilities, (ii) install new emission controls on our facilities and (iii) administer and

manage any GHG emissions program. Increased costs associated with compliance with any future legislation or regulation of GHG emissions, if it occurs, may have a material adverse effect on our results of operations, financial condition and ability to make cash distributions. In addition, climate change legislation and regulations may result in increased costs not only for our business but also for agricultural producers that utilize our fertilizer products, thereby potentially decreasing demand for our nitrogen fertilizer products. Decreased demand for our fertilizer products may have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Environmental Remediation . Under CERCLA and related state laws, certain persons may be liable for the release or threatened release of hazardous substances. These persons can include the current owner or operator of property where a release or threatened release occurred, any persons who owned or operated the property when the release occurred, and any persons who disposed of, or arranged for the transportation or disposal of, hazardous substances at a contaminated property. Liability under CERCLA is strict, retroactive and, under certain circumstances, joint and several, so that any responsible party may be held liable for the entire cost of investigating and remediating the release of hazardous substances. As is the case with all companies engaged in similar industries, depending on the underlying facts and circumstances we face potential exposure from future claims and lawsuits involving environmental matters, including soil and water contamination, personal injury or property damage allegedly caused by hazardous substances that we manufactured, handled, used, stored, transported, spilled, disposed of or released. We cannot assure you that we will not become involved in future proceedings related to our release of hazardous or extremely hazardous substances or that, if we were held responsible for damages in any existing or future proceedings, such costs would be covered by insurance or would not be material.

Environmental Insurance . We have a premises pollution liability insurance policy with an aggregate limit of $25.0 million per pollution condition, subject to a self-insured retention of $250,000. The insurance policy was renewed for a three-year term in September 2011 and will expire on October 1, 2014. Our policy covers claims, remediation costs and associated legal defense expenses for pollution conditions at or migrating from our facility and the transportation risks associated with moving waste from our facility to any location for unloading or depositing waste, but does not cover business interruptions. Our policy contains terms, exclusions, conditions and limitations that could apply to a particular pollution condition claim, and we cannot guarantee that a claim will be adequately insured for all potential damages.

Safety, Health and Security Matters

We are subject to a number of federal and state laws and regulations related to safety, including the federal Occupational Safety and Health Act, or OSHA, and comparable state statutes, the purpose of which are to protect the health and safety of workers. We also are subject to OSHA Process Safety Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals. These regulations apply to any process that involves a chemical at or above the specified thresholds or any process that involves flammable liquid or gas, pressurized tanks, caverns and wells in excess of 10,000 pounds at various locations. We have an internal safety, health and security program designed to monitor and enforce compliance with worker safety requirements, and we routinely review and consider improvements in our programs. We also are subject to EPA Chemical Accident Prevention Provisions, known as the Risk Management Plan requirements, which are designed to prevent the accidental release of toxic, reactive, flammable or explosive materials, and the United States Coast Guard’s Maritime Security Standards for Facilities, which are designed to regulate the security of high-risk maritime facilities. We believe that we are in material compliance with all applicable laws and regulations related to worker health and safety. Notwithstanding these preventative measures, we cannot guarantee that serious accidents will not occur in the future.

Employees

As of December 31, 2011, we had 57 non-unionized and salaried employees, and 90 unionized employees. We have a collective bargaining agreement, which was renewed in October 2006 and expires in October 2012. We have not experienced a work stoppage at our facility since 1991.

Financial Information

We operate in only one business segment. Additionally, all of our properties are located in the United States and all of the related revenues are derived from purchasers located in the United States. Our financial information is included in Part II—Item 8 “Financial Statements and Supplementary Data.”

Properties

We operate our facility on an approximately 210 acre site in East Dubuque, Illinois adjacent to the Mississippi River. We own the land, buildings, several special purpose structures, equipment, storage tanks and specialized truck, rail and river barge loading facilities, and hold easements for the roadways, wells, the rail track and the barge dock. We also have the right to store 15,000 tons of ammonia at Agrium’s terminal in Niota, Illinois. See “—Marketing and Distribution.”

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available free of charge as soon as reasonably practical after they are filed or furnished to the SEC, at the “Investor Relations” portion of our website, www.rentechnitrogen.com. Materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, and other information regarding us that we file electronically with the SEC. The information contained on our website does not constitute part of this report.

ITEM 1A — RISK FACTORS

Set forth below are certain risk factors related to our business. Actual results could differ materially from those anticipated as a result of these and various other factors, including those set forth in our other periodic and current reports filed with the SEC, from time to time. If any of the following risks and uncertainties develops into an actual event, our business, financial condition, cash flow or results of operations could be materially adversely affected. In that case, we might not be able to pay distributions on our common units, the trading price of our common units could decline and you could lose all or part of your investment. Although many of our business risks are comparable to those faced by a corporation engaged in a similar business, limited partner interests are inherently different from the capital stock of a corporation and involve additional risks described below.

Risks Related to Our Business

We may not have sufficient cash available for distribution to pay any quarterly distributions on our common units.

We may not have sufficient cash available for distribution each quarter to enable us to pay any distributions to our common unitholders. Furthermore, our partnership agreement does not require us to pay distributions on a quarterly basis or otherwise. The amount of cash we will be able to distribute on our common units principally depends on the amount of cash flow we generate from our operations, which is directly dependent upon the operating margins we generate, which have been volatile historically, and cash collections under product prepayment contracts for our products. Our operating margins are significantly affected by the price and availability of natural gas, market-driven product prices we are able to charge our customers and our production costs, as well as seasonality, weather conditions, governmental regulation, unplanned maintenance or shutdowns at our facility and global and domestic demand for nitrogen fertilizer products, among other factors. In addition:

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Our partnership agreement does not provide for any minimum quarterly distribution and our quarterly distributions, if any, will be subject to significant fluctuations directly related to the cash flow we generate after payment of our expenses due to the nature of our business.

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The amount of distributions we make, if any, and the decision to make any distribution at all is determined by the board of directors of our general partner, whose interests may differ from those of our common unitholders. Our general partner has limited fiduciary and contractual duties, which may permit it to favor its own interests or the interests of Rentech to the detriment of our common unitholders.

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Our 2012 credit agreement limits, and any credit facility or other debt instruments we enter into in the future may limit, the distributions that we can make. Our 2012 credit agreement contains, and any future credit facility or debt instruments we enter into may contain, financial tests and covenants that we must satisfy. Any failure to comply with these tests and covenants could result in the applicable lenders prohibiting distributions by us.

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The amount of cash available to pay any quarterly distribution to our unitholders depends primarily on our cash flow, and not solely on our profitability, which is affected by non-cash items that may be large relative to our reported net income. As a result, we may make distributions during periods when we record losses and may not make distributions during periods when we record net income.

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The actual amount of cash available for distribution will depend on numerous factors, some of which are beyond our control, including the availability and price of natural gas, ammonia and UAN prices, our operating costs, global and domestic demand for nitrogen fertilizer products, fluctuations in our capital expenditures and working capital needs, our product pre-sale and cash collection cycle and the amount of fees and expenses we incur.

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Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, or Delaware Act, we are prohibited from making a distribution to our limited partners if the distribution would cause our liabilities to exceed the fair value of our assets.

The amount of our quarterly cash distributions, if any, will vary significantly both quarterly and annually and will be directly dependent on the performance of our business. Unlike most publicly traded limited partnerships, we do not have a minimum quarterly distribution or employ structures intended to consistently maintain or increase distributions over time.

Investors who are looking for an investment that will pay regular and predictable quarterly distributions should not invest in our common units. We expect our business performance will be more seasonal and volatile, and our cash flow will be less stable, than the business performance and cash flow of most publicly traded limited partnerships. As a result, our quarterly cash distributions will be volatile and are expected to vary quarterly and annually. Unlike most publicly traded limited partnerships, we do not have a minimum quarterly distribution or employ structures intended to consistently maintain or increase distributions over time. The amount of our quarterly cash distributions will be directly dependent on the performance of our business, which has been volatile historically as a result of volatile nitrogen fertilizer and natural gas prices, unplanned outages, seasonal and global fluctuations in demand for nitrogen fertilizer products and the timing of our product pre-sale and cash collections. Because our quarterly distributions will be subject to significant fluctuations directly related to the cash flow we generate after payment of our fixed and variable expenses, future quarterly distributions paid to our unitholders will vary significantly from quarter to quarter and may be zero. Given the seasonal nature of our business, we expect that our unitholders will have direct exposure to fluctuations in the margins we realize on sales of nitrogen fertilizers and other products that we produce. In addition, we frequently make product sales pursuant to product prepayment contracts, whereby we receive cash in respect of product to be picked up by or delivered to a customer at a later date, but do not record revenue in respect of such sales until product is picked up or delivered. The cash received from product prepayments increases our operating cash flow in the quarter in which the cash is received, but may effectively reduce our operating cash flow in a subsequent quarter if the cash was received in a quarter prior to the one in which the revenue is recorded.

We may modify or revoke our cash distribution policy at any time at our discretion. Our partnership agreement does not require us to make any distributions at all.

Our current cash distribution policy is to distribute all of the cash available for distribution we generate each quarter to unitholders of record on a pro rata basis. However, we may change such policy at any time at our discretion and could elect not to make distributions for one or more quarters. Our partnership agreement does not require us to make any distributions at all. Accordingly, investors are cautioned not to place undue reliance on the permanence of such a policy in making an investment decision. Any modification or revocation of our cash distribution policy could substantially reduce or eliminate the amounts of distributions to our unitholders.

Our operations may become unprofitable and may require substantial working capital financing.

During the three months ended December 31, 2011 and each of the five fiscal years ended September 30, 2011, 2010, 2009, 2008 and 2007, we generated positive income from operations and positive cash flow from operations. However, during the fiscal year ended September 30, 2006, we operated at a net loss despite the fact that we generated positive cash flow from operations. In prior fiscal years, we sustained losses and negative cash flow from operations. Our profits and cash flow are subject to changes in the prices for our products and our main input, natural gas, which are commodities, and, as such, the prices can be volatile in response to numerous factors outside of our control. Our profits depend on maintaining high rates of production of our products, and interruptions in operations at our facility could materially adversely affect our profitability. If we are not able to operate our facility at a profit or if we are not able to retain cash or access a sufficient amount of financing for working capital, our business, financial condition, cash flow, results of operations and ability to pay cash distributions could be materially adversely affected, which could adversely affect the trading price of our common units.

The nitrogen fertilizer business is, and nitrogen fertilizer prices are, seasonal, cyclical and highly volatile and have experienced substantial and sudden downturns in the past. Currently, nitrogen fertilizer demand is at a relative high point

and could decrease significantly in the future. Cycles in demand and pricing could potentially expose us to significant fluctuations in our operating and financial results, and expose you to substantial volatility in our quarterly distributions and material reductions in the trading price of our common units.

We are exposed to fluctuations in nitrogen fertilizer demand and prices in the agricultural industry. These fluctuations historically have had, and could in the future have, significant effects on prices across all nitrogen fertilizer products and, in turn, our financial condition, cash flow and results of operations, which could result in significant volatility or material reductions in the price of our common units or an inability to make cash distributions on our common units.

Nitrogen fertilizer products are commodities, the prices of which can be highly volatile. The price of nitrogen fertilizer products depends on a number of factors, including general economic conditions, cyclical trends in end-user markets, supply and demand imbalances, the prices of natural gas and other raw materials, and weather conditions, all of which have a greater relevance because of the seasonal nature of fertilizer application. If seasonal demand exceeds the projections on which we base production, our customers may acquire nitrogen fertilizer products from our competitors, and our profitability will be negatively impacted. If seasonal demand is less than we expect, we will be left with excess inventory that will have to be stored or liquidated, the costs of which could adversely affect our operating margins and our ability to pay cash distributions.

Demand for nitrogen fertilizer products is dependent on demand for crop nutrients by the global agricultural industry. Nitrogen fertilizer products are currently in high demand, driven by a growing world population, changes in dietary habits and an expanded production of corn. Supply is affected by available capacity and operating rates of nitrogen producers, raw material costs, government policies and global trade. A significant or prolonged decrease in nitrogen fertilizer prices would have a material adverse effect on our business, cash flow and ability to make distributions.

Any decline in United States agricultural production or crop prices or limitations on the use of nitrogen fertilizer for agricultural purposes could have a material adverse effect on the market for nitrogen fertilizer, and on our results of operations, financial condition and ability to make cash distributions.

Conditions in the United States agricultural industry significantly impact our operating results. This is particularly the case in the production of corn, which is a major driver of the demand for nitrogen fertilizer products in the United States. The United States agricultural industry in general, and the production and prices of corn in particular, can be affected by a number of factors, including weather patterns and soil conditions, current and projected grain inventories and prices, domestic and international supply of and demand for United States agricultural products and United States and foreign policies regarding trade in agricultural products. Prices for these agricultural products can decrease suddenly and significantly. For example, in June 2011, an unexpectedly large corn crop estimate resulted in an approximately 20% decrease in corn prices from their peak levels earlier in the month, the largest monthly decrease since June 2009.

State and federal governmental regulations and policies, including farm and biofuel subsidies and commodity support programs, as well as the prices of fertilizer products, may also directly or indirectly influence the number of acres planted, the mix of crops planted and the use of fertilizers for particular agricultural applications. Developments in crop technology, such as nitrogen fixation, the conversion of atmospheric nitrogen into compounds that plants can assimilate, could also reduce the use of chemical fertilizers and adversely affect the demand for nitrogen fertilizer. In addition, from time to time various state legislatures have considered limitations on the use and application of chemical fertilizers due to concerns about the impact of these products on the environment. The adoption or enforcement of such regulations could adversely affect the demand for and prices of nitrogen fertilizers, which could adversely affect our results of operations, cash flows and ability to make cash distributions to our unitholders.

A major factor underlying the current high level of demand for our nitrogen-based fertilizer products is the expanding production of ethanol. A decrease in ethanol production, an increase in ethanol imports or a shift away from corn as a principal raw material used to produce ethanol could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

A major factor underlying the current level of demand for corn and the use of nitrogen fertilizer products is the current production level of ethanol in the United States. Ethanol production in the United States is dependent in part upon a myriad of federal and state incentives. Such incentive programs may not be renewed, or if renewed, they may be renewed on terms significantly less favorable to ethanol producers than current incentive programs. Studies showing that expanded ethanol production may increase the level of GHGs in the environment, or other factors, may reduce political support for ethanol production. For example, the Volumetric Ethanol Excise Tax Credit, or VEETC, provided for a 45 cents per gallon tax credit to blenders and refiners for gasoline that has been

blended with ethanol. On June 16, 2011, the United States Senate voted to eliminate the VEETC, and even though it was never ultimately repealed, the VEETC expired on December 31, 2011. We cannot guarantee that the VEETC will be renewed or that any other ethanol-related subsidy will be implemented in its place. Furthermore, the current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass. If the VEETC is not renewed (or if another ethanol-related subsidy is not implemented in its place), or if an efficient method of producing ethanol from cellulose-based biomass is developed and commercially deployed at scale, the demand for corn may decrease significantly. Any reduction in the demand for corn and, in turn, for nitrogen fertilizer products could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions to our unitholders.

Nitrogen fertilizer products are global commodities. Any decrease in the price of nitrogen fertilizer products from foreign countries could harm us.

Fertilizers are global commodities, with little or no product differentiation, and customers make their purchasing decisions principally on the basis of delivered price and availability of the product. In recent years, the price of nitrogen fertilizer in the United States has been substantially driven by pricing in the global fertilizer market and favorable prices for natural gas in the United States as compared to those in foreign countries. If foreign natural gas prices become lower than natural gas prices in the United States, competition from foreign businesses will likely increase and this could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions to our unitholders.

We face intense competition from other nitrogen fertilizer producers.

We have a number of competitors in the United States and in other countries, including state-owned and government-subsidized entities. Our principal competitors include domestic and foreign fertilizer producers, major grain companies and independent distributors and brokers, including Koch, CF Industries, Agrium, Gavilon, LLC, CHS Inc., Transammonia, Inc. and Helm Fertilizer Corp. Some competitors have greater total resources, or better name recognition, and are less dependent on earnings from fertilizer sales, which make them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities. For example, certain of our competitors have announced that they currently have expansions planned or underway to increase production capacity of their nitrogen fertilizer products. Furthermore, there are a few dormant nitrogen production facilities located outside of the States of Illinois, Indiana and Iowa that are scheduled to resume operations in the near future. We may face additional competition due to the expansion of facilities that are currently operating and the reopening of currently dormant facilities. Also, other producers of nitrogen fertilizer products are contemplating the construction of new nitrogen fertilizer facilities in North America, including in the Mid Corn Belt. If a new nitrogen fertilizer facility is completed in our core market, it could benefit from the same competitive advantage associated with the location of our facility. As a result, the completion of such a facility could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions to our unitholders. In addition, competitors utilizing different corporate structures may be better able to withstand lower cash flow than we can as a limited partnership. Our competitive position could suffer to the extent we are not able to adapt our product mix to meet the needs of our customers or expand our own resources either through investments in new or existing operations or through acquisitions, joint ventures or partnerships. An inability to compete successfully could result in the loss of customers, which could adversely affect our sales and profitability, and our ability to make cash distributions to our unitholders. In addition, as a result of increased pricing pressures caused by competition, we may in the future experience reductions in our profit margins on sales, or may be unable to pass future input price increases on to our customers, which would reduce our cash flows and the cash available for distribution to our unitholders.

Our business is seasonal, which may result in our carrying significant amounts of inventory and seasonal variations in working capital. Our inability to predict future seasonal nitrogen fertilizer demand accurately may result in excess inventory or product shortages.

Our business is highly seasonal. Historically, most of the annual deliveries of our products have occurred during the quarters ending June 30 and December 31 of each year due to the condensed nature of the spring planting season and the fall harvest. Farmers in our market tend to apply nitrogen fertilizer during two short application periods, one in the spring and the other in the fall. Since interim period operating results reflect the seasonal nature of our business, they are not indicative of results expected for the full fiscal year. In addition, results for comparable quarters can vary significantly from one year to the next due primarily to weather-related shifts in planting schedules and purchase patterns of our customers. We expect to incur substantial expenditures for fixed costs throughout the year and substantial expenditures for inventory in advance of the spring planting season and fall harvest season. Seasonality also relates to the limited windows of opportunity that nitrogen fertilizer customers have to complete required tasks at each stage of crop cultivation. Should events such as adverse weather or production or transportation interruptions occur during these

seasonal windows, we would face the possibility of reduced revenue without the opportunity to recover until the following season. In addition, an adverse weather pattern affecting our core market could have a material adverse effect on the demand for our products and our revenues, and we may not have sufficient geographic diversity in our customer base to mitigate such effects. Because of the seasonality of agriculture, we also expect to face the risk of significant inventory carrying costs should our customers’ activities be curtailed during their normal seasons. The seasonality can negatively impact accounts receivable collections and increase bad debts. In addition, variations in the proportion of product sold through forward sales and variances in the terms and timing of product prepayment contracts can affect working capital requirements and increase the seasonal and year-to-year volatility of our cash flow and cash available for distribution to our unitholders.

If seasonal demand exceeds our projections, we will not have enough product and our customers may acquire products from our competitors, which would negatively impact our profitability. If seasonal demand is less than we expect, we will be left with excess inventory and higher working capital and liquidity requirements.

The degree of seasonality of our business can change significantly from year to year due to conditions in the agricultural industry and other factors. As a consequence of our seasonality, we expect that our distributions will be volatile and will vary quarterly and annually.

Any operational disruption at our facility as a result of equipment failure, an accident, adverse weather, a natural disaster or another interruption could result in a reduction of sales volumes and could cause us to incur substantial expenditures. A prolonged disruption could materially affect the cash flow we expect from our facility, or lead to a default under our 2012 credit agreement.

The equipment at our facility could fail and could be difficult to replace. Our facility may be subject to significant interruption if it were to experience a major accident or equipment failure, including accidents or equipment failures caused during expansion projects, or if it were damaged by severe weather or natural disaster. Significant shutdowns at our facility could significantly reduce the amount of product available for sale, which could reduce or eliminate profits and cash flow from our operations. Repairs to our facility in such circumstances could be expensive, and could be so extensive that our facility could not economically be placed back into service. It has become increasingly difficult to obtain replacement parts for equipment and the unavailability of replacement parts could impede our ability to make repairs to our facility when needed. We currently maintain property insurance, including business interruption insurance, but we may not have sufficient coverage, or may be unable in the future to obtain sufficient coverage at reasonable costs. A prolonged disruption at our facility could materially affect the cash flow we expect from our facility, or lead to a default under our 2012 credit agreement. In addition, operations at our facility are subject to hazards inherent in chemical processing. Some of those hazards may cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties. As a result, operational disruptions at our facility could materially adversely impact our business, financial condition, results of operations and cash flow.

The market for natural gas has been volatile. Natural gas prices are currently at a relative low point. If prices for natural gas increase significantly, we may not be able to economically operate our facility.

The operation of our facility with natural gas as the primary feedstock exposes us to market risk due to increases in natural gas prices, particularly if the price of natural gas in the United States were to become higher than the price of natural gas outside the United States. During 2008, natural gas prices spiked to near-record high prices. This was due to various supply and demand factors, including the increasing overall demand for natural gas from industrial users, which is affected, in part, by the general conditions of the United States and global economies, and other factors. The profitability of operating our facility is significantly dependent on the cost of natural gas, and our facility has operated in the past, and may operate in the future, at a net loss. Since we expect to purchase a substantial portion of our natural gas for use in our facility on the spot market we remain susceptible to fluctuations in the price of natural gas. We also expect to use short-term, fixed supply, fixed price forward purchase contracts to lock in pricing for a portion of our natural gas requirements. Our ability to enter into forward purchase contracts is dependent upon our creditworthiness and, in the event of a deterioration in our credit, counterparties could refuse to enter into forward purchase contracts on acceptable terms. If we are unable to enter into forward purchase contracts for the supply of natural gas, we would need to purchase natural gas on the spot market, which would impair our ability to hedge our exposure to risk from fluctuations in natural gas prices. Moreover, forward purchase contracts may not protect us from increases in natural gas prices. A hypothetical increase of $0.10 per MMBtu of natural gas would increase our cost to produce one ton of ammonia by approximately $3.50. Higher than anticipated costs for the catalyst and other materials used at our facility could also adversely affect operating results. These increased costs could materially and adversely affect our results of operations, financial condition and ability to make cash distributions.

An increase in natural gas prices could impact our relative competitive position when compared to other foreign and domestic nitrogen fertilizer producers.

We rely on natural gas as our primary feedstock, and the cost of natural gas is a large component of the total production cost for our nitrogen fertilizer. The dramatic increase in nitrogen fertilizer prices in recent years was not the direct result of an increase in natural gas prices, but rather the result of increased demand for nitrogen-based fertilizers due to historically low stocks of global grains and a surge in the prices of corn and wheat, the primary crops in the Mid Corn Belt region. This increase in demand for nitrogen fertilizers has created an environment in which nitrogen fertilizer prices have diverged from their traditional correlation with natural gas prices. An increase in natural gas prices would impact our operations by making us less competitive with competitors who do not use natural gas as their primary feedstock, and would therefore have a material adverse impact on the trading price of our common units. In addition, if natural gas prices in the United States were to increase to a level where foreign nitrogen fertilizer producers were able to improve their competitive position on a price-basis, this would negatively affect our competitive position in the Mid Corn Belt region and thus have a material adverse effect on our results of operations, financial condition, cash flows, and ability to make cash distributions.

Due to our lack of asset diversification, adverse developments in the nitrogen fertilizer industry could adversely affect our results of operations and our ability to make distributions to our unitholders.

We rely exclusively on the revenues generated from our facility. An adverse development in the market for nitrogen fertilizer products in our region generally or at our facility in particular would have a significantly greater impact on our operations and cash available for distribution to our unitholders than it would on other companies that are more diversified geographically or that have a more diverse asset and product base. The largest publicly traded companies with which we compete sell a more diverse range of fertilizer products to broader markets.

Any interruption in the supply of natural gas to our facility through Nicor Inc. could have a material adverse effect on our results of operations, financial condition and our ability to make cash distributions.

Our operations depend on the availability of natural gas. We have an agreement with Nicor Inc. pursuant to which we access natural gas from the Northern Natural Gas Pipeline. Our access to satisfactory supplies of natural gas through Nicor Inc. could be disrupted due to a number of causes, including volume limitations under the agreement, pipeline malfunctions, service interruptions, mechanical failures or other reasons. The agreement extends for five consecutive periods of 12 months each, with the first period having commenced on November 1, 2010 and the last period ending October 31, 2015. For each period, Nicor Inc. may establish a bidding period during which we may match the best bid received by Nicor Inc. for the natural gas capacity provided under the agreement. We could be out-bid for any of the remaining periods under the agreement. In addition, upon expiration of the last period, we may be unable to renew the agreement on satisfactory terms, or at all. Any disruption in the supply of natural gas to our facility could restrict our ability to continue to make our products. In the event we needed to obtain natural gas from another source, we would need to build a new connection from that source to our facility and negotiate related easement rights, which would be costly, disruptive and/or unfeasible. As a result, any interruption in the supply of natural gas through Nicor Inc. could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Our facility faces operating hazards and interruptions, including unplanned maintenance or shutdowns. We could face potentially significant costs to the extent these hazards or interruptions cause a material decline in production and are not fully covered by our existing insurance coverage. Insurance companies that currently insure companies in our industry may cease to do so, may change the coverage provided or may substantially increase premiums in the future.

Our operations, located at a single location, are subject to significant operating hazards and interruptions. Any significant curtailing of production at our facility or individual units within our facility could result in materially lower levels of revenues and cash flow for the duration of any shutdown and materially adversely impact our ability to make cash distributions to our unitholders. Operations at our facility could be curtailed or partially or completely shut down, temporarily or permanently, as the result of a number of circumstances, most of which are not within our control, such as:

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unplanned maintenance or catastrophic events such as a major accident or fire, damage by severe weather, flooding or other natural disaster;

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labor difficulties that result in a work stoppage or slowdown;

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environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at our facility;

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increasingly stringent environmental and emission regulations;

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a disruption in the supply of natural gas or electricity to our facility; and

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a governmental ban or other limitation on the use of nitrogen fertilizer products, either generally or specifically those manufactured at our facility.

The magnitude of the effect on us of any unplanned shutdown will depend on the length of the shutdown and the extent of the operations affected by the shutdown.

Our facility also requires a planned maintenance turnaround every two years, which generally lasts between 18 and 25 days. Upon completion of a facility turnaround, we may face delays and difficulties restarting production at our facility. For example, in October 2009, our ammonia facility underwent a 15-day maintenance turnaround and a subsequent 15-day unplanned shutdown due to equipment failures. The duration of our turnarounds or other shutdowns, and the impact they have on our operations, could materially adversely affect our cash flow and ability to make cash distributions in the quarter or quarters in which the turnarounds occur.

A major accident, fire, explosion, flood, severe weather event, terrorist attack or other event also could damage our facility or the environment and the surrounding community or result in injuries or loss of life. Scheduled and unplanned maintenance could reduce our cash flow and ability to make cash distributions to our unitholders during or for the period of time that any portion of our facility is not operating. Any unplanned future shutdowns could have a material adverse effect on our ability to make cash distributions to our unitholders.

If we experience significant property damage, business interruption, environmental claims, fines, penalties or other liabilities, our business could be materially adversely affected to the extent the damages or claims exceed the amount of valid and collectible insurance available to us. We are currently insured under Rentech’s casualty, environmental, property and business interruption insurance policies. The property and business interruption insurance policies currently in place have a $300.0 million limit with respect to all occurrences at our and Rentech’s facilities within a 72-hour period, with a $1.0 million deductible for physical damage and a 30 day waiting period before losses resulting from business interruptions are recoverable. The policies also contain exclusions and conditions that could have a material adverse impact on our ability to receive indemnification thereunder, as well as customary sub-limits for particular types of losses. For example, the current property policy contains a specific sub-limit of approximately $160.0 million for losses resulting from business interruptions and $5.0 million for damage caused by covered flooding. We are fully exposed to all losses in excess of the applicable limits and sub-limits and for losses due to business interruptions of fewer than 30 days.

Market factors, including but not limited to catastrophic perils that impact our industry, significant changes in the investment returns of insurance companies, insurance company solvency trends and industry loss ratios and loss trends, can negatively impact the future cost and availability of insurance. There can be no assurance that we will be able to buy and maintain insurance with adequate limits, reasonable pricing terms and conditions or collect from insurance claims that we make.

There is no assurance that the transportation costs of our competitors will not decline. Any significant decline in our competitors’ transportation costs could have a material adverse effect on our results of operations, financial condition and our ability to make cash distributions.

Many of our competitors incur greater costs than we and our customers do in transporting their products over longer distances via rail, ships, barges and pipelines. There can be no assurance that our competitors’ transportation costs will not decline or that additional pipelines will not be built in the future, lowering the price at which our competitors can sell their products, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Our results of operations are highly dependent upon and fluctuate based upon business and economic conditions and governmental policies affecting the agricultural industry. These factors are outside of our control and may significantly affect our profitability.

Our results of operations are highly dependent upon business and economic conditions and governmental policies affecting the agricultural industry, which we cannot control. The agricultural products business can be affected by a number of factors. The most important of these factors, for United States markets, are:

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weather patterns and field conditions (particularly during periods of traditionally high nitrogen fertilizer consumption);

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quantities of nitrogen fertilizers imported to and exported from North America;

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current and projected grain inventories and prices, which are heavily influenced by United States exports and world-wide grain markets; and

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United States governmental policies, including farm and biofuel policies, which may directly or indirectly influence the number of acres planted, the level of grain inventories, the mix of crops planted or crop prices.

International market conditions, which are also outside of our control, may also significantly influence our operating results. The international market for nitrogen fertilizers is influenced by such factors as the relative value of the United States dollar and its impact upon the cost of importing nitrogen fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries and other regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and investment.

Ammonia can be very volatile and extremely hazardous. Any liability for accidents involving ammonia that cause severe damage to property or injury to the environment and human health could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions. In addition, the costs of transporting ammonia could increase significantly in the future.

We produce, process, store, handle, distribute and transport ammonia, which can be very volatile and extremely hazardous. Major accidents or releases involving ammonia could cause severe damage or injury to property, the environment and human health, as well as a possible disruption of supplies and markets. Such an event could result in civil lawsuits, fines, penalties and regulatory enforcement proceedings, all of which could lead to significant liabilities. Any damage to persons, equipment or property or other disruption of our ability to produce or distribute our products could result in a significant decrease in operating revenues and significant additional cost to replace or repair and insure our assets, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions. We periodically experience minor releases of ammonia related to leaks from our equipment or error in operation and use of equipment at our facility. Similar events may occur in the future.

In some cases, we transport ammonia by railcar. We may incur significant losses or costs relating to the transportation of our products on railcars. Due to the dangerous and potentially toxic nature of the cargo, in particular ammonia, on board railcars, a railcar accident may result in fires, explosions and pollution. These circumstances may result in sudden, severe damage or injury to property, the environment and human health. In the event of pollution, we may be held responsible even if we are not at fault and even if we complied with the laws and regulations in effect at the time of the accident. Litigation arising from accidents involving ammonia may result in our being named as a defendant in lawsuits asserting claims for large amounts of damages, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions. Given the risks inherent in transporting ammonia, the costs of transporting ammonia could increase significantly in the future. A number of initiatives are underway in the railroad and chemical industries that may result in changes to railcar design in order to minimize railway accidents involving hazardous materials. If any such design changes are implemented, or if accidents involving hazardous freight increase the insurance and other costs of railcars, our transportation costs could increase significantly. In addition, we believe that railroads are taking other actions, such as requiring indemnification from their customers for liabilities relating to TIH chemicals, to shift the risks they face from shipping TIH chemicals to their customers, which may make transportation of ammonia by rail more costly or less feasible.

We are subject to risks and uncertainties related to transportation and equipment that are beyond our control and that may have a material adverse effect on our results of operations, financial condition and ability to make distributions.

Although our customers generally pick up our products at our facility, we occasionally rely on barge and railroad companies to ship products to our customers. The availability of these transportation services and related equipment is subject to various hazards, including extreme weather conditions, work stoppages, delays, spills, derailments and other accidents and other operating hazards. For example, barge transport can be impacted by lock closures on the Upper Mississippi River resulting from inclement weather or surface

conditions, including fog, rain, snow, wind, ice, strong currents, floods, droughts and other unplanned natural phenomena, lock malfunction, tow conditions and other conditions. In addition, we believe that railroads are taking other actions, such as requiring indemnification from their customers for liabilities relating to TIH chemicals, to shift the risks they face from shipping TIH chemicals to their customers, which may make transportation of ammonia by rail more costly. These transportation services and equipment are also subject to environmental, safety and other regulatory oversight. Due to concerns related to terrorism or accidents, local, state and federal governments could implement new regulations affecting the transportation of our products. In addition, new regulations could be implemented affecting the equipment used to ship our products. Any delay in our ability to ship our products as a result of transportation companies’ failure to operate properly, the implementation of new and more stringent regulatory requirements affecting transportation operations or equipment, or significant increases in the cost of these services or equipment could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Our business is subject to extensive and frequently changing environmental laws and regulations. We expect that the cost of compliance with these laws and regulations will increase over time, and we could become subject to material environmental liabilities.

Our business is subject to extensive and frequently changing federal, state and local environmental, health and safety regulations governing the emission and release of hazardous substances into the environment, the treatment and discharge of waste water and the storage, handling, use and transportation of our nitrogen fertilizer products. These laws include the CAA, the federal Clean Water Act, the Resource Conservation and Recovery Act, the CERCLA, the Toxic Substances Control Act, and various other federal, state and local laws and regulations. Violations of these laws and regulations could result in substantial penalties, injunctive orders compelling installation of additional controls, civil and criminal sanctions, permit revocations or facility shutdowns. In addition, new environmental laws and regulations, new interpretations of existing laws and regulations, increased governmental enforcement of laws and regulations or other developments could require us to make additional expenditures. Many of these laws and regulations are becoming increasingly stringent, and we expect the cost of compliance with these requirements to increase over time. The ultimate impact on our business of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that our 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 expenditures or costs for environmental compliance could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Our business also is subject to accidental spills, discharges or other releases of hazardous substances into the environment. Past or future spills related to our facility or transportation of products or hazardous substances from our facility may give rise to liability (including strict liability, or liability without fault, and potential cleanup responsibility) to governmental entities or private parties under federal, state or local environmental laws, as well as under common law. For example, we could be held strictly liable under CERCLA, for past or future spills without regard to fault or whether our actions were in compliance with the law at the time of the spills. Pursuant to CERCLA and similar state statutes, we could be held liable for contamination associated with our facility, facilities we formerly owned or operated (if any) and facilities to which we transported or arranged for the transportation of wastes or byproducts containing hazardous substances for treatment, storage or disposal. The potential penalties and cleanup costs for past or future releases or spills, liability to third parties for damage to their property or exposure to hazardous substances, or the need to address newly discovered information or conditions that may require response actions could be significant and could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

We may incur future costs relating to the off-site disposal of hazardous wastes. Companies that dispose of, or arrange for the transportation or disposal of, hazardous substances at off-site locations may be held jointly and severally liable for the costs of investigation and remediation of contamination at those off-site locations, regardless of fault. We could become involved in litigation or other proceedings involving off-site waste disposal and the damages or costs in any such proceedings could be material.

We may be unable to obtain or renew permits necessary for our operations, which could inhibit our ability to do business.

We hold numerous environmental and other governmental permits and approvals authorizing operations at our facility. Expansion of our operations is also predicated upon securing the necessary environmental or other permits or approvals. A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or to revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue operations and on our business, financial condition, results of operations and ability to make cash distributions.

Environmental laws and regulations on fertilizer end-use and application and numeric nutrient water quality criteria could have a material adverse impact on fertilizer demand in the future.

Future environmental laws and regulations on the end-use and application of fertilizers could cause changes in demand for our products. In addition, future environmental laws and regulations, or new interpretations of existing laws or regulations, could limit our ability to market and sell our products to end users. From time to time, various state legislatures have proposed bans or other limitations on fertilizer products. In addition, a number of states have adopted or proposed numeric nutrient water quality criteria that could result in decreased demand for our fertilizer products in those states. Similarly, a new final EPA rule establishing numeric nutrient criteria for certain Florida water bodies may require farmers to implement best management practices, including the reduction of fertilizer use, to reduce the impact of fertilizer on water quality. Any such laws, regulations or interpretations could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Climate change laws and regulations could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Currently, various legislative and regulatory measures to address GHG emissions (including CO ₂ , methane and nitrous oxides) are in various phases of discussion or implementation. At the federal legislative level, Congress has previously considered legislation requiring a mandatory reduction of GHG emissions. Although Congressional passage of such legislation does not appear likely at this time, it could be adopted at a future date. It is also possible that Congress may pass alternative climate change bills that do not mandate a nationwide cap-and-trade program and instead focus on promoting renewable energy and energy efficiency.

In the absence of congressional legislation curbing GHG emissions, the EPA is moving ahead administratively under its CAA authority. In October 2009, the EPA finalized a rule requiring certain large emitters of GHGs to inventory and report their GHG emissions to the EPA. In accordance with the rule, we monitor our GHG emissions from our facility and began reporting the emissions to the EPA annually beginning in September 2011. On December 7, 2009, the EPA finalized its “endangerment finding” that GHG emissions, including CO ₂ , pose a threat to human health and welfare. The finding allows the EPA to regulate GHG emissions as air pollutants under the CAA. In May 2010, the EPA finalized the “Greenhouse Gas Tailoring Rule,” which establishes new GHG emissions thresholds that determine when stationary sources, such as our facility, must obtain permits under the PSD, and Title V programs of the CAA. The permitting requirements of the PSD program apply only to newly constructed or modified major sources. Obtaining a PSD permit requires a source to install the BACT, for those regulated pollutants that are emitted in certain quantities. Phase I of the Greenhouse Gas Tailoring Rule, which became effective on January 2, 2011, requires projects already triggering PSD permitting that are also increasing GHG emissions by more than 75,000 tons per year to comply with BACT rules for their GHG emissions. Phase II of the Greenhouse Gas Tailoring Rule, which became effective on July 1, 2011, requires preconstruction permits using BACT for new projects that emit 100,000 tons of GHG emissions per year or existing facilities that make major modifications increasing GHG emissions by more than 75,000 tons per year. The ongoing ammonia capacity expansion project at our facility did not trigger the need to install BACT because actual construction was commenced prior to July 1, 2011 and is not considered a major modification with respect to criteria pollutants. However, a future major modification to our facility may require us to install BACT and potentially require us to obtain other CAA permits for our GHG emissions at our facility. The EPA’s endangerment finding, the Greenhouse Gas Tailoring Rule and certain other GHG emission rules have been challenged and will likely be subject to extensive litigation. In addition, a number of Congressional bills to overturn the endangerment finding and bar the EPA from regulating GHG emissions, or at least to defer such action by the EPA under the CAA, have been proposed, although President Obama has announced his intention to veto any such bills if passed.

The implementation of additional EPA regulations and/or the passage of federal or state climate change legislation will likely increase the costs we incur to (i) operate and maintain our facilities, (ii) install new emission controls on our facilities and (iii) administer and manage any GHG emissions program. Increased costs associated with compliance with any future legislation or regulation of GHG emissions, if it occurs, may have a material adverse effect on our results of operations, financial condition and

ability to make cash distributions. In addition, climate change legislation and regulations may result in increased costs not only for our business but also for agricultural producers that utilize our fertilizer products, thereby potentially decreasing demand for our nitrogen fertilizer products. Decreased demand for our fertilizer products may have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

Agrium is a distributor and customer of a significant portion of our nitrogen fertilizer products, and we have the right to store products at Agrium’s terminal in Niota, Illinois. Any loss of Agrium as our distributor or customer, loss of our storage rights or decline in sales of products through or to Agrium could materially adversely affect our results of operations, financial condition and ability to make cash distributions.

We use Agrium as a distributor of a significant portion of our nitrogen fertilizer products pursuant to a distribution agreement between Agrium and us. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, between 80% and 92% of our total product sales were made through Agrium. Under the distribution agreement, if we are unable to reach an agreement with Agrium for the purchase and sale of our products, Agrium is under no obligation to make such purchase and sale. Agrium sells products that compete with ours, and may be incentivized to prioritize the sale of its products over ours. In the event of any decline in sales of our products through Agrium as distributor, we may not be able to find buyers for our products.

The distribution agreement has a term that ends in April 2016, but automatically renews for subsequent one-year periods (unless either party delivers a termination notice to the other party at least three months prior to an automatic renewal). The distribution agreement may be terminated prior to its stated term for specified causes. Under the distribution agreement, Agrium bears the credit risk on products sold through Agrium pursuant to the agreement. Agrium also is largely responsible for marketing our products to customers and the associated expense. As a result, if our distribution agreement with Agrium terminates for any reason, Agrium would no longer bear the credit risk on the sale of any of our products and we would become responsible for all of the marketing costs for our products.

Under the distribution agreement, we have the right to store up to 15,000 tons of ammonia at Agrium’s terminal in Niota, Illinois, and we sell a portion of our ammonia at that terminal. Our right to store ammonia at the terminal expires on June 30, 2016, but automatically renews for successive one year periods, unless we deliver a termination notice to Agrium with respect to such storage rights at least three months prior to an automatic renewal. Our right to use the storage space immediately terminates if the distribution agreement terminates in accordance with its terms. Ammonia storage sites and terminals served by barge on the Mississippi River are controlled primarily by CF Industries, Koch and Agrium, each of which is one of our competitors. If we lose the right to store ammonia at the Niota, Illinois terminal, we may not be able to find suitable replacement storage on acceptable terms, or at all, and we may be forced to reduce production. We also may lose sales to customers that purchase products at the terminal.

In addition to distributing our products, Agrium is also one of our significant customers. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, approximately 1%, 3%, 7% and 0%, respectively, of our total product sales were to Agrium as a direct customer (rather than a distributor) and approximately 7%, 15%, 11% and 5%, respectively, of our total product sales were to CPS, a controlled affiliate of Agrium. Agrium or CPS could elect to reduce or cease purchasing our products for a number of reasons, especially if our relationship with Agrium as a distributor were to end. If our sales to Agrium as a direct customer or CPS decline, we may not be able to find other customers to purchase the excess supply of our products.

Sales of our products through or to Agrium could decline or the distribution agreement or our rights to storage could terminate as a result of a number of causes which are outside of our control. Any loss of Agrium as our distributor or customer, loss of our storage rights or decline in sales of products through Agrium could materially adversely affect our results of operations, financial condition and ability to make cash distributions.

New regulations concerning the transportation of hazardous chemicals, risks of terrorism and the security of chemical manufacturing facilities could result in higher operating costs.

The costs of complying with regulations relating to the transportation of hazardous chemicals and security associated with our facility may have a material adverse effect on our results of operations, financial condition and ability to make cash distributions to our unitholders. Targets such as chemical manufacturing facilities may be at greater risk of future terrorist attacks than other targets in the United States. The chemical industry has responded to the issues that arose in response to the terrorist attacks on September 11, 2001 by starting new initiatives relating to the security of chemical industry facilities and the transportation of hazardous chemicals in the United States. Future terrorist attacks could lead to even stronger, more costly initiatives. Simultaneously, local, state and federal governments have begun a regulatory process that could lead to new regulations impacting the security of chemical facility locations and the transportation of hazardous chemicals. Our business could be materially adversely affected by the cost of complying with new regulations.

We are largely dependent on our customers to transport purchased goods from our facility because we do not maintain a fleet of trucks or rail cars.

We do not maintain a fleet of trucks and, unlike some of our major competitors, we do not maintain a fleet of rail cars because our customers generally are located close to our facility and have been willing and able to transport purchased goods from our facility. In most instances, our customers purchase our nitrogen products FOB delivered basis at our facility and then arrange and pay to transport them to their final destinations by truck according to customary practice in our market. However, in the future, our customers’ transportation needs and preferences may change and our customers may no longer be willing or able to transport purchased goods from our facility. In the event that our competitors are able to transport their products more efficiently or cost effectively than our customers, those customers may reduce or cease purchases of our products. If this were to occur, we could be forced to make a substantial investment in a fleet of trucks and/or rail cars to meet our customers’ delivery needs, and this would be expensive and time consuming. We may not be able to obtain transportation capabilities on a timely basis or at all, and our inability to provide transportation for products could have a material adverse effect on our business, cash flow and ability to make distributions.

Due to our dependence on significant customers, the loss of one or more of our significant customers could adversely affect our results of operations and our ability to make distributions to our unitholders.

Our business depends on significant customers, and the loss of one or several significant customers may have a material adverse effect on our results of operations, financial condition and ability to make cash distributions to our unitholders. In the aggregate, our top five ammonia customers represented approximately 54%, 46%, 52% and 49%, respectively, of our ammonia sales for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, and our top five UAN customers represented approximately 53%, 50%, 60% and 60%, respectively, of our UAN sales for the same periods. In addition, Twin States accounted for approximately 7%, 6%, 10% and 11%, respectively, of our total product sales for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009. Growmark, accounted for approximately 20%, 7%, 8% and 11%, respectively, of our total product sales for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, approximately 1%, 3%, 7% and 0%, respectively, of our total product sales were to Agrium as a direct customer (rather than a distributor) and approximately 7%, 15%, 11% and 5%, respectively, of our total product sales were to CPS, a controlled affiliate of Agrium. Given the nature of our business, and consistent with industry practice, we generally do not have long-term minimum sales contracts with any of our customers. If our sales to any of our significant customers were to decline, we may not be able to find other customers to purchase the excess supply of our products. The loss of one or several of our significant customers, or a significant reduction in purchase volume by any of them, could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

We are subject to strict laws and regulations regarding employee and process safety, and failure to comply with these laws and regulations could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.

We are subject to a number of federal and state laws and regulations related to safety, including OSHA and comparable state statutes, the purpose of which are to protect the health and safety of workers. In addition, OSHA requires that we maintain information about hazardous materials used or produced in our operations and that we provide this information to employees, state and local governmental authorities, and local residents. Failure to comply with OSHA requirements and other related state regulations, including general industry standards, record keeping requirements and monitoring and control of occupational exposure to regulated substances, could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions if we are subjected to significant penalties, fines or compliance costs.

Our acquisition strategy involves significant risks.

One of our business strategies is to pursue acquisitions. However, acquisitions involve numerous risks and uncertainties, including intense competition for suitable acquisition targets, the potential unavailability of financial resources necessary to consummate acquisitions, difficulties in identifying suitable acquisition targets or in completing any transactions identified on sufficiently favorable terms; and the need to obtain regulatory or other governmental approvals that may be necessary to complete acquisitions. In addition, any future acquisitions may entail significant transaction costs, tax consequences and risks associated with entry into new markets and lines of business.

In addition to the risks involved in identifying and completing acquisitions described above, even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as:

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unforeseen difficulties in the acquired operations and disruption of the ongoing operations of our business;

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failure to achieve cost savings or other financial or operating objectives with respect to an acquisition;

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strain on the operational and managerial controls and procedures of our business, and the need to modify systems or to add management resources;

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difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies;

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assumption of unknown material liabilities or regulatory non-compliance issues;

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amortization of acquired assets, which would reduce future reported earnings;

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possible adverse short-term effects on our cash flows or operating results; and

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diversion of management’s attention from the ongoing operations of our business.

In addition, in connection with any potential acquisition, we will need to consider whether the business we intend to acquire could affect our tax treatment as a partnership for United States federal income tax purposes. See “—Tax Risks—Our tax treatment depends on our status as a partnership for United States federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service were to treat us as a corporation for United States federal income tax purposes or if we were to become subject to additional amounts of entity-level taxation for state tax purposes, then our cash available for distribution to our unitholders would be substantially reduced.”

Failure to manage acquisition growth risks could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions. There can be no assurance that we will be able to consummate any acquisitions, successfully integrate acquired entities, or generate positive cash flow at any acquired company.

There are significant risks associated with expansion projects that may prevent completion of those projects on budget, on schedule or at all.

We have commenced expansion projects at our facility. Expansion projects of the scope and scale we are undertaking or may undertake in the future entail significant risks, including:

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unforeseen engineering or environmental problems;

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work stoppages;

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weather interference;

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unanticipated cost increases;

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unavailability of necessary equipment; and

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unavailability of financing on acceptable terms.

Construction, equipment or staffing problems or difficulties in obtaining any of the requisite licenses, permits and authorizations from regulatory authorities could increase the total cost, delay or prevent the construction or completion of an expansion project.

In addition, we cannot assure you that we will have adequate sources of funding to undertake or complete major expansion projects. As a result, we may need to obtain additional debt and/or equity financing to complete expansion projects. There is no guarantee that we will be able to obtain other debt or equity financing on acceptable terms or at all.

As a result of these factors, we cannot assure you that our expansion projects will commence operations on schedule or at all or that the costs for the expansion projects will not exceed budgeted amounts. Failure to complete an expansion project on budget, on schedule or at all may adversely impact our ability to grow our business.

Expansion of our production capacity may change the balance of supply and demand in our markets, and our new products may not achieve market acceptance.

As part of our current expansion projects, we expect to increase our capacity to produce ammonia and urea and to install the equipment necessary to enable us to produce and sell DEF. Increased production of our existing products may reduce the overall demand for those products as a result of market saturation. We may be required to sell these products at lower prices, or may not be able to sell all of the products we produce. In addition, there can be no assurance that our new products will be well-received or that we will achieve revenues or profitability levels we expect. If we cannot sell our products or are forced to reduce the prices at which we sell them, this would have a material adverse effect on our results of operations, financial condition and the ability to make cash distributions to our unitholders.

We depend on key personnel for the success of our business.

We depend on the services of the executive officers of our general partner. The loss of the services of any member of our executive officer team could have an adverse effect on our business and reduce our ability to make cash distributions to our unitholders. We may not be able to locate or employ on acceptable terms qualified replacements for senior management or other key employees if our existing senior management’s or key employees’ services become unavailable.

Certain members of our executive management team on whom we rely to manage important aspects of our business face conflicts regarding the allocation of their time.

We rely on the executive officers and employees of our general partner to manage our operations and activities. Certain of these executive officers and employees of our general partner perform services for Rentech in addition to us. These shared executive officers and employees include our chief executive officer, chief financial officer, president and general counsel. Because the shared officers and employees allocate time among us and Rentech, they may face conflicts regarding the allocation of their time, which may adversely affect our business, results of operations and financial condition.

A shortage of skilled labor, together with rising labor costs, could adversely affect our results of operations and cash available for distribution to our unitholders.

Efficient production of nitrogen fertilizer using modern techniques and equipment requires skilled employees. To the extent that the services of skilled labor becomes unavailable to us for any reason, including as a result of the expiration and non-renewal of our collective bargaining agreement or the retirement of experienced employees from our aging work force, we would be required to hire other personnel. We have a collective bargaining agreement which will expire in October 2012. Upon expiration, we may be unable to renew the collective bargaining agreement on satisfactory terms or at all. We face hiring competition from our competitors, our customers and other companies operating in our industry, and we may not be able to locate or employ qualified replacements on acceptable terms or at all. If our current skilled employees quit, retire or otherwise cease to be employed by us and we are unable to locate or hire qualified replacements, or if the cost to locate and hire qualified replacements for these employees increases materially, our results of operations and cash available for distribution to our unitholders could be adversely affected.

Our 2012 credit agreement contains significant limitations on our business operations, including our ability to make distributions and other payments.

We have entered into the 2012 credit agreement, comprised of a $35.0 million revolving working capital facility, or the 2012 revolving credit facility, and a $100.0 million capital expenditures facility. It permits us to incur significant indebtedness in the future, subject to the satisfaction of its conditions to borrowing. Our ability to make cash distributions to our unitholders and our ability to borrow under our 2012 credit agreement to fund distributions (if we elected to do so) are subject to covenant restrictions under the agreements governing our 2012 credit agreement. If we were unable to comply with any such covenant restrictions in any quarter, our ability to make cash distributions to our unitholders would be curtailed.

In addition, we are subject to covenants contained in our 2012 credit agreement and may be subject to any agreement governing other future indebtedness. These covenants restrict our ability to, among other things, incur, assume or permit to exist additional indebtedness, guarantees and other contingent obligations, incur liens, make negative pledges, pay dividends or make other distributions, make payments to our subsidiaries, make certain loans and investments, consolidate, merge or sell all or substantially all of our assets, enter into sale-leaseback transactions and enter into transactions with our affiliates. Any failure to comply with these covenants could result in a default under our 2012 credit agreement. Upon a default, unless waived, the lenders under our 2012 credit agreement would have all remedies available to a secured lender, and could elect to terminate their commitments, cease making further loans, cause their loans to become due and payable in full, institute foreclosure proceedings against our assets, and force us into bankruptcy or liquidation.

We are a holding company and depend upon our subsidiary for our cash flow.

We are a holding company. All of our operations are conducted and all of our assets are owned by our operating company, which is our wholly owned subsidiary, and we intend to continue to conduct our operations at the operating company and any of our future subsidiaries. Consequently, our cash flow and our ability to meet our obligations or to make cash distributions depend upon the cash flow of our operating company and any of our future subsidiaries and the payment of funds by our operating company and any of our future subsidiaries to us in the form of dividends or otherwise. The ability of our operating company and any of our future subsidiaries to make any payments to us depend on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. In particular, our 2012 credit agreement imposes, and future credit facilities entered into by our operating company or any of our future subsidiaries may impose, significant limitations on the ability of our subsidiaries to make distributions to us and consequently our ability to make distributions to our unitholders.

We have limited experience operating as a stand-alone company.

Because we did not operate as a stand-alone company until the closing of our initial public offering on November 9, 2011, it is difficult for you to evaluate our business and results of operations to date and to assess our future prospects and viability. Our facility commenced operations in 1965. Since 1987 and until the closing of our initial public offering, we operated as part of a larger company. The financial information reflecting our business contained in this report, including our historical financial information included herein, do not necessarily reflect what our operating performance would have been had we been a stand-alone company during the periods presented.

Our relationship with Rentech and its business, results of operations, financial condition and prospects subjects us to potential risks that are beyond our control.

Due to our relationship with Rentech, adverse developments or announcements concerning Rentech, its business, results of operations, financial condition or prospects could materially adversely affect our financial condition, even if we have not suffered any similar development. In addition, the credit and business risk profiles of Rentech may be factors considered in credit evaluations of us. Another factor that may be considered is the financial condition of Rentech, including the degree of its financial leverage and its dependence on cash flow from us to further its business strategy and continue its operations. Rentech is in the business of developing energy projects expected to produce certified synthetic fuels and electric power from carbon-containing materials such as biomass, waste and fossil resources. Rentech owns technologies that enable the production of such fuels and power when integrated with certain other technologies that it licenses or purchases. Rentech has a history of operating losses and has never operated at a profit. If Rentech does not achieve significant amounts of revenues and operate at a profit on an ongoing basis in the future, Rentech may be unable to continue its operations at its current level. Ultimately, Rentech’s ability to remain in business will depend upon earning a profit from commercialization of its technologies. Rentech has not been able to achieve sustained commercial use of these technologies as of this time. The credit and risk profile of Rentech could adversely affect our credit ratings and risk profile, which could increase our borrowing costs or hinder our ability to raise capital. Furthermore, financial constraints at Rentech may cause Rentech to make business decisions, including decisions to liquidate the common units that it holds in us or its interest in our general partner, which may adversely affect our business and the market price of our common units.

Risks Related to an Investment in Us

We intend to distribute all of the cash available for distribution we generate each quarter, which could limit our ability to grow and make acquisitions.

Our policy is to distribute all of the cash available for distribution we generate each quarter to our unitholders. Our first distribution will take place following the first calendar quarter of 2012 and will equal cash available for distribution with respect to the period beginning on the closing date of our initial public offering and ending on March 31, 2012. Cash available for distribution for each quarter will be determined by the board of directors of our general partner following the end of such quarter. As a result, our general partner will rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities by us, to fund our expansion capital expenditures, and accordingly, to the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow.

In addition, because we intend to distribute all of the cash available for distribution that we generate each quarter, our growth may not be as fast as that of businesses that reinvest their cash available for distribution to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units will decrease the amount we distribute on each outstanding unit. There are no limitations in our partnership agreement on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, would reduce the cash available for distribution that we have to distribute to our unitholders.

The board of directors and officers of our general partner have fiduciary duties to Rentech, and the interests of Rentech may differ significantly from, or conflict with, the interests of our public common unitholders.

Our general partner is responsible for managing us. Although our general partner has fiduciary duties to manage us in a manner that is in, or not opposed to, our best interests, the fiduciary duties are specifically limited by the express terms of our partnership agreement, and the directors and officers of our general partner also have fiduciary duties to manage our general partner in a manner beneficial to Rentech and its shareholders. The interests of Rentech and its shareholders may differ from, or conflict with, the interests of our common unitholders. In resolving these conflicts, our general partner may favor its own interests or the interests of holders of Rentech’s common stock over our interests and those of our common unitholders.

The potential conflicts of interest include, among others, the following:

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Neither our partnership agreement nor any other agreement requires the owners of our general partner to pursue a business strategy that favors us. The affiliates of our general partner have fiduciary duties to make decisions in their own best interests and in the best interest of holders of Rentech’s common stock, which may be contrary to our interests. In addition, our general partner is allowed to take into account the interests of parties other than us or our unitholders in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders.

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Our general partner has limited its liability and reduced its fiduciary duties under our partnership agreement and has also restricted the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty. As a result of purchasing common units, unitholders consent to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law.

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The board of directors of our general partner will determine the amount and timing of asset purchases and sales, capital expenditures, borrowings, repayment of indebtedness and issuances of additional partner interests, each of which can affect the amount of cash that is available for distribution to our common unitholders.

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Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf. There is no limitation on the amounts our general partner can cause us to pay it or its affiliates.

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Our general partner may exercise its rights to call and purchase all of our common units if at any time it and its affiliates own more than 80% of our common units.

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Our general partner controls the enforcement of obligations owed to us by it and its affiliates. In addition, our general partner determines whether to retain separate counsel or others to perform services for us.

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Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.

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Certain of the executive officers of our general partner, and the majority of the directors of our general partner, also serve as directors and/or executive officers of Rentech. The executive officers who work for both Rentech and our general partner, including our chief executive officer, chief financial officer, president and general counsel, divide their time between our business and the business of Rentech. These executive officers will face conflicts of interest from time to time in making decisions which may benefit either us or Rentech.

Our partnership agreement limits the liability and reduces the fiduciary duties of our general partner and restricts the remedies available to us and our common unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

Our partnership agreement limits the liability and reduces the fiduciary duties of our general partner, while also restricting the remedies available to our common unitholders for actions that, without these limitations and reductions, might constitute breaches of fiduciary duty. Delaware partnership law permits such contractual reductions of fiduciary duty. By purchasing common units, common unitholders consent to some actions that might otherwise constitute a breach of fiduciary or other duties applicable under state law. Our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise be held by state fiduciary duty law. For example:

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Our partnership agreement provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as general partner so long as it acted in good faith, meaning it subjectively believed that the decisions were in, or not opposed to, our best interests.

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Our partnership agreement provides that the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to our general partner. The owners of our general partner are permitted to engage in separate businesses which directly compete with us and are not required to share or communicate or offer any potential business opportunities to us even if the opportunity is one that we might reasonably have pursued. The partnership agreement provides that the owners of our general partner will not be liable to us or any unitholder for breach of any duty or obligation by reason of the fact that such person pursued or acquired for itself any business opportunity.

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Our partnership agreement provides that our general partner and the officers and directors of our general partner will not be liable for monetary damages to us for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or those persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that such person’s conduct was criminal.

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Our partnership agreement generally provides that affiliate transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally provided to or available from unrelated third parties or be “fair and reasonable.” In determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationship between the parties involved, including other transactions that may be particularly advantageous or beneficial to us.

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Our partnership agreement provides that in resolving conflicts of interest, it will be conclusively deemed that in making its decision, the conflicts committee acted in good faith.

By purchasing a common unit, a unitholder will become bound by the provisions of our partnership agreement, including the provisions described above.

Our partnership agreement permits our general partner to make a number of decisions in its individual capacity or in its sole discretion and, as such, our general partner has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our common unitholders in making these decisions.

Our partnership agreement contains provisions that permit our general partner to make a number of decisions in its individual capacity, as opposed to its capacity as our general partner, or in its sole discretion. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting,

us, our affiliates or our common unitholders. Decisions made by our general partner in its individual capacity or in its sole discretion will be made by RNHI as the sole member of our general partner, and not by the board of directors of our general partner. Examples include the exercise of the general partner’s call right, its voting rights with respect to any common units it may own, its registration rights and its determination whether or not to consent to any merger or consolidation or amendment to our partnership agreement. In effect, the standards to which our general partner would otherwise be held by state fiduciary duty law are reduced. By purchasing a common unit, a unitholder will become bound by the provisions of our partnership agreement, including the provisions described above.

RNHI has the power to appoint and remove our general partner’s directors.

RNHI has the power to appoint and remove all of the members of the board of directors of our general partner. Our general partner has control over all decisions related to our operations. Our public unitholders do not have an ability to influence any operating decisions and will not be able to prevent us from entering into any transactions. Furthermore, the goals and objectives of Rentech, as the indirect owner of our general partner, may not be consistent with those of our public unitholders.

Common units are subject to our general partner’s call right.

If at any time our general partner and its affiliates own more than 80% of our common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to purchase all, but not less than all, of the common units held by public unitholders at a price not less than their then-current market price, as calculated pursuant to the terms of our partnership agreement. As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability upon a sale of your common units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the call right. There is no restriction in our partnership agreement that prevents our general partner from issuing additional common units and then exercising its call right. Our general partner may use its own discretion, free of fiduciary duty restrictions, in determining whether to exercise this right.

Our unitholders have limited voting rights and are not entitled to elect our general partner or our general partner’s directors.

Unlike the holders of common stock in a corporation, our unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will have no right to elect our general partner or our general partner’s board of directors on an annual or other continuing basis. The board of directors of our general partner, including the independent directors, will be chosen entirely by Rentech as the indirect owner of the general partner and not by our common unitholders. Unlike publicly traded corporations, we will not hold annual meetings of our unitholders to elect directors or conduct other matters routinely conducted at annual meetings of shareholders. Furthermore, even if our unitholders are dissatisfied with the performance of our general partner, they will have no practical ability to remove our general partner. As a result of these limitations, the price at which the common units will trade could be diminished.

Our public unitholders will not have sufficient voting power to remove our general partner without Rentech’s consent.

Rentech indirectly owns 60.8% of our common units. Our general partner may be removed by a vote of the holders of at least 66 ^2/3 % of our outstanding common units, including any common units held by our general partner and its affiliates (including Rentech), voting together as a single class. As a result, public holders of our common units are not able to remove the general partner, under any circumstances, unless Rentech sells some of the common units that it owns or we sell additional units to the public.

Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units (other than our general partner and its affiliates and permitted transferees).

Our partnership agreement restricts unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, may not vote on any matter. Our partnership agreement also contains provisions limiting the ability of common unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the ability of our common unitholders to influence the manner or direction of management.

Cost reimbursements due to our general partner and its affiliates will reduce cash available for distribution to you.

Prior to making any distribution on our outstanding units, we will reimburse our general partner for all expenses it incurs on our behalf including, without limitation, our pro rata portion of management compensation and overhead charged by Rentech in accordance with our services agreement. The services agreement does not contain any cap on the amount we may be required to pay pursuant to this agreement. The payment of these amounts, including allocated overhead, to our general partner and its affiliates could adversely affect our ability to make distributions to you.

Limited partners may not have limited liability if a court finds that unitholder action constitutes control of our business.

A general partner of a partnership generally has unlimited liability for the obligations of the Partnership, except for those contractual obligations of the Partnership that are expressly made without recourse to the general partner. Our Partnership is organized under Delaware law and our operating company conducts business in Illinois. Limited partners could be liable for our obligations as if such limited partners were general partners if a court or government agency determined that:

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we were conducting business in a state but had not complied with that particular state’s partnership statute; or

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limited partners’ right to act with other unitholders to remove or replace our general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constituted “control” of our business.

Unitholders may have liability to repay distributions.

In the event that: (i) we make distributions to our unitholders when our nonrecourse liabilities exceed the sum of (a) the fair market value of our assets not subject to recourse liability and (b) the excess of the fair market value of our assets subject to recourse liability over such liability, or a distribution causes such a result, and (ii) a unitholder knows at the time of the distribution of such circumstances, such unitholder will be liable for a period of three years from the time of the impermissible distribution to repay the distribution under Section 17-607 of the Delaware Act.

Likewise, upon the winding up of the Partnership, in the event that (a) we do not distribute assets in the following order: (i) to creditors in satisfaction of their liabilities; (ii) to partners and former partners in satisfaction of liabilities for distributions owed under our partnership agreement; (iii) to partners for the return of their contribution; and (iv) to the partners in the proportions in which the partners share in distributions, and (b) a unitholder knows at the time of such circumstances, then such unitholder will be liable for a period of three years from the impermissible distribution to repay the distribution under Section 17-807 of the Delaware Act.

A purchaser of common units who becomes a limited partner is liable for the obligations of the transferring limited partner to make contributions to the Partnership that are known by the purchaser at the time it became a limited partner, and for unknown obligations if the liabilities could be determined from our partnership agreement.

Our unitholders who fail to furnish certain information requested by our general partner or who our general partner, upon receipt of such information, determines are not eligible citizens may not be entitled to receive distributions in kind upon our liquidation and their common units will be subject to redemption.

Our general partner may require each limited partner to furnish information about his nationality, citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within a reasonable period after a request for the information or our general partner determines after receipt of the information that the limited partner is not an eligible citizen, the limited partner may be treated as an ineligible holder. An ineligible holder does not have the right to direct the voting of his common units and may not receive distributions in kind upon our liquidation. Furthermore, we have the right to redeem all of the common units of any holder that is an ineligible holder. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner.

Common units held by persons who are non-taxpaying assignees will be subject to the possibility of redemption.

To avoid any adverse effect on the maximum applicable rates chargeable to customers by us under certain laws or regulations that may be applicable to our future business or operations, or in order to reverse an adverse determination that has occurred regarding such maximum rate, our partnership agreement gives our general partner the power to amend the agreement. If our general partner determines that our not being treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes, coupled with the tax status (or lack of proof thereof) of one or more of our limited partners, has, or is reasonably

likely to have, a material adverse effect on the maximum applicable rates chargeable to customers by us, then our general partner may adopt such amendments to our partnership agreement as it determines are necessary or advisable to obtain proof of the U.S. federal income tax status of our limited partners (and their owners, to the extent relevant) and permit us to redeem the common units held by any person whose tax status has or is reasonably likely to have a material adverse effect on the maximum applicable rates or who fails to comply with the procedures instituted by our general partner to obtain proof of the U.S. federal income tax status.

Our general partner’s interest in us and the control of our general partner may be transferred to a third party without unitholder consent.

Our general partner may transfer its general partner interest in us to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. Furthermore, there is no restriction in our partnership agreement on the ability of RNHI to transfer its equity interest in our general partner to a third party. The new equity owner of our general partner would then be in a position to replace the board of directors and the officers of our general partner with its own choices and to influence the decisions taken by the board of directors and officers of our general partner.

Increases in interest rates could adversely impact our unit price and our ability to issue additional equity to make acquisitions, incur debt or for other purposes.

We cannot predict how interest rates will react to changing market conditions. Interest rates on our 2012 credit agreement and future credit facilities and debt securities could be higher than current levels, causing our financing costs to increase accordingly. Additionally, as with other yield-oriented securities, we expect that our unit price will be impacted by the level of our quarterly cash distributions and implied distribution yield. The distribution yield is often used by investors to compare and rank related yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates may affect the yield requirements of investors who invest in our common units, and a rising interest rate environment could have a material adverse impact on our unit price and our ability to issue additional equity to make acquisitions or to incur debt as well as increasing our interest costs.

We may issue additional common units and other equity interests without your approval, which would dilute your existing ownership interests.

Under our partnership agreement, we are authorized to issue an unlimited number of additional interests without a vote of the unitholders. The issuance by us of additional common units or other equity interests of equal or senior rank will have the following effects:

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the proportionate ownership interest of unitholders immediately prior to the issuance will decrease;

•

the amount of cash distributions on each unit will decrease;

•

the ratio of our taxable income to distributions may increase;

•

the relative voting strength of each previously outstanding unit will be diminished; and

•

the market price of the common units may decline.

In addition, our partnership agreement does not prohibit the issuance by our subsidiaries of equity interests, which may effectively rank senior to the common units.

The level of indebtedness we could incur in the future could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations.

On February 28, 2012, RNLLC entered into the 2012 credit agreement. The 2012 credit agreement has a five-year maturity and is comprised of the $35.0 million 2012 revolving credit facility and the $100.0 million capital expenditures facility. The level of indebtedness we could incur in the future could have important consequences, including:

•

increasing our vulnerability to general economic and industry conditions;

•

requiring all or a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore restricting or reducing our ability to use our cash flow to make distributions or to fund our operations, capital expenditures and future business opportunities;

•

limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;

•

incurring higher interest expense in the event of increases in our 2012 credit agreement’s variable interest rates;

•

limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have greater capital resources;

•

limiting our ability to make investments, dispose of assets, pay cash distributions or repurchase common units; and

•

subjecting us to financial and other restrictive covenants in our indebtedness, which may restrict our activities, and the failure to comply with which could result in an event of default.

Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to maintain the condition of our operating assets and properties, as well as to provide capacity for the growth of our business, depends on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors.

If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce distributions, reduce or delay capital expenditures, acquisitions, investments or other business activities, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Failure to pay our indebtedness on time would constitute an event of default under the agreements governing our indebtedness, which would give rise to our lenders’ ability to accelerate the obligations and seek other remedies against us.

Tax Risks

Our tax treatment depends on our status as a partnership for United States federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service were to treat us as a corporation for United States federal income tax purposes or if we were to become subject to additional amounts of entity-level taxation for state tax purposes, then our cash available for distribution to our unitholders would be substantially reduced.

The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for United States federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service, or the IRS, on that or any other tax matter affecting us.

Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for United States federal income tax purposes. A change in our current business or a change in current law could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.

If we were treated as a corporation for United States federal income tax purposes, we would pay United States federal income tax on all of our taxable income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay additional state and local income tax at varying rates. Distributions to our unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to our unitholders. Because a tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Therefore, treatment of us as a corporation for United States federal income tax purposes would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.

Changes in current state law may subject us to additional entity-level taxation by individual states. Several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of taxation. Imposition of such a tax by any state in which we do business will reduce our cash available for distribution to our unitholders.

The tax treatment of publicly traded limited partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

The present United States federal income tax treatment of publicly traded limited partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. Current law may change to cause us to be treated as a corporation for United States federal income tax purposes or otherwise subject us to entity-level taxation. For example, members of Congress have considered substantive changes to the existing United States federal income tax laws that affect publicly traded limited partnerships. Any modification to the United States federal income tax laws and interpretations thereof may or may not be applied retroactively. We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any such changes could cause a substantial reduction in the value of our common units.

If the IRS contests any of the United States federal income tax positions we take, the market for our common units may be materially and adversely impacted, and the cost of any IRS contest will reduce our cash available for distribution to our unitholders.

We have not requested, and do not plan to request, a ruling from the IRS with respect to our treatment as a partnership for United States federal income tax purposes or any other matter affecting us. The IRS may adopt positions that differ from the positions we take, and the IRS’s positions may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade. In addition, our costs of any contest with the IRS will be borne indirectly by our unitholders because the costs will reduce our cash available for distribution.

Unitholders’ share of our income will be taxable for United States federal income tax purposes even if they do not receive any cash distributions from us.

Because our unitholders will be treated as partners to whom we will allocate taxable income that could be different in amount than the cash we distribute, a unitholder’s allocable share of our taxable income will be taxable to him, which may require the payment of United States federal income taxes and, in some cases, state and local income taxes on his share of our taxable income, even if he receives no cash distributions from us. Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income.

Tax gain or loss on the disposition of our common units could be more or less than expected.

If our unitholders sell common units, they will recognize a gain or loss for United States federal income tax purposes equal to the difference between the amount realized and their tax basis in those common units. Because distributions in excess of their allocable share of our net taxable income decrease their tax basis in their common units, the amount, if any, of such prior excess distributions with respect to the common units our unitholders sell will, in effect, become taxable income to our unitholders if they sell such common units at a price greater than their tax basis in those common units, even if the price they receive is less than their original cost. Furthermore, a substantial portion of the amount realized on any sale of a unitholder’s common units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture. In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if our unitholders sell common units, they may incur a tax liability in excess of the amount of cash the unitholders receive from the sale.

Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.

Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons, raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from United States federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes, generally at the highest applicable effective tax rate, and non-U.S. persons will be required to file United States federal and state income tax returns and pay United States federal and state tax on their share of our taxable income. Unitholders that are tax-exempt entities or non-U.S. persons should consult their tax advisors before investing in our common units.

We will treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.

Due to our inability to match transferors and transferees of common units and for other reasons, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations promulgated under the Internal Revenue Code, referred to as “Treasury Regulations.” A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of common units and could cause a substantial reduction in the value of our common units or result in audit adjustments to our unitholders’ tax returns.

We will prorate our items of income, gain, loss and deduction, for United States federal income tax purposes, between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.

We will prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. The use of this proration method may not be permitted under existing Treasury Regulations. If the IRS were to challenge our proration method or new Treasury Regulations were issued requiring a change, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

A unitholder whose common units are loaned to a “short seller” to effect a short sale of common units may be considered as having disposed of those common units. If so, the unitholder would no longer be treated for United States federal income tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.

Because a unitholder whose common units are loaned to a “short seller” to effect a short sale of common units may be considered as having disposed of the loaned common units, he may no longer be treated for United States federal income tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the common unitholder as to those common units could be fully taxable as ordinary income.

The sale or exchange of 50% or more of our capital and profits interests during any 12-month period will result in the termination of the Partnership for United States federal income tax purposes.

We will be considered to have technically terminated the Partnership for United States federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. For purposes of determining whether the 50% threshold has been met, multiple sales of the same common unit will be counted only once. While we would continue our existence as a Delaware limited partnership, our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and our unitholders could receive two Schedules K-1 if relief was not available, as described below) for one fiscal year and could result in a significant deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than 12 months of our taxable income or loss being includable in his taxable income for the year of termination. A technical termination currently would not affect our classification as a partnership for United States federal income tax purposes, but instead, we would be treated as a new partnership for such tax purposes. If treated as a new partnership, we must make new tax elections and could be subject to penalties if we are unable to determine that a technical termination occurred. The IRS has recently announced a publicly traded limited partnership relief procedure whereby a publicly traded limited partnership that has technically terminated may request special relief that, if granted, would, among other things, permit the Partnership to provide only a single Schedule K-1 to unitholders for the tax year notwithstanding two partnership tax years.

Unitholders will likely be subject to state and local taxes and return filing requirements in jurisdictions where they do not live as a result of investing in our common units.

In addition to United States federal income taxes, unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or control property now or in the future, even if they do not live in any of those jurisdictions. Unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, unitholders may be subject to penalties for failure to comply with those requirements. We currently own assets and conduct business in the State of Illinois, and the State of Illinois currently imposes a personal income tax on individuals. The State of Illinois also imposes an income tax on corporations and other entities. As we make acquisitions or expand our business, we may own or control assets or conduct business in additional states that impose a personal income tax. It is the responsibility of each unitholder to file all United States federal, state, local and non-U.S. tax returns.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

The information required to be disclosed in this Item 2 is incorporated herein by reference to Part I—Item 1 “Business.”

ITEM 3. LEGAL PROCEEDINGS

We are party to litigation from time to time in the normal course of business. We maintain insurance to cover certain actions and believe that resolution of our current litigation will not have a material adverse effect on us.

In October 2009, the EPA Region 5 issued a Notice and Finding of Violation pursuant to the CAA related to the number 1 nitric acid plant at our facility. The notice alleges violations of the CAA’s New Source Performance Standard for nitric acid plants, Prevention of Significant Deterioration requirements and Title V Permit Program requirements. The notice appears to be part of the EPA’s CAA National Enforcement Priority for New Source Review/Prevention of Significant Deterioration related to acid plants, which seeks to reduce emissions from acid plants through proceedings that result in the installation of new pollution control technology. Without admitting liability, we have entered into a consent decree with the EPA to resolve the alleged violations, and the consent decree was entered by the court, effective as of February 13, 2012. The consent decree requires us to pay a civil penalty of $108,000, install and operate certain pollution control equipment on one of our nitric acid plants, and to perform certain additional actions and periodically report to the EPA. We have commenced implementation of the consent decree requirements, including the installation and operation of the pollution control equipment, and on February 17, 2012, we paid the $108,000 civil penalty.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF COMMON UNITS

Our common units began trading on the New York Stock Exchange, or the NYSE, under the symbol “RNF” on November 4, 2011. The following table sets forth the range of high and low closing prices for our common units as reported by the NYSE for the period November 4, 2011 through December 31, 2011:


	High		Low
November 4, 2011 through December 31, 2011	$	20.47	$	16.22

The approximate number of unitholders of record as of February 29, 2012 was three. Based upon the securities position listings maintained for our common units by registered clearing agencies, we estimate the number of beneficial owners is not less than 7,600.

Our policy is to distribute all of the cash available for distribution which we generate each quarter to our unitholders. Our first distribution will take place following the first calendar quarter of 2012 and will equal cash available for distribution with respect to the period beginning on the closing date of our initial public offering and ending on March 31, 2012. Cash available for distribution for each quarter will be determined by the board of directors of our general partner following the end of each quarter. We expect that cash available for distribution for each quarter will generally equal the cash flow we generate 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 directors of our general partner deems necessary or appropriate. We do not intend to maintain excess distribution coverage for the purpose of maintaining stability or growth in our quarterly distribution or otherwise to reserve cash for distributions, nor do we intend to incur debt to pay quarterly distributions. Any distributions made to our unitholders will be done on a pro rata basis.

The 2012 credit agreement provides that dividends and distributions from us and our operating company are permitted so long as (i) no default or event of default exists or will result therefrom and (ii) our operating company delivers a certificate to the administrative agent under the 2012 credit agreement certifying pro forma compliance with the terms of the 2012 credit agreement, including its financial covenants, as of the date of such dividend or distribution.

We may change our distribution policy at any time and from time to time. Our partnership agreement does not require us to pay cash distributions on a quarterly or other basis.

We intend to pay our distributions on or about the 15th day of each February, May, August and November to holders of record on or about the 1st day of each such month.

Equity Compensation Plan Information

See Part III—Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters” for information regarding securities authorized for issuance under equity compensation plans.

Recent Sales of Unregistered Securities

On November 9, 2011, in connection with our initial public offering, RNHI contributed its member interests in our operating company to us and, in exchange, we issued to RNHI 23,250,000 common units representing limited partner interests.

Purchases of Equity Securities by the Issuer

We did not repurchase any of our common units during the three months ended December 31, 2011, and we do not have any announced or existing plans to repurchase any of our common units.

ITEM 6. SELECTED FINANCIAL DATA

The following tables include selected summary financial data for the three months ended December 31, 2011 and 2010 and each of the last five fiscal years ended September 30. The data below should be read in conjunction with Part II—Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II—Item 8 “Financial Statements and Supplementary Data.”


	Three Months Ended
	December 31,						Fiscal Years Ended September 30,
	2011			2010			2011			2010			2009			2008			2007
				(unaudited)															(unaudited)
	(in thousands, except per unit data, product pricing, $ per MMBtu and on-stream factors)
STATEMENTS OF OPERATIONS DATA
Revenues	$	63,014		$	42,962		$	179,857		$	131,396		$	186,449		$	216,615		$	134,419
Cost of sales	$	37,460		$	26,835		$	103,286		$	106,020		$	125,888		$	160,633		$	118,510
Gross profit	$	25,554		$	16,127		$	76,571		$	25,376		$	60,561		$	55,982		$	15,909
Operating income	$	22,648		$	14,584		$	69,854		$	20,389		$	55,313		$	51,752		$	10,219
Other income (expenses), net	$	(12,193	)	$	(7,488	)	$	(27,513	)	$	(12,036	)	$	(8,578	)	$	(1,779	)	$	753
Income before income taxes	$	10,455		$	7,096		$	42,341		$	8,353		$	46,735		$	49,973		$	10,972
Income tax (benefit) expense	$	—		$	2,772		$	17,415		$	3,344		$	18,576		$	19,875		$	4,367
Net income	$	10,455		$	4,324		$	24,926		$	5,009		$	28,159		$	30,098		$	6,605
Net income subsequent to initial public offering (November 9, 2011 through December 31, 2011)	$	11,331
Net income per common unit—Basic	$	0.30
Net income per common unit—Diluted	$	0.30
Weighted-average units used to compute net income per common unit:
Basic		38,250
Diluted		38,255

FINANCIAL AND OTHER DATA
Cash flows provided by (used in) operating activities	$	(5,979	)	$	23,717		$	83,668		$	20,144		$	23,867		$	61,962		$	31,185
Cash flows used in investing activities	$	(11,566	)	$	(2,212	)	$	(17,386	)	$	(11,583	)	$	(12,259	)	$	(8,260	)	$	(8,464	)
Cash flows provided by (used in) financing activities	$	11,009		$	(19,818	)	$	(49,844	)	$	(10,288	)	$	(31,215	)	$	(24,814	)	$	(943	)

KEY OPERATING DATA

Products sold (tons):
Ammonia		55			44			125			153			126			173			145
UAN		65			79			315			294			267			313			275
Products pricing (dollars per ton):


Ammonia	$	684		$	512		$	588		$	377		$	726		$	539		$	351
UAN	$	307		$	193		$	269		$	180		$	267		$	308		$	209
Production (tons):
Ammonia		63			75			273			267			267			299			270
UAN		68			86			312			287			274			311			269
Natural gas used in production:
Volume (MMBtu)		2,299			2,813			10,303			9,923			10,133			11,086			10,135
Pricing ($ per MMBtu)	$	4.71		$	4.82		$	4.76		$	4.95		$	5.67		$	9.34		$	7.17
On-stream factors ⁽¹⁾ :
Ammonia		83.7	%		100.0	%		96.4	%		91.8	%		98.1	%		99.5	%		94.2	%
UAN		84.8	%		100.0	%		96.4	%		92.9	%		96.7	%		98.4	%		94.8	%

BALANCE SHEET DATA
Cash and cash equivalents	$	44,836		$	36,621		$	51,372		$	34,934		$	36,661		$	56,268		$	27,380
Working capital	$	32,113		$	(6,350	)	$	(32,270	)	$	22,565		$	(2,860	)	$	31,251		$	25,974
Construction in progress	$	7,062		$	4,553		$	20,318		$	2,474		$	6,882		$	3,490		$	772
Total assets	$	130,443		$	114,052		$	152,408		$	108,837		$	115,769		$	159,552		$	108,266
Total long-term liabilities	$	277		$	68,446		$	114,981		$	54,549		$	7,642		$	59,045		$	8,062
Total partners’ capital / stockholder’s equity (deficit)	$	99,191		$	(22,843	)	$	(76,133	)	$	20,334		$	42,433		$	26,118		$	70,284

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

ITEM 7.

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 the financial statements and related notes included elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those set forth under Part I—Item 1A “Risk Factors,” “Forward-Looking Statements” and elsewhere in this report.

OVERVIEW

We are a Delaware limited partnership formed in July 2011 by Rentech, a publicly traded provider of clean energy solutions and nitrogen fertilizer, to own, operate and grow our nitrogen fertilizer business. Our nitrogen fertilizer facility, which is located in East Dubuque, Illinois, has been in operation since 1965 with infrequent unplanned shutdowns. We produce primarily ammonia and UAN at our facility, using natural gas as our primary feedstock. Substantially all of our products are nitrogen-based.

Our 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 National Corn Growers Association. We consider our market to be comprised of the States of Illinois, Iowa and Wisconsin.

Our core market consists of the area located within an estimated 200-mile radius of our facility. In most instances, our customers purchase our nitrogen products at our 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 facility, we do not incur any shipping costs, in contrast to nitrogen fertilizer producers located outside of our core market that must incur transportation and storage costs to transport their products to, and sell their products in, our market. In addition, we do not maintain a fleet of trucks and, unlike some of our major competitors, we do not maintain a fleet of rail cars because our customers generally are located close to our facility and prefer to be responsible for transportation. Having no need to maintain a fleet of trucks or rail cars lowers our fixed costs. The combination of our proximity to our customers and our storage capacity at our facility also allows for better timing of the pick-up and application of our 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.

For further information concerning our potential financing needs and related risks, see Part I—Item 1 “Business,” and Part I— Item 1A “Risk Factors”.

Factors Affecting Comparability of Financial Information

Our historical results of operations for the periods prior to the initial public offering may not be comparable with our results of operations for the three months ended December 31, 2011 or in the future for the reasons discussed below.

Corporate Allocations

Prior to the closing of our initial public offering, REMC was consolidated with Rentech’s operations since it was acquired by Rentech in 2006. Our consolidated financial statements included elsewhere in this report reflect REMC on a stand-alone or “carve-out” basis from Rentech for periods prior to our initial public offering. In the consolidated financial statements, corporate overhead costs incurred by Rentech on behalf of REMC were allocated to REMC and are reflected in operating expenses. These costs include the following:

•

compensation of human resources, legal, information systems, accounting and finance, investor relations and other Rentech personnel, which were allocated to REMC based on the estimated amount of time spent by the Rentech personnel on work for REMC;

•

stock-based compensation of REMC personnel, all of which was allocated to REMC;

•

third-party hosting costs for accounting and financial reporting software, which were allocated to REMC based on the estimated proportion of such costs that related to REMC transactions;

•

audit and tax services expenses, which were allocated to REMC based on an estimate of the time spent by third-party providers on REMC audit and tax matters;

•

income taxes, which were allocated to REMC on a hypothetical separate tax return basis;

•

capital costs of accounting and financial reporting software, which were allocated to REMC based on an estimate of the time the software was used by REMC personnel; and

•

amortization of the original issue discount and the loss on the early extinguishment of debt relating to REMC’s former credit agreement, all of which was allocated to REMC.

For the fiscal years ended September 30, 2011, 2010 and 2009, the total operating expenses incurred by Rentech and allocated to REMC were approximately $2.0 million, $1.4 million and $1.6 million, respectively. See Note 2 to the financial statements.

REMC and Rentech entered into a management services agreement on April 26, 2006 and amended that agreement on July 29, 2011. As compensation for Rentech’s management services, REMC paid Rentech the actual corporate overhead costs incurred by Rentech on behalf of REMC, including, without limitation, compensation expenses for Rentech personnel providing services to REMC, stock-based and incentive bonus compensation expenses of REMC personnel, legal, audit, accounting and tax services expenses, income tax expenses and software expenses. The management services agreement terminated in accordance with its terms at the closing of our initial public offering and, upon its termination, REMC was required to pay Rentech any corporate overhead costs owed by REMC under the agreement. The amount of these corporate overhead costs was approximately $19.4 million, which primarily represent estimated income taxes attributable to REMC.

On November 9, 2011, the closing date of our initial public offering, we, our general partner and Rentech entered into a services agreement, pursuant to which we and our general partner will obtain certain management and other services from Rentech. Our consolidated financial statements following our initial public offering reflect the impact of the reimbursements we are required to make to Rentech under the services agreement instead of those used for purposes of preparing REMC’s stand-alone financial statements. Under the services agreement, we, our general partner and our operating subsidiary are obligated to reimburse Rentech for (i) all costs, if any, incurred by Rentech or its affiliates in connection with the employment of its employees who are seconded to us and who provide us services under the agreement on a full-time basis, but excluding share-based compensation; (ii) a prorated share of costs incurred by Rentech or its affiliates in connection with the employment of its employees, excluding seconded personnel, who provide us services under the agreement on a part-time basis, but excluding share-based compensation, and such prorated share shall be 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 us; (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.

Publicly Traded Limited Partnership Expenses

Our general and administrative expense have increased due to the costs of operating as a publicly traded limited partnership, including costs associated with SEC reporting requirements, annual and quarterly reports to unitholders, tax return and Schedule K-1 preparation and distribution, work performed by our independent auditors, investor relations activities and registrar and transfer agent services. We estimate that this incremental general and administrative expense will be approximately $3.6 million per year, excluding the costs associated with our initial public offering. Our consolidated financial statements following our initial public offering reflect the impact of this expense, which affect the comparability of our post-offering results with our financial statements from periods prior to the closing of our initial public offering.

Expansion Projects

As discussed in Part I—Item 1A “Business—Expansion Projects,” we have commenced or are evaluating potential projects to expand the production capabilities at our facility. To the extent that we proceed with and complete one or more of these expansion projects, we expect to incur significant costs and expenses for the construction and development of such projects. We expect to finance the costs and expenses of the ammonia capacity expansion project with indebtedness, which will significantly increase our interest expense. We also expect our depreciation expense to increase from additional assets placed into service from the ammonia capacity expansion project. If we finance some or all of the costs and expenses of other expansion projects with indebtedness, then our interest expense could increase significantly. We also would expect our depreciation expense to increase from additional assets 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.

Key Industry Factors

Supply and Demand

Our earnings and cash flow from operations are significantly affected by nitrogen fertilizer product prices. The price at which we ultimately sell our nitrogen fertilizer products depends on numerous factors, including the global supply and demand for nitrogen fertilizer products which, in turn, depends on, among other factors, world grain demand and prices, inventory and production levels, changes in world population, the cost and availability of natural gas in various regions of the world, the cost and availability of fertilizer transportation infrastructure, weather conditions, the availability of imports and the extent of government intervention in agriculture markets. Nitrogen fertilizer prices are also affected by local factors, including weather and soil conditions, local market conditions and the operating levels of competing facilities. An expansion or upgrade of our competitors’ facilities, international political and economic developments and other factors are likely to continue to play an important role in nitrogen fertilizer industry economics. These factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in product margins. In addition, demand for fertilizers is affected by the aggregate crop planting decisions and fertilizer application rate decisions of individual farmers. Individual farmers make planting decisions based largely on the prospective profitability of a harvest, while the specific varieties and amounts of fertilizer they apply depend on factors including crop prices, their current liquidity, soil conditions, weather patterns and the types of crops planted. Moreover, the industry typically experiences seasonal fluctuations in demand for nitrogen fertilizer products.

Natural Gas Prices

Natural gas is the primary feedstock for the production of nitrogen fertilizers, accounting for approximately 80% to 85% of the cash production costs for ammonia. Over the last five years, United States natural gas reserves have increased significantly due to, among other factors, advances in extracting shale gas, which have reduced and stabilized natural gas prices, providing North America with a cost advantage over Europe. As a result, our competitive position and that of other North American nitrogen fertilizer producers have been positively impacted.

We historically have purchased natural gas in the spot market, through the use of forward purchase contracts, or a combination of both. We historically have used forward purchase contracts to lock in pricing for a portion of our facility’s natural gas requirements. These forward purchase contracts are generally either fixed-price or index-priced, short-term in nature and for a fixed supply quantity. We are able to purchase natural gas at competitive prices due to our connection to Nicor Inc.’s distribution system and its proximity to the Northern Natural Gas interstate pipeline system. Over the past several years, natural gas prices have experienced significant fluctuations, which has had an impact on our cost of producing nitrogen fertilizer. During the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, we spent approximately $10.8 million, $49.2 million, $50.5 million and $57.5 million, respectively, on natural gas, which equaled an average cost per MMBtu of approximately $ 4.71, $4.76, $4.95 and $5.67, respectively.

Transportation Costs

Costs for transporting nitrogen fertilizer can be significant relative to its selling price. For example, ammonia is costly to transport because it is a toxic gas at ambient temperatures and therefore must be transported under refrigeration in specialized equipment. The United States imported an average of over 50% of its annual fertilizer needs between 1999 and 2009 according to the USDA. Therefore, nitrogen fertilizer prices in North America are influenced by the cost to transport product from exporting countries, granting an advantage to local producers who ship over shorter distances.

The price of our nitrogen fertilizer products is impacted by our transportation cost advantage over out-of-region competitors serving our core market. In most instances, our customers purchase our nitrogen products at our 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 facility, we do not incur any shipping costs, in contrast to nitrogen fertilizer producers outside of our core market that must incur transportation and storage costs to transport their products to, and sell their products in, our market. Accordingly, we may offer nitrogen fertilizers at market prices that factor in the storage and transportation costs of out-of-region producers without having incurred such costs. In addition, we do not maintain a fleet of trucks and, unlike some of our major competitors, we do not maintain a fleet of rail cars, which lowers our fixed costs.

Key Operational Factors

Product Prepayment Contracts

We enter into product prepayment contracts committing our customers to purchase our nitrogen fertilizer products at a later date. These customers pay a portion of the contract price for our products shortly after entering into such contracts and the remaining balance of the contract price prior to picking up or delivery of the products. We recognize revenue when products are picked-up or delivered and the customer takes title. The cash received from product prepayments increases our operating cash flow in the quarter in which the cash is received, but may effectively reduce our operating cash flow in a subsequent quarter if the cash was received in a quarter prior to the one in which the revenue is recorded. Our policy is to purchase under fixed-price forward contracts approximately enough natural gas to manufacture the products that have been sold under product prepayment contracts for later delivery, effectively fixing most of the gross margin on pre-sold product. Our earnings and operating cash flow in future periods may be affected by the degree to which we continue this practice or seek to maximize our gross margins by more opportunistically timing product sales and natural gas purchases.

Facility Reliability

Consistent, safe and reliable operations at our facility are critical to our financial performance and results of operations. Unplanned shutdowns of our facility may result in lost margin opportunity, increased maintenance expense and a temporary increase in working capital investment and related inventory position. The financial impact of planned shutdowns, including facility turnarounds, is mitigated through a diligent planning process that takes into account the existing margin environment, the availability of resources to perform the needed maintenance, feedstock logistics and other factors. We generally undergo a facility turnaround every two years, which typically lasts 18 to 25 days and costs approximately $3.0 to $5.0 million per turnaround. These costs are expensed as incurred. Our facility underwent a turnaround in October 2009 at a cost of approximately $4.0 million and in September and October of 2011 at a cost of approximately $7.5 million. In many cases, we also perform significant maintenance capital projects at our facility during a turnaround to minimize disruption to our operations. These capital projects are undertaken during turnarounds to minimize disruption to our operations, but are capitalized as property, plant and equipment rather than expensed as turnaround costs. Our maintenance capital expenditures for such projects were $24.5 million, $9.9 million and $12.7 million for the fiscal years ended September 30, 2011, 2010 and 2009, respectively. Our maintenance capital expenditures totaled approximately $2.5 million and $2.7 million for the three months ended December 31, 2011 and 2010, respectively. As part of the 2011 turnaround, we completed a significant maintenance capital project to replace our existing steam methane reformer tubes, which had been operational since 1980, and made other capital improvements to our facility. Following this maintenance project, we expect that annual maintenance capital expenditures will revert back to their customary levels. See “—Liquidity and Capital Resources—Capital Expenditures.”

Factors Affecting Results of Operations

Revenues

We generate revenue primarily from sales of nitrogen fertilizer products manufactured at our facility and used primarily in corn production. Our facility is designed to produce ammonia, UAN, liquid and granular urea, nitric acid and CO ₂ using natural gas as a feedstock. Revenues are seasonal based on the planting, growing and harvesting cycles of customers utilizing nitrogen fertilizer.

Cost of Sales

Our cost of sales primarily consists of product shipments and turnaround expenses. Product shipments, the most significant element of cost of sales, primarily consists of natural gas, labor costs and depreciation. Turnaround expenses represent the cost of the planned shut-down of our facility for maintenance, which is done approximately every two years.

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

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 at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ based on the accuracy of the information utilized and subsequent events. Our accounting policies are described in the notes to our audited financial statements included elsewhere in this report. Our critical accounting policies, estimates and assumptions could materially affect the amounts recorded in our financial statements. The most significant estimates and assumptions relate to revenue recognition, inventories and the valuation of long-lived assets.

Revenue Recognition . We recognize revenue when the following elements are substantially satisfied: there are no uncertainties regarding customer acceptance; there is persuasive evidence that an agreement exists documenting the specific terms of the transaction; the sales price is fixed or determinable; and collectibility is reasonably assured. Management assesses the business environment, the customer’s financial condition, historical collection experience, accounts receivable aging and customer disputes to determine whether collectibility is reasonably assured. If collectibility is not considered reasonably assured at the time of sale, we do not recognize revenue until collection occurs.

We recognize revenues from product sales when the customer takes ownership from our facility in East Dubuque, Illinois or our leased storage facility in Niota, Illinois and assumes risk of loss, collection of the related receivable is probable, persuasive evidence of a sale arrangement exists and the sales price is fixed or determinable.

Certain product sales occur under product prepayment contracts which require payment in advance of delivery. We record a liability for deferred revenue in the amount of, and upon receipt of, cash in advance of shipment. We recognize revenue related to the product prepayment contracts and relieve the liability for deferred revenue when customers take ownership of products. A significant portion of the revenue recognized during any period may be related to product prepayment contracts, for which cash may have been collected during an earlier period, with the result being that a significant portion of revenue recognized during a period may not generate cash receipts during that period.

Natural gas, though not purchased for the purpose of resale, is occasionally sold under certain circumstances. Natural gas is sold when contracted quantities received are in excess of production requirements and storage capacities, in which case the sales price is recorded in revenues and the related cost is recorded in cost of sales. Natural gas is also sold with a simultaneous natural gas purchase in order to receive a benefit that reduces raw material cost, in which case the net of the sales price and the related cost of sales are recorded within cost of sales.

Inventories . Our inventory is stated at the lower of cost or estimated net realizable value. The cost of inventories is determined using the first-in first-out method. We perform an analysis of our inventory balances at least quarterly to determine if the carrying amount of inventories exceeds their net realizable value. The analysis of estimated net realizable value is based on customer orders, market trends and historical pricing. If the carrying amount exceeds the estimated net realizable value, the carrying amount is reduced to the estimated net realizable value. We allocate fixed production overhead costs to inventory based on the normal capacity of our production facilities.

Valuation of Long-Lived Assets. We assess the realizable value of long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In assessing the recoverability of our assets, we make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. As applicable, we make assumptions regarding the useful lives of the assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets.

Business Segments

We operate in one business segment.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010

Revenues


	For the Three Months Ended December 31,
	2011		2010
	(unaudited)
	(in thousands)
Revenues:
Product shipments	$	62,656	$	42,962
Sales of excess inventory of natural gas		358		—

Total revenues	$	63,014	$	42,962


	For the Three Months Ended December 31, 2011				For the Three Months Ended December 31, 2010
	Tons		Revenue		Tons		Revenue
					(unaudited)
	(in thousands)				(in thousands)
Product Shipments:
Ammonia		55	$	37,391		44	$	22,828
UAN		65		20,088		79		15,298
Urea (liquid and granular)		7		3,714		7		2,994
CO ₂		15		433		34		783
Nitric Acid		3		1,030		3		1,059

Total		145	$	62,656		167	$	42,962

We generate revenue primarily from sales of nitrogen fertilizer products manufactured at our facility and used primarily in corn production. Our facility is designed to produce ammonia, UAN, liquid and granular urea, nitric acid and CO ₂ using natural gas as a feedstock. Revenues are seasonal based on the planting, growing, and harvesting cycles of customers utilizing nitrogen fertilizer.

The average sales prices per ton in the three months ended December 31, 2011 as compared with the three months ended December 31, 2010 increased by 34% and 59% for ammonia and UAN, respectively. These increases were due to higher demand caused by a combination of low levels of grain and fertilizer inventories and expectations of higher corn acreage in 2012. These two products comprised approximately 92% and 89%, respectively, of our product sales for three months ended December 31, 2011 and 2010.

Cost of Sales


	For the Three Months Ended December 31,
	2011		2010
			(unaudited)
	(in thousands)
Cost of sales:
Product shipments	$	34,024	$	26,835
Turnaround expenses		2,957		—
Sales of excess inventory of natural gas		479		—

Total cost of sales	$	37,460	$	26,835

Cost of sales was approximately $37.5 million for the three months ended December 31, 2011 compared to approximately $26.8 million for the three months ended December 31, 2010. Cost of sales from product shipments was approximately $34.0 million for the three months ended December 31, 2011, compared to approximately $26.8 million for the three months ended December 31, 2010. The increase in cost of sales on product shipments for the three months ended December 31, 2011 compared to the three months ended December 31, 2010 was primarily due to the sale of approximately 12,000 tons of ammonia that were purchased by barge at a cost much higher than the production cost of such ammonia would have been and higher natural gas costs.

Natural gas costs comprised approximately 47% of cost of sales on product shipments for the three months ended December 31, 2011 compared to 53% of cost of sales on product shipments for the three months ended December 31, 2010. Labor costs comprised approximately 14% of cost of sales on product shipments for the three months ended December 31, 2011 compared to approximately 12% of cost of sales on product shipments for the three months ended December 31, 2010. Depreciation expense included in cost of sales was $3.2 million and $2.5 million, respectively, for the three months ended December 31, 2011 and 2010 and comprised approximately 9% of cost of sales on product shipments for each of the three months ended December 31, 2011 and 2010.

Natural gas, though not purchased for the purpose of resale, is occasionally sold under certain circumstances, such as when contracted quantities received exceed our production requirements or our storage capacity. In these situations, which we refer to as sales of excess inventory of natural gas, the sales proceeds are recorded as revenue and the related cost is recorded as a cost of sales.

Gross Profit


	For the Three Months Ended December 31,
	2011			2010
				(unaudited)
	(in thousands)
Gross profit (loss):
Product shipments	$	28,632		$	16,127
Turnaround expenses		(2,957	)		—
Sales of excess inventory of natural gas		(121	)		—

Total gross profit	$	25,554		$	16,127

Gross profit was approximately $25.6 million for the three months ended December 31, 2011 compared to approximately $16.1 million for the three months ended December 31, 2010. Gross profit margin on product shipments was 46% for the three months ended December 31, 2011 as compared to 38% for the three months ended December 31, 2010. This increase was primarily due to higher sales prices, partially offset by lower margins received on sales of approximately 12,000 tons of ammonia purchased by barge and higher natural gas costs.

Operating Expenses


	For the Three Months Ended December 31,
	2011			2010
				(unaudited)
	(in thousands)
Operating expenses:
Selling, general and administrative	$	3,336		$	1,431
Depreciation		77			112
Gain on disposal of property, plant and equipment		(507	)		—

Total operating expenses	$	2,906		$	1,543

Operating expenses were approximately $2.9 million for the three months ended December 31, 2011 compared to approximately $1.5 million for the three months ended December 31, 2010. These expenses were primarily comprised of selling, general and administrative expense and depreciation expense which was partially offset by gain on disposal of property, plant and equipment.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $3.3 million for the three months ended December 31, 2011 compared to approximately $1.4 million for the three months ended December 31, 2010. This increase was primarily due to approximately $0.5 million in additional payroll of which approximately $0.3 million was payroll costs allocated to us by Rentech, approximately $0.4 million related to publicly traded limited partnership expenses, and an increase in accounting, internal audit, and tax services expenses of approximately $0.8 million due to our change in fiscal year end and becoming a publicly traded limited partnership.

Depreciation . Depreciation expense was approximately $0.1 million for the three months ended December 31, 2011 and 2010. 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, as a manufacturing cost, is distributed between cost of sales and finished goods inventory, based on product volumes.

Gain on Disposal of Property, Plant and Equipment . For the three months ended December 31, 2011, gain on disposal of property, plant and equipment was primarily due to the sale of tubes and catalyst removed during the turnaround in September and October 2011.

Operating Income


	For the Three Months Ended December 31,
	2011			2010
				(unaudited)
	(in thousands)
Operating income (loss):
Product shipments	$	25,726		$	14,584
Turnaround expenses		(2,957	)		—
Sales of excess inventory of natural gas		(121	)		—

Total operating income	$	22,648		$	14,584

Operating income was approximately $22.6 million for the three months ended December 31, 2011 compared to approximately $14.6 million for the three months ended December 31, 2010. Operating income from product shipments was approximately $25.7 million for the three months ended December 31, 2011 compared to approximately $14.6 million for the three months ended December 31, 2010. The increase in income from operations for product shipments was primarily due to higher sales prices, partially offset by lower margins received on sales of approximately 12,000 tons of ammonia purchased by barge, higher natural gas costs and higher operating expenses.

Other Income (Expense), Net


	For the Three Months Ended December 31,
	2011			2010
				(unaudited)
	(in thousands)
Other income (expense), net:
Interest income	$	14		$	13
Interest expense		(1,947	)		(2,912	)
Loss on debt extinguishment		(10,263	)		(4,593	)
Other income, net		3			4

Total other expense, net	$	(12,193	)	$	(7,488	)

Net other expense was approximately $12.2 million for the three months ended December 31, 2011 compared to approximately $7.5 million for the three months ended December 31, 2010. The increase in other expense for the three months ended December 31, 2011 as compared to the three months ended December 31, 2010 was primarily due to the larger loss on debt extinguishment primarily due to a higher amount of debt issuance costs written off and the payment of a call premium fee of approximately $2.9 million.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2011 AND 2010

Revenues


	For the Fiscal Years Ended September 30,
	2011		2010
	(in thousands)
Revenues:
Product shipments	$	179,400	$	129,392
Sales of excess inventory of natural gas		457		2,004

Total revenues	$	179,857	$	131,396


	For the Fiscal Year Ended September 30, 2011				For the Fiscal Year Ended September 30, 2010
	Tons		Revenue		Tons		Revenue
	(in thousands)				(in thousands)
Product Shipments:
Ammonia		125	$	73,346		153	$	57,909
UAN		315		84,646		294		52,912
Urea (liquid and granular)		29		13,708		32		12,663
CO ₂		110		2,825		107		2,779
Nitric Acid		15		4,875		11		3,129

Total		594	$	179,400		597	$	129,392

Revenues were approximately $179.9 million for the fiscal year ended September 30, 2011 compared to approximately $131.4 million for the fiscal year ended September 30, 2010. This increase was primarily the result of higher prices paid for our products during fiscal year ended September 30, 2011, resulting from stronger demand for nitrogen fertilizer products during the period. Ammonia sales volumes decreased and UAN sales volumes increased during the fiscal year ended September 30, 2011 as we upgraded more ammonia into UAN to realize higher gross profit margins.

The average sales prices per ton in the current fiscal year as compared with the prior fiscal year increased by 56% and 49% for ammonia and UAN, respectively. These increases were due to higher demand caused by a combination of low levels of corn and fertilizer inventories and expectations of higher corn acreage in 2011. These two products comprised approximately 88% and 86%, respectively, of our product sales for each of the fiscal years ended September 30, 2011 and 2010.

Cost of Sales


	For the Fiscal Years Ended September 30,
	2011		2010
	(in thousands)
Cost of sales:
Product shipments	$	98,250	$	99,749
Turnaround expenses		4,490		3,955
Sales of excess inventory of natural gas		546		2,259
Simultaneous sale and purchase of natural gas		—		57

Total cost of sales	$	103,286	$	106,020

Cost of sales was approximately $103.3 million for the fiscal year ended September 30, 2011 compared to approximately $106.0 million for the fiscal year ended September 30, 2010. Cost of sales from product shipments was approximately $98.3 million for the fiscal year ended September 30, 2011, compared to approximately $99.7 million for the fiscal year ended September 30, 2010. The decrease in cost of sales on product shipments for the fiscal year ended September 30, 2011 compared to the fiscal year ended September 30, 2010 was primarily due to lower natural gas prices during the fiscal year ended September 30, 2011 and unplanned repairs and maintenance costs during the first quarter of fiscal 2010.

Natural gas costs comprised approximately 50% of cost of sales on product shipments for the fiscal year ended September 30, 2011 compared to 54% of cost of sales on product shipments for the fiscal year ended September 30, 2010. Labor costs comprised approximately 12% of cost of sales on product shipments for each of the fiscal years ended September 30, 2011 and 2010. Depreciation expense included in cost of sales was $9.6 million and $10.1 million for the fiscal years ended September 30, 2011 and 2010, respectively, and comprised approximately 10% of cost of sales on product shipments for each of the fiscal years ended September 2011 and 2010.

Turnaround expenses represent the cost of maintenance during turnarounds, which occur approximately every two years. A facility turnaround occurred in September and October 2011 and October 2009. As a result, during the fiscal years ended September 30, 2011 and 2010, we incurred turnaround expenses of approximately $4.5 million and $4.0 million, respectively. In October 2011, we expensed additional costs relating to the turnaround.

When the opportunity presents itself, we may also sell, to a third party at one location, natural gas that we have purchased or are required to purchase under fixed-price contracts and simultaneously purchase, at a different location and at a lower price, the same quantity of natural gas in order to capture an immediate benefit from the price differential between the two delivery points. We refer to these situations as a simultaneous sale and purchase of natural gas. The sale of gas in conjunction with a simultaneous purchase may be at a price lower (or higher) than the purchase price previously committed under a forward purchase contract, which may result in a loss (or profit) compared to the price required in the forward purchase contract. The natural gas is immediately repurchased at a lower price resulting in a lower cost of sales when inventory is sold. All or a portion of a loss relative to the forward purchase contract may be offset (or a profit increased) by a gain on the simultaneous sale and purchase transaction. None of these transactions occurred during the fiscal year ended September 30, 2011, and only a minor amount occurred during the fiscal year ended September 30, 2010.

Gross Profit


	For the Fiscal Years Ended September 30,
	2011			2010
	(in thousands)
Gross profit (loss):
Product shipments	$	81,150		$	29,643
Turnaround expenses		(4,490	)		(3,955	)
Sales of excess inventory of natural gas		(89	)		(255	)
Simultaneous sale and purchase of natural gas		—			(57	)

Total gross profit	$	76,571		$	25,376

Gross profit was approximately $76.5 million for the fiscal year ended September 30, 2011 compared to approximately $25.4 million for the fiscal year ended September 30, 2010. Gross profit margin on product shipments was 45% for the fiscal year ended September 30, 2011 as compared to 23% for the fiscal year ended September 30, 2010. This increase was primarily due to higher sales prices and lower natural gas prices during the fiscal year ended September 30, 2011 and unplanned repairs and maintenance costs during the first quarter of fiscal 2010.

Operating Expenses


	For the Fiscal Years Ended September 30,
	2011		2010
	(in thousands)
Operating expenses:
Selling, general and administrative	$	5,786	$	4,497
Depreciation		409		439
Loss on impairment		—		95
(Gain) loss on disposal of property, plant and equipment		522		(44	)

Total operating expenses	$	6,717	$	4,987

Operating expenses were approximately $6.7 million for the fiscal year ended September 30, 2011 compared to approximately $5.0 million for the fiscal year ended September 30, 2010. These expenses were primarily comprised of selling, general and administrative expense, depreciation expense and loss on disposal of property, plant and equipment.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $5.8 million for the fiscal year ended September 30, 2011 compared to approximately $4.5 million for the fiscal year ended September 30, 2010. This increase was primarily due to additional audit and tax fees, administrative agent fees under our then-existing credit agreement and sales-based incentive bonuses.

Depreciation . Depreciation expense was approximately $0.4 million for the fiscal years ended September 30, 2011 and 2010. 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, as a manufacturing cost, is distributed between cost of sales and finished goods inventory, based on product volumes.

Loss on Disposal of Property, Plant and Equipment . Loss on disposal or property, plant and equipment was approximately $0.5 million for the fiscal year ended September 30, 2011 compared to a gain of approximately $44,000 for the fiscal year ended September 30, 2010. This increase was primarily due to the removal of a selective catalyst recovery unit for approximately $886,000 in the fiscal year ended September 30, 2011 which was partially offset by various miscellaneous sales and exchanges of nonmonetary assets totaling approximately $364,000 in the fiscal year ended September 30, 2011.

Operating Income


	For the Fiscal Years Ended September 30,
	2011			2010
	(in thousands)
Operating income (loss):
Product shipments	$	74,433		$	24,656
Turnaround expenses		(4,490	)		(3,955	)
Sales of excess inventory of natural gas		(89	)		(255	)
Simultaneous sale and purchase of natural gas		—			(57	)

Total operating income	$	69,854		$	20,389

Operating income was approximately $69.9 million for the fiscal year ended September 30, 2011 compared to approximately $20.4 million for the fiscal year ended September 30, 2010. Operating income from product shipments was approximately $74.4 million for the fiscal year ended September 30, 2011 compared to approximately $24.7 million for the fiscal year ended September 30, 2010. The increase in income from operations for product shipments was primarily due to higher sales prices and lower natural gas prices during the fiscal year ended September 30, 2011 and unplanned repairs and maintenance costs during the first quarter of fiscal 2010, partially offset by additional audit and tax fees, administrative agent fees under a former credit agreement REMC entered into during the fiscal year ended September 30, 2010, or our 2010 credit agreement, and sales-based incentive bonuses incurred during fiscal year ended September 30, 2011.

Other Income (Expense), Net


	For the Fiscal Years Ended September 30,
	2011			2010
	(in thousands)
Other income (expense), net:
Interest income	$	51		$	57
Interest expense		(13,752	)		(9,859	)
Loss on debt extinguishment		(13,816	)		(2,268	)
Other income (expense), net		4			34

Total other expense, net	$	(27,513	)	$	(12,036	)

Net other expense was approximately $27.5 million for the fiscal year ended September 30, 2011 compared to approximately $12.0 million for the fiscal year ended September 30, 2010. During the fiscal year ended September 30, 2011, we had a loss on debt extinguishment of $4.6 million relating to a November 2010 amendment to our 2010 credit agreement. In June 2011, we had a loss on debt extinguishment of $9.2 million relating to a former credit agreement REMC entered into during the fiscal year ended September 30, 2011, or our 2011 credit agreement. Also, interest expense increased primarily due to higher outstanding principal balances under our 2010 credit agreement and our 2011 credit agreement.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009

Revenues


	For the Fiscal Years Ended September 30,
	2010		2009
	(in thousands)
Revenues:
Product shipments	$	129,392	$	184,071
Sales of excess inventory of natural gas		2,004		2,378

Total revenues	$	131,396	$	186,449


	For the Fiscal Year Ended September 30, 2010				For the Fiscal Year Ended September 30, 2009
	Tons		Revenue		Tons		Revenue
	(in thousands)				(in thousands)
Product Shipments:
Ammonia		153	$	57,909		126	$	91,413
UAN		294		52,912		267		71,185
Urea (liquid and granular)		32		12,663		36		15,876
CO ₂		107		2,779		95		2,571
Nitric Acid		11		3,129		9		3,026

Total		597	$	129,392		533	$	184,071

Revenues were approximately $131.4 million for the fiscal year ended September 30, 2010 compared to approximately $186.4 million for the fiscal year ended September 30, 2009. The decrease was primarily due to decreased sales prices for all of our products which was partially offset by an increase in our UAN sales volume. Sales volume increased for UAN due to a higher availability of the product in the fiscal year ended September 30, 2010, as compared to the previous year. This was due to a combination of higher carryover inventory into the year and lower production in the fiscal year ended September 30, 2009 compared to the fiscal year ended September 30, 2010. The lower production in the fiscal year ended September 30, 2009 can be attributed in part to an unplanned shutdown due to a power outage in January 2009, following which ammonia production was reduced to two-thirds of capacity for 67 days to avoid inventory containment issues. This was partially offset by a 15-day turnaround in October 2009 and subsequent 15-day unplanned shutdown due to equipment failures, which reduced production in the fiscal year ended September 30, 2010.

The average sales price per ton decreased by 48% for ammonia and by 33% for UAN in the fiscal year ended September 30, 2010 compared to the respective average sales prices per ton of ammonia and UAN in the fiscal year ended September 30, 2009. These decreases occurred because the prices for a majority of the shipments in the fiscal year ended September 30, 2009 had been determined in product prepayment contracts that were signed when fertilizer prices were at peak levels in 2008. Management believes that the significant decline in prices for nitrogen fertilizer that occurred from the end of 2008 through 2009 was due to, among other things, a substantial drop in corn prices and the price of natural gas, a key input, and weak economic conditions. Sales of ammonia and UAN comprised approximately 86% and 88%, respectively, of our product sales for the fiscal years ended September 30, 2010 and 2009.

Cost of Sales


	For the Fiscal Years Ended September 30,
	2010		2009
	(in thousands)
Cost of sales:
Product shipments	$	99,749	$	98,968
Turnaround expenses		3,955		149
Sales of excess inventory of natural gas		2,259		3,996
Simultaneous sale and purchase of natural gas		57		22,775

Total cost of sales	$	106,020	$	125,888

Cost of sales was approximately $106.0 million for the fiscal year ended September 30, 2010 compared to approximately $125.9 million for the fiscal year ended September 30, 2009. Cost of sales from product shipments was approximately $99.7 million for the fiscal year ended September 30, 2010, compared to approximately $99.0 million for the fiscal year ended September 30, 2009.

Natural gas and labor costs comprised approximately 54% and 12%, respectively, of cost of sales on product shipments for the fiscal year ended September 30, 2010 compared to 64% and 13%, respectively, for the fiscal year ended September 30, 2009. Depreciation expense included in cost of sales was $10.1 million and $8.3 million for the fiscal years ended September 30, 2010 and 2009, respectively, and comprised approximately 10% of cost of sales on product shipments for the fiscal year ended September 2010 compared to 8% of cost of sales on product shipments for the fiscal year ended September 30 2009.

Turnaround expenses represent the cost of maintenance during turnarounds, which occur approximately every two years. A facility turnaround occurred in October 2009 and some preliminary turnaround activities occurred in September 2009, which did not require the facility to be shut down. As a result, during the fiscal years ended September 30, 2010 and 2009, we incurred turnaround expenses of approximately $4.0 million and $149,000, respectively.

During fiscal year 2009, we were able to take advantage of simultaneous sale and purchase opportunities, resulting in immediate benefits of $188,000. In fiscal year 2009, the natural gas sold as part of the simultaneous sale and purchase transactions had been purchased under forward purchase contracts that required us to pay prices higher than the prices received in conjunction with the simultaneous sale and purchase transactions, resulting in losses on sales of this natural gas of $22.8 million. The natural gas was immediately repurchased at a lower price which resulted in the benefit of $188,000 from the simultaneous sale and purchase transactions. The losses were recorded as cost of sales at the time of the simultaneous purchase and sale transactions, net of the immediate benefits from the simultaneous sale and purchase of $188,000. The recording of the losses is effectively accelerating the timing of recognizing the cost of the high-priced natural gas purchased under the original forward purchase contracts. In the absence of the simultaneous sale and purchase transactions, the higher priced natural gas under contract would have been inventoried into finished product and later expensed when the related finished product was sold. For fiscal year 2009, the $22.8 million loss recorded at the time of the simultaneous sale and purchase transactions was followed by a $22.8 million reduction in cost of sales as product produced from the lower priced natural gas was sold. During fiscal year 2010, simultaneous sale and purchases of natural gas were immaterial. See “—Comparison of the Results of Operations for the Fiscal Years Ended September 30, 2011 and 2010—Cost of Sales” for a discussion of our sales of excess inventory of natural gas and simultaneous sale and purchase of natural gas.

Gross Profit


	For the Fiscal Years Ended September 30,
	2010			2009
	(in thousands)
Gross profit (loss):
Product shipments	$	29,643		$	85,103
Turnaround expenses		(3,955	)		(149	)
Sales of excess inventory of natural gas		(255	)		(1,618	)
Simultaneous sale and purchase of natural gas		(57	)		(22,775	)

Total gross profit	$	25,376		$	60,561

Gross profit was approximately $25.4 million for the fiscal year ended September 30, 2010 compared to approximately $60.6 million for the fiscal year ended September 30, 2009. Our gross profit margin on product shipments was 23% for the fiscal year ended September 30, 2010 compared to 46% for the fiscal year ended September 30, 2009. This decrease was primarily due to lower sales prices, partially offset by increased sales volume of UAN and lower natural gas prices in the fiscal year ended September 30, 2010 compared to the fiscal year ended September 30, 2009.

Operating Expenses


	For the Fiscal Years Ended September 30,
	2010			2009
	(in thousands)
Operating expenses:
Selling, general and administrative	$	4,497		$	4,758
Depreciation		439			403
Loss on impairment		95			—
(Gain) loss on disposal of property, plant and equipment		(44	)		87

Total operating expenses	$	4,987		$	5,248

Operating expenses were approximately $5.0 million for the fiscal year ended September 30, 2010 compared to approximately $5.2 million for the fiscal year ended September 30, 2009. These expenses were primarily comprised of selling, general and administrative expense and depreciation expense.

Selling, General and Administrative Expense . Selling, general and administrative expenses were approximately $4.5 million for the fiscal year ended September 30, 2010 compared to approximately $4.8 million for the fiscal year ended September 30, 2009. This decrease was primarily due to lower audit and tax fees allocated to us by Rentech and reductions in consulting and legal expenses, partially offset by fees paid to the administrative agent, legal expenses and title insurer expenses incurred in connection with the modification of our credit agreement in July 2010.

Depreciation . Depreciation expense was approximately $0.4 million for each of the fiscal years ended September 30, 2010 and 2009. A portion of depreciation expense is associated with assets supporting general and administrative functions and is recorded in operating expense. As a manufacturing cost, the majority of depreciation expense is distributed between cost of sales and finished goods inventory, based on product volumes.

Operating Income


	For the Fiscal Years Ended September 30,
	2010			2009
	(in thousands)
Operating income (loss):
Product shipments	$	24,656		$	79,855
Turnaround expenses		(3,955	)		(149	)
Sales of excess inventory of natural gas		(255	)		(1,618	)
Simultaneous sale and purchase of natural gas		(57	)		(22,775	)

Total operating income	$	20,389		$	55,313

Operating income was approximately $20.4 million for the fiscal year ended September 30, 2010 compared to approximately $55.3 million for the fiscal year ended September 30, 2009. Operating income from product shipments was approximately $24.7 million for the fiscal year ended September 30, 2010 compared to approximately $79.9 million for the fiscal year ended September 30, 2009. This decrease was primarily due to lower sales prices, partially offset by increased sales volume of UAN and lower natural gas prices in the fiscal year ended September 30, 2010 compared to the fiscal year ended September 30, 2009.

Other Income (Expense), Net


	For the Fiscal Years Ended September 30,
	2010			2009
	(in thousands)
Other income (expense), net:
Interest income	$	57		$	190
Interest expense		(9,859	)		(8,481	)
Loss on debt extinguishment		(2,268	)		—
Other income (expense), net		34			(287	)

Total other expense, net	$	(12,036	)	$	(8,578	)

Net other expense was approximately $12.0 million for the fiscal year ended September 30, 2010 compared to approximately $8.6 million for the fiscal year ended September 30, 2009. This increase was primarily due to higher interest expense resulting from additional borrowings and a loss on extinguishment of debt in January 2010.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity has historically been cash from operations. We expect to fund our operating needs, including maintenance capital expenditures, from operating cash flow, cash on hand and borrowings under our 2012 revolving credit facility. We believe that our current and expected sources of liquidity will be adequate to fund these operating needs and capital expenditures for the next 12 months. We intend to fund the costs of our ammonia capacity expansion project with borrowings under our capital expenditures facility. In the event that we pursue any other expansion projects or acquisitions, we would likely require external financing. External financing sources for expansion projects and acquisitions could include equity or debt, including loans from Rentech.

Sources of Liquidity

Our Initial Public Offering

On November 9, 2011, we completed our initial public offering of 15,000,000 common units representing limited partner interests at a public offering price of $20.00 per common unit. The common units sold to the public in our initial public offering represent 39.2% of our common units outstanding as of the closing of our initial public offering. RNHI owns the remaining 60.8% of our common units. At the closing of our initial public offering, RNHI contributed its member interests in REMC to us, and REMC converted into a limited liability company named Rentech Nitrogen, LLC, organized under the laws of the State of Delaware. We used cash on hand and proceeds from our initial public offering to pay distributions to Rentech and RNHI totaling approximately $137.0 million, repaid debt, paid expenses of our initial public offering, and retained approximately $50.0 million of cash. Specifically, we (i) used approximately $150.8 million of the net proceeds of our initial public offering to make a capital contribution to our operating company for the repayment in full and termination of our 2011 credit agreement and the payment of related fees and expenses; (ii) used approximately $34.7 million of the net proceeds of our initial public offering to make a distribution to RNHI to reimburse it for expenditures made by our operating company during the two-year period preceding our initial public offering for the expansion and improvement of our facility, including expenditures for preliminary work relating to our operating company’s expansion projects; (iii) used approximately $1.1 million of the net proceeds of our initial public offering for the payment of expenditures related to the replacement of our operating company’s steam methane reformer tubes; (iv) retained approximately $5.5 million of the net proceeds of our initial public offering for the payment of expenditures related to our operating company’s urea expansion and DEF build-out project; (v) used approximately $0.6 million of the net proceeds of our initial public offering for the payment of expenditures related to FEED for our operating company’s ammonia capacity expansion project; (vi) retained approximately $40.0 million of the net proceeds of our initial public offering for general working capital purposes; and (vii) used the balance of the net proceeds of our initial public offering, less unpaid transaction expenses, to make a distribution to RNHI in the amount of approximately $43.5 million. Also, our operating company (i) paid approximately $19.4 million to Rentech and, following such payment, the management services agreement between our operating company and Rentech terminated in accordance with its terms; and (ii) distributed to RNHI approximately $39.3 million which equaled all of our operating company’s cash prior to receipt of the net proceeds of our initial public offering.

Distributions

We intend to distribute all of the cash available for distribution we generate each quarter to our unitholders, 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 directors of our general partner following the end of such quarter. As a result of our quarterly distributions, our liquidity will be significantly impacted, 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.

Credit Agreements

On November 10, 2011 our operating company entered into a $25 million credit agreement, or the 2011 revolving credit agreement, among itself, us, as guarantor, and General Electric Capital Corporation, as administrative agent and lender, pursuant to which our operating company obtained a revolving credit facility, or the 2011 revolving credit facility. The 2011 revolving credit facility was to be used to fund our operating company’s seasonal working capital needs, letters of credit and for general partnership purposes. There were no borrowings under the 2011 revolving credit facility.

On December 28, 2011, Rentech entered into a credit agreement, or the bridge loan agreement, as a lender, with us as guarantor, and our operating company as the borrower. The bridge loan agreement consisted of a commitment by Rentech to lend up to $40.0 million to our operating company until May 31, 2012. The bridge loan was put in place to fund certain costs related to the ammonia capacity expansion project currently being developed by our operating company while more permanent longer term financing was structured and negotiated. Total principal borrowed under the bridge loan was approximately $5.9 million.

On February 28, 2012, our operating company entered into the 2012 credit agreement, among itself, us, as guarantor, General Electric Capital Corporation, as administrative agent and swingline lender, GE Capital Markets, Inc., as sole lead arranger and bookrunner, BMO Harris Bank, N.A. as syndication agent, and the lenders party thereto. The 2012 credit agreement amended, restated and replaced the 2011 revolving credit agreement.

The 2012 credit agreement consists of (i) the capital expenditures facility that can be used to pay for capital expenditures related to the ammonia capacity expansion project and for fees and expenses due to the lenders, and (ii) the 2012 revolving credit facility that can be used for seasonal working capital needs, letters of credit and for general purposes.

The 2012 credit agreement has a maturity date of February 27, 2017. Borrowings under the 2012 credit agreement bear interest at a rate equal to an applicable margin plus, at our operating company’s 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. The applicable margin for borrowings under the 2012 credit agreement is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. Additionally, our operating company is required to pay a fee to the lenders under the capital expenditures facility on the undrawn available portion at a rate of 0.75% per annum and a fee to the lenders under the 2012 revolving credit facility on the undrawn available portion at a rate of 0.50% per annum. Our operating company also is required to pay customary letter of credit fees on issued letters of credit. In the event our operating company reduces or terminates the 2012 credit agreement prior to its third anniversary, our operating company will be required to pay a prepayment premium of 1.0% of the principal amount reduced or terminated, subject to certain exceptions.

The 2012 revolving credit facility includes a letter of credit sublimit of $10 million and it can be drawn on or letters of credit can be issued through the day that is seven days prior to the maturity date. The amounts outstanding under the 2012 revolving credit facility will be required to be reduced to zero (other than outstanding letters of credit) for three periods of ten consecutive business days during each year with each period not less than four months apart, and one period to begin each April.

The capital expenditures facility is available for borrowing until February 27, 2014 and requires amortization payments expected to begin in the spring of 2014. In the first two years of amortization, our operating company must make amortization payments of 10% per year, or 2.5% per quarter, and thereafter, 25% per year, or 6.25% per quarter of the aggregate amount drawn, in each case with the final principal payment due upon maturity.

All obligations of our operating company under the 2012 credit agreement are unconditionally guaranteed by us. All obligations under the 2012 credit agreement and the guarantees of those obligations are secured by substantially all of our operating company’s assets, as well as substantially all our assets (including our equity interest in our operating company).

The 2012 credit agreement also contains customary affirmative and negative covenants and events of default relating to us and our operating company and our respective subsidiaries. The covenants and events of default include, among other things, limitations on the incurrence of indebtedness and liens, the making of investments, the sale of assets and the making of restricted payments. The 2012 credit agreement also contains specific provisions limiting RNHI, the sole member of our general partner, from engaging in certain business activities and owning certain property, and events of default relating to a change in control in the event Rentech ceases to appoint the majority of the board of directors of both RNHI and our general partner. Dividends and distributions from our operating company and us are permitted so long as (1) no default or event of default exists or will result therefrom and (2) our operating company delivers a certificate to the administrative agent under the 2012 credit agreement certifying pro forma compliance with the terms of the 2012 credit agreement, including its financial covenants, as of the date of such dividend or distribution.

In addition, the 2012 credit agreement requires our operating company to comply with certain financial covenants including (1) a maximum Total Leverage Ratio (as defined in the 2012 credit agreement) of 2.5x as of the end of each fiscal quarter for the 12 month period then ending, and (2) maintenance of a minimum Fixed Charge Coverage Ratio (as defined in the 2012 credit agreement) of not less than 1.0x as of the end of each fiscal quarter for the 12 month period then ending.

Upon entry into the 2012 credit agreement, our operating company borrowed approximately $8.5 million under the capital expenditures facility (i) to repay in full outstanding borrowings under the bridge loan of approximately $5.9 million and (ii) to pay fees associated with the 2012 credit agreement of approximately $2.6 million. Our operating company terminated the Bridge Loan Agreement upon entry into the 2012 Credit Agreement.

Capital Expenditures

We divide our capital expenditures into two categories: maintenance and expansion capital expenditures. Maintenance capital expenditures are capital expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets or for the acquisition of existing, or the construction or development of new capital assets) made to maintain, including over the long term, our operating capacity or operating income, 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 capital expenditures 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 totaled approximately $2.5 million and $2.7 million in the three months ended December 31, 2011 and December 31, 2010, respectively, and $24.5 million and $9.9 million in the fiscal years ended September 30, 2011 and 2010, respectively. Our maintenance capital expenditures are expected to be approximately $4.0 million for the year ending December 31, 2012. Our expansion capital expenditures totaled approximately $1.9 million and $0 in the three months ended December 31, 2011 and December 31, 2010, respectively. Our expansion capital expenditures are expected to be approximately $55.6 million for the year ending December 31, 2012 for expenditures related to our urea expansion and DEF build-out project and our ammonia capacity expansion project. We expect that our urea expansion project and DEF build-out could be completed by the end of 2012 and to collectively cost approximately $6.0 million to complete. We are using a portion of the net proceeds from our initial public offering to fund this project. FEED for our ammonia capacity expansion project was completed in November 2011. We expect that the ammonia expansion project could cost approximately $100.0 million to complete. We have entered into the 2012 credit agreement, which provides for a $135.0 million senior secured credit facility including a $100.0 million capital expenditures facility. With the exception of FEED, which was funded using a portion of the net proceeds from our initial public offering, we intend to use borrowings under the capital expenditures facility to fund the ammonia capacity expansion project.

Our estimated capital expenditures are subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects. For example, we may experience increases in labor or equipment costs necessary to comply with government regulations or to complete projects that sustain or improve the profitability of our facility. Our future capital expenditures will be determined by the board of directors of our general partner.

CASH FLOWS

Operating Activities

Revenues were approximately $63.0 million for the three months ended December 31, 2011 compared to approximately $43.0 million for the three months ended December 31, 2010. This increase was primarily the result of higher prices paid for our products during the three months ended December 31, 2011. Deferred revenue decreased $13.8 million during the three months ended December 31, 2011, versus an increase of $17.0 million during the three months ended December 31, 2010. The decrease during the three months ended December 31, 2011 was a result of a high volume of prepaid shipments resulting from the normal seasonality of our business, and due to the fact that few new contracts were signed during the period, as compared to the three months ended December 31, 2010. In comparison, the balance increased during the three months ended December 31, 2010 due to signing a significant number of new contracts during the period, partially offset by the fulfillment of product prepayment contracts during the three months ended December 31, 2010. Revenues were approximately $179.9 million for the fiscal year ended September 30, 2011 compared to approximately $131.4 million for the fiscal year ended September 30, 2010. This increase was primarily the result of higher prices paid for our products during fiscal year ended September 30, 2011, resulting from stronger demand for nitrogen fertilizer products during the period. Deferred revenue increased $19.6 million during the fiscal year ended September 30, 2011, versus a decrease of $3.7 million during the fiscal year ended September 30, 2010. This increase in deferred revenue was due to higher prepaid sales prices in fiscal year 2011 than in fiscal year 2010, and also a higher quantity of ammonia and UAN product presold in fiscal year 2011. The increase in revenues and deferred revenue from fiscal year 2011 to fiscal year 2010 are the primary reasons net cash flow from operating activities increased from $20.1 million in fiscal year 2010 to $83.7 million in fiscal year 2011. Net cash provided by operating activities decreased by $3.7 million from fiscal year 2009, to $20.1 million for fiscal year 2010, primarily due to lower fertilizer sales prices, partially offset by lower natural gas prices. Our profits, operating cash flows and cash available for distribution are subject to changes in the prices of our products and our primary feedstock, natural gas. Our products and feedstocks which are commodities, and, as such, their prices can be volatile in response to numerous factors outside of our control. In addition, the timing of product prepayment contracts and associated cash receipts are factors largely outside of our control that affect our profits, operating cash flows and cash available for distribution.

Net cash used by operating activities for the three months ended December 31, 2011 was approximately $6.0 million. We had net income of $10.5 million for the three months ended December 31, 2011. During this period, we used a portion of the net proceeds from our initial public offering to repay in full the term loans outstanding under our 2011 credit agreement, including approximately $2.9 million to pay the associated prepayment penalty fees. This transaction resulted in a loss on debt extinguishment of $10.3 million. Accounts receivable increased by approximately $2.9 million due to higher sales volumes in the three months ended December 31, 2011 than in the three months ended September 30, 2011, due to normal seasonality of the business and our facility being down for a turnaround during the second half of September 2011. Inventories decreased by approximately $11.2 million due to a high volume of product sales during this quarter, which was due to the normal seasonality of our business. Deferred revenue decreased by approximately $13.8 million as a result of deliveries on product prepayment contracts being higher than the signing of new product prepayment

contracts during the period due to the normal seasonality of our business, and due to the fact that few new product prepayment contracts were signed during the period. Accrued liabilities, accrued payroll and other liabilities decreased by approximately $1.6 million due to a large amount of accruals at September 30, 2011 related to turnaround costs.

Net cash provided by operating activities for the three months ended December 31, 2010 was approximately $23.7 million. We had net income of $4.3 million for the three months ended December 31, 2010. During this period, we entered into the second amendment to our 2010 credit agreement and repaid a portion of the principal outstanding under our 2010 credit agreement. This transaction resulted in a loss on the extinguishment of debt of $4.6 million. Accounts receivable increased by approximately $7.0 million due to higher sales volume leading up to December 31, 2010 than up to September 30, 2010, due to normal seasonality of the business and due to a large increase in UAN sales prices beginning in October 2010. Inventories decreased by approximately $1.5 million due to a high volume of product sales during this quarter which was attributable to the normal seasonality of our business. This decrease was less than the decrease we typically experience during this period due to low inventory levels leading into the period, caused by unusually high sales volume the previous summer. Deferred revenue increased by approximately $17.0 million due to a significant number of new contracts that were signed during the period, partially offset by the fulfillment of product prepayment contracts during the three months ended December 31, 2010.

Net cash provided by operating activities for the fiscal year ended September 30, 2011 was approximately $83.7 million. We had net income of $24.9 million for the fiscal year ended September 30, 2011. During this period, we entered into the second amendment to our 2010 credit agreement and repaid a portion of the principal outstanding under our 2010 credit agreement. This transaction resulted in a loss on the extinguishment of debt of $4.6 million. We also entered into our 2011 credit agreement during this period and paid off the outstanding principal balance under our 2010 credit agreement. This transaction resulted in a loss on debt extinguishment of $9.2 million. These two transactions resulted in a total loss on debt extinguishment of $13.8 million. During the fiscal year ended September 30, 2011, we used $8.3 million of proceeds from our 2011 credit agreement to pay the prepayment penalty fee resulting from the prepayment of term loans outstanding under our 2010 credit agreement. During the fiscal year ended September 30, 2011, accounts receivable decreased by $5.0 million, due to having a high volume of summer sales in fiscal year ended September 30, 2010 which increased the September 30, 2010 balance. Accounts payable and accrued liabilities increased by $0.4 million and $4.6 million, respectively, during the fiscal year ended September 30, 2011 due to significant vendor invoices and accruals for turnaround activities in September 2011, as well as for significant capital expenditures during the turnaround. Inventories increased $9.2 million during the fiscal year ended September 30, 2011 due to having more summer sales contracts in fiscal year 2010, whereas in fiscal year 2011, it followed the normal seasonal trend of having more fall sales contracts, requiring high inventory levels at September 30, 2011 to fulfill those contracts. Deferred revenue increased $19.6 million during the fiscal year ended September 30, 2011. The increase was due to higher prepaid sales prices in the fiscal year ended September 30, 2011 than in the fiscal year ended September 30, 2010, and also a higher quantity of ammonia and UAN product presold in the fiscal year ended September 30, 2011.

Net cash provided by operating activities for the fiscal year ended September 30, 2010 was $20.1 million. We had net income of $5.0 million for fiscal year 2010. During the fiscal year ended September 30, 2010, we entered into our 2010 credit agreement, the proceeds from which were used to repay in full the term loan under the credit agreement we entered into in fiscal year 2008, or our 2008 credit agreement. This transaction resulted in a loss on the extinguishment of debt of $2.3 million. During the fiscal year ended September 30, 2010, accounts receivable increased by $0.9 million due to high summer sales volume, mainly resulting from some large shipments by barge. During the fiscal year ended September 30, 2009, we recorded a property insurance claim receivable for insured property losses related to a weather-related shutdown of our facility in January 2009. During the fiscal year ended September 30, 2010, we collected the outstanding balance of $1.8 million. Inventories decreased during the fiscal year ended September 30, 2010 by $4.7 million due to a combination of inventory levels having been high leading into the fiscal year from a seasonal build-up of inventory prior to the fall ammonia application season and reduction of inventories from higher than normal sales volumes during the summer of 2010, mainly due to some large shipments by barge. This was partially offset by higher costs of natural gas associated with product held in inventory. Deposits on natural gas purchase contracts increased by $1.6 million during the fiscal year ended September 30, 2010 due to timing of purchases and vendor selection, which impact payment terms. Deferred revenue resulting from product pre-sales decreased $3.7 million during the fiscal year ended September 30, 2010 due to timing of cash receipts on fall product prepayment contracts.

Net cash provided by operating activities for the fiscal year ended September 30, 2009 was approximately $23.9 million. During the fiscal year ended September 30, 2009, we had net income of $28.2 million. Accounts receivable decreased by $3.8 million during the fiscal year ended September 30, 2009 due to reduced UAN sales and collection of old receivable balances. We recorded a property insurance claim receivable for insured property losses related to a weather-related shutdown of our facility in January 2009. Inventories decreased during the fiscal year ended September 30, 2009 by $5.3 million due to significant reductions in natural gas prices, partially offset by higher inventory levels at the end of the year. Deposits on natural gas contracts decreased by $17.6 million

due to an unusually large amount of deposits required as of September 30, 2008 and a significant drop in natural gas prices after executing the commitments, causing the natural gas suppliers to require deposits to reduce their credit risk. Deferred revenue decreased by $44.6 million during the fiscal year ended September 30, 2009 due to both lower product prepayment prices and a lower volume of tons presold.

Investing Activities

Net cash used in investing activities was approximately $11.6 million, $2.2 million, $17.4 million, $11.6 million and $12.3 million, respectively, for the three months ended December 31, 2011 and 2010, and the fiscal years ended September 30, 2011, 2010 and 2009. The increase in net additions of $9.4 million for the three months ended December 31, 2011 compared to the three months ended December 31, 2010 was primarily due to capital projects worked as part of the turnaround conducted in September and October of 2011. The increase in net additions of $5.8 million for the fiscal year ended September 30, 2011 compared to the fiscal year ended September 30, 2010 was primarily due to capital projects undertaken during the turnaround which was started in September of 2011. The decrease in net additions of $0.6 million for the fiscal year ended September 30, 2010 compared to the fiscal year ended September 30, 2009 was primarily due to large capital projects for the ammonia plant at our facility, which were started and completed in the fiscal year ended September 30, 2009.

Financing Activities

Net cash provided by (used in) financing activities was approximately $11.0 million and ($19.8 million), respectively, for the three months ended December 31, 2011 and 2010. During the three months ended December 31, 2011, we completed our initial public offering, which raised a total of $300.0 million in gross proceeds, and approximately $276.0 million in net proceeds after deducting underwriting discounts and commissions of $21.0 million and offering expenses of approximately $3.0 million, excluding approximately $1.0 million in offering expenses paid prior to September 30, 2011. We also repaid in full and terminated our 2011 credit agreement, which had an outstanding principal balance of $146.3 million, and made distributions of $117.4 million. During the three months ended December 31, 2010, concurrently with entering into the second amendment to our 2010 credit agreement, we and Rentech entered into a second incremental loan assumption agreement to borrow an additional $52.0 million, with an original issue discount of $1.0 million. We also prepaid $20.0 million of outstanding principal in connection with the second amendment to our 2010 credit agreement, from cash on hand that we had reserved for such purpose, and made $2.5 million in scheduled principal payments. Net cash used in financing activities was approximately $49.8 million, $10.3 million and $31.2 million, respectively, for the fiscal years ended September 30, 2011, 2010 and 2009. During the fiscal year ended September 30, 2011, concurrently with entering into the second amendment to our 2010 credit agreement, we and Rentech entered into a second incremental loan assumption agreement to borrow an additional $52.0 million, with an original issue discount of $1.0 million. We also entered into our 2011 credit agreement pursuant to which we borrowed $150.0 million, $85.4 million of which was used to pay off the outstanding principal balance under our 2010 credit agreement. Additionally, for the fiscal year ended September 30, 2011, in addition to $8.7 million of scheduled principal payments, we prepaid $20.0 million of outstanding principal in connection with the second amendment to our 2010 credit agreement, from cash on hand that we had reserved for such purpose, and $5.0 million as a mandatory prepayment in connection with the $5.0 million dividend paid by us to Rentech. During the fiscal year ended September 30, 2010, we replaced our 2008 credit agreement, which had an outstanding balance of $37.1 million and issuance costs of $0.9 million, with the net proceeds from our 2010 credit agreement, which had an initial principal amount of $62.5 million. Our 2010 credit agreement was amended on July 21, 2010 resulting in the increase of the principal balance to $67.5 million. Our 2010 credit agreement had an aggregate original issue discount amount of $3.1 million. For the fiscal year ended September 30, 2009, we made $15.9 million of payments pursuant to our 2008 credit agreement.

CONTRACTUAL OBLIGATIONS

The following table lists our significant contractual obligations and their future payments at December 31, 2011:


Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
2011 revolving credit facility (1)	$	—	$	—	$	—	$	—	$	—
Natural gas (2)		12,337		12,337		—		—		—
Purchase obligations (3)		7,405		7,405		—		—		—
Asbestos removal (4)		277		—		—		—		277
Operating leases		282		240		39		3		—
Gas and electric fixed charges (5)		2,409		913		1,090		406		—

Total	$	22,710	$	20,895	$	1,129	$	409	$	277

(1)

On November 10, 2011, our operating company entered into the 2011 revolving credit agreement, providing for a $25.0 million senior secured revolving credit facility with a two year maturity, or the 2011 revolving credit facility, and paid associated financing costs of approximately $0.9 million. At December 31, 2011, there were no outstanding borrowings under the 2011 revolving credit facility. On February 28, 2012, our operating company entered into the 2012 credit agreement and paid associated financing costs of approximately $2.6 million. The 2012 revolving credit facility under the 2012 credit agreement replaced and upsized the 2011 revolving credit facility. Borrowings under the 2012 credit agreement bear interest at a variable rate based upon either LIBOR or the lender’s alternative base rate, plus in each case an applicable margin. As of the date of this report, there is approximately $8.5 million outstanding under the 2012 credit agreement.

(2)

As of December 31, 2011, the natural gas purchase contracts included delivery dates through May 31, 2012. Subsequent to December 31, 2011, we entered into additional fixed quantity natural gas supply contracts at fixed and indexed prices for various delivery dates through September 30, 2012. The total MMBtus associated with these additional contracts are approximately 2.7 million and the total amount of the purchase commitments are approximately $7.6 million, resulting in a weighted average rate per MMBtu of approximately $2.80. We are required to make additional prepayments under these purchase contracts in the event that market prices fall below the purchase prices in the contracts.

(3)	The amount presented represents certain open purchase orders with our vendors. Not all of our open purchase orders are purchase obligations, since some of the orders are not enforceable or legally binding on us until the goods are received or the services are provided.

(4)

We have a legal obligation to handle and dispose of asbestos at our facility in a special manner when undergoing major or minor renovations or when buildings at this location are demolished, even though the timing and method of settlement are conditional on future events that may or may not be in our control. As a result, we have developed an estimate for a conditional obligation for this disposal. In addition, we, through our normal repair and maintenance program, may encounter situations in which we are required to remove asbestos in order to complete other work. We applied the expected present value technique to calculate the fair value of the asset retirement obligation for the property and, accordingly, the asset and related obligation for the property have been recorded. Since we own the property and currently have no plans to dispose of the property, the obligation is considered long-term and, therefore, considered to be incurred more than five years after December 31, 2011.

(5)	As part of the gas transportation and electric supply contracts, we must pay monthly fixed charges over the term of the contracts.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any material off-balance sheet arrangements as of December 31, 2011.

RECENT ACCOUNTING PRONOUNCEMENTS FROM FINANCIAL STATEMENT DISCLOSURES

In May 2011, the FASB issued guidance which clarifies previous guidance related to fair value measurement. This guidance is effective during interim and annual periods beginning after December 15, 2011. It is effective for our interim period beginning on January 1, 2012. Early application is not permitted. The adoption of this guidance is not expected to have a material impact on our financial position, results of operations or disclosures.

ITEM 7A. QUANTITATIVE

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk . Between November 10, 2011 and December 31, 2011, there were no borrowings made under the 2011 revolving credit facility. We are exposed to interest rate risks related to the 2012 credit agreement. The borrowings under the 2012 credit agreement bear interest at a rate equal to an applicable margin, plus at RNLLC’s 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% and (3) the 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. The applicable margin for borrowings under the 2012 credit agreement is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. As of December 31, 2011, we had not yet entered into our 2012 credit agreement. However, based upon a hypothetical outstanding balance of $10.0 million under our 2012 credit agreement at December 31, 2011, and assuming interest rates are above the applicable minimum, an increase or decrease by 100 basis points of interest would result in an increase or decrease in annual interest expense of approximately $0.1 million.

Commodity Price Risk. We are 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 products manufactured at our facility. Currently, we purchase natural gas for use in our facility on the spot market, and through short-term, fixed supply, fixed price forward and index price purchase contracts. Natural gas prices have fluctuated during the last several years, increasing 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 customers during the high-delivery-volume spring and fall seasons. 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.

We enter into product prepayment contracts committing our customers to purchase our nitrogen fertilizer products at a later date. By using fixed-price forward contracts, we purchase approximately enough natural gas to manufacture the products that have been sold under product prepayment contracts for later delivery. We believe that entering into such fixed-price forward and pre-sale 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 of decreasing natural gas prices and increasing nitrogen fertilizer commodity prices after we have entered into the relevant fix-priced forward and product prepayment contracts. 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 also are exposed to fluctuations in natural gas prices.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

RENTECH NITROGEN PARTNERS, L.P.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page
Financial Statements of Rentech Nitrogen Partners, L.P.:

Report of Independent Registered Public Accounting Firm		64
Consolidated Balance Sheets		65
Consolidated Statements of Operations		66
Consolidated Statements of Stockholder’s Equity (Deficit) / Partners’ Capital		67
Consolidated Statements of Cash Flows		68
Notes to Consolidated Financial Statements		70

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Rentech Nitrogen GP, LLC and Unitholders of Rentech Nitrogen Partners, L.P.

In our opinion, the consolidated balance sheets and the related consolidated statements of operations, of stockholder’s equity (deficit) / partners’ capital and of cash flows present fairly, in all material respects, the financial position of Rentech Nitrogen Partners, L.P. and its subsidiary at December 31, 2011, and September 30, 2011 and 2010, and the results of their operations and their cash flows for the three month period ended December 31, 2011 and each of the three years in the period ended September 30, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Partnership’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Partnership’s internal control over financial reporting based on our audits (which was an integrated audit as of and for the three months ended December 31, 2011). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

March 15, 2012

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Balance Sheets

(Amounts in thousands, except per share data)


	As of December 31,		As of September 30,
	2011		2011			2010
ASSETS
Current assets
Cash	$	44,836	$	51,372		$	34,934
Accounts receivable, net of allowance for doubtful accounts of $0 at December 31, 2011, September 30, 2011 and 2010		7,428		4,617			9,578
Receivable from general partner		72		—			—
Inventories		4,991		16,512			6,966
Deposits on gas contracts		2,807		1,399			2,353
Prepaid expenses and other current assets		1,712		3,072			958
Debt issuance costs		468		2,316			1,548
Other receivables, net		774		553			91
Deferred income taxes		—		1,449			91

Total current assets		63,088		81,290			56,519
Property, plant and equipment, net		59,348		44,950			48,783
Construction in progress		7,062		20,318			2,474
Other assets
Debt issuance costs		404		5,309			1,061
Other assets		541		541			—

Total other assets		945		5,850			1,061

Total assets	$	130,443	$	152,408		$	108,837


LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) / PARTNERS’ CAPITAL
Current liabilities
Accounts payable	$	3,201	$	7,413		$	2,426
Payable to general partner		904		—			—
Accrued payroll and benefits		1,429		2,009			1,284
Accrued liabilities		5,110		11,495			2,913
Deferred revenue		20,331		34,081			14,473
Due to parent company		—		20,073			—
Accrued interest		—		41			23
Term loan		—		38,448			12,835

Total current liabilities		30,975		113,560			33,954

Long-term liabilities
Term loan, net of current portion		—		107,802			48,040
Deferred income taxes		—		6,911			6,272
Other		277		268			237

Total long-term liabilities		277		114,981			54,549

Total liabilities		31,252		228,541			88,503

Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred stock — $100 par value; 120,000 shares authorized; no shares issued and outstanding at September 30, 2011 and 2010		—		—			—
Series A preferred stock — $100 par value; 30,000 shares authorized; no shares issued and outstanding at September 30, 2011 and 2010		—		—			—
Common stock — no par value; 1,000 shares authorized; 985 shares issued and outstanding at September 30, 2011 and 2010		—		—			—
Additional paid-in capital				70,773			70,773
Receivable from parent company		—		—			(114,158	)
Retained earnings (accumulated deficit)		—		(146,906	)		63,719

Total stockholder’s equity (deficit)		—		(76,133	)		20,334

Partners’ capital
Common unitholders — 38,250,000 units issued and outstanding at December 31, 2011		99,191		—			—
General partner’s interest		—		—			—

Total partners’ capital		99,191		—			—

Total liabilities and stockholder’s equity / partners’ capital	$	130,443	$	152,408		$	108,837

See Accompanying Notes to Consolidated Financial Statements.

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Operations

(Amounts in thousands, except per unit data)


	For the Three Months Ended December 31,						For the Fiscal Years Ended September 30,
	2011			2010			2011			2010			2009
				(unaudited)
Revenues	$	63,014		$	42,962		$	179,857		$	131,396		$	186,449
Cost of sales		37,460			26,835			103,286			106,020			125,888

Gross profit		25,554			16,127			76,571			25,376			60,561

Operating expenses
Selling, general and administrative expense		3,336			1,431			5,786			4,497			4,758
Depreciation		77			112			409			439			403
Loss on impairment		—			—			—			95			—
(Gain) loss on disposal of property, plant and equipment		(507	)		—			522			(44	)		87

Total operating expenses		2,906			1,543			6,717			4,987			5,248

Operating income		22,648			14,584			69,854			20,389			55,313

Other income (expense), net
Interest income		14			13			51			57			190
Interest expense		(1,947	)		(2,912	)		(13,752	)		(9,859	)		(8,481	)
Loss on debt extinguishment		(10,263	)		(4,593	)		(13,816	)		(2,268	)		—
Other income (expense), net		3			4			4			34			(287	)

Total other expense, net		(12,193	)		(7,488	)		(27,513	)		(12,036	)		(8,578	)

Income before income taxes		10,455			7,096			42,341			8,353			46,735
Income tax (benefit) expense		—			2,772			17,415			3,344			18,576

Net income	$	10,455		$	4,324		$	24,926		$	5,009		$	28,159


Net income subsequent to initial public offering (November 9, 2011 through December 31, 2011)	$	11,331

Net income per common unit—Basic	$	0.30
Net income per common unit—Diluted	$	0.30

Weighted-average units used to compute net income per common unit:
Basic		38,250
Diluted		38,255

See Accompanying Notes to Consolidated Financial Statements.

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Stockholder’s Equity (Deficit) / Partners’ Capital

(Amounts in thousands)

		XXXX			XXXX		XXXX			XXXX			XXXX			XXXX			XXXX		XXXX			XXXX			XXXX
						Additional			Receivable from			Retained Earnings			Total			Number of								Total
	Common Stock					Paid-in			Parent			(Accumulated			Stockholders’			Common		Common			General			Partners’
	Shares			Amount		Capital			Company			Deficit)			Equity			Units		Unitholders			Partner			Capital
Balance, September 30, 2008		985		$	—	$	70,773		$	(75,206	)	$	30,551		$	26,118			—	$	—		$	—		$	—
Net advances to parent company		—			—		—			(11,844	)		—			(11,844	)		—		—			—			—
Net income		—			—		—			—			28,159			28,159			—		—			—			—

Balance, September 30, 2009		985		$	—	$	70,773		$	(87,050	)	$	58,710		$	42,433			—	$	—		$	—		$	—

Net advances to parent company		—			—		—			(27,108	)		—			(27,108	)		—		—			—			—
Net income		—			—		—			—			5,009			5,009			—		—			—			—

Balance, September 30, 2010		985		$	—	$	70,773		$	(114,158	)	$	63,719		$	20,334			—	$			$			$

Dividends paid		—			—		—			112,740			(235,551	)		(122,811	)		—		—			—			—
Net advances from parent company		—			—		—			1,418			—			1,418			—		—			—			—
Initial contribution to RNP		—			—		—			—			—			—			—		—			—			—
Net income		—			—		—			—			24,926			24,926			—		—			—			—

Balance, September 30, 2011		985		$	—	$	70,773		$	—		$	(146,906	)	$	(76,133	)		—	$	—		$	—		$	—

Deferred tax adjustment		—			—		—			—			5,462			5,462			—		—			—			—
Net loss attributable to the period from October 1, 2011 through November 8, 2011							—			—			(876	)		(876	)		—		—			—			—
Contribution to RNP for common units		(985	)		—		(70,773	)		—			142,320			71,547			23,250		—			(71,547	)		(71,547	)
Contribution through reduction of due to parent company		—			—		—			—			—			—			—		—			1,678			1,678
Transfer equity to limited partners		—			—		—			—			—			—			—		(187,295	)		187,295			—
Issuance of common units to public, net of offering and other costs		—			—		—			—			—			—			15,000		275,092			—			275,092
Distributions		—			—		—			—			—			—			—		—			(117,426	)		(117,426	)
Unit-based compensation expense		—			—		—			—			—			—					63						63
Net income attributable to the period from November 9, 2011 through December 31, 2011		—			—		—			—			—			—			—		11,331			—			11,331

Balance, December 31, 2011		—		$	—	$	—		$	—		$	—		$	—			38,250	$	99,191		$	—		$	99,191

See Accompanying Notes to Consolidated Financial Statements.

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Cash Flows

(Amounts in thousands)


	For the Three Months Ended December 31,						For the Fiscal Years Ended September 30,
	2011			2010			2011			2010			2009
				(unaudited)
Cash flows from operating activities
Net income	$	10,455		$	4,324		$	24,926		$	5,009		$	28,159
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation		3,287			2,600			10,021			10,544			8,683
Utilization of spare parts		309			380			1,698			1,521			1,676
Non-cash interest expense		357			496			1,632			2,907			2,938
Loss on debt extinguishment		10,263			4,593			13,816			2,268			—
Premiums on early payment of debt		—			—			—			—			452
Deferred income taxes		—			—			(718	)		(2,846	)		243
Payment of call premium fee		(2,933	)		—			(8,261	)		—			—
Other		(435	)		8			376			78			87
Changes in operating assets and liabilities:
Accounts receivable		(2,883	)		(7,034	)		4,962			(861	)		3,811
Property insurance claim receivable		—			—			—			1,795			(1,795	)
Other receivables		194			91			(137	)		(82	)		17
Inventories		11,164			1,451			(9,218	)		4,655			5,278
Deposits on gas contracts		(1,409	)		303			955			(1,629	)		17,644
Prepaid expenses and other assets		161			(482	)		(1,118	)		1,853			1,588
Accounts payable		(682	)		266			402			87			(516	)
Deferred revenue		(13,750	)		17,028			19,608			(3,730	)		(44,605	)
Due to parent company		(18,395	)		—			20,073			—			—
Accrued interest		(41	)		10			18			(414	)		(138	)
Accrued liabilities, accrued payroll and other		(1,641	)		(317	)		4,633			(1,011	)		345

Net cash provided by (used in) operating activities		(5,979	)		23,717			83,668			20,144			23,867


Cash flows from investing activities
Purchase of property, plant, equipment and construction in progress		(11,656	)		(2,212	)		(17,411	)		(11,597	)		(12,259	)
Proceeds from disposal of property, plant and equipment		90			—			25			14			—

Net cash used in investing activities		(11,566	)		(2,212	)		(17,386	)		(11,583	)		(12,259	)


Cash flows from financing activities
Proceeds from initial public offering, net of costs		276,007			—			—			—			—
Proceeds from term loan, net of original issue discount		—			50,960			200,960			64,425			—
Retirement of term loan, including costs		(146,250	)		—			(85,383	)		(38,040	)		—
Payment of debt issuance costs		(904	)		(290	)		(8,747	)		(4,060	)		(498	)
Payments on premiums of early payments of debt		—			—			—			—			(452	)
Payments on term loan		—			(22,522	)		(33,658	)		(4,209	)		(15,888	)
Payments on notes payable for financed insurance premiums		(418	)		(465	)		(1,623	)		(1,296	)		(575	)
Payment of dividends		(117,426	)		(50,857	)		(122,811	)		—			—
Net receipts from (advances to) parent company		—			3,356			1,418			(27,108	)		(13,802	)

Net cash provided by (used in) financing activities		11,009			(19,818	)		(49,844	)		(10,288	)		(31,215	)

Increase (decrease) in cash		(6,536	)		1,687			16,438			(1,727	)		(19,607	)
Cash and cash equivalents, beginning of period		51,372			34,934			34,934			36,661			56,268

Cash and cash equivalents, end of period	$	44,836		$	36,621		$	51,372		$	34,934		$	36,661

See Accompanying Notes to Consolidated Financial Statements.

RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Cash Flows—Continued

(Amounts in thousands)

For the three months ended December 31, 2011 and 2010 and the fiscal years ended September 30, 2011, 2010 and 2009, the Company made certain cash payments as follows:


	For the Three Months Ended December 31,				For the Fiscal Years Ended September 30,
	2011		2010		2011		2010		2009
			(unaudited)
Cash payments of interest	$	1,631	$	2,406	$	12,102	$	7,366	$	5,681

Excluded from the statements of cash flows were the effects of certain non-cash financing and investing activities as follows:


	For the Three Months Ended December 31,				For the Fiscal Years Ended September 30,
	2011		2010		2011		2010		2009
			(unaudited)
Purchase of insurance policies financed with notes payable	$	679	$	428	$	1,537	$	1,547	$	1,150
Receivable from parent company reclassified as dividend		—		—		112,740		—		—
Receivable for sales of property, plant and equipment in other receivables		741		—		325		—		—
Consideration received for warrants – non-cash contribution from Rentech		—		—		—		—		1,577
Purchase of insurance policies financed by Rentech		—		—		—		—		381
Record asset retirement obligation asset and liability		—		—		—		—		210
Purchase of property, plant, equipment and construction in progress in accounts payable and accrued liabilities		2,329		792		9,605		261		2,008
Deferred taxes written off through retained earnings		5,462		—		—		—		—
Capital contribution through reduction of due to parent company		1,678		—		—		—		—
Prepaid IPO costs offset against proceeds of IPO		3,907		—		—		—		—
IPO costs in accrued liabilities		72		—		—		—		—

See Accompanying Notes to Consolidated Financial Statements

Note 1 — Description of Business

Description of Business

Rentech Nitrogen Partners, L.P. (“RNP”, “we”, or “the Partnership”) owns and operates a nitrogen fertilizer manufacturing plant that uses natural gas as its feedstock. RNP’s plant, located in East Dubuque, Illinois (the “Plant”), manufactures and sells within the corn-belt region of the United States natural gas-based nitrogen fertilizer and industrial products including ammonia, urea ammonium nitrate, urea granule and urea solution, nitric acid, and liquid carbon dioxide.

In fiscal years 2009, 2010 and 2011, Rentech Energy Midwest Corporation (“REMC” or “the Company”), the predecessor of RNP, was a wholly-owned subsidiary of Rentech, Inc. (“Rentech”). On November 9, 2011, the Partnership completed its initial public offering (the “Offering”) of 15,000,000 common units representing limited partner interests at a public offering price of $20.00 per common unit. The common units sold to the public in the Offering represent 39.2% of the Partnership common units outstanding as of the closing of the Offering. Rentech Nitrogen Holdings, Inc. (“RNHI”), Rentech’s indirect wholly-owned subsidiary, owns the remaining 60.8% of the Partnership common units and Rentech Nitrogen GP, LLC (the “General Partner”), RNHI’s wholly-owned subsidiary, owns 100% of the non-economic general partner interest in us. The Partnership’s assets consist of all of the equity interests of REMC, which owns the Plant. At the Offering, REMC was converted into a limited liability company, Rentech Nitrogen, LLC (“RNLLC”).

Change in Fiscal Year End

On February 1, 2012, the board of directors of the General Partner approved a change in the Partnership’s fiscal year end from September 30 to December 31. As a result of this change, the Partnership is filing a Transition Report on Form 10-K for the three-month transition period ended December 31, 2011. References to any of our fiscal years mean the fiscal year ending September 30 of that calendar year. Financial information in these notes with respect to the three months ended December 31, 2010 is unaudited.

Note 2 — Summary of Certain Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Presentation

Prior to the closing of the Offering, REMC was consolidated with Rentech’s operations since it was acquired by Rentech in 2006. During that time REMC benefitted from certain corporate services provided by Rentech. These consolidated financial statements reflect REMC on a stand-alone or “carve-out” basis from Rentech for the period prior to the Offering and certain corporate overhead costs were allocated to REMC and certain transactions between the Company and Rentech were re-categorized as if REMC were a standalone entity. Management believes that the method used to allocate the corporate overhead costs is reasonable and reflects management’s estimate of what the expenses would have been on a stand-alone basis for REMC.

Intercompany loans and advances from REMC to Rentech are recorded in a contra-equity account Receivable from Parent Company. No interest has been recorded on this receivable. Amortization of the discount on REMC’s term loan, which was recorded by Rentech, was pushed down to REMC. An estimate of the cost of time spent on REMC’s matters by the Rentech human resource, legal, information systems, accounting and finance, and investor relations departments has been reflected in REMC’s statements of operations. A percentage of third party costs relating to the information technology operating system was pushed down to REMC. Actual audit and tax services expenses for REMC were pushed down to REMC. The percentage of the expense for an employee at Rentech who was responsible for overseeing the operations at REMC was also pushed down to REMC. Rentech over the years granted Restricted Stock Units and stock options to employees of REMC. The related stock based compensation for such grants was recorded by Rentech. These costs have also been recorded by REMC in these financial statements. Total operating expenses pushed down to REMC were $2,026,000, $1,414,000 and $1,648,000 for the fiscal years ended September 30, 2011, 2010 and 2009, respectively. The entries relating to income taxes have been determined on a separate return basis.

Subsequent Events

The Partnership has evaluated events, if any, which occurred subsequent to December 31, 2011 through the date these financial statements were issued, to ensure that such events have been properly reflected in these statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at 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 Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. Fair values of receivables, 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 and their carrying amounts approximate fair value or they are receivable or payable on demand. The carrying amount of debt outstanding also approximates fair value as of September 30, 2011 and 2010 because interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company.

Revenue Recognition

Revenues from our nitrogen products are recognized when customers take ownership upon shipment from the Plant or its leased facility and assumes risk of loss, collection of the related receivable is probable, persuasive evidence of a sale arrangement exists and the sales price is fixed or determinable. Management assesses the business environment, the customer’s financial condition, historical collection experience, accounts receivable aging and customer disputes to determine whether collectability is reasonably assured. If collectability is not considered reasonably assured at the time of sale, the Partnership does not recognize revenue until collection occurs.

Natural gas, though not purchased for the purpose of resale, is occasionally sold when contracted quantities received are in excess of production and storage capacities, in which case the sales price is recorded in revenues and the related cost is recorded in cost of sales. Natural gas is also sold with a simultaneous gas purchase in order to receive an economic benefit that reduces raw material cost, in which case the net of the sales price and the related cost of sales are recorded within cost of sales.

On April 26, 2006, Rentech’s subsidiary, Rentech Development Corporation (“RDC”), entered into a Distribution Agreement (the “Distribution Agreement”) with Royster-Clark Resources, LLC, who subsequently assigned the agreement to Agrium U.S.A., Inc. (“Agrium”), and RDC similarly assigned the agreement to REMC, prior to its conversion into RNLLC. The Distribution Agreement is for a 10 year period, subject to renewal options. Pursuant to the Distribution Agreement, Agrium is obligated to use commercially reasonable efforts to promote the sale of, and solicit and secure orders from its customers for nitrogen fertilizer products manufactured at the Plant, and to purchase from RNLLC nitrogen fertilizer products manufactured at the facility for prices to be negotiated in good faith from time to time. Under the Distribution Agreement, Agrium is appointed as the exclusive distributor for the sale, purchase and resale of nitrogen products manufactured at the Plant. Sale terms are negotiated and approved by RNLLC. Agrium bears the credit risk on products sold through Agrium pursuant to the Distribution Agreement. If an agreement is not reached on the terms and conditions of any proposed Agrium sale transaction, RNLLC has the right to sell to third parties provided the sale is on the same timetable and volumes and at a price not lower than the one proposed by Agrium. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, the Distribution Agreement accounted for 92%, 83%, 80%, and 85%, respectively, of net revenues from continuing operations. Receivables from Agrium accounted for 83%, 77% and 86% of the total accounts receivable balance of the Partnership as of December 31, 2011 and September 30, 2011 and 2010, respectively. RNP negotiates sales with other customers and these transactions are not subject to the terms of the Distribution Agreement.

Under the Distribution Agreement, RNLLC pays commissions to Agrium not to exceed $5 million during each contract year on applicable gross sales during the first 10 years of the agreement. The commission rate was 2% during the first year of the agreement and increased by 1% on each anniversary date of the agreement up to the current maximum rate of 5%. For the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, the effective commission rate associated with sales under the Distribution Agreement was 2.6%, 4.3%, 4.2% and 2.3%, respectively.

RNP derives substantially all of its revenues and cash flows from the production and sale of nitrogen fertilizers, and it sells a majority of its nitrogen products to customers located in its core market. RNP sold over 90% of its nitrogen products to customers for agricultural uses during the three months ended December 31, 2011 and for each of the fiscal years ended September 30, 2011, 2010 and 2009. RNP generally does not have long-term minimum sales contracts with any of its customers.

Deferred Revenue

The Partnership records a liability for deferred revenue to the extent that payment has been received under product prepayment contracts, which create obligations for delivery of product within a specified period of time in the future. The terms of these product prepayment contracts require payment in advance of delivery. The Partnership recognizes revenue related to the product prepayment contracts and relieves the liability for deferred revenue when products are shipped. A significant portion of the revenue recognized during any period may be related to product prepayment contracts, for which cash was collected during an earlier period, with the result that a significant portion of revenue recognized during a period may not generate cash receipts during that period. As of December 31, 2011, September 30, 2011 and 2010, deferred revenue was $20,331,000, $34,081,000 and $14,473,000, respectively.

Cost of Sales

Cost of sales are comprised of manufacturing costs related to the Partnership’s nitrogen fertilizer and industrial products. Cost of sales expenses include direct materials such as natural gas, direct labor, indirect labor, employee fringe benefits, depreciation on plant machinery and other costs, including shipping and handling charges incurred to transport products sold.

The Partnership enters into short-term contracts to purchase physical supplies of natural gas in fixed quantities at both fixed and indexed prices. We anticipate that we will physically receive the contract quantities and use them in the production of fertilizer and industrial products. We believe it is probable that the counterparties will fulfill their contractual obligations when executing these contracts. Natural gas purchases, including the cost of transportation to the Plant, are recorded at the point of delivery into the pipeline system.

Accounting for Derivative Instruments

We elect the normal purchase normal sale exemption for our derivative instruments. As such, we do not recognize the unrealized gains or losses related to these derivative instruments in our financial statements.

Cash

The Partnership has various checking and savings accounts with major financial institutions. At times balances with these financial institutions may be in excess of federally insured limits.

Accounts Receivable

Trade receivables are initially recorded at fair value based on the sale of goods to customers and are stated net of allowances.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects the Partnership’s best estimate of probable losses inherent in the accounts receivable balance. The Partnership determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. The Partnership reviews its allowance for doubtful accounts quarterly. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Inventories

Inventories consist of raw materials and finished goods. The primary raw material in the production of nitrogen products is natural gas. Raw materials also include certain chemicals used in the manufacturing process. Finished goods include the nitrogen products stored at the Plant that are ready for shipment along with any inventory that may be stored at a remote facility. The Partnership allocates fixed production overhead costs to inventory based on the normal capacity of its production facilities and unallocated overhead costs are recognized as expense in the period incurred. At December 31, 2011, September 30, 2011 and 2010, inventories on the balance sheets included depreciation of $456,000, $836,000 and $513,000, respectively.

Inventories are stated at the lower of cost or estimated net realizable value. The cost of inventories is determined using the first-in first-out method. The estimated net realizable value is based on customer orders, market trends and historical pricing. On at least a quarterly basis, the Partnership performs an analysis of its inventory balances to determine if the carrying amount of inventories exceeds their net realizable value. If the carrying amount exceeds the estimated net realizable value, the carrying amount is reduced to the estimated net realizable value.

Deposits on Gas Contracts

The Partnership enters into forward contracts with fixed delivery prices to purchase portions of the natural gas required to produce fertilizer for the Partnership’s nitrogen fertilizer business. Some of the forward contracts require the Partnership to pay a deposit for the natural gas at the time of contract signing, and all of the contracts require deposits in the event that the market price for natural gas falls after the date of the contract to a price below the fixed price in the contracts.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation expense is calculated using the straight-line method over the estimated useful lives of the assets, as follows:


Type of Asset		Estimated Useful Life
Building and building improvements		30-40 years
Land improvements		15-20 years
Machinery and equipment		7-10 years
Furniture, fixtures and office equipment		7-10 years
Computer equipment and software		3-5 years
Vehicles		3-5 years
Spare parts		Useful life of the spare parts or the related equipment
Ammonia catalyst		3-10 years
Platinum catalyst		Based on units of production

Significant renewals and betterments are capitalized. Costs of maintenance and repairs are expensed as incurred. Approximately every two years, RNP incurs turnaround expenses which represent the cost of shutting down the Plant for planned maintenance. Such costs are expensed as incurred. When property, plant and equipment is retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in operating expenses.

Spare parts are maintained by RNP to reduce the length of possible interruptions in plant operations from an infrastructure breakdown at the Plant. The spare parts may be held for use for many years before the spare parts are used. As a result, they are capitalized as a fixed asset at cost and are depreciated on a straight-line basis over the useful life of the related equipment until the spare parts are installed. When spare parts are utilized, the net book values of the assets are charged to earnings as a cost of sale. Periodically, the spare parts are evaluated for obsolescence and impairment and if the value of the spare parts is impaired, it is charged against earnings.

Long-lived assets and construction in progress are reviewed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the asset’s fair value.

The Partnership capitalizes certain direct development costs associated with internal-use software, including external direct costs of material and services, and payroll costs for employees devoting time to software implementation projects. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

Grants that compensate the Partnership for the cost of property, plant and equipment are recorded as a reduction to the cost of the related asset and are recognized over the useful life of the asset by reducing depreciation expense.

Construction in Progress

We also capitalize costs for improvements to the existing machinery and equipment at our facility and certain costs associated with our information technology initiatives. We do not depreciate construction in progress costs until the underlying assets are placed into service.

Income Taxes

The Partnership and RNLLC are not directly subject to federal and state income taxes. Instead, their taxable income or loss is allocated to their individual partners.

The description that follows relates to REMC prior to the offering. REMC was not a separate tax-paying entity. REMC was included in Rentech’s consolidated federal and certain state income tax groups for income tax reporting purposes and was responsible for its separate company income taxes calculated upon its taxable income at a current estimate of the annual effective tax rate. On a separate return basis, the Company had income taxes payable owed to Rentech.

The Company accounted for income taxes in accordance with applicable accounting guidance. Such accounting guidance requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax benefit of net operating loss and tax credit carryforwards.

The realization of deferred income tax assets is dependent on the generation of taxable income in appropriate jurisdictions during the periods in which those temporary differences are deductible. Management considered the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in determining the amount of the valuation allowance. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management determined if it were more likely than not that the Company would have realized the benefits of these deductible differences. As of December 31, 2011, the most significant factor considered in determining the realizability of these deferred tax assets was our profitability over the past three years. Management believes that at this point in time, it is more likely than not that the deferred tax assets would have been realized.

Accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance requires that the Company recognize in its financial statements, only those tax positions that are “more-likely-than-not” of being sustained, based on the technical merits of the position. The Company had performed a comprehensive review of its material tax positions in accordance with accounting guidance and had determined that no uncertain tax positions existed.

In accordance with its accounting policy, the Company recognized accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. Since the Company had no uncertain tax positions, no interest or penalties have been accrued related to uncertain tax positions in the balance sheet or statement of operations. The Company was subject to examination for federal and Illinois income taxes for the tax years ended September 30, 2007 through September 30, 2009.

While management believes the Company had adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax regulations. Additionally, the recognition and measurement of certain tax benefits includes estimates and judgment by management and inherently includes subjectivity. Accordingly, additional provisions on federal and state tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Net Income Per Common Unit

The net income per common unit on the Consolidated Statement of Operations are based on net income of the Partnership after the closing of the Offering on November 9, 2011 through December 31, 2011, since this is the amount of net income that is attributable to the newly issued common units. The Partnership’s net income is allocated wholly to the common unitholders since the General Partner has a non-economic interest.

Basic income per common unit is calculated by dividing net income by the weighted average number of common units outstanding for the period. Diluted net income per common unit is calculated by dividing net income by the weighted average number of common units outstanding plus the dilutive effect, calculated using the “treasury stock” method for the unvested phantom units. For the three months ended December 31, 2011, there were no phantom units excluded from the calculation of diluted net income per common unit.

Quarterly Distributions of Available Cash

The Partnership’s first distribution will take place following the first calendar quarter of 2012 and will include cash available for distribution with respect to the period beginning on the date of the closing of the Offering, November 9, 2011, and ending on March

31, 2012. 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 of 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 flow it generates during the quarter, less cash needed for maintenance capital expenditures, debt service (if any) and other contractual obligations, and reserves for future operating or capital needs that the board of directors 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 directors of the General Partner. Any distributions made by the Partnership to its unitholders will be done on a pro rata basis.

Related Parties

On November 9, 2011, the closing date of the Offering, the Partnership, the General Partner and Rentech entered into a services agreement, pursuant to which the Partnership and the General Partner will obtain certain management and other services from Rentech. The Partnership’s consolidated financial statements following the Offering reflect the impact of the reimbursements the Partnership is required to make to Rentech under the services agreement instead of those used for purposes of preparing REMC’s stand-alone financial statements. Under the services agreement, the Partnership, the General Partner and RNLLC are obligated to reimburse Rentech for (i) all costs, if any, 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, but excluding share-based compensation; (ii) a prorated share of costs 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, but excluding share-based compensation, and such prorated share shall be 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.

Recent Accounting Pronouncements

In May 2011, the FASB issued guidance clarifying previous guidance related to fair value measurement. This guidance is effective during interim and annual periods beginning after December 15, 2011. It is effective for the Partnership’s interim period beginning on January 1, 2012. Early application is not permitted. The adoption of this guidance is not expected to have a material impact on the Partnership’s financial position, results of operations or disclosures.

Note 3 — Inventories

Inventories consisted of the following:

		$,00000		$,00000		$,00000
	As of December 31,		As of September 30,
	2011		2011		2010
			(in thousands)
Finished goods	$	4,567	$	16,020	$	6,338
Raw materials		424		492		628

Total inventory	$	4,991	$	16,512	$	6,966

Note 4 — Property, Plant and Equipment

Property, plant and equipment consisted of the following:


	As of December 31,			As of September 30,
	2011			2011			2010
				(in thousands)
Land and land improvements	$	1,281		$	1,281		$	1,210
Buildings and building improvements		5,140			5,140			5,352
Machinery and equipment		94,929			77,822			73,967
Furniture, fixtures and office equipment		57			57			57
Computer equipment and computer software		2,053			1,998			1,964
Vehicles		125			125			125
Conditional asset (asbestos removal)		210			210			210

		103,795			86,633			82,885
Less accumulated depreciation		(44,447	)		(41,683	)		(34,102	)

Total depreciable property, plant and equipment, net	$	59,348		$	44,950		$	48,783

The Partnership has a legal obligation to handle and dispose of asbestos at its Plant in a special manner when undergoing major or minor renovations or when buildings at this location are demolished, even though the timing and method of settlement are conditional on future events that may or may not be in its control. As a result, the Partnership has developed an estimate for a conditional obligation for this disposal. In addition, the Partnership, through its normal repair and maintenance program, may encounter situations in which it is required to remove asbestos in order to complete other work. The Partnership applied the expected present value technique to calculate the fair value of the asset retirement obligation for the property and, accordingly, the asset and related obligation for the property have been recorded. In accordance with the applicable guidance, the liability is increased over time and such increase is recorded as accretion expense. The liability at December 31, 2011, September 30, 2011 and 2010 was $277,000, $268,000 and $237,000, respectively. The accretion expense for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009 was $9,000, $31,000, $27,000 and $0, respectively.

Note 5 — Debt

The Partnership’s debt obligations at December 31, 2011 consist of short-term notes payable, a $25.0 million revolving credit facility and a bridge loan. At December 31, 2011, there were no outstanding advances under the revolving credit facility and the bridge loan. REMC’s debt obligations at September 30, 2011 and 2010 consisted of short-term notes payable and a term loan.

Short-term Notes Payable

The Partnership, through Rentech, enters into non-collateralized short-term notes payable to finance insurance premiums. During the fiscal year ended September 30, 2010, REMC entered into non-collateralized short-term notes payable to finance insurance premiums totaling $1,547,000. The notes payable bore interest between 2.55% and 3.28% with monthly payments of principal and interest and a scheduled maturity date in March 2011. The balance due as of September 30, 2010 was $821,000 which was included in accrued liabilities. During the fiscal year ended September 30, 2011, REMC entered into non-collateralized short-term notes payable to finance insurance premiums totaling $1,537,000. The notes payable bear interest between 2.55% and 3.04% with monthly payments of principal and interest and a scheduled maturity date in March 2012. The balance due as of September 30, 2011 and December 31, 2011 were $739,000 and $370,000, respectively, which was included in accrued liabilities. During the three months ended December 31, 2011, the Partnership entered into non-collateralized short-term note payable to finance insurance premiums totaling $679,000. The note payable bears interest at 3.04% with monthly payments of principal and interest and a scheduled maturity date in September 2012. The balance due as of December 31, 2011 was $630,000 which was included in accrued liabilities.

Term Loans

On June 13, 2008, Rentech and REMC executed an amended and restated credit agreement (the “2008 Credit Agreement”) by and among REMC as the borrower, Rentech as a guarantor, Credit Suisse, Cayman Islands Branch (“Credit Suisse”), as administrative agent and collateral agent and the lenders party thereto for the principal amount of $53,000,000.

Term loans outstanding under the 2008 Credit Agreement bore interest at the election of REMC of either: (a)(i) the greater of LIBOR or 3%, plus (a)(ii) 10.0%; or (b)(i) the greater of 4%, the prime rate, as determined by Credit Suisse, or 0.5% in excess of the federal funds effective rate, plus (b)(ii) 9.0%. Interest payments were made on a quarterly basis, as required by the terms of the agreement.

On January 14, 2009, REMC entered into the First Amendment to Amended and Restated Credit Agreement and Waiver (the “2009 First Amendment and Waiver”). In addition to an increase in interest rates and certain fees to the lenders and its advisors, as further consideration for the 2009 First Amendment and Waiver, Rentech sold to Credit Suisse Management LLC, SOLA LTD and Solus Core Opportunities Master Fund Ltd., for an aggregate issue price of approximately $50,000, warrants to purchase 4,993,379 shares of Rentech’s common stock, or 3% of Rentech’s outstanding shares at the time of issuance. The exercise price of $0.92 per share for each warrant was a 20% premium above the weighted average price for Rentech’s stock over the 10 trading days preceding the January 14, 2009 closing date of the 2009 First Amendment and Waiver. Seventy-five percent of the warrants were immediately exercisable and expire 5 years from the grant date. The remaining 25% of the warrants were set to expire on the maturity date of the term loan. This portion of the warrants vested and became exercisable July 1, 2009.

On January 29, 2010, Rentech and REMC replaced the 2008 Credit Agreement with a senior collateralized credit agreement (the “2010 Credit Agreement”) with Credit Suisse, as administrative agent and collateral agent, and the lenders party thereto. Under the 2010 Credit Agreement, REMC borrowed $62.5 million in the form of new collateralized term loans (the “2010 Initial Term Loans”), the proceeds of which were used to repay the term loan outstanding under the 2008 Credit Agreement (the principal amount of which at the time of prepayment was $37 million), to make an intercompany loan to Rentech in the amount of $18 million and to pay related fees and expenses. The 2010 Initial Term Loans were issued with original issue discount of 3%. The payoff of the term loan under the 2008 Credit Agreement was considered an early extinguishment of debt. As a result, for the fiscal year ended September 30, 2010, loss on debt extinguishment of $2.3 million was recorded in the consolidated statements of operations.

On July 21, 2010, REMC and Rentech entered into an amendment to credit agreement, waiver and collateral agent consent to the 2010 Credit Agreement (the “First Amendment”). The First Amendment included an early prepayment by REMC of $15 million of principal of the 2010 Initial Term Loans outstanding, and a simultaneous borrowing of an additional $20 million (the “First Incremental Loan”), with proceeds of approximately $18.5 million transferred to Rentech in the form of an intercompany loan. The First Incremental Loan was issued with original issue discount of 6%. The other terms of the First Incremental Loan, including without limitation, the maturity date, interest rate and collateral security, are the same as the Initial Term Loans.

On November 24, 2010, Rentech and REMC entered into a Second Amendment to Credit Agreement, Waiver and Collateral Agent Consent (the “Second Amendment”) to the 2010 Credit Agreement with certain subsidiaries of Rentech, certain lenders party thereto and Credit Suisse, as administrative agent and collateral agent.

The Second Amendment included an early prepayment by REMC of $20 million of principal of the 2010 Initial Term Loans outstanding, and a simultaneous borrowing of an additional $52.0 million (the “Second Incremental Loan”), with proceeds of approximately $50.85 million distributed to Rentech in the form of a dividend from REMC. The Second Incremental Loan was issued with an original issue discount of 2%. In addition, the Second Amendment, among other things permitted a special distribution of up to $5 million by REMC to Rentech upon the satisfaction of certain conditions, and on March 11, 2011 REMC made the $5 million dividend to Rentech. Simultaneously with this distribution, REMC made a mandatory early prepayment of the term loan of $5 million.

All outstanding term loans under the 2010 Credit Agreement incurred interest, at the election of REMC, at either (a)(i) the greater of LIBOR or 2.5%, plus (ii) 10.0% or (b)(i) the greatest of (w) the prime rate, as determined by Credit Suisse, (x) 0.5% in excess of the federal funds effective rate, (y) LIBOR plus 1.0% or (z) 3.5% plus (ii) 9.0%. Interest payments were made on a quarterly basis and were subject to annual amortization, payable quarterly, of 7.5% of the outstanding principal amount in calendar years 2010 and 2011.

On June 10, 2011, Rentech and REMC entered into a five-year $150.0 million collateralized term loan facility pursuant to a credit agreement (the “2011 Credit Agreement”) among REMC, Rentech, certain subsidiaries of Rentech, certain lenders party thereto and Credit Suisse. The Company paid upfront fees to the lenders under the 2011 Credit Agreement equal to 2.0% of the aggregate principal amount of the term loans. The term loans incurred interest, upon the Company’s election, at either (a)(i) the greater of LIBOR and 1.5%, plus (ii) 8.5% or (b)(i) the greatest of (w) the prime rate, as determined by Credit Suisse, (x) 0.5% in excess of the federal funds effective rate, (y) LIBOR plus 1.0% and (z) 2.5% plus (ii) 7.5%. Interest payments were generally required to be made on a quarterly basis. The term loans were subject to amortization, payable quarterly, of 2.5% of the original principal amount until March 31, 2016. The remaining unpaid principal balance was payable on June 10, 2016, the maturity date. The term loans could be prepaid voluntarily at any time. In the first year, voluntary prepayments of the term loans could be made subject to a prepayment fee of 2.0% of the amount prepaid, and if prepaid in the second year, 1.0% of the amount prepaid. Voluntary prepayments made after the second anniversary of the closing date of the loan could be prepaid without any prepayment fee. REMC used a portion of the net proceeds of the 2011 Credit Agreement to repay amounts outstanding under the 2010 Credit Agreement in full, and to pay related fees and expenses.

The 2011 Credit Agreement required that a certain percentage of excess cash flow from REMC, as defined in the 2011 Credit Agreement, be applied to repay outstanding principal. The percentage of REMC’s excess cash flow required to be applied as a prepayment depended on REMC’s leverage ratio as of the relevant calculation date and the aggregate outstanding principal amount of loans under the 2011 Credit Agreement on such date.

The obligations under the 2011 Credit Agreement were collateralized by substantially all of the Company’s assets, the assets of Rentech and the assets of most of Rentech’s subsidiaries, including a pledge of the equity interests in many of the Rentech’s subsidiaries. In addition, REMC granted the lenders a mortgage on its real property to collateralize its obligations under the 2011 Credit Agreement and related loan documents. The obligations under the 2011 Credit Agreement were also guaranteed by Rentech and certain of its subsidiaries. The 2011 Credit Agreement contained restrictions on the amount of cash that could be transferred from REMC to Rentech or its non-REMC subsidiaries. The 2011 Credit Agreement included restrictive covenants that limit, among other things, Rentech and certain of its subsidiaries’ ability to dispose of assets, pay cash dividends and repurchase stock.

The Second Amendment was accounted for as an extinguishment of debt, taking into consideration the change in future cash flows after this amendment and amendments in the preceding 12 months. As a result, for the fiscal year ended September 30, 2011, a loss on extinguishment of debt, related to the Second Amendment, of $4.6 million was recorded in the statements of operations. The 2011 Credit Agreement was also accounted for as an extinguishment of debt. As a result, for the fiscal year ended September 30, 2011, a loss on extinguishment of debt, related to the entry into the 2011 Credit Agreement and repayment of the 2010 Credit Agreement, of $9.2 million was recorded in the statements of operations, resulting in a total loss on debt extinguishment, related to the Second Amendment and the 2011 Credit Agreement, of $13.8 million. On November 9, 2011, a portion of the proceeds of the Offering were used to repay in full the term loans outstanding under the 2011 Credit Agreement. As a result, for the three months ended December 31, 2011 a loss on debt extinguishment was recorded for $10.3 million.

Long-term debt consists of the following:


	As of December 31,		As of September 30,
	2011		2011			2010
			(in thousands)
Face value of term loan under the credit agreements	$	—	$	146,250		$	63,291
Less unamortized discount		—		—			(2,416	)

Book value of term loan under the credit agreements		—		146,250			60,875
Less current portion		—		(38,448	)		(12,835	)

Term loan, long term portion	$	—	$	107,802		$	48,040

2011 Revolving Credit Facility

On November 9, 2011, the borrowings outstanding under the 2011 Credit Agreement were repaid in full in connection with the Offering. On November 10, 2011, the Partnership and RNLLC entered into a credit agreement (the “2011 Revolving Credit Agreement”), providing for a $25.0 million senior secured revolving credit facility with a two year maturity (the “2011 Revolving Credit Facility”) and paid associated financing costs of approximately $0.9 million. The 2011 Revolving Credit Facility included a letter of credit sublimit of up to $2.5 million for issuance of letters of credit. The borrowings under the 2011 Revolving Credit Facility would have borne interest at a rate equal to an applicable margin plus, at the Partnership’s 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% and (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. The applicable margin for borrowings under the 2011 Revolving Credit Facility was 3.25% with respect to base rate borrowings and 4.25% with respect to LIBOR borrowings. Additionally, the Partnership was required to pay a fee to the lenders under the 2011 Revolving Credit Facility on the unused amount at a rate of 0.5% per annum. The Partnership was also required to pay customary letter of credit fees on issued letters of credit. In the event the Partnership reduced or repaid in full any borrowings outstanding under the 2011 Revolving Credit Facility prior to its first anniversary, it was required to pay a prepayment premium of 2.0% of the principal amount repaid, subject to certain exceptions. The 2011 Revolving Credit Facility was available to fund the Partnership’s seasonal working capital needs, letters of credit and for general partnership purposes. There were never any borrowings made under the 2011 Revolving Credit Facility.

Bridge Loan

On December 28, 2011 RNLLC (the “Borrower”) entered into a credit agreement among itself, the Partnership as guarantor, and Rentech, a holder of 60.8% of the outstanding common units of the Partnership, as the Lender (the “Bridge Loan Agreement”). The Bridge Loan Agreement consisted of a commitment by Rentech to lend up to $40.0 million to the Borrower until May 31, 2012 (the “Bridge Loan”). The Partnership entered into the Bridge Loan to fund certain capital expenditures and construction costs relating to its ammonia capacity expansion project until a term loan facility for the cost of the entire project could be put in place.

In connection with the Bridge Loan, the Borrower also entered into a First Amendment to Credit Agreement, dated as of December 28, 2011 (the “First Amendment”) among itself, the Partnership as guarantor, and General Electric Capital Corporation, as administrative agent and lender. The First Amendment amended the terms of the 2011 Revolving Credit Facility to permit the Borrower and the Partnership to enter into the Bridge Loan Agreement and to incur the Bridge Loan.

The Bridge Loan matured on the earlier of three months after the payoff and termination of the 2011 Revolving Credit Facility or six months after the maturity of the 2011 Revolving Credit Facility. All obligations of the Borrower under the Bridge Loan Agreement were unconditionally guaranteed by the Partnership. The obligations of the Borrower and the Partnership to Rentech under the Bridge Loan Agreement were unsecured and subordinated to the obligations of the Borrower and the Partnership under the 2011 Revolving Credit Facility. In the event the 2011 Revolving Credit Facility was terminated, the Partnership would have been required to pledge substantially all of its assets to secure the Bridge Loan if Rentech so requests.

Borrowings under the Bridge Loan initially bore interest at a rate equal to LIBOR plus a margin of 5.5%. On June 1, 2012 the margin over LIBOR would have increased to 6.0%, and on each subsequent six month anniversary thereof, the margin would have increased by an additional one half percent (0.5%). Interest on the Bridge Loan, if not paid in cash, would have been capitalized

monthly and added to the principal balance of the Bridge Loan and would have also borne interest. The principal amount of the Bridge Loan, including all capitalized interest added to the principal balance of the Bridge Loan, and any accrued and unpaid interest, would have been due and payable on the maturity of the Bridge Loan.

Upon signing the Bridge Loan Agreement, the Borrower agreed to pay Rentech a closing fee equal to 2.0% of the committed amount, or $800,000.00. In the event the Bridge Loan had been repaid on or prior to March 31, 2012, then 75% of the closing fee would have been credited toward Borrower’s repayment amount, and if the Bridge Loan had been repaid after March 31, 2012 but prior to June 1, 2012, then 50% of the closing fee would have been credited toward the repayment amount. No credits of the closing fee would have been made if repayment of the Bridge Loan had occurred on or after June 1, 2012. At December 31, 2011, there were no outstanding advances under the Bridge Loan Agreement.

On February 28, 2012, RNLLC entered into a credit agreement (the “2012 Credit Agreement”), which provides for a $135.0 million senior collateralized credit facility with a five year maturity. The 2012 Credit Agreement amended, restated and replaced the 2011 Revolving Credit Agreement and RNLLC repaid in full outstanding amounts under the Bridge Loan. In addition, Rentech reimbursed RNLLC for $600,000 in closing fees originally paid by RNLLC in accordance with the terms of the Bridge Loan Agreement. For additional information refer to Note 12 – Subsequent Events.

Note 6 — 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 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. Occasionally the Partnership enters into index-price contracts. The Partnership has entered into multiple natural gas forward purchase contracts for various delivery dates through May 31, 2012. Commitments for natural gas purchases consist of the following:


			As of September 30,
	As of December 31, 2011		2011		2010
			(in thousands)
MMBtus under fixed-price contracts		3,040		3,182		3,465
MMBtus under index-price contracts		—		—		403

Total MMBtus under contracts		3,040		3,182		3,868


Commitments to purchase natural gas	$	12,337	$	14,370	$	15,294
Weighted average rate per MMBtu based on the fixed rates and the indexes applicable to each contract	$	4.06	$	4.52	$	3.95

Subsequent to December 31, 2011, the Partnership entered into additional fixed quantity natural gas supply contracts at fixed and indexed prices for various delivery dates through September 30, 2012. The total MMBtus associated with these additional contracts are approximately 2,714,000 and the total amount of the purchase commitments are approximately $7,611,000, resulting in a weighted average rate per MMBtu of approximately $2.80. The Partnership is required to make additional prepayments under these purchase contracts in the event that market prices fall below the purchase prices in the contracts. These payments are recorded as deposits on gas contracts in the accompanying balance sheets.

Operating Leases

The Partnership has various operating leases of real and personal property which expire through October 2014. Total lease expense for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010, and 2009 was $285,000, $844,000, $1,205,000 and $935,000, respectively.

Future minimum lease payments as of December 31, 2011 are as follows (in thousands):

		$,00000000
For the Fiscal Years Ending December 31,
2012	$	240
2013		20
2014		19
2015		3
2016		—
Thereafter		—

	$	282

Litigation

The Partnership is party to litigation from time to time in the normal course of business. While the outcome of the Partnership’s current matters cannot be predicted with certainty, the Partnership maintains insurance to cover certain actions and believes that resolution of its current litigation will not have a material adverse effect on the Partnership.

In October 2009, the EPA Region 5 issued a Notice and Finding of Violation pursuant to the CAA related to the number 1 nitric acid plant at the East Dubuque Plant. The notice alleges violations of the CAA’s New Source Performance Standard for nitric acid plants, Prevention of Significant Deterioration requirements and Title V Permit Program requirements. The notice appears to be part of the EPA’s Clean Air Act National Enforcement Priority for New Source Review/Prevention of Significant Deterioration related to acid plants, which seeks to reduce emissions from acid plants through proceedings that result in the installation of new pollution control technology. Without admitting liability, we have entered into a consent decree (the “Consent Decree”) with the EPA to resolve the alleged violations, and the Consent Decree was entered by the court, effective as of February 13, 2012. The Consent Decree requires us to pay a civil penalty of $108,000, install and operate certain pollution control equipment on one of our nitric acid plants, and to perform certain additional actions and periodically report to the EPA. We have commenced implementation of the Consent Decree requirements, including the installation and operation of the pollution control equipment, and on February 17, 2012, we paid the $108,000 civil penalty.

Note 7 — Long-Term Incentive Equity Awards

On November 2, 2011, the board of directors of the General Partner adopted the Rentech Nitrogen Partners, L.P. 2011 Long-Term Incentive Plan (the “2011 LTIP”). The General Partner’s officers, employees, consultants and non-employee directors, as well as other key employees of Rentech, the indirect parent of the General Partner, and certain of the Partnership’s other affiliates who make significant contributions to its business, are eligible to receive awards under the 2011 LTIP, thereby linking the recipients’ compensation directly to the Partnership’s performance. The 2011 LTIP provides for the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards. Subject to adjustment in the event of certain transactions or changes in capitalization, 3,825,000 common units may be delivered pursuant to awards under the 2011 LTIP.

During the three months ended December 31, 2011, the Partnership issued 163,388 unit-settled phantom units (which entitles the holder to distribution rights during the vesting period) covering the Partnership’s common units. The grant date fair value of each unit was $18.40. The units vest in three equal annual installments; however, for most of the units there is pro-rata vesting in the year of termination of employment.

Note 8 — Accounting for Stock Based Compensation

The accounting guidance requires all share-based payments, including grants of stock options, to be recognized in the statement of operations, based on their fair values. Most grants have graded vesting provisions where an equal number of shares vest on each anniversary of the grant date. Rentech and RNP allocate the total compensation cost on a straight-line attribution method over the requisite service period. Stock based compensation expense that the Partnership records is included in selling, general and administrative expense.

Rentech Awards

During the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, charges associated with all equity-based grants issued to REMC employees were recorded as follows:


	For the Three Months Ended December 31,		For the Fiscal Years Ended September 30,
	2011		2011		2010		2009
	(in thousands)
Stock based compensation expense	$	18	$	173	$	121	$	114

2011 LTIP

During the three months ended December 31, 2011, charges associated with all equity-based grants issued by RNP under the 2011 LTIP was $63,000. As of December 31, 2011, there was $2,943,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements from previously granted phantom units. That cost is expected to be recognized over a weighted-average period of 2.9 years.

Note 9 — Defined Contribution Plan

Salaried employees participate in Rentech’s 401(k) plan while union employees participate in the Partnership’s 401(k) plan. Salaried employees who are at least 18 years of age and have 60 days of service are eligible to participate in Rentech’s plan. Rentech is currently matching 75% of the first 6% of the participant’s salary deferrals. Participants are fully vested in both matching and any discretionary contributions made to the plan by Rentech. Union employees who are at least 18 years of age and have been employed by RNP for 120 days are eligible to participate in the Partnership’s plan. Union employees hired before October 20, 1999 receive a Partnership contribution of 4% of compensation and a Partnership match of 50% of the first 2% of the participant’s salary deferrals. Union employees hired after October 19, 1999 receive a Partnership matching contribution of 75% of the first 6% of the participant’s salary deferrals. Participants are fully vested in both matching and any discretionary contributions made to the plan by RNP. The Partnership contributed $122,000, $450,000, $442,000 and $434,000 to the plans for the three months ended December 31, 2011 and the fiscal years ended September 30, 2011, 2010 and 2009, respectively

Note 10 — Income Taxes

The provision for income taxes for the three months ended December 31, 2011 and 2010 and the fiscal years ended September 30, 2011, 2010 and 2009 was as follows:


	For the Three Months Ended December 31,					For the Fiscal Years Ended September 30,
	2011		2010			2011			2010			2009
	(in thousands)
Current:
Federal	$	—	$	2,436		$	15,540		$	5,454		$	16,152
State		—		312			2,593			736			2,181

Total Current		—		2,748			18,133			6,190			18,333

Deferred:
Federal	$	—	$	54		$	(764	)	$	(2,507	)	$	214
State		—		(30	)		46			(339	)		29

Total Deferred		—		24			(718	)		(2,846	)		243

		—		2,772			17,415			3,344			18,576

A reconciliation of the income taxes at the federal statutory rate to the effective tax rate was as follows:

		$14,754		$14,754			$14,754		$14,754		$14,754
	For the Three Months Ended December 31,					For the Fiscal Years Ended September 30,
	2011		2010			2011		2010		2009
	(in thousands)
Federal income tax benefit calculated at the federal statutory rate	$	—	$	2,483		$	14,754	$	2,924	$	16,358
State income tax benefit net of federal benefit		—		320			2,466		397		2,210
Permanent. True ups, other		—		6			22		23		8
Change in state tax rate		—		(37	)		173		—		—
Income tax expense	$	—	$	2,772		$	17,415	$	3,344	$	18,576

The components of the net deferred tax liability and net deferred tax asset as of December 31, 2011, September 30, 2011 and 2010 are presented below. The amounts as of December 31, 2011 are pro forma amounts, which reflect balances just before the Offering.


	Pro Forma as of December 31,			As of September 30,
	2011			2011			2010
	(in thousands)
Current deferred tax assets/(liabilities):
Accruals for financial statement purposes not allowed for income taxes	$	1,910		$	1,780		$	1,351
Basis difference in prepaid expenses		(335	)		(281	)		(268	)
Inventory		82			(50	)		(992	)

Current deferred tax asset (liability), net	$	1,657		$	1,449		$	91
Long-term deferred tax assets/(liabilities):
Basis difference relating to intangibles	$	—		$	—		$	38
Basis difference in property, plant and equipment		(625	)		(6,911	)		(6,335	)
Other		—			—			25

Long-term deferred tax asset/(liability), net	$	(625	)	$	(6,911	)	$	(6,272	)

Net deferred tax assets/(liabilities)	$	1,032		$	(5,462	)	$	(6,181	)

Note 11 — Selected Quarterly Financial Data (Unaudited)

Selected unaudited condensed financial information for the fiscal years ended September 30, 2011 and 2010 is presented in the tables below (in thousands).


	First Quarter			Second Quarter			Third Quarter		Fourth Quarter
For the 2011 Fiscal Year
Revenues	$	42,962		$	23,943		$	74,385	$	38,567
Gross profit	$	16,127		$	10,201		$	37,427	$	12,816
Operating income	$	14,584		$	9,012		$	35,882	$	10,376
Income before income taxes	$	7,096		$	6,003		$	23,377	$	5,865
Net income	$	4,324		$	3,533		$	13,757	$	3,312

	First Quarter			Second Quarter			Third Quarter		Fourth Quarter
For the 2010 Fiscal Year
Revenues	$	27,023		$	19,182		$	50,111	$	35,080
Gross profit (loss)	$	(1,162	)	$	3,011		$	15,375	$	8,152
Operating income (loss)	$	(2,307	)	$	2,020		$	14,267	$	6,409
Income (loss) before income taxes	$	(4,330	)	$	(2,614	)	$	11,576	$	3,721
Net income (loss)	$	(2,610	)	$	(1,576	)	$	6,977	$	2,218

Note 12 — Subsequent Events

On February 28, 2012, RNLLC entered into the 2012 Credit Agreement among itself, the Partnership, as guarantor, General Electric Capital Corporation, as administrative agent and swingline lender, GE Capital Markets, Inc., as sole lead arranger and bookrunner, BMO Harris Bank, N.A. as syndication agent, and the lenders party thereto (the “Lenders”). The 2012 Credit Agreement amended, restated and replaced the 2011 Revolving Credit Agreement.

The 2012 Credit Agreement consists of (i) a $100.0 million multiple draw term loan (the “Capital Expenditures Facility”) that can be used to pay for capital expenditures related to the ammonia capacity expansion project and for fees and expenses due to the Lenders, and (ii) a $35.0 million revolving facility (the “2012 Revolving Credit Facility”) that can be used for seasonal working capital needs, letters of credit and for general purposes.

The 2012 Credit Agreement has a maturity date of February 27, 2017. Borrowings under the 2012 Credit Agreement bear interest at a rate equal to an applicable margin plus, at RNLLC’s 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. The applicable margin for borrowings under the 2012 Credit Agreement is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. Additionally, RNLLC is required to pay a fee to the lenders under the Capital Expenditures Facility on the undrawn available portion at a rate of 0.75% per annum and a fee to the lenders under the 2012 Revolving Credit Facility on the undrawn available portion at a rate of 0.50% per annum. RNLLC also is required to pay customary letter of credit fees on issued letters of credit. In the event RNLLC reduces or terminates the 2012 Credit Agreement prior to its third anniversary, RNLLC will be required to pay a prepayment premium of 1.0% of the principal amount reduced or terminated, subject to certain exceptions.

The 2012 Revolving Credit Facility includes a letter of credit sublimit of $10 million and it can be drawn on or letters of credit can be issued through the day that is seven days prior to the maturity date. The amounts outstanding under the 2012 Revolving Credit Facility will be required to be reduced to zero (other than outstanding letters of credit) for three periods of ten consecutive business days during each year with each period not less than four months apart, and one period to begin each April.

The Capital Expenditures Facility is available for borrowing until February 27, 2014 and requires amortization payments expected to begin in the spring of 2014. In the first two years of amortization, RNLLC must make amortization payments of 10% per year, or 2.5% per quarter, and thereafter, 25% per year, or 6.25% per quarter, of the aggregate amount drawn, in each case, with the final principal payment due upon maturity.

Upon entry into the 2012 Credit Agreement, RNLLC borrowed approximately $8.5 million under the Capital Expenditures Facility (i) to repay in full outstanding borrowings under the Bridge Loan of approximately $5.9 million and (ii) to pay fees associated with the 2012 Credit Agreement of approximately $2.6 million. RNLLC terminated the Bridge Loan Agreement upon entry into the 2012 Credit Agreement.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

DISCLOSURE

None.

ITEM 9A. 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 partners’ principal executive officer and principal 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 the 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 December 31, 2011.

Management’s Annual Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate.

Our management, including our general partner’s Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of its internal control over financial reporting based upon the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. In connection with management’s assessment of our internal control over financial reporting described above, management concluded that our internal control over financial reporting was effective as of December 31, 2011.

The effectiveness of our internal control over financial reporting as of December 31, 2011 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2011 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

There is no information required to be disclosed in a report on Form 8-K during the three months ended December 31, 2011 that has not previously been reported.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Management of Rentech Nitrogen Partners, L.P.

Our general partner, Rentech Nitrogen GP, LLC, manages our operations and activities subject to the terms and conditions specified in our partnership agreement. Our general partner is owned by RNHI, an indirect wholly owned subsidiary of Rentech. The operations of our general partner in its capacity as general partner are managed by its board of directors. Actions by our general partner that are made in its individual capacity or in its sole discretion will be made by RNHI as the sole member of our general partner and not by the board of directors of our general partner. Our general partner is not elected by our unitholders. The officers of our general partner manage the day-to-day affairs of our business.

Whenever our general partner makes a determination or takes or declines to take an action in its individual, rather than representative, capacity, it is entitled to make such determination or to take or decline to take such other action free of any fiduciary duty or obligation whatsoever to us, any limited partner or assignee, and it is not required to act in good faith or pursuant to any other standard imposed by our partnership agreement or under Delaware law or any other law. Examples include the exercise of its call right or its registration rights, its voting rights with respect to the units it owns and its determination whether or not to consent to any merger or consolidation of the Partnership. Actions by our general partner that are made in its individual capacity or in its sole discretion are made by RNHI, the sole member of our general partner, not by its board of directors.

Limited partners are entitled to elect the directors of our general partner or directly or indirectly participate in our management or operation. Our partnership agreement contains various provisions which replace default fiduciary duties with contractual governance standards. Our general partner is liable, as a general partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made expressly non-recourse to it. Our general partner therefore may cause us to incur indebtedness or other obligations that are non-recourse to it. Our 2012 credit agreement is non-recourse to our general partner.

As a publicly traded limited partnership, we qualify for, and are relying on, certain exemptions from the New York Stock Exchange’s corporate governance requirements, including:

• the requirement that a majority of the board of directors of our general partner consist of independent directors; and

• the requirement that the board of directors of our general partner have a nominating/corporate governance committee and a compensation committee that are composed entirely of independent directors.

As a result of these exemptions, our general partner’s board of directors is not comprised of a majority of independent directors and our general partner’s board of directors does not currently intend to establish a nominating/corporate governance committee or a compensation committee. Accordingly, unitholders do not have the same protections afforded to equityholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.

The board of directors of our general partner currently consists of seven directors. In accordance with the rules of the New York Stock Exchange, the board of directors of our general partner had at least one independent director prior to the listing of our common units on the New York Stock Exchange, and had at least two independent directors within three months of that listing and plans to have at least three independent directors within 12 months of that listing. As the third independent director is added, we expect that one of our non-independent directors will resign as a member of the board of directors of our general partner.

The board of directors of our general partner has one standing committee, which is its audit committee. The members of the audit committee currently consist of Michael S. Burke, James F. Dietz and Keith B. Forman, and Mr. Burke is the chairman of the audit committee. The board of directors of our general partner has determined that Messrs. Dietz and Forman are independent directors who meet the independence requirements established by the New York Stock Exchange and the Exchange Act, and that, based upon their education and experience, Messrs. Burke, Dietz and Forman have the requisite qualifications to qualify under the rules of the SEC, and designated them as audit committee financial experts. After one additional independent director is added to the board of directors and audit committee of our general partner, we expect that Mr. Burke will resign as a member of the audit committee, but will remain a member of the board. The audit committee’s primary functions include reviewing our external financial reporting, recommending engagement of our independent auditors and reviewing procedures for internal auditing and the adequacy of our internal accounting controls.

The board of directors of our general partner may from time to time establish a conflicts committee, which would not be a standing committee, consisting entirely of independent directors. Pursuant to our partnership agreement, the board may, but is not required to, seek the approval of the conflicts committee whenever a conflict arises between our general partner or its affiliates, on the one hand, and us or any public unitholder, on the other. The conflicts committee may then determine whether the resolution of the conflict of interest is in the best interests of the Partnership. The members of the conflicts committee may not be officers or employees of our general partner or directors, officers or employees of its affiliates, and must meet the independence standard established by the New York Stock Exchange and the Exchange Act to serve on an audit committee of a board of directors. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners and not a breach by the general partner of any duties it may owe us or our unitholders.

Meetings and Other Information

Since our initial public offering, the board of directors of our general partner has had one regularly scheduled meeting and our audit committee has had one meeting. None of the directors attended fewer than 100% of the aggregate number of meetings of the board of directors and committees of the board on which the director served.

Our committee charters and governance guidelines, as well as our Code of Business Conduct Ethics that applies to our directors, officers and employees, Disclosure Policy and our Whistleblower Policy are available on our website at http://www.rentechnitrogen.com. We intend to disclose any amendment to or waiver of our Code of Business Conduct or Ethics either on our website or by filing a Current Report on Form 8-K. Our website address referenced above is not intended to be an active hyperlink, and the contents of our website shall not be deemed to be incorporated herein.

Section 16(a) of the Exchange Act requires the executive officers and directors of our general partner, and persons who own more than ten percent of a registered class of our equity securities, or, collectively, the Insiders, to file initial reports of ownership and reports of changes in ownership with the SEC. Insiders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us or written representations from certain Insiders that they were not required to file a Form 5 to report previously unreported ownership or changes in ownership. We believe that, during the three months ending December 31, 2011, the Insiders complied with all such filing requirements.

Report of the Audit Committee

The audit committee of our general partner oversees our financial reporting process on behalf of the board of directors. Management has the primary responsibility for the financial statements and the reporting process. In fulfilling its oversight responsibilities, the audit committee reviewed and discussed with management the audited financial statements contained in this report.

Our independent registered public accounting firm, PricewaterhouseCoopers LLP, is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States of America. The audit committee reviewed with PricewaterhouseCoopers LLP their judgment as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the audit committee under generally accepted auditing standards.

The audit committee discussed with PricewaterhouseCoopers LLP the matters required to be discussed by SAS 61 (Codification of Statement on Auditing Standards, AU § 380), as may be modified or supplemented. The committee received written disclosures and the letter from PricewaterhouseCoopers LLP required by PCAOB Rule 3526 Communication with Audit Committees Concerning Independence , as may be modified or supplemented, and has discussed with PricewaterhouseCoopers LLP its independence from management and the Partnership.

Based on the reviews and discussions referred to above, the audit committee recommended to the board of directors that the audited financial statements be included in this report for filing with the SEC.

Michael S. Burke, Chairman

James F. Dietz

Keith B. Forman

Executive Officers and Directors

The following table sets forth the names, positions and ages (as of February 29, 2012) of the executive officers and directors of our general partner.

D. Hunt Ramsbottom, Dan J. Cohrs, John H. Diesch and Colin M. Morris are also officers of Rentech and provide their services to our general partner and us pursuant to the services agreement we entered into among us, Rentech and our general partner. These officers divide their working time between the management of Rentech and us.


Name	Age		Position With Our General Partner
D. Hunt Ramsbottom		54	Chief Executive Officer and Director
Dan J. Cohrs		59	Chief Financial Officer
John H. Diesch		54	President and Director
John A. Ambrose		58	Chief Operating Officer
Wilfred R. Bahl, Jr.		61	Senior Vice President of Finance and Administration
Marc E. Wallis		51	Senior Vice President of Sales and Marketing
Colin M. Morris		39	Senior Vice President, General Counsel and Secretary
Halbert S. Washburn		51	Director
Michael F. Ray		58	Director
Michael S. Burke		48	Director
James F. Dietz		65	Director
Keith B. Forman		53	Director

D. Hunt Ramsbottom D. Hunt Ramsbottom was appointed Chief Executive Officer and as a member of the board of directors of our general partner in July 2011. Since September 2005, Mr. Ramsbottom has served as President and a director of Rentech and, since December 2005, he has served as Chief Executive Officer of Rentech. Mr. Ramsbottom had been serving as a consultant to Rentech since August 2005 under the terms of a Management Consulting Agreement Rentech entered into with Management Resource Center, Inc. Mr. Ramsbottom has over 25 years of experience building and managing growth companies. Prior to accepting his position at Rentech, Mr. Ramsbottom held various key management positions including: from 2004 to 2005, as Principal and Managing Director of Circle Funding Group, LLC, a buyout firm; from 1997 to 2004, as Chief Executive Officer and Chairman of M2 Automotive, Inc., an automotive repair venture; and from 1989 to 1997, as Chief Executive Officer of Thompson PBE, a supplier of paints and related supplies, which was acquired by FinishMaster, Inc. in 1997. On April 17, 2005, M2 Automotive, Inc. completed an assignment for the benefit of its creditors pursuant to a state law insolvency proceeding. The board of directors of our general partner has determined that Mr. Ramsbottom brings to the board knowledge of our business, a historical understanding of our operations gained through his service as President and Chief Executive Officer of Rentech and experience with companies as Chief Executive Officer and Principal and Managing Director, and therefore he should serve on the board of directors of our general partner.

Dan J. Cohrs . Dan J. Cohrs was appointed Chief Financial Officer of our general partner in July 2011. Since October 2008, Mr. Cohrs has served as Executive Vice President and Chief Financial Officer of Rentech. Mr. Cohrs was also Treasurer of Rentech from October 2008 until November 2009 and was re-appointed Treasurer in October 2010. Mr. Cohrs has more than 25 years of experience in corporate finance, strategy and planning, and mergers and acquisitions. From April 2008 through September 2008, Mr. Cohrs served as Chief Development and Financial Officer of Agency 3.0, LLC, a private digital advertising and consulting agency in Los Angeles, California and he was a Partner and a Board Member of Agency 3.0, LLC until September 2009. From August 2007 through September 2008, he served as Chief Development & Financial Officer of Skycrest Ventures, LLC, a private investment and consulting firm in Los Angeles that was related to Agency 3.0, LLC. From June 2006 to May 2007, Mr. Cohrs served as a consultant for finance and corporate development, as well as Interim Chief Financial Officer for several months during that period of time, for Amp’d Mobile, a private mobile media entertainment company in Los Angeles. From 2003 to 2007, Mr. Cohrs worked as an independent consultant and advised companies regarding financings, investor presentations and business plans. From November 2005 to March 2006, Mr. Cohrs served as a Visiting Senior Lecturer at Cornell University’s Johnson School of Management in the area of corporate governance. From May 1998 to June 2003, Mr. Cohrs served as Executive Vice President and Chief Financial Officer of Global Crossing Ltd. Prior to being employed at Global Crossing Ltd., Mr. Cohrs held senior positions in finance and strategy at Marriot Corporation, Northwest Airlines, Inc. and GTE Corporation, a predecessor of Verizon Communications, Inc.

On June 1, 2007, Amp’d Mobile, Inc. filed a petition for bankruptcy under chapter 11 of title 11 of the United States Code, 11 U.S.C. § 101, et seq., or the Bankruptcy Code, with the United States Bankruptcy Court for the District of Delaware. On January 28, 2002, Global Crossing Ltd., and certain of its direct and indirect subsidiaries, filed a petition for bankruptcy under chapter 11 of title 11 of the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. On April 11, 2005, the SEC, Global Crossing Ltd., Mr. Cohrs (at the relevant time, the Chief Financial Officer of Global Crossing Ltd.) and other members of Global Crossing Ltd.’s senior management reached a settlement related to an SEC investigation regarding alleged violations of the reporting provisions of Section 13(a) of the Securities Exchange Act of 1934 (and the regulations thereunder). The parties to the agreement (other than the SEC) agreed not to cause any violations of such reporting provisions in the future, and in connection with a parallel civil action, Mr. Cohrs agreed to pay a $100,000 civil penalty. In the SEC order, none of the allegations related to fraud, no party admitted liability and no other violations of securities laws were alleged. Also in connection with Global Crossing, Ltd., on July 16, 2004, Mr. Cohrs and the Secretary of the United States Department of Labor entered into a settlement agreement, the relevant restrictions of which expired on July 16, 2009, pursuant to which Mr. Cohrs agreed, among other things, that he would give notice to the Secretary, and if the Secretary objected, then he would not serve in a fiduciary capacity with respect to any plan covered by the Employee Retirement Income Security Act, or ERISA.

John H. Diesch . John H. Diesch was appointed President and a member of the board of directors of our general partner in July 2011. Since January 2008, Mr. Diesch has served as Senior Vice President of Operations of Rentech and is responsible for plant operations at our facility, Rentech’s Product Demonstration Unit in Commerce City, Colorado and the operation of future synthetic fuels plants, including Rentech’s proposed facility near Natchez, Mississippi. From April 2006 to January 2008, Mr. Diesch served as President of REMC and Vice President of Operations for Rentech. From April 1999 to April 2006, Mr. Diesch served as Managing Director of Royster-Clark Nitrogen, Inc., and previously served as Vice President and General Manager of nitrogen production and distribution for IMC AgriBusiness Inc., an agricultural fertilizer manufacturer. In 1991, he joined Vigoro Industries Inc., a manufacturer and distributor of potash, nitrogen fertilizers and related products, as North Bend, Ohio Plant Manager after serving as Plant Manager, Production Manager and Process Engineer with Arcadian Corporation, a nitrogen manufacturer, Columbia Nitrogen Corp., a manufacturer of fertilizer products, and Monsanto Company, a multinational agricultural biotechnology corporation. Mr. Diesch is a former member of the board of directors of the Gasification Technologies Council and previously served as director of the Fertilizer Institute and with the Dubuque Area Chamber of Commerce, and was recently management Chairman of the Board for the Dubuque Area Labor Management Council. The board of directors of our general partner has determined that Mr. Diesch brings to the board knowledge of our business and our industry and valuable insight into the operation of our facility, and therefore he should serve on the board of directors of our general partner.

John A. Ambrose . John A. Ambrose was appointed Chief Operating Officer of our general partner in July 2011. Since December 2007, Mr. Ambrose has served as the President of REMC after joining REMC in April 2007 as Operations Director. Mr. Ambrose has 36 years of chemical manufacturing experience in specialty and commodity chemical manufacturing, including international responsibilities. From 2003 to 2007, he served as Plant Manager at Ferro Corporation, a global producer of technology-based performance materials for manufacturers. Mr. Ambrose began his career with PPG Industries, Inc., a global supplier of paints, coatings, optical products, specialty materials, chemicals, glass and fiber glass, where he advanced through several manufacturing positions over the course of 28 years, initially in chlor-alkali, then holding positions such as environmental compliance/remediation manager and manufacturing manager within the Optical Monomers business unit. As director of manufacturing from 1996 to 2003, he managed and expanded multiple worldwide plants for the company’s precipitated silica business unit. He serves on the board of directors of The Fertilizer Institute and the Chemistry Industry Council of Illinois.

Wilfred R. Bahl, Jr. Wilfred R. Bahl, Jr. was appointed Senior Vice President of Finance and Administration of our general partner in July 2011. Since April 2006, Mr. Bahl has served as the Vice President and Chief Financial Officer of REMC. He has 38 years of finance experience, with 31 of those years at our facility. From 1999 to 2006, Mr. Bahl was the Director of Finance and Energy for Royster-Clark Nitrogen, Inc. From 1998 to 1999, he served as Vice President of Business Development and, from 1995 to 1998, he served as the Vice President of Finance and Administration of IMC Nitrogen Co. From 1991 to 1995, he served as Vice President of Finance for Phoenix Chemical Co. In 1987, he served as Treasurer and was appointed to the board of directors of Phoenix Chemical Co and was appointed to the executive committee of the board of directors in 1989. From 1980 to 1987, Mr. Bahl served as the Administrative and Accounting Manager of N-Ren Corporation and later as its Controller. Prior to joining N-Ren Corporation, he held various accounting positions with Flexsteel Industries, Inc., a furniture manufacturer, and Eska Company, a manufacturer of snow blower and outboard motors.

Marc E. Wallis . Marc E. Wallis was appointed Senior Vice President of Sales and Marketing of our general partner in July 2011. Mr. Wallis has served as Vice President, Sales and Marketing of REMC since 2006 and has a long history working with our facility. From 2000 to 2006, he held the position of National Accounts Sales Manager of our company. From 1995 to 2000, Mr. Wallis held the positions of Director of Sales and Purchasing at IMC Agribusiness Inc., the prior owner of our facility. From 1987 to 1995, Mr. Wallis held the position of Director of Purchasing at the Vigoro Corporation, a manufacturer and distributor of potash, nitrogen fertilizers and related products.

Colin M. Morris . Colin M. Morris was appointed Senior Vice President, General Counsel and Secretary of our general partner and Rentech in October 2011. From July 2011 to October 2011, Mr. Morris served as the Vice President, General Counsel and Secretary of our general partner and from June 2006 to October 2011, Mr. Morris served as the Vice President, General Counsel and Secretary of Rentech. Mr. Morris practiced corporate and securities law at the Los Angeles office of Latham & Watkins LLP from June 2004 to May 2006. From September 2000 to May 2004, Mr. Morris practiced corporate and securities law in the Silicon Valley office of Wilson, Sonsini, Goodrich and Rosati. Prior to that, Mr. Morris practiced corporate and securities law in the Silicon Valley office of Pillsbury Winthrop Shaw Pittman LLP.

Halbert S. Washburn . Halbert S. Washburn was appointed as a member of the board of directors of our general partner in July 2011. Since December 2005, Mr. Washburn has served as a member of the board of directors of Rentech, and since June 2011 has served as its Chairman. Mr. Washburn has over 25 years of experience in the energy industry. Since August 2006, Mr. Washburn has been the Chief Executive Officer of BreitBurn GP, LLC, the general partner of BreitBurn Energy Partners LP. Since August 2006, he was the Co-Chief Executive Officer and served on the board of directors of BreitBurn GP, LLC. He has served as the Co-President and a director of BreitBurn Energy Corporation since 1988. He also has served as a Co-Chief Executive Officer and a director for BreitBurn Energy Holdings, LLC and as Co-Chief Executive Officer and a director of BEH (GP), LLC. Mr. Washburn previously served as Chairman on the Executive Committee of the board of directors of the California Independent Petroleum Association. He also served as Chairman of the Stanford University Petroleum Investments Committee and as Secretary and Chairman of the Wildcat Committee. The board of directors of our general partner has determined that Mr. Washburn brings to the board knowledge of our business and extensive experience with master limited partnerships, including his service as an executive officer and director of several BreitBurn entities, and therefore he should serve on the board of directors of our general partner.

Michael F. Ray . Michael F. Ray was appointed as a member of the board of directors of our general partner in July 2011. Since May 2005, Mr. Ray has served as a member of the board of directors of Rentech. Mr. Ray founded and, since 2001, has served as President of ThioSolv, LLC. ThioSolv, LLC is in the business of developing and licensing technology to the refining and chemical sector. Also, since May 2005, Mr. Ray has served as General Partner of GBTX Leasing, LLC, a company that owns and leases rail cars for the movement of liquid chemicals and salts. Since 2008, Mr. Ray has served as a member of the board of directors and the Technology Committee, for Cyanco Corporation, a producer of sodium cyanide in the Western United States, and a subsidiary of Oaktree Capital Management which holds a controlling interest in the company. From 1995 to 2001, Mr. Ray served as Vice President of Business Development for the Catalyst and Chemicals Division of The Coastal Corporation, a company that principally gathered, processed, stored and distributed natural gas. Mr. Ray served as President (from 1990 to 1995), Vice President of Corporate Development and Administration (from 1986 to 1990) and Vice President of Carbon Dioxide Marketing (from 1985 to 1986) of Coastal Chem, Inc., a manufacturer of dry ice and solid carbon dioxide. Mr. Ray served as Regional Operations Manager (from 1981 to 1985) and Plant Manager (from 1980 to 1981) of Liquid Carbonic Corporation, a seller of carbon dioxide products. Mr. Ray previously served as a member of the board of directors of Coastal Chem, Inc., Cheyenne LEADS and Wyoming Heritage Society. Mr. Ray also served on the Nitrogen Fertilizer Industry Ad Hoc Committee, the University of Wyoming EPSCOR Steering Committee and Wyoming Governor’s committee for evaluating state employee compensation. The board of directors of our general partner has determined that Mr. Ray brings to the board valuable knowledge of and experience in the chemical and nitrogen fertilizer industries and directorial and governance experience as a director of Coastal Chem, Inc., and therefore he should serve on the board of directors of our general partner.

Michael S. Burke . Michael S. Burke was appointed as a member of the board of directors of our general partner in July 2011. Since March 2007, Mr. Burke has served as a member of the board of directors of Rentech. Mr. Burke was appointed President of AECOM Technology Corporation, or AECOM, on October 1, 2011. AECOM is a global provider of professional technical and management support services to government and commercial clients. From December 2006 through September 2011, Mr. Burke served as Executive Vice President, Chief Financial Officer of AECOM. Mr. Burke joined AECOM as Senior Vice President, Corporate Strategy in October 2005. From 1990 to 2005, Mr. Burke was with the accounting firm, KPMG LLP, where he served in various senior leadership positions, most recently as a Western Area Managing Partner from 2002 to 2005 and was a member of the board of directors of KPMG from 2000 through 2005. While on the board of directors of KPMG, Mr. Burke served as the Chairman of the Board Process and Governance Committee and a member of the Audit and Finance Committee. Mr. Burke also serves on various

charitable and community boards. Mr. Burke received a B.S. degree in accounting from the University of Scranton and a J.D. degree from Southwestern University. The board of directors of our general partner has determined that Mr. Burke brings to the board extensive accounting, financial and business experience, including experience with a public company, and therefore he should serve on the board of directors of our general partner.

James F. Dietz . James F. Dietz was appointed as a member of the board of directors of our general partner in February 2012. Mr. Dietz has over 41 years of experience in the fertilizer and chemical industries. Mr. Dietz most recently served as Executive Vice President and Chief Operating Officer of Potash Corporation of Saskatchewan Inc., or PotashCorp, from November 2000 until his retirement in June 2010. In November 2000, Mr. Dietz was named Executive Vice President & Chief Operating Officer for PotashCorp. From 1998 to November 2000, Mr. Dietz served as President of PotashCorp Nitrogen, and from 1997 to 1998, as Executive Vice President. In addition to responsibility for PotashCorp’s worldwide operations, Mr. Dietz had responsibility for the corporation’s Safety, Health, and Environment performance and the Procurement functions. From 1993 to 1997, Mr. Dietz was Vice President of Manufacturing with Arcadian Corporation in Memphis, Tennessee. From 1969 to 1993, Mr. Dietz had increasing operational responsibility for Standard Oil of Ohio (Sohio) and BP, both in the United States and the United Kingdom. The board of directors of our general partner has determined that Mr. Dietz brings to the board valuable knowledge of and experience in the chemical and nitrogen fertilizer industries, and therefore he should serve on the board of directors of our general partner.

Keith B . Forman . Keith B. Forman was appointed as a member of the board of directors of our general partner at the closing of our initial public offering. Since April 2007, Mr. Forman has been a director of Capital Product Partners L.P., a publicly traded shipping limited partnership specializing in the seaborne transportation of oil, refined oil products and chemicals. Mr. Forman currently serves as the Chairman of its conflicts committee and is a member of its audit committee. From November 2007 until March 2010, Mr. Forman served as Partner and Chief Financial Officer of Crestwood Midstream Partners LP, a private investment partnership focused on making equity investments in the midstream energy market. The other partners of Crestwood Mainstream Partners LP included the Blackstone Group L.P., Kayne Anderson Energy Funds and GSO Capital Partners LP. From February 2005 to 2007, Mr. Forman was a member of the board of directors of Kayne Anderson Energy Development, a closed-end investment fund focused on making debt and equity investments in energy companies, and was a member of its audit committee. Mr. Forman was also a member of the board of directors of Energy Solutions International Ltd., a privately held supplier of oil and gas pipeline software management systems, from April 2004 to January 2009. From January 2004 to July 2005, Mr. Forman was Senior Vice President, Finance for El Paso Corporation, a provider of natural gas services. From January 1992 to December 2003, he served as Chief Financial Officer of GulfTerra Energy Partners L.P., a publicly traded master limited partnership, and was responsible for the financing activities of the partnership, including in commercial and investment banking relationships. The board of directors of our general partner has determined that Mr. Forman brings to the board accounting, financial and directorial experience, including extensive experience with master limited partnerships, and therefore he should serve on the board of directors of our general partner.

The directors of our general partner hold office until the earliest of their death, resignation or removal.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

Transition Period

On February 1, 2012, the board of directors of our general partner approved the change of our fiscal year end from September 30 to December 31 to coincide with the end of the calendar year. In connection with this change, we are providing the information contained in this Compensation Discussion and Analysis as it relates to our compensation practices during the three-months ended December 31, 2011, or the Transition Period. Comparable information for the twelve-month period ending on September 30, 2011 (our last fiscal year-end prior to this change) is available in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, or the 2011 10-K.

The board of directors of our general partner approved the change in our fiscal year to align our financial reporting periods with the tax reporting periods of our limited partners and our publicly-traded peer group companies. The board of directors believes that the change will make it easier for our unitholders and analysts to compare our financial performance to that of our peer group companies.

As described more fully below, during the Transition Period, the most significant compensation decisions made by the compensation committee of the board of directors of Rentech, or the Compensation Committee, included the following:

•

Evaluating the compensation of our executive officers and, as appropriate, increasing the base salaries of certain of our named executive officers, or NEOs, identified below;

•

Making annual grants of equity awards and special grants of equity awards in connection with our initial public offering, or the IPO; and

•

Entering into employment agreements with certain of our NEOs in connection with our IPO, as described in more detail below.

Overview

This Compensation Discussion and Analysis provides an overview and analysis of our executive compensation program during this Transition Period for our NEOs. Our executive compensation program is designed to align executive pay with individual performance on both short and long-term bases, link executive pay to specific, measurable financial, technological and development achievements intended to create value for securityholders and utilize compensation as a tool to attract and retain the high-caliber executives that are critical to our long-term success.

The following table sets forth the key elements of our NEOs’ compensation, along with the primary objectives associated with each element of compensation. We note that, though annual incentive compensation is and has historically been a key component of our executive compensation, no such program has been devised or implemented with respect to the Transition Period at this time (as discussed further in “—Annual Incentive Compensation” below).


Compensation Element		Primary Objective
Base salary		To recognize performance of job responsibilities, provide stable income and attract and retain experienced individuals with superior talent.

Annual incentive compensation		To promote short-term performance objectives and reward individual contributions to the achievement of those objectives.

Long-term equity incentive awards		To emphasize long-term performance objectives, align the interests of our NEOs with shareholder interests, encourage the maximization of shareholder value and retain key executives.

Severance and change in control benefits		To encourage the continued attention and dedication of our NEOs and provide reasonable individual security to enable our NEOs to focus on our best interests, particularly when considering strategic alternatives.

Retirement savings (401(k) plan)		To provide an opportunity for tax-efficient savings and matching contributions by us.

Other elements of compensation and perquisites		To attract and retain talented executives in a cost-efficient manner by providing benefits with high perceived values at relatively low cost.

To serve the foregoing objectives, our overall compensation program is generally designed to be flexible rather than purely formulaic. In alignment with the objectives set forth above, Rentech’s Compensation Committee, has generally determined the overall compensation of our NEOs and its allocation among the elements described above, relying on the analyses and advice provided by Rentech’s compensation consultant as well as input from our management team.

Our compensation decisions for our NEOs during the Transition Period are discussed in detail below. This discussion is intended to be read in conjunction with the executive compensation tables and related disclosures that follow this Compensation Discussion and Analysis.

Named Executive Officers

Rentech Nitrogen GP, LLC, our general partner, manages our operations and activities on our behalf through its officers and directors and is solely responsible for providing the employees and other personnel necessary to conduct our operations. Although all of the employees that conduct our business are employed by our general partner and its affiliates, we sometimes refer to these individuals in this prospectus as our officers and employees for ease of reference. Please see “Certain Relationships and Related Party Transactions, and Director Independence—Our Agreements with Rentech.”

The following discussion describes and analyzes our compensation objectives and policies, as well as the material components of our executive compensation program for each of D. Hunt Ramsbottom, Dan J. Cohrs, John A. Ambrose, Wilfred R. Bahl, Jr. and Marc E. Wallis, our NEOs. Our NEOs were appointed to their positions during 2011 in connection with our formation and the formation of our general partner. Messrs. Ramsbottom and Cohrs also serve as officers of Rentech, our parent company, and are sometimes referred to in this registration statement as our “Shared NEOs” (and Messrs. Ambrose, Bahl and Wallis are sometimes referred to as our “Non-Shared NEOs”).

Following our formation and the formation of our general partner, our Shared NEOs, who were already officers of Rentech and REMC, also became officers of our general partner, while our Non-Shared NEOs, who were already officers of REMC, also became officers of our general partner. Upon the closing of our initial public offering, which occurred during the Transition Period, all of our NEOs ceased to be officers of, and to be employed by, REMC. The following table sets forth each NEO’s title(s) prior to our formation and the formation of our general partner in 2011, as well as such executive’s title(s) following appointment as our NEO.


Officer	Pre-Formation Title(s)	Post-Formation Title(s)
D. Hunt Ramsbottom	Chief Executive Officer, Rentech, Inc. Vice President, REMC	Chief Executive Officer, Rentech, Inc. and Rentech Nitrogen GP, LLC

Dan J. Cohrs	Chief Financial Officer, Rentech, Inc. Vice President and Treasurer, REMC	Executive Vice President & Chief Financial Officer, Rentech, Inc. and Chief Financial Officer, Rentech Nitrogen GP, LLC

John A. Ambrose	President, REMC	Chief Operating Officer, Rentech Nitrogen GP, LLC

Wilfred R. Bahl, Jr.	Chief Financial Officer and Vice President, REMC	Senior Vice President of Finance and Administration, Rentech Nitrogen GP, LLC

Marc E. Wallis	Vice President, Sales and Marketing, REMC	Senior Vice President of Sales and Marketing, Rentech Nitrogen GP, LLC

Compensation Philosophy

We operate in a highly competitive and dynamic industry, characterized by rapidly changing market requirements. To succeed in this environment, we need to recruit and retain a highly talented and seasoned team of executive, technical, sales, marketing, operations, financial and other business professionals. We recognize that our ability to attract and retain these professionals largely depends on how we compensate and reward our employees, including our NEOs. As discussed under the heading “Compensation

Decisions: Roles of Rentech’s Compensation Committee, our General Partner and our Chief Executive Officer” below, prior to the closing of our initial public offering, compensation matters affecting our NEOs were administered by Rentech’s Compensation Committee with input from our compensation consultant and others. Following the closing of our initial public offering, responsibility and authority for compensation-related decisions: (i) for our Shared NEOs resides with Rentech’s Compensation Committee (subject to input and advice from our Chief Executive Officer with regard to our Chief Financial Officer), and (ii) for our Non-Shared NEOs resides with the board of directors of our general partner (subject to input and advice from our Chief Executive Officer), taking into consideration the recommendation of Rentech’s Compensation Committee, in all cases, administered in a manner consistent with the compensation philosophy discussed above. For ease of reference, we refer below to determinations and perspectives formulated by this group as our own. Rentech’s Compensation Committee and our general partner, as applicable, conduct periodic reviews of our NEOs’ compensation and consider adjustments as appropriate.

As a newly formed entity, we are in the process of designing and implementing our compensation strategy and objectives to address our recruiting and retention needs, which we are building around the following principles and objectives:

•

Attract, engage and retain the best executives to work for us, with experience and managerial talent that will build our reputation as an employer of choice in a highly-competitive and dynamic industry;

•

Align compensation with our corporate strategies, business and financial objectives and the long-term interests of our unitholders with a focus on increasing long-term value and rewarding achievements of our short- and mid-term financial and strategic objectives;

•

Motivate and reward executives whose knowledge, skills and performance ensure our continued success; and

•

Ensure that our total compensation is fair, reasonable and competitive.

We seek to create an environment that is responsive to the needs of our employees, is open to employee communication and continual performance feedback, encourages teamwork and rewards commitment and performance. Our compensation program is intended to be flexible and complementary and to collectively serve the principles and objectives of our compensation philosophy. Each of the key elements of our executive compensation program is discussed in more detail below (see “—Core Components of Executive Compensation”).

Compensation Decisions: Roles of Rentech’s Compensation Committee, our General Partner and our Chief Executive Officer

Prior to our formation and the formation of our general partner, each of our NEOs served as an officer of REMC. Upon the closing of our initial public offering, all of our NEOs ceased to be officers of, and to be employed by, REMC. Our Shared NEOs also serve as officers of Rentech. Historically, the initial compensation arrangements for our NEOs have been determined in arm’s-length negotiations with each individual executive at the time of such executive’s hiring. Mr. Ramsbottom has been an officer of Rentech since September 2005 and an officer of REMC since its acquisition by Rentech in April 2006. Mr. Ramsbottom negotiated his initial employment terms with Rentech’s then-current board of directors at the time of his hiring. Mr. Cohrs was hired in October 2008 and negotiated his employment terms with Mr. Ramsbottom, our Chief Executive Officer, subject to the oversight and approval of Rentech’s Compensation Committee. Messrs. Wallis and Ambrose joined REMC shortly after its acquisition by Rentech, each negotiating his employment terms individually with our Chief Executive Officer, subject to the oversight and approval of Rentech’s Compensation Committee. Mr. Bahl was hired by REMC prior to Rentech’s acquisition of REMC in April 2006, but negotiated new terms of employment with our Chief Executive Officer, subject to the oversight and approval of Rentech’s Compensation Committee and board of directors, or Rentech’s Board of Directors, as applicable, at the time of Rentech’s acquisition of REMC.

In the years subsequent to their hiring (or, in the case of Mr. Bahl, since Rentech’s acquisition of REMC), including during the Transition Period, changes to the terms and conditions of our NEOs’ employment, other than our Chief Executive Officer, have been determined by our Chief Executive Officer with the oversight and approval of Rentech’s Compensation Committee, subject to the terms of applicable employment and change-in-control/severance arrangements that are in place with our NEOs (discussed under the heading “—Severance Benefits” below). Changes to the terms and conditions of our Chief Executive Officer’s employment during that period, including during the Transition Period, have been determined by Rentech’s Compensation Committee and Board of Directors, as applicable, subject to the terms and conditions of his employment agreement.

Decisions regarding the terms and conditions of our NEOs’ employment have been influenced by a variety of factors, including, but not limited to:

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The NEO’s background, experience and accomplishments;

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Our financial condition, performance and available resources;

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Our need to fill a particular position or retain a particular executive;

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An evaluation of the competitive market, based on the collective experience of the members of Rentech’s Compensation Committee, our Chief Executive Officer and advice from Rentech’s compensation consultant;

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The NEO’s length of service; and

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The compensation levels of our other executive officers.

Generally, the focus of these compensation decisions has been to retain these skilled individuals and to incentivize them to help meet prescribed financial and other goals. The current compensation levels of our executive officers, including our NEOs, primarily reflect the varying roles and responsibilities of each individual, their accomplishments and the length of time each executive has been employed by Rentech and/or REMC.

Compensation Consultant

During fiscal years 2010 and 2011and continuing through the Transition Period, Rentech’s Compensation Committee engaged Radford, an Aon Hewitt Company, as an independent compensation consultant to assist in the continuing analysis of the executive compensation program for certain of our officers, including our NEOs. Services provided by Radford during 2011 and through the Transition Period with respect to our NEOs included:

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Analyzing and verifying Rentech’s peer group companies and applicable benchmarks;

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Providing compensation survey data and assisting Rentech’s Compensation Committee with the interpretation of this data;

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Advising on the reasonableness and effectiveness of our compensation components, levels and programs for our directors and officers, including our NEOs; and

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Analyzing the impact of our initial public offering on our compensation components, levels and programs and advising as to any appropriate compensation changes, including any changes or additions to equity compensation.

Rentech’s current peer group was established in 2010 based on discussions among the members of Rentech’s Compensation Committee, certain of Rentech’s executive officers (including certain Shared NEOs) and Radford. The peer group consists of alternative energy companies and certain technology companies with a related focus, in each case, with (i) annual revenues ranging from $50 million to $550 million, (ii) market values ranging from $80 million to $750 million, (iii) revenues ranging from $50 million to $550 million (with a median of $316 million), and (iv) similar employee numbers. Following are the companies that comprise Rentech’s current peer group:


Advanced Energy Industries		Fuel Tech

Broadwind Energy		Fuelcell Energy

Cohu, Inc.		LSB Industries

Converge, Inc.		Maxwell Technologies

Echelon Corp.		MGP Ingredients

EMCORE Corp.		Rudolph Technologies

Energy Conversion Devices		Satcon Technology

EnerNoc Inc.		Ultra Clean Holdings

Evergreen Solar		Vicor Corp.

FormFactor Inc.		Zoltek

In mid-2010, Rentech’s Compensation Committee reviewed data points as a benchmark for various elements of executive compensation, including base salaries, target incentive as a percentage of salary, total cash compensation, long-term incentives and total direct compensation, based on information gathered from the public filings of Rentech’s peer companies set forth above. Rentech’s Compensation Committee also reviewed aggregated published survey data from Radford’s 2010 Global Technology Survey (using a data set comprised of public high-tech companies with revenue between $50 million and $500 million) in order to validate its benchmarks.

Rentech’s Compensation Committee determined that the compensation of our Shared NEOs was generally above the market median in totality and for individual components of compensation at that time (with the exception of Mr. Ramsbottom’s base salary, which was slightly below the median), yet still within reasonable market practices and in line with Rentech’s compensation philosophy and strategy. Specifically, Rentech’s base salaries and target total cash compensation were on average higher than the median of the market data. A comparison of Rentech’s long-term incentives and total direct compensation (comprised of base salary, annual cash incentives and equity incentives) also revealed levels above the median of the market for our Shared NEOs. Based on this analysis, Rentech concluded that the level of our total compensation was well positioned to attract and retain the type of management team that we believe is necessary to successfully implement Rentech’s commercialization strategy. We believe that these levels and types of compensation are also consistent with our compensation philosophy and foster our compensation objectives, and continued to provide appropriate incentives through the Transition Period.

Comparative data for our Non-Shared NEOs were not provided by Radford on an individualized basis due to the fact that they were not public company officers at the relevant times. However, compensation policies, including salary levels, annual cash incentives and equity award levels for our Non-Shared NEOs have been guided generally by the input received from Radford with respect to our executive compensation program and we believe that, as with our Shared NEOs, the compensation levels for these NEOs are appropriate for retaining the type of management team that we believe to be essential to our success.

In connection with our IPO, Rentech’s Compensation Committee expanded the scope of services provided by Radford by further engaging Radford to provide data and analysis with regard to the levels and types of compensation of our NEOs and directors in connection with and following our IPO, and to consider whether Rentech’s peer group remains an appropriate peer group for us. Radford serves at the discretion of Rentech’s Compensation Committee and may be terminated by that committee. We intend to continue to work with Radford to guide and shape our compensation program and we expect that Radford will provide compensation advice both generally for our Non-Shared NEOs and specifically with regard to services provided to us (as opposed to Rentech) by our Shared NEOs.

Radford’s total fee for services provided to Rentech’s Compensation Committee for the Transition Period was approximately $5,000. Of that amount, approximately $3,000 in fees related to work done by Radford on our behalf.

Allocation

All of the executive officers and other personnel necessary for our business to function are employed and compensated by our general partner and/or Rentech, subject to reimbursement of the appropriate entity by us in accordance with the terms of the services agreement. Because each of our Shared NEOs is also an officer of Rentech, our Shared NEOs generally devote less than a majority of their total business time specifically to our general partner and to us. Rentech has the ultimate decision-making authority with respect to the portion of our Shared NEOs’ compensation that is allocated to us pursuant to Rentech’s allocation methodology, subject to the terms of the services agreement. Any such compensation allocation decisions are not subject to approval by us or our general partner. Please see “Certain Relationships and Related Party Transactions—Our Agreements with Rentech—Services Agreement.”

Core Components of Executive Compensation

Through Rentech’s Compensation Committee, we design the principal components of our executive compensation program to fulfill one or more of the principles and objectives described above. Compensation of our NEOs consists of the following elements:

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Cash compensation comprised of base salary and annual cash incentive compensation;

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Equity incentive compensation;

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Certain severance and change in control benefits;

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Health and welfare benefits and certain limited perquisites and other personal benefits; and

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Retirement savings (401(k)) plan.

We view each component of our executive compensation program as related but distinct, and we have historically reassessed the total compensation of our NEOs periodically to ensure that overall compensation objectives are met. In addition, in determining the appropriate level for each compensation component, we have considered, but not relied on exclusively, our understanding of the competitive market based on the collective experience of members of Rentech’s Compensation Committee (and our Chief Executive Officer with regard to the other NEOs), our recruiting and retention goals, our view of internal equity and consistency, the length of service of our executives, our overall financial and operational performance and other relevant considerations.

We have not adopted any formal or informal policies or guidelines for allocating compensation between currently-paid and long-term compensation, between cash and non-cash compensation, or among different forms of non-cash compensation. Generally, we offer a competitive, but balanced, total compensation package that provides the stability of a competitive, fixed income while also affording our executives the opportunity to be appropriately rewarded through cash and equity incentives if we attain short-term goals and perform well over time.

Each of the primary elements of our executive compensation program is discussed in more detail below. While we have identified particular compensation objectives that each element of executive compensation serves, our compensation programs are intended to be flexible and complementary and to collectively serve all of the executive compensation objectives described above. Accordingly, whether or not specifically mentioned below, we believe that, as a part of our overall executive compensation policy, each individual element, to a greater or lesser extent, serves each of our compensation objectives.

Cash Compensation

We provide our NEOs with cash compensation in the form of base salaries and annual cash incentive awards. Our cash compensation is structured to provide a market-level base salary for our NEOs while creating an opportunity to exceed market levels for total compensation if short- and long-term performance exceeds expectations. We believe that this mix appropriately combines the stability of non-variable compensation (in the form of base salary) with variable performance awards (in the form of annual cash incentives) that reward individual contributions to the success of the business.

Base Salary

As discussed above, base salaries for our NEOs were initially set in arm’s-length negotiations during the hiring process for these executives. These base salaries have historically been reviewed annually by Rentech’s Compensation Committee (with input from our Chief Executive Officer with respect to the other NEOs) and were again reviewed at the end of 2011 for purposes of determining 2012 salaries. Our NEOs are not entitled to any formulaic base salary increases.

In connection with the closing of our IPO, effective November 7, 2011, we increased the base salaries of each of our Shared NEOs by 10% to compensate these executives for their expanded responsibilities, duties and exposure to potential liabilities as senior officers of two publicly traded companies. In addition, effective November 7, 2011, Messrs. Ambrose, Bahl and Wallis received salary increases of approximately 15%, 10% and 5%, respectively, upon the closing of our IPO pursuant to their respective employment agreements. These increases were intended to compensate these executives for their expanded responsibilities, duties and exposure to potential liabilities as senior officers of a publicly traded company (for a description of the terms of these employment agreements, see “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table”).

In addition to the increases made to our NEOs’ base salaries in connection with the closing of our IPO, the Compensation Committee increased the base salaries of our NEOs, effective January 2012, in connection with its annual salary review at the end of our fiscal year 2011. Effective January 2012, Mr. Ramsbottom’s base salary increased by approximately 3% to $497,200 in recognition of his leadership of Rentech and to more closely align his salary to the median salary in Rentech’s peer group. Mr. Cohrs’ base salary also increased in January 2012 by approximately 3% to $426,575 in recognition of his effective capital raising efforts on behalf of Rentech and his continued leadership as our Chief Financial Officer. Each of Messrs. Ambrose, Bahl and Wallis also received an annual salary increase, effective January 2012, of approximately 3.5% in connection with their annual reviews.

The base salaries for our NEOs, at the beginning of the Transition Period and following their salary increases (i) in connection with our IPO on November 7, 2011, and (ii) in connection with our annual salary review in January 2012 are set forth in the following table:


Name	Transition Period Base Salary (Before IPO Increase) ($)		Transition Period Base Salary (After IPO Increase) ($)		Post-Transition Period Base Salary (After Annual Increase) ($)
D. Hunt Ramsbottom.		440,000		484,000		497,200

Dan J. Cohrs		377,500		415,250		426,575

John A. Ambrose		182,880		210,300		217,661

Wilfred R. Bahl, Jr.		180,910		199,000		205,965

Marc E. Wallis		180,000		189,000		195,615

Annual Incentive Compensation

Rentech maintains an annual incentive program to reward executive officers, including our NEOs (other than Mr. Wallis), based on its financial and operational performance, achievement of specific milestones related to technology, financing and project development work associated with Rentech’s alternative energy business, and the individual NEO’s relative contribution to that performance during the year (referred to below as the our annual incentive program). We separately maintain a sales-based annual incentive program for Mr. Wallis to incentivize him in light of his position and responsibilities (referred to below as the sales incentive program). We recognize that successful completion of short-term objectives is critical in achieving our planned level of growth and attaining our other long-term business objectives. Accordingly, our annual and sales incentive programs are designed to reward executives for successfully taking the immediate steps necessary to implement our long-term business strategy.

A detailed description of our annual and sales incentive programs for our fiscal year 2011 (ending September 30, 2011), including our determination and weighting of applicable performance criteria and an analysis of our performance (and that of our NEOs) against these criteria, is contained in our 2011 10-K. Historically, we have implemented new annual and sales incentive programs at the end of the calendar year (which, prior to the Transition Period, constituted the start of our fiscal year). In connection with our transition to a fiscal year that coincides with the calendar year, we are in the process of evaluating and determining how best to structure annual and sales incentive awards in light of the Transition Period.

At this point in time, no annual or sales incentive program has been established with respect to the Transition Period and no incentive award payments are currently contemplated. We expect that, as part of this transition process, Rentech’s Compensation Committee will determine how best to analyze and reward performance during the Transition Period. While no determinations have been made at this time (and, accordingly, no assurances can be given that any cash incentives will be deemed to be earned with respect to the Transition Period), we expect that Rentech’s Compensation Committee will take into account both the Transition Period and the fiscal year 2012 service period in determining 2012 annual incentives. We expect to disclose any such determinations in future filings as may be required by applicable disclosure rules.

Long-Term Equity Incentive Awards

Rentech believes that senior executives, including our NEOs, should have an ongoing stake in the success of their employer to closely align their interests with those of its shareholders. Rentech’s Compensation Committee also believes that equity awards provide meaningful retention and performance incentives that appropriately encourage our executive officers, including our NEOs, to remain employed with us and put forth their best efforts and performance at all times. Accordingly, equity incentive awards have historically been a key component of our compensation program, including during the Transition Period, as these awards have served to align the interests of our NEOs with those of Rentech’s shareholders and incentivize our NEOs to work toward long-term growth. During the Transition Period, Rentech granted equity awards to our NEOs under its 2006 and 2009 Incentive Awards Plans and we granted equity awards to our NEOs under our 2011 Long-Term Incentive Plan. Each of these plans is intended to provide incentives for a broad group of service providers, including employees (both NEOs and other employees), directors and consultants, in each case, who are critical to our success and the creation of shareholder value.

During the Transition Period, we granted two distinct sets of equity awards to our NEOs. The first set of awards is referred to below as the “2012 Awards” and constitutes annual grants of equity awards, consistent with Rentech’s past practice of granting awards annually to its NEOs. The second set of equity awards is referred to below as “IPO-Related Equity Awards” and is intended to reward the efforts of certain of our NEOs for their roles in orchestrating, as well as to incentivize their continued performance following, our IPO. All of these awards, which are described in additional detail below, are intended to promote the share ownership, performance and retention goals described above.

2012 Awards

During the Transition Period, (i) Rentech granted 2012 Awards to all of our NEOs comprised of time-vesting restricted stock units (“RSUs”) and performance-vesting restricted stock units (“PSUs”), and (ii) we granted 2012 Awards to our Non-Shared NEOs comprised of phantom units (“phantom units”) that are settled in our common units upon vesting (and which entitle their holders to dividend and other distribution rights while the phantom units are outstanding). Each RSU, PSU and phantom unit confers upon its holder the right to receive one share of Rentech common stock or one of our common units, as applicable, without payment of purchase price, thereby delivering the full grant-date value of the underlying shares or units, as well as any post-grant share or unit price increase. Accordingly, each of these awards enables us to confer upon our executives value in excess of simple future appreciation.

RSUs and phantom units granted as 2012 Awards during the Transition Period vest in substantially equal, annual increments over a period of three years from the grant date, thus providing a key retention incentive to our NEOs over this period. PSUs granted as 2012 Awards require both continued service and the attainment of performance criteria as conditions to vesting, thereby providing both retention and enhanced performance incentives. Specifically, PSUs granted during the Transition Period vest only if, on or prior to October 12, 2014, Rentech’s value weighted average share price for any thirty-day period equals or exceeds $3.00, further subject to the recipient’s continued employment through the attainment of this performance objective.

All of the 2012 Awards are subject to accelerated vesting in connection with certain qualifying terminations of employment including, in some cases, in connection with a change in control (as described under “—Potential Payments upon Termination or Change-in-Control” below). We believe that the applicable vesting periods provide an important retention incentive, while accelerated vesting (where appropriate) protects executives against forfeiture of their awards in appropriate circumstances and aligns management’s incentives more closely with the interests of our shareholders. In order to further incentivize post-grant performance with the 2012 Awards, Rentech granted (i) one-third of the 2012 Awards in the form of PSUs ( i.e. , subject to both performance-vesting and time-vesting conditions) to our Non-Shared NEOs and (ii) two-thirds of the 2012 Awards in the form of PSUs to our Shared NEOs.

The 2012 Awards are intended as annual awards in respect of 2012 and should provide retention and performance incentives at levels appropriate for 2012; however, in light of the Transition Period (which Rentech’s Compensation Committee may take into consideration for purposes of structuring compensation for our fiscal year 2012), Rentech’s Compensation Committee may, in its discretion, decide to grant additional equity incentives during calendar year 2012. No determinations have been made with regard to any such awards at this time (if any) and there can be no assurance that any additional grants will be made.

In determining appropriate levels of equity grants for the 2012 Awards, Rentech’s Compensation Committee considered, among other things, the role and responsibility of each NEO and the perceived need to reward and retain the NEO. The following table sets forth the 2012 Awards that we and Rentech granted to our NEOs during the Transition Period (all grants were made on December 13, 2011):


Officer	Rentech Restricted Stock Units (RSUs)		Rentech Performance Stock Units (PSUs)		Partnership Phantom Units
D. Hunt Ramsbottom		401,875		800,625		—

Dan J. Cohrs		195,938		397,812		—

John A. Ambrose		16,459		33,416		2,494

Wilfred R. Bahl, Jr.		10,973		22,277		1,663

Marc E. Wallis		6,270		12,730		950

IPO-Related Equity Awards

In connection with the closing of our IPO, we and Rentech made equity incentive grants to our NEOs (referred to below as the “IPO Grants”) to reward these executives for their success in completing our IPO and to incentivize these executives with respect to the additional demands that will be placed upon them in connection with our becoming a publicly traded company. The IPO Grants are additional to the 2012 Awards and are expected to further promote the share ownership, performance and retention goals described above.

The IPO Grants were comprised in equal parts (determined by reference to the fair market value of the shares or units underlying the awards, as applicable) of (i) phantom units that are settled in our common units upon vesting (and which entitles their holders to dividend and other distribution rights while the phantom units are outstanding) and (ii) time-vest RSUs (covering Rentech’s stock), in each case, vesting in ratable one-third increments over three years from the closing of our IPO, and subject to accelerated vesting upon qualifying terminations of employment (as described under “—Potential Payments upon Termination or Change-in-Control” below).

We believe that awards covering equity interests of both us and Rentech were appropriate in consideration of (i) the services provided by each of our NEOs for our benefit and (ii) the connection between our success and the value of Rentech’s stock in light of Rentech’s substantial ownership interest in us. We further believe that these awards were appropriate to recognize the outstanding performance of these executives in bringing the IPO to fruition. These awards should also serve as important retention incentives for the NEOs due to applicable time-based vesting conditions, which should help to ensure the stability and consistency of our management team. In determining appropriate levels of IPO Grants, Rentech’s Compensation Committee considered, among other things, the NEOs’ contributions to the IPO process, the role and responsibility of the NEO and the perceived need to reward and retain the NEO.

The IPO Grants made to our NEOs are summarized in the table below (all of which were made on December 13, 2012):


Officer	Partnership Phantom Units		Rentech Restricted Stock Units (RSUs)
D. Hunt Ramsbottom		33,273		435,097

Dan J. Cohrs		23,158		302,834

John A. Ambrose		11,164		145,990

Wilfred R. Bahl, Jr.		10,306		134,760

Marc E. Wallis		9,447		123,530

2011 Incentive Award Plan

In connection with our initial public offering, we adopted a 2011 long-term incentive plan (referred to as the “2011 LTIP”). Our general partner’s officers (including the NEOs), employees, consultants and non-employee directors, as well as other key employees of Rentech and certain of our other affiliates who make significant contributions to our business, are eligible to receive awards under the 2011 LTIP, thereby linking the recipients’ compensation directly to our performance. The description set forth below is a summary of the material features of the 2011 LTIP.

General

The 2011 LTIP provides for the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards. Subject to adjustment in the event of certain transactions or changes in capitalization, 3,825,000 common units may be delivered pursuant to awards under the 2011 LTIP. Units

subject to awards that are cancelled or forfeited, or that otherwise terminate or expire, will be available for delivery pursuant to subsequently granted awards. Units that are withheld to satisfy tax withholding obligations or payment of an award’s exercise price will not be available for future awards. The 2011 LTIP is administered by the board of directors of our general partner or a committee designated by the board (referred to below collectively as the “plan administrator”), taking into consideration the recommendation of Rentech’s Compensation Committee. The 2011 LTIP is designed to promote our interests, as well as the interests of our unitholders, by rewarding the officers, employees and directors of our general partner and certain of its affiliates for delivering desired performance results, as well as by strengthening our ability to attract, retain and motivate qualified individuals to serve as directors, consultants and employees.

Administration

Subject to the terms and conditions of the 2011 LTIP and applicable law, the plan administrator has the authority to interpret and administer the 2011 LTIP, determine the types of awards granted and the grantees, set the terms and conditions of awards and adopt rules as it deems appropriate for the administration of the plan. The plan administrator may delegate certain duties to a committee of directors and/or officers of our general partner subject to any limitations that may be imposed under Section 16 of the Exchange Act and/or stock exchange rules, as applicable.

Vesting

The plan administrator may, in its discretion, subject awards to vesting linked to the grantee’s completion of a period of service, the achievement of specified performance or financial objectives, a change in control and/or other criteria determined by the plan administrator and set forth in an award agreement.

Unit Awards

A unit award is an award of common units that are fully vested upon grant and are not subject to forfeiture. Unit awards may be paid in addition to, or in lieu of, cash or other compensation that would otherwise be payable to a participant. A unit award may be wholly discretionary in amount or it may be paid with respect to a bonus or other incentive compensation award, the amount of which is determined based on the achievement of performance criteria or other factors.

Restricted Units and Phantom Units

A restricted unit is a common unit that is subject to forfeiture. Upon vesting, the forfeiture restrictions lapse and the recipient holds a common unit that is not subject to forfeiture. A phantom unit is a notional unit that entitles the grantee to receive a common unit (or its cash equivalent) upon the vesting of the phantom unit or on a deferred basis upon specified future dates or events. Distributions made by us with respect to awards of restricted units may, in the discretion of the plan administrator, be subject to the same vesting requirements as the restricted units. The plan administrator, in its discretion, may also grant tandem distribution equivalent rights with respect to phantom units.

Distribution Equivalent Rights

Distribution equivalent rights are rights to receive an amount equal to all or a portion of the cash distributions made on common units underlying an award for the period during which the award remains outstanding.

Unit Options and Unit Appreciation Rights

Unit options represent the right to purchase a number of common units at a specified exercise price. Unit appreciation rights represent the right to receive the appreciation in the value of a number of common units over a specified strike price, either in cash or in common units, as determined by the plan administrator. Unit options and unit appreciation rights may be granted to such eligible individuals and with such terms as the plan administrator may determine, consistent with the 2011 LTIP; however, unit options and unit appreciation rights must have exercise prices that are no less than the fair market value of their underlying common units on the date of grant.

Profits Interest Units

Profits interest units are awards of units that are intended to constitute “profits interests” within the meaning of the Internal Revenue Code. Profits interest units may be subject to vesting conditions and other restrictions as the plan administrator may deem appropriate in accordance with the terms of the 2011 LTIP.

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Other Unit-Based Awards

“Other unit-based awards” are awards that, in whole or in part, are valued by reference to the value of a common unit. These unit-based awards may contain such vesting, payment and other terms and conditions as the plan administrator may deem appropriate in accordance with the terms of the 2011 LTIP. Other unit-based awards may be paid in cash and/or in units (including restricted units), on a current or deferred basis, as the plan administrator may determine.

Source of Common Units; Cost

Common units to be delivered with respect to awards may be newly-issued units, common units acquired by our general partner in the open market, common units already owned by our general partner or us, common units acquired by our general partner directly from us or any other person or any combination of the foregoing. Pursuant to our partnership agreement, our general partner will be entitled to reimbursement by us for the cost incurred in acquiring such common units. With respect to unit options, our general partner will be entitled to reimbursement from us for the difference between the cost it incurs in acquiring these common units and the proceeds it receives from an optionee at the time of exercise of an option. Thus, we will bear the cost of the unit options. If we issue new common units with respect to these awards, the total number of common units outstanding will increase, and our general partner will remit the proceeds it receives from a participant, if any, upon exercise of an award to us. With respect to any awards settled in cash, our general partner will be entitled to reimbursement by us for the amount of such cash settlement.

Adjustments

The plan administrator has broad discretion to equitably adjust the number and type of securities available for issuance under the 2011 LTIP, as well as the terms and conditions of outstanding and future awards, in the event of certain changes affecting our units, such as non-cash distributions, unit splits, combinations or exchanges of units, mergers, consolidations or distributions of our assets to unitholders. In addition, in the event of an “equity restructuring,” the plan administrator will make equitable adjustments to the 2011 LTIP and outstanding awards, including with respect to the number and type of units covered by each outstanding award and the terms and conditions of such awards.

Change in Control

In the event of a change in control (as defined in the 2011 LTIP), the plan administrator may, in its discretion: (i) provide for the termination of outstanding awards in exchange for payment or the replacement of such awards with other rights or property, with such payment in an amount equal to, or such other rights or property having a value equal to, the amount that would have been attained upon the exercise of such award or the realization of the participant’s rights under such award, (ii) provide that outstanding awards will be assumed by the surviving entity or substituted for similar awards covering equity of the surviving entity, (iii) make adjustments to the number and type of units covered by each outstanding award and the terms and conditions of such awards and/or (iv) provide that the outstanding awards will vest in full and become exercisable or payable upon such event.

Amendment or Termination of 2011 LTIP

The plan administrator, at its discretion, may terminate the 2011 LTIP at any time with respect to common units that are not yet subject to an outstanding award. The 2011 LTIP will automatically terminate on the 10th anniversary of the date it was initially adopted by our general partner. The plan administrator will also have the right to alter or amend the 2011 LTIP or any part of it from time to time, subject to approval by our unitholders to the extent necessary to comply with applicable law and securities exchange listing standards or rules, or to amend any outstanding award made under the 2011 LTIP, provided that no change in any outstanding award may be made that would materially reduce the rights or benefits of a participant without the consent of the affected participant.

Severance Benefits

We believe that vulnerability to termination of employment at the senior executive level creates uncertainty for our NEOs that is appropriately addressed by providing severance protections which enable and encourage these executives to focus their attention on their work duties and responsibilities in all situations. We operate in a highly volatile and acquisitive industry that heightens this vulnerability in the change-in-control context. Accordingly, in order to attract and retain our key managerial talent, Rentech (in the case of our Shared NEOs) and our general partner (in the case of our Non-Shared NEOs) are parties to agreements with our NEOs which provide for specified severance payments and benefits in connection with certain qualifying terminations of employment. The principles underlying the various components of these agreements are discussed in this section. For a description of the specific terms and conditions of each agreement, see “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards

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Table” and “—Potential Payments upon Termination or Change-in-Control” below. In connection with our IPO, the Non-Shared NEOs entered into employment agreements with our general partner that took effect upon the closing of our IPO and superseded and replaced change in control severance agreements that had been in effect between these NEOs and REMC. These employment agreements were intended to bring the severance protections covering our Non-Shared NEOs into line with those appropriate for public company officers. The specific terms of all of these agreements are described in detail under the heading “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table”.

Under their employment agreements, our Shared NEOs are entitled to severance upon involuntary terminations without “cause” or for “good reason” (each as defined in the applicable employment agreement) consisting of (i) one year (in the case of Mr. Cohrs) or three years (in the case of Mr. Ramsbottom) of base salary continuation (payable over two years for Mr. Ramsbottom), (ii) payment of target bonus and (iii) up to eighteen months of subsidized healthcare premiums, in addition to certain accelerated equity vesting under the terms of individual equity awards. In the case of an involuntary termination of employment in connection with our non-renewal of the applicable agreement, Mr. Ramsbottom is entitled to the same severance, while Mr. Cohrs is entitled to a reduced severance consisting of only the salary continuation described above (but not payment of the target bonus or subsidized healthcare continuation) and, at Rentech’s discretion, an annual bonus for the fiscal year preceding the non-renewal. We believe that, in light of these NEOs’ seniority and the resulting vulnerability to involuntary termination, these severance payments and benefits provide an appropriate level of assurance in the non-transactional context. The specific levels of payments and benefits are determined by the relative seniority and duration of service of the NEOs.

In addition, if our Shared NEOs are involuntarily terminated (without cause, for good reason or due to non-renewal) in connection with a change in control, these NEOs are entitled to receive their cash severance in a lump-sum and are further eligible for a severance enhancement equal to the amount by which their respective prior-year bonuses exceeds their then-current target bonus (in the case of Mr. Ramsbottom, payment of this enhanced bonus, if applicable, would be in lieu of one year of salary payments, such that Mr. Ramsbottom would receive two years of salary payment plus the amount of his prior-year bonus instead of three years of salary). We believe that the lump-sum payment is appropriate to limit the NEOs’ exposure to any credit risk associated with new owners/management and that the potential enhancement provides an appropriate additional incentive to focus on the best interests of the shareholders in the context of a potential transaction. These NEOs are also entitled to a tax gross-up payment in the event that any “golden parachute” excise taxes are imposed on them under Section 280G of the Internal Revenue Code in connection with a transaction. The gross-up payments are intended to counter any disincentive the NEOs may have to consummate a beneficial transaction as a result of the potential imposition of these golden parachute excise taxes.

Under their employment agreements, Messrs. Ambrose, Bahl and Wallis are entitled to severance payments and benefits upon an involuntary termination without “cause” or for “good reason” (each as defined in the applicable employment agreement). These severance benefits are comprised of continuation salary payments for one year and payment of the executive’s target bonus for the year, in addition to up to one year of subsidized healthcare premiums. In the case of an involuntary termination of employment in connection with our non-renewal of the applicable agreement, Messrs. Ambrose, Bahl and Wallis are entitled to a reduced severance consisting of only the salary continuation described above (but not payment of the target bonus or subsidized healthcare continuation) and, at our discretion, an annual bonus for the fiscal year preceding the non-renewal.

Benefits and Perquisites

Rentech maintains a standard complement of health and retirement benefit plans for our employees, including our NEOs, that provide medical, dental, and vision benefits, flexible spending accounts, a 401(k) savings plan (including an employer-match component), short-term and long-term disability insurance, accidental death and dismemberment insurance and life insurance coverage. These benefits are generally provided to our NEOs on the same terms and conditions as they are provided to our other non-union employees.

We believe that these health and retirement benefits comprise key elements of a comprehensive compensation program. Our health benefits help provide stability and peace of mind to our NEOs, thus enabling them to better focus on their work responsibilities, while our 401(k) plan provides a vehicle for tax-preferred retirement savings with additional compensation in the form of an employer match that adds to the overall desirability of our executive compensation package. Our employee benefits programs are designed to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. Rentech periodically reviews and adjusts these employee benefits programs as needed based upon regular monitoring of applicable laws and practices in the competitive market.

Messrs. Ramsbottom and Cohrs receive reimbursement of certain financial advisor costs, and these executives, as well as Messrs. Ambrose and Bahl, also receive a monthly car allowance. Mr. Wallis has access to a company-provided car intended

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primarily for business use, but Mr. Wallis may make use of this car for certain personal matters as well. While we believe that these benefits are appropriate and commensurate with these NEOs’ positions, we do not generally view perquisites or other personal benefits as a material component of our executive compensation program. In the future, we may provide additional or different perquisites or other personal benefits in limited circumstances, such as where we believe doing so is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation and/or retention purposes.

Tax and Accounting Considerations

Section 280G of the Internal Revenue Code

Section 280G of the Internal Revenue Code disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Section 4999 of the Internal Revenue Code imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G of the Internal Revenue Code based on the executive’s prior compensation. In approving compensation arrangements for our NEOs in the future, we expect to consider all elements of the cost of providing such compensation, including the potential impact of Section 280G of the Internal Revenue Code. However, we may authorize compensation arrangements that could give rise to loss of deductibility under Section 280G of the Internal Revenue Code and the imposition of excise taxes under Section 4999 of the Internal Revenue Code if we feel that such arrangements are appropriate to attract and retain executive talent.

Under their employment agreements with Rentech, Messrs. Ramsbottom and Cohrs are entitled to gross-up payments in the event that any excise taxes are imposed on them. Rentech has historically provided these protections to its senior executives to ensure that they will be properly incentivized in the event of a potential change in control of Rentech to maximize shareholder value in a transaction while minimizing concern for potential consequences of the transaction to these executives.

Section 409A of the Internal Revenue Code

Section 409A of the Internal Revenue Code requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income tax liabilities, substantial additional taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefit plans and arrangements for all of our employees and other service providers, including our NEOs, so that they are either exempt from, or satisfy the requirements of, Section 409A of the Internal Revenue Code.

Accounting for Stock-Based Compensation

Rentech has followed, and we expect to follow, Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, for stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of stock options, restricted stock, RSUs and other equity-based awards under equity incentive award plans have been (by Rentech) and will be accounted for under ASC Topic 718. We expect that we will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.

Compensation Committee Report

The board of directors of our general partner does not have a Compensation Committee. The board of directors has reviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussion, the board of directors determined that the Compensation Discussion and Analysis should be included in this report.

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		D. Hunt Ramsbottom
		John H. Diesch
		Halbert S. Washburn
		Michael F. Ray
		Michael S. Burke James F. Dietz
		Keith B. Forman

Compensation Committee Interlocks and Insider Participation

During the Transition Period, the following individuals served as members of Rentech’s Compensation Committee: Michael S. Burke, Halbert S. Washburn, and Edward M. Stern. None of these individuals has ever served as an officer or employee of Rentech or any of its subsidiaries (including our general partner). No executive officer of Rentech or us has served as a director or member of the compensation committee of another entity at which an executive officer of such entity is also a director of Rentech.

Summary Compensation Table

We and our general partner were formed in July 2011. Accordingly, neither we nor our general partner accrued any obligations with respect to management compensation or benefits for directors and executive officers for any prior periods. The following table summarizes the compensation that was attributable to services performed for us during the Transition Period (under the heading “3 Mo 2011”) and the fiscal year ending September 30, 2011 for each of our NEOs (excluding any estimate for non-equity incentive plan compensation).

With respect to our Shared NEOs, the amounts contained in the summary compensation table reflect the portion of these NEOs’ total compensation paid by Rentech that we estimate was attributable to services performed by these NEOs for us during the Transition Period and the fiscal year 2011, calculated by multiplying each amount by a good faith estimate of the percentage of time such NEO dedicated to such services for us. The estimated percentage of time allocable to us for Messrs. Ramsbottom and Cohrs are: (i) 53% and 45%, respectively, during the Transition Period, and (ii) 20% and 20%, respectively, during fiscal year 2011. Our Non-Shared NEOs devoted substantially all of their business time to us during the relevant periods.


Name and Principal Position	Year (1)		Salary ($)		Stock Awards ($) ⁽²⁾		Option Awards ($) ⁽³⁾		Non- Equity Incentive Plan Compensation ($) ⁽⁴⁾		All Other Compensation ($) ⁽⁵⁾		Total ($)
D. Hunt Ramsbottom ⁽⁶⁾
Chief Executive Officer		3 Mo 2011		61,701		1,830,757		—		—		2,188		1,894,646
		FY2011		86,950		48,357		91,452		44,000		8,648		279,407
Dan J. Cohrs, ⁽⁷⁾
Chief Financial Officer		3 Mo 2011		44,946		1,000,651		—		—		1,424		1,047,021
		FY 2011		74,775		28,445		53,795		22,650		8,105		187,770
John A. Ambrose,
Chief Operating Officer		3 Mo 2011		49,719		552,644		—		—		3,753		606,116
		FY 2011		181,127		21,334		40,346		87,780		13,855		344,442

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Name and Principal Position	Year ⁽¹⁾		Salary ($)		Stock Awards ($) ⁽²⁾		Option Awards ($) ⁽³⁾		Non- Equity Incentive Plan Compensation ($) ⁽⁴⁾		All Other Compensation ($) ⁽⁵⁾		Total ($)
Wilfred R. Bahl, Jr.,
Senior Vice President of Finance and Administration		3 Mo 2011		47,866		481,389		—		—		4,508		533,763
		FY 2011		179,810		8,533		16,139		65,124		17,470		287,076
Marc E. Wallis,
Senior Vice President of Sales and Marketing		3 Mo 2011		46,313		415,443		—		—		1,050		462,806
		FY 2011		164,416		7,112		13,449		220,500		8,354		413,831

(1)	3 Mo 2011 refers to the three-month Transition Period from October 1, 2011 through December 31, 2011. The FY2011 amounts include the compensation earned by each NEO during the full twelve-month period that comprised our fiscal year 2011 (ending on September 30, 2011).

(2)

Amounts reflect the full grant-date fair value of RSU awards granted, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. Rentech provides information regarding the assumptions used to calculate the value of all Rentech stock awards made to executive officers in note 15 to its consolidated financial statements included in Rentech’s Form 10-K, filed March 15, 2012. There can be no assurance that awards will vest (in which case no value will be realized by the executive).

(3)

Amounts reflect the full grant-date fair value of stock options granted, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. Rentech provides information regarding the assumptions used to calculate the value of all Rentech stock options granted to executive officers in note 15 to its consolidated financial statements included in Rentech’s Form 10-K, filed March 15, 2012. There can be no assurance that awards will vest (in which case no value will be realized by the executive).

(4)

In our fiscal year 2011, prior to the Transition Period, each of our NEOs (other than Mr. Wallis) participated in Rentech’s annual incentive program and received an annual incentive award based on the achievement of certain pre-established financial and other performance criteria and determined by reference to target bonuses either as set forth in their respective employment agreements or as determined by their seniority. Mr. Wallis participated in our sales incentive program and received an annual incentive award based on the attainment of sales and marketing goals. For fiscal year 2011, the amount of compensation payable under the annual and sales incentive programs was determined (i) for Messrs. Ramsbottom and Cohrs at approximately 50% of their respective target levels, (ii) for Messrs. Ambrose and Bahl at approximately 120% of their respective target levels, and (iii) for Mr. Wallis in an amount equal to approximately 122.5% of his base salary. Neither we nor Rentech have established any non-equity incentive program applicable to the Transition Period and, accordingly, no non-equity incentive amounts have become payable or been paid for this period. We may in the future take into consideration performance during the Transition Period in determining non-equity incentive awards for 2012 (if any), in which case we will disclose any relevant metrics as required by applicable disclosure rules. There can be no assurance at this time that any non-equity incentive awards (or bonuses) will be paid in respect of the Transition Period.

(5)

Amounts under the “All Other Compensation” column for the Transition Period consist of (i) 401(k) matching contributions for Messrs. Ramsbottom, Cohrs, Ambrose, Bahl and Wallis of $192, $0, $1,097, $2,252 and $675, respectively; and (ii) perquisites consisting of company-paid auto allowances, financial and tax planning benefits and long-term disability insurance. The following table identifies and quantifies these perquisites for the Transition Period. With respect to our Shared NEOs, the amounts set forth below have been allocated based on the estimated percentage of time each Shared NEO dedicated to services for us during the Transition Period:

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Perquisites


Name	Auto Allowance			Long-Term Disability		Supplemental Life Insurance		Financial and Tax Planning		Tax Gross-up Payment		Total
D. Hunt Ramsbottom		1,908			56		32		—		—		1,996

Dan J. Cohrs		1,350			47		27		—		—		1,424

John A. Ambrose		2,500			105		51		—		—		2,656

Wilfred R. Bahl, Jr.		2,100			105		51		—		—		2,256

Marc E. Wallis		219	^(A)		105		51		—		—		375

(A)	Represents the value of personal usage of a company-provided vehicle determined by multiplying 15% (the percentage of time that we estimate Mr. Wallis used the vehicle for personal purposes) by $1,460 (the total company costs associated with the vehicle).

(6)

We estimate that Mr. Ramsbottom dedicated approximately 53% and 20% of his work time to our business and affairs during the Transition Period and the fiscal year ended September 30, 2011, respectively, and, accordingly, the compensation figures attributable to Mr. Ramsbottom in this Summary Compensation Table reflect 53% and 20% of his total compensation for each category, except that 100% of the grant-date fair value of the Partnership phantom units is included in the “Stock Awards” column because the Partnership phantom units were made in respect of services performed solely for us. Mr. Ramsbottom’s “Total Compensation” for the Transition Period and the fiscal year ended September 30, 2011, including amounts paid for services provided to Rentech and its affiliates, equalled $3,031,889 and $1,397,035, respectively.

(7)

We estimate that Mr. Cohrs dedicated approximately 45% and 20% of his work time to our business and affairs during the Transition Period and the fiscal year ended September 30, 2011 and, accordingly, the compensation figures attributable to Mr. Cohrs in this Summary Compensation Table reflect 45% and 20% of his total compensation for each category, except that 100% of the grant-date fair value of the Partnership phantom units is included in the “Stock Awards” column because the Partnership phantom units were made in respect of services performed solely for us. Mr. Cohrs’ “Total Compensation” for the Transition Period and the fiscal year ended September 30, 2011, including amounts paid for services provided to Rentech and its affiliates, equalled $1,805,916 and $938,854, respectively.

Grants of Plan-Based Awards

The following table sets forth information with respect to the NEOs concerning the grant of plan-based awards from Rentech’s and the Partnership’s plans during the Transition Period. With respect to our Shared NEOs, the amounts set forth below reflect the portion of these NEOs’ plan-based awards that we estimate was attributable to services performed by these NEOs for us during the Transition Period, calculated in the same manner as amounts disclosed for these Shared NEOs in the Summary Compensation Table.

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Name	Grant Date		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards							All Other Stock Awards: Number of Shares of Stock or Units (#)			All Other Option Awards: Number of Securities Underlying Options (#) ⁽¹⁾		Grant Date Fair Value of Stock and Option Awards ($) ⁽¹⁾⁽²⁾
Name	Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)			Maximum (#)						Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($) ⁽¹⁾⁽²⁾
D. Hunt Ramsbottom		12/13/2011		—		—		—		—		—			—		230,601	⁽³⁾			$	371,268

		12/13/2011		—		—		—		—		—			—		212,994	⁽⁴⁾			$	290,921

		12/13/2011		—		—		—		—		424,331	⁽⁵⁾		—		—				$	556,345

		12/13/2011		—		—		—		—		—			—		33,273	⁽⁶⁾			$	612,223

Dan J. Cohrs		12/13/2011		—		—		—		—		—			—		136,275	⁽³⁾			$	219,403

		12/13/2011		—		—		—		—		—			—		88,172	⁽⁴⁾			$	120,432

		12/13/2011		—		—		—		—		179,015	⁽⁵⁾		—		—				$	234,709

		12/13/2011		—		—		—		—		—			—		23,158	⁽⁶⁾			$	426,107

John A. Ambrose		12/13/2011		—		—		—		—		—			—		145,990	⁽³⁾			$	235,044

		12/13/2011		—		—		—		—		—			—		16,459	⁽⁴⁾			$	22,481

		12/13/2011		—		—		—		—		33,416	⁽⁵⁾		—		—				$	43,812

		12/13/2011		—		—		—		—		—			—		11,164	⁽⁶⁾			$	205,418

		12/13/2011		—		—		—		—		—			—		2,494	⁽⁷⁾			$	45,890

Wilfred R. Bahl, Jr.		12/13/2011		—		—		—		—		—			—		134,760	⁽³⁾			$	216,964

		12/13/2011		—		—		—		—		—			—		10,973	⁽⁴⁾			$	14,988

		12/13/2011		—		—		—		—		22,277	⁽⁵⁾		—		—				$	29,208

		12/13/2011		—		—		—		—		—			—		10,306	⁽⁶⁾			$	189,630

		12/13/2011		—		—		—		—		—			—		1,663	⁽⁷⁾			$	30,599

Marc E. Wallis		12/13/2011		—		—		—		—		—			—		123,530	⁽³⁾			$	198,883

		12/13/2011		—		—		—		—		—			—		6,270	⁽⁴⁾			$	8,564

		12/13/2011		—		—		—		—		12,730	⁽⁵⁾		—		—				$	16,690

		12/13/2011		—		—		—		—		—			—		9,447	⁽⁶⁾			$	173,825

		12/13/2011		—		—		—		—		—			—		950	⁽⁷⁾			$	17,480

(1)

All Rentech equity grants to NEOs other than Messrs. Ramsbottom and Cohrs were made under Rentech’s 2009 Amended and Restated Incentive Award Plan. Messrs. Ramsbottom’s and Cohrs’ RSU awards for 230,601 and 136,275 shares, respectively (each as allocated to us), were granted under Rentech’s Amended and Restated 2006 Incentive Award Plan, as amended. The remaining RSU awards for Messrs. Ramsbottom and Cohrs (as allocated to us) were granted under Rentech’s 2009 Amended and Restated Incentive Award Plan. Amounts reflect the full grant date fair value of Rentech RSUs granted during the Transition Period, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. Rentech provides information regarding the assumptions used to calculate the fair value of all compensatory equity awards made to executive officers in note 15 to its consolidated financial statements included in Rentech’s Form 10-K, filed March 15, 2012. There can be no assurance that awards will vest (in which case no value will be realized by the individual), or that the value upon vesting will approximate the aggregate grant date fair value determined under ASC Topic 718.

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(2)

All of our equity grant awards were made under the Rentech Nitrogen Partners, L.P. 2011 Long-Term Incentive Plan. Amounts reflect the full grant date fair value of Partnership phantom units granted during the Transition Period, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the fair value of all compensatory equity awards made to executive officers in note 7 to our consolidated financial statements included in this report. There can be no assurance that awards will vest (in which case no value will be realized by the individual), or that the value upon vesting will approximate the aggregate grant date fair value determined under ASC Topic 718.

(3)

These Rentech RSUs will vest in three substantially equal annual installments on November 9, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date and accelerated vesting (i) in full upon the executive’s termination of employment by the employer without cause or by the executive for good reason, (ii) in full upon the executive’s death or disability or (iii) on a pro rata basis if the executive terminates employment for any other reason.

(4)

These Rentech RSUs will vest in three substantially equal annual installments on October 12, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date and accelerated vesting in connection with (i) the executive’s termination of employment by the employer without cause or by the executive for good reason, in either case, in connection with a change of control of Rentech or (ii) the executive’s death or disability.

(5)

These Rentech PSUs vest in full on the first date occurring on or prior to October 12, 2014 on which Rentech’s value weighted average share price for any thirty-day period equals or exceeds $3.00, subject to the executive’s continued employment through the applicable vesting date and further subject to accelerated vesting in connection with (i) the executive’s termination of employment by the employer without cause or by the executive for good reason, in either case, in connection with a change in control of Rentech or (ii) the executive’s death or disability.

(6)

These Partnership phantom units vest in three substantially equal installments on November 9, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date and accelerated vesting (i) in full upon the executive’s termination of employment by the employer without cause or by the executive for good reason, (ii) in full upon the executive’s death or disability or (iii) on a pro rata basis if the executive terminates employment for any other reason.

(7)

These Partnership phantom units vest in three substantially equal installments on October 12, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date and accelerated vesting (i) upon the executive’s termination of employment by the employer without cause or by the executive for good reason, in either case, in connection with a change of control of the Partnership or (ii) upon the executive’s death or disability.

Narrative Disclosure to Summary Compensation Table

and Grants of Plan-Based Awards Table

Employment Agreements with Shared NEOs

Messrs. Ramsbottom and Cohrs are parties to employment agreements with Rentech that expire on December 31 and October 22, 2011, respectively, subject in each case to automatic one-year renewals absent 90-days’ advance notice from either party to the contrary. Under these employment agreements, Messrs. Ramsbottom and Cohrs are entitled, respectively, to (i) base salaries which, effective as of January 1, 2012, were $497,200 and $426,575, and (ii) annual incentive bonuses targeted at 100% and 60% of applicable base salary (with actual bonus eligibility for each executive ranging from zero to twice the applicable target).

In addition, the employment agreements provide for monthly auto allowances, as well as customary indemnification, health, welfare, retirement and vacation benefits. The Shared NEOs also receive reimbursement of certain financial and tax planning costs (though only Mr. Ramsbottom’s employment agreement expressly provides for such benefits; Rentech reimburses these costs for each of the Shared NEOs). The agreements also contain customary confidentiality and other restrictive covenants. Each of the Shared NEOs has executed a corporate confidentiality and proprietary rights agreement. Though not addressed in the employment agreements, each of the NEOs is entitled to accelerated vesting of certain equity awards in the event of a change in control of Rentech. For a discussion of the severance and change-in-control benefits for which our Shared NEOs are eligible under their employment agreements, as well as a description of the severance benefits for which our Non-Shared NEOs are eligible in connection with a change in control, see “—Potential Payments upon Termination or Change-in-Control” below.

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Post-IPO Employment Agreements with Non-Shared NEOs

In connection with our IPO, our general partner entered into employment agreements with each of our Non-Shared NEOs (referred to herein as the “post-IPO employment agreements”), which became effective upon the closing of our IPO and superseded these executives’ existing change in control severance agreements with REMC. Each post-IPO employment agreement continues for an initial term of two years, subject to automatic one-year renewals thereafter. Under their post-IPO employment agreements, Messrs. Ambrose, Bahl and Wallis receive annual base salaries which, effective as of January 1, 2012, were $217,661, $205,965 and $195,615, respectively. In addition, these agreements provide that Messrs. Ambrose and Bahl will be eligible to receive annual cash bonuses targeted at 40% and 30% of base salary, respectively (and capped at 80% and 60% of base salary, respectively), while Mr. Wallis will be eligible to receive a non-targeted annual bonus of up to 150% of base salary, in each case, based on the attainment of performance criteria established by our general partner’s board of directors.

Under the post-IPO employment agreements, our Non-Shared NEOs are entitled to severance upon a termination of employment without “cause” or for “good reason” (each as defined in the applicable agreement) consisting of (i) one year of base salary continuation, (ii) payment of the executive’s target bonus for the year in which termination occurs (or, in the case of Mr. Wallis who does not have a target bonus, payment of an additional amount equal to 100% of his base salary), and (iii) up to twelve months of subsidized healthcare premiums. In addition, if our general partner elects not to renew the employment term, the affected executive is entitled to a reduced severance consisting solely of one year of base salary continuation.

Under the terms of their post-IPO employment agreements, our Non-Shared NEOs are eligible to participate in our customary retirement, health, welfare, disability and other benefit plans. In addition, the post-IPO employment agreements contain customary non-competition and non-solicitation covenants effective during employment and for one year following termination.

Pre-IPO Change in Control Severance Benefits Agreements with Non-Shared NEOs

Prior to the closing of our IPO, each of Messrs. Ambrose, Bahl and Wallis was party to a change in control severance benefits agreement with REMC, dated as of August 1, 2010, May 10, 2011, and August 12, 2008, respectively, that provided for certain severance and change in control benefits. Under these agreements, upon termination of employment by the employer without cause or by the executive for good reason (each as defined in the applicable agreement), in either case, within one month before or one year after a change in control of REMC, the executive was entitled to receive: (i) an amount equal to one times his annual base salary plus a bonus of 40% annual base salary or, with respect to Mr. Wallis, 20% of annual base salary, and (ii) company-paid continuation health benefits for up to 12 months. Cash severance payments would be paid in substantially equal installments over a twelve-month period following the date of termination (or, if later, the consummation of the change in control). During employment and for one year following termination, the change in control severance benefits agreements prohibited these NEOs from soliciting certain of our employees and customers. These agreements were replaced and superseded by the Non-Shared NEOs’ employment agreements with our general partner (as described above) upon the closing of our IPO.

Outstanding Equity Awards at December 31, 2011

The following table sets forth information with respect to the NEOs detailing outstanding equity awards from Rentech and the Partnership as of December 31, 2011. With respect to our Shared NEOs, the amounts set forth below reflect the total number of each NEO’s outstanding equity awards as of December 31, 2011 rather than an allocation based on the estimated percentage of time each Shared NEO dedicated to services for the Partnership during the Transition Period. In addition to the vesting schedules described for each outstanding award in the notes to this table, certain awards may be eligible for accelerated vesting in certain circumstances (for a discussion of accelerated equity vesting, see “—Potential Payments upon Termination or Change-in-Control” below).

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	Option Awards											Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date			Number of Units or Shares of Stock that have not Vested (#)		Market Value of Units or Shares of Stock that have not Vested ($) (1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($)(1)		Notes
D. Hunt Ramsbottom		250,000		—		—	$	4.15		7/13/2016			—		—		—		—		(2	)
		—		—		373,750	$	1.82		(3	)		—		—		—		—		(3	)
		233,333		466,667		—	$	0.95		10/4/2020			—		—		—		—		(4	)
		—		—		—		—		—			—		—		1,000,000	$	1,310,000		(5	)
		—		—		—		—		—			75,000	$	98,250		—		—		(6	)
		—		—		—		—		—			133,226	$	174,526		—		—		(7	)
		—		—		—		—		—			29,751	$	38,974		—		—		(8	)
		—		—		—		—		—			200,000	$	262,000		—		—		(9	)
		—		—		—		—		—			435,097	$	569,977		—		—		(10	)
		—		—		—		—		—			401,875	$	526,456		—		—		(11	)
		—		—		—		—		—			—		—		800,625	$	1,048,819		(12	)
		—		—		—		—		—			33,273		544,014		—		—		(13	)
Dan J. Cohrs		137,255		274,510		—	$	0.95		10/4/2020			—		—		—		—		(4	)
		—		—		—		—		—			—		—		700,000	$	917,000		(5	)
		—		—		—		—		—			61,666	$	80,782		—		—		(6	)
		—		—		—		—		—			16,402	$	21,487		—		—		(8	)
		—		—		—		—		—			117,647	$	154,118		—		—		(9	)
		—		—		—		—		—			302,834	$	396,713		—		—		(10	)
		—		—		—		—		—			195,938	$	256,679		—		—		(11	)
		—		—		—		—		—			—		—		397,812	$	521,134		(12	)
		—		—		—		—		—			23,158		378,633		—		—		(13	)
John A. Ambrose		20,588		41,177		—	$	0.95		10/4/2020			—		—		—		—		(4	)
		—		—		—		—		—			16,666	$	21,832		—		—		(6	)
		—		—		—		—		—			17,647	$	23,118		—		—		(9	)
		—		—		—		—		—			145,990	$	191,247		—		—		(10	)
		—		—		—		—		—			16,459	$	21,561		—		—		(11	)
		—		—		—		—		—			—		—		33,416	$	43,775		(12	)
		—		—		—		—		—			11,164		182,531		—		—		(13	)
		—		—		—		—		—			2,494		40,777		—		—		(14	)
Wilfred R. Bahl, Jr.		30,000		—		—	$	4.15		7/13/2016			—		—		—		—		(2	)
		8,235		16,471		—	$	0.95		10/4/2020			—		—		—		—		(4	)
		—		—		—		—		—			10,000	$	13,100		—		—		(6	)
		—		—		—		—		—			7,059	$	9,247		—		—		(9	)
		—		—		—		—		—			134,760	$	176,536		—		—		(10	)
		—		—		—		—		—			10,973	$	14,375		—		—		(11	)
		—		—		—		—		—			—		—		22,277	$	29,183		(12	)
		—		—		—		—		—			10,306		168,503		—		—		(13	)
		—		—		—		—		—			1,663		27,190		—		—		(14	)
Marc E. Wallis		6,863		13,725		—	$	0.95		10/4/2020			—		—		—		—		(4	)
		—		—		—		—		—			8,334	$	10,918		—		—		(6	)
		—		—		—		—		—			5,883	$	7,707		—		—		(9	)
		—		—		—		—		—			123,530	$	161,824		—		—		(10	)
		—		—		—		—		—			6,270	$	8,214		—		—		(11	)
		—		—		—		—		—			—		—		12,730	$	16,676		(12	)
		—		—		—		—		—			9,447		154,458		—		—		(13	)
		—		—		—		—		—			950		15,533		—		—		(14	)

(1)

Calculated based on the $1.31 closing price of Rentech’s common stock on December 30, 2011 (the last business day of that year) except for the Partnership’s phantom units, described in notes 13 and 14 below, which was calculated based on the $16.35 closing price of the Partnership’s common units on December 30, 2011.

(2)	Represents a stock option award granted on July 14, 2006 that vested in three equal annual installments on each of July 14, 2007, 2008 and 2009.

(3)	Represents a warrant currently held by the Ramsbottom Family Living Trust that vested on December 31, 2011 and expires on December 31, 2012.

(4)

Represents Rentech stock options granted on October 4, 2010 that vest in three substantially equal annual installments on October 4, 2011, 2012 and 2013, subject to the executive’s continued employment through the applicable vesting date (these stock options are referred to below as the 2010 Options).

(5)

Represents Rentech RSUs granted on November 17, 2009 that are eligible to vest upon the attainment of milestones related to the development, construction and operation of Rentech’s Rialto Project or another comparable project designated by Rentech’s Compensation Committee. Subject to the executive’s continued employment through the applicable vesting date, sixty percent (60%) of the shares underlying each RSU award will vest upon the closing of financing for the project, twenty percent (20%) of the shares underlying each RSU award will vest upon completion of construction and initial operation of the project facility and twenty percent (20%) of the shares underlying each RSU award will vest upon sustained operation of the project facility (these RSUs are referred to below as the 2009 Performance-Vest RSUs).

(6)	Represents Rentech RSUs granted on November 17, 2009, the remaining unvested one-third of which will vest on November 17, 2012, subject to the executive’s continued employment through the applicable vesting date (these RSUs are referred to below as the 2009 Time-Vest RSUs).

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(7)

Represents Rentech RSUs granted on November 3, 2009, of which approximately 56% vested upon grant and the remaining portion will vest November 3, 2012, subject to the executive’s continued employment through the applicable vesting date (these RSUs are referred to below as Management Stock Purchase Plan RSUs).

(8)

Represents Rentech RSUs granted on December 10, 2009, of which 50% vested upon grant and the remaining portion will vest December 10, 2012, subject to the executive’s continued employment through the applicable vesting date (these RSUs are also referred to below as Management Stock Purchase Plan RSUs).

(9)

Represents Rentech RSUs granted on October 4, 2010, the remaining unvested two-thirds of which will vest in two substantially equal annual installments on October 4, 2012 and 2013, subject to the executive’s continued employment through the applicable vesting date (these RSUs are referred to below as the 2010 RSUs).

(10)	Represents Rentech RSUs granted on December 13, 2011 vesting in three equal annual installments on November 9, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date (these RSUs are referred to below as the 2011 IPO RSUs).

(11)	Represents Rentech RSUs granted on December 13, 2011 vesting in three equal annual installments on October 12, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date (these RSUs are referred to below as the 2011 Time-Vest RSUs).

(12)

Represents Rentech PSUs granted on December 13, 2011 vesting in full on the first date occurring on or prior to October 12, 2014 on which Rentech’s value weighted average share price for any thirty-day period equals or exceeds $3.00, subject to the executive’s continued employment through the applicable vesting date (these PSUs are referred to below as the 2011 PSUs).

(13)	Represents the Partnership’s phantom units granted on December 13, 2011 vesting in three equal annual installments on November 9, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date (these units are referred to below as the 2011 IPO Units).

(14)	Represents the Partnership’s phantom units granted on December 13, 2011 vesting in three equal annual installments on October 12, 2012, 2013 and 2014, subject to the executive’s continued employment through the applicable vesting date (these units are referred to below as the 2011 Time-Vest Units).

Option Exercises and Stock Vested

The following table sets forth information with respect to the NEOs concerning the option exercises and stock vested under Rentech’s equity plan(s) during the Transition Period. With respect to our Shared NEOs, the amounts set forth below reflect the total number of each NEO’s outstanding equity awards as of December 31, 2011 rather than an allocation based on the estimated percentage of time each Shared NEO dedicated to services for us during the Transition Period.


	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($) ⁽¹⁾
D. Hunt Ramsbottom		—		—		175,000	$	201,500
Dan J. Cohrs		—		—		228,825	$	278,425
John A. Ambrose		—		—		25,491	$	33,658
Wilfred R. Bahl, Jr.		—		—		13,529	$	18,729
Marc E. Wallis		—		—		11,274	$	15,607

(1)	Amounts shown are based on the fair market value of Rentech’s common stock on the applicable vesting date.

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Potential Payments upon Termination or Change-in-Control

Our NEOs are entitled to certain payments and benefits upon qualifying terminations of employment, and in certain cases, upon a change in control. The following discussion describes the terms and conditions of these payments and benefits and the circumstances in which they will be paid or provided. All severance payments are conditioned upon the executive’s execution of a general release of claims against the employer.

Shared NEOs, Termination Not in Connection with a Change in Control

Under the Shared NEOs’ employment agreements (described in “—Severance Benefits” above), upon termination of the executive’s employment by Rentech without cause, by the executive with good reason or, in the case of Mr. Ramsbottom only, due to a non-renewal of his employment term by Rentech (each as defined in the employment agreements), the executive is entitled to receive: (i) an amount equal to three times (in the case of Mr. Ramsbottom) or one times (in the case of Mr. Cohrs) base salary, payable in substantially equal installments over a two-year period (for Mr. Ramsbottom) or a one-year period (for Mr. Cohrs), plus (ii) in the case of Mr. Cohrs, payment of his target annual bonus on the date that annual bonuses are paid generally for the year in which termination occurs, and (iii) company-paid continuation health benefits for up to eighteen months following the date of termination. Upon termination of Mr. Cohrs’ employment in connection with Rentech’s non-renewal of his employment term, he will be entitled to receive an amount equal to one times base salary, payable over the one-year period following termination, and will be eligible to receive an annual bonus for the year of termination.

In addition, the Shared NEOs will be entitled to the following enhanced vesting provisions with respect to qualifying terminations occurring outside of the context of a change in control of Rentech:

•

The 2011 Time-Vest RSUs, 2011 PSUs, 2010 Options, 2010 RSUs, the 2009 Time-Vest RSUs and the Management Stock Purchase Plan RSUs held by the executive will accelerate and vest in full upon a termination of employment due to the applicable executive’s death or disability.

•

The 2011 IPO RSUs and the 2011 IPO Units held by the executive will (i) accelerate and vest in full upon the executive’s termination of employment without cause or for good reason, or due to the executive’s death or disability, and (ii) vest with respect to a pro rata portion of the number of unvested RSUs that would have vested on the next subsequent vesting date upon any other termination of employment other than a termination for cause.

•

The 2009 Performance-Vest RSUs held by the executive will, following the executive’s termination due to his death or disability, remain outstanding and eligible to vest for a period of six months following such termination and will vest if and to the extent that applicable vesting milestones are attained during such period.

Shared NEOs, Change in Control (No Termination)

The Shared NEOs are not entitled to any cash payments based solely on the occurrence of a change in control of Rentech (absent any qualifying termination), however, the Shared NEOs will be entitled to full accelerated vesting upon such change in control with respect to their Management Stock Purchase Plan RSUs. The 2011 IPO RSUs, 2011 Time-Vest RSUs, 2011 PSUs, 2011 IPO Units, 2010 Options, 2010 RSUs, 2009 Time-Vest RSUs and 2009 Performance-Vest RSUs are not impacted by a change in control of Rentech (absent a qualifying termination in connection with such change in control).

Shared NEOs, Termination in Connection with a Change in Control

If either of the Shared NEOs terminates employment without cause, for good reason or due a non-renewal of his employment term by Rentech, in any case, within three months before or two years after a change in control of Rentech, then the executive will receive the severance described above, except that (i) the base salary component of the executive’s severance will be paid in a lump sum and (ii) if the executive’s actual annual bonus for the year immediately preceding the change in control exceeds his target bonus for the year in which the termination occurs, (A) in the case of Mr. Ramsbottom, he will receive two times base salary plus the amount of such prior-year bonus (instead of three times his base salary) and (B) in the case of Mr. Cohrs, he will receive one times base salary plus the amount of such prior-year bonus (instead of base salary plus target annual bonus). The Shared NEOs’ employment agreements entitle each of these executives to a “gross-up” payment from Rentech covering all taxes, penalties and interest associated with any “golden parachute” excise taxes that are imposed on the executives by reason of Internal Revenue Code Section 280G in connection with a change in control of Rentech.

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In addition, the Shared NEOs will be entitled to the following enhanced vesting provisions with respect to qualifying terminations occurring in connection with a change in control of Rentech:

•

The 2011 Time-Vest RSUs, 2011 PSUs, 2010 Options, the 2010 RSUs and the 2009 Time-Vest RSUs will vest in full if the executive terminates employment without cause or for good reason, in either case, within sixty days prior to or one year after the change in control.

•

As noted above, (i) the Management Stock Purchase Plan RSUs held by the executive will vest in full upon the change in control (without regard to whether the executive terminates employment) and (ii) the 2011 IPO RSUs and 2011 IPO Units will vest in full upon a termination without cause or for good reason, or due to the executive’s death or disability (whether or not in connection with a change in control).

•

The 2009 Performance-Vest RSUs held by the executive will remain outstanding and eligible to vest for a period of six months following the executive’s termination without cause or for good reason, in either case, occurring within sixty days prior to or one year after the change in control, and these RSUs will vest if and to the extent that applicable vesting milestones are attained during such period.

Non-Shared NEOs, Termination Not in Connection with a Change in Control

Under the Non-Shared NEOs’ post-IPO employment agreements (which superseded these executives’ prior change in control severance benefits agreements prior to the end of the Transition Period), upon termination of employment by the employer without cause or by the executive for good reason (each as defined in the applicable agreement), the executive is entitled to receive: (i) an amount equal to one times his annual base salary, payable in substantially equal instalments over a twelve-month period following the date of termination, plus one times his target bonus for the year in which termination occurs (or, in the case of Mr. Wallis, who does not have a target bonus, payment of an additional amount equal to 100% of his base salary), and (ii) up to 12 months of subsidized healthcare premiums. If our general partner elects not to renew the employment term, the executive is entitled to a reduced severance consisting solely of one year of base salary continuation. During employment and for one year following termination, the employment agreements prohibited these NEOs from soliciting certain of our employees and customers.

In addition, the Non-Shared NEOs will be entitled to the following enhanced vesting provisions with respect to qualifying terminations:

•

The 2011 Time-Vest RSUs, 2011 PSUs, 2011 Time-Vest Units, 2010 Options, 2010 RSUs and the 2009 Time-Vest RSUs held by the executive will accelerate and vest in full upon a termination of employment due to the applicable executive’s death or disability.

•

Non-Shared NEOs, Change in Control (No Termination)

The Non-Shared NEOs are not entitled to any cash payments or any accelerated vesting of equity awards based solely on the occurrence of a change in control of Rentech and/or the Partnership (absent any qualifying termination).

Non-Shared NEOs, Termination in Connection with a Change in Control

If the Non-Shared NEOs terminate employment without cause, for good reason or due a non-renewal of the applicable employment term by us, in any case, then the executive will receive the severance described above. In addition, the following enhanced vesting provisions will apply:

•

The 2011 Time-Vest RSUs, 2011 PSUs, 2011 Time-Vest Units, 2010 Options, 2010 RSUs and the 2009 Time-Vest RSUs held by the executive will vest in full if the executive terminates employment without cause or for good reason, in either case, within sixty days prior to or one year after the change in control. Each of these awards also vests in full upon the executive’s termination of employment due to death or disability (whether or not in connection with a change in control).

113

•

As noted above, the 2011 IPO RSUs and 2011 IPO Units will vest in full upon a termination without cause or for good reason, or due to the executive’s death or disability (whether or not in connection with a change in control).

The following table summarizes the change-in-control and/or severance payments and benefits to which we expect that our NEOs would have become entitled if the relevant event(s) had occurred on December 31, 2011, in accordance with applicable disclosure rules. With respect to our Shared NEOs, the amounts set forth below reflect the portion of these NEOs’ change-in-control and severance payments that we estimate will be attributable to services performed by these NEOs for the Partnership during the Transition Period, calculated in the same manner as amounts disclosed for these Shared NEOs in the Summary Compensation Table.


Name	Benefit	Termination without Cause or for Good Reason ($)			Termination due to Non- Renewal ($)			Termination due to Death/ Disability ($)			Qualifying Termination in Connection with a Change in Control			Change in Control (No Termination)			Other Terminations
D. Hunt

Ramsbottom	Cash Severance	$	769,560	⁽¹⁾	$	769,560	⁽¹⁾		—		$	769,560	⁽²⁾		—			—
	Value of Accelerated Stock Awards ⁽³⁾	$	302,088	⁽⁴⁾		—	⁽⁵⁾	$	1,441,071	⁽⁶⁾	$	2,135,371	⁽⁷⁾	$	113,155	⁽⁸⁾	$	14,346	⁽⁹⁾
	Value of Accelerated Option Awards ⁽¹⁰⁾		—			—		$	89,040	⁽¹¹⁾	$	89,040	⁽¹²⁾		—			—
	Value of Accelerated Units ⁽¹³⁾	$	544,014	⁽¹⁴⁾		—	⁽⁵⁾	$	544,014	⁽¹⁵⁾	$	544,014	⁽¹⁶⁾		—		$	25,834	⁽¹⁷⁾
	Value of Healthcare Premiums	$	15,147	⁽¹⁸⁾	$	15,147	⁽¹⁸⁾		—		$	15,147	⁽¹⁸⁾		—			—
	Value of Excise Tax Gross-Up		—			—			—		$	1,202,606	⁽¹⁹⁾	$	—	⁽¹⁹⁾		—

	Total	$	1,630,809		$	784,707		$	2,074,125		$	4,755,738		$	113,155		$	40,180

Dan J. Cohrs	Cash Severance	$	298,980	⁽²⁰⁾	$	186,863	⁽²¹⁾		—		$	298,980	⁽²²⁾		—			—
	Value of Accelerated Stock Awards ⁽³⁾	$	178,521	⁽²³⁾		—	⁽⁵⁾	$	643,910	⁽²⁴⁾	$	1,056,560	⁽²⁵⁾	$	9,669	⁽²⁶⁾	$	8,478	⁽²⁷⁾
	Value of Accelerated Option Awards ⁽¹⁰⁾		—			—		$	44,471	⁽²⁸⁾	$	44,471	⁽²⁹⁾		—			—
	Value of Accelerated Units ⁽¹³⁾	$	378,633	⁽³⁰⁾		—	⁽⁵⁾	$	378,633	⁽³¹⁾	$	378,633	⁽³²⁾		—		$	17,981	⁽³³⁾
	Value of Healthcare Premiums	$	12,861	⁽¹⁸⁾		—			—		$	12,861	⁽¹⁸⁾		—			—
	Value of Excise Tax Gross-Up		—			—			—		$	541,918	⁽¹⁹⁾	$	—	⁽¹⁹⁾		—

	Total	$	868,995		$	186,863		$	1,067,014		$	2,333,423		$	9,669		$	26,459

114


Name	Benefit	Termination without Cause or for Good Reason ($)			Termination due to Non- Renewal ($)			Termination due to Death/ Disability ($)			Qualifying Termination in Connection with a Change in Control			Change in Control (No Termination)		Other Terminations
John A. Ambrose	Cash Severance	$	294,420	⁽²⁰⁾	$	210,300	⁽²¹⁾		—			—			—		—
	Value of Accelerated Stock Awards ⁽³⁾	$	191,247	⁽³⁴⁾		—	⁽⁵⁾	$	301,533	⁽³⁵⁾	$	301,533	⁽³⁶⁾		—	$	9,082	⁽³⁷⁾
	Value of Accelerated Option Awards ⁽¹⁰⁾		—			—		$	14,824	⁽³⁸⁾	$	14,824	⁽³⁸⁾		—		—
	Value of Accelerated Units ⁽¹³⁾	$	182,531	⁽³⁹⁾		—	⁽⁵⁾	$	223,308	⁽⁴⁰⁾	$	223,308	⁽⁴¹⁾		—	$	8,668	⁽⁴²⁾
	Value of Healthcare Premiums	$	19,053	⁽¹⁸⁾		—			—			—			—		—

	Total	$	687,251		$	210,300		$	539,665		$	539,665			—	$	17,750

Wilfred R. Bahl, Jr.	Cash Severance	$	258,700	⁽²⁰⁾	$	199,000	⁽²¹⁾		—			—			—		—
	Value of Accelerated Stock Awards ⁽³⁾	$	176,536	⁽⁴³⁾		—	⁽⁵⁾	$	242,440	⁽⁴⁴⁾	$	242,440	⁽⁴⁵⁾		—	$	8,383	⁽⁴⁶⁾
	Value of Accelerated Option Awards ⁽¹⁰⁾		—			—		$	5,929	⁽⁴⁷⁾	$	5,929	⁽⁴⁷⁾		—		—
	Value of Accelerated Units ⁽¹³⁾	$	168,503	⁽⁴⁸⁾		—	⁽⁵⁾	$	195,693	⁽⁴⁹⁾	$	195,693	⁽⁵⁰⁾		—	$	8,002	⁽⁵¹⁾
	Value of Healthcare Premiums	$	19,053	⁽¹⁸⁾		—			—			—			—		—

	Total	$	622,792		$	199,000		$	444,062		$	444,062			—	$	16,385

Marc E. Wallis	Cash Severance	$	378,000	⁽²⁰⁾	$	189,000	⁽²¹⁾		—			—			—		—
	Value of Accelerated Stock Awards ⁽³⁾	$	161,824	⁽⁵²⁾		—	⁽⁵⁾	$	205,339	⁽⁵³⁾	$	205,339	⁽⁵⁴⁾		—	$	7,685	⁽⁵⁵⁾
	Value of Accelerated Option Awards ⁽¹⁰⁾		—			—		$	4,941	⁽⁵⁶⁾	$	4,941	⁽⁵⁶⁾		—		—
	Value of Accelerated Units ⁽¹³⁾	$	154,458	⁽⁵⁷⁾		—	⁽⁵⁾	$	169,991	⁽⁵⁸⁾	$	169,991	⁽⁵⁹⁾		—	$	7,335	⁽⁶⁰⁾
	Value of Healthcare Premiums	$	19,053	⁽¹⁸⁾		—			—			—			—		—

	Total	$	713,335		$	189,000		$	380,271		$	380,271			—	$	15,020

⁽¹⁾	Represents three times Mr. Ramsbottom’s annual base salary, payable over the two-year period after his termination date.

⁽²⁾	Represents three times Mr. Ramsbottom’s annual base salary, payable in a lump sum upon termination.

⁽³⁾	Value of RSUs determined by multiplying the number of accelerating RSUs by the fair market value of Rentech’s common stock ($1.31) on December 30, 2011.

⁽⁴⁾	Represents the aggregate value of 230,601 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Ramsbottom’s termination without cause or for good reason on December 31, 2011.

⁽⁵⁾

Pursuant to the terms of the applicable award agreements, 2011 IPO RSUs and 2011 IPO Units vest pro rata on an accelerated basis upon an executive’s termination due to non-renewal of the executive’s employment agreement; however, none of the NEOs’ employment agreements was up for renewal as December 31, 2011. Therefore, no such accelerated vesting would have occurred due to non-renewal the executives’ employment agreements on December 31, 2011.

115

⁽⁶⁾

Represents the aggregate value of 230,601 unvested 2011 IPO RSUs, 212,994 unvested 2011 Time-Vest RSUs, 424,331 unvested 2011 PSUs, 106,000 unvested 2010 RSUs, 39,750 unvested 2009 Time-Vest RSUs and 86,378 unvested Management Stock Purchase Plan RSUs held by Mr. Ramsbottom that would have vested on an accelerated basis upon Mr. Ramsbottom’s termination due to death or disability on December 31, 2011. We have assumed for purposes of this calculation that all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Ramsbottom vested in full on such date).

⁽⁷⁾

Represents the aggregate value of (i) 230,601 unvested 2011 IPO RSUs, 212,994 unvested 2011 Time-Vest RSUs, 424,331 unvested 2011 PSUs, 106,000 unvested 2010 RSUs, 39,750 unvested 2009 Time-Vest RSUs and 530,000 unvested 2009 Performance-Vest RSUs that would have vested on an accelerated basis if Mr. Ramsbottom terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after a change in control of Rentech, and (ii) 86,378 unvested Management Stock Purchase Plan RSUs. We have assumed for purposes of this calculation that (A) all performance criteria applicable to the 2009 Performance-Vest RSUs and 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2009 Performance-Vest RSUs and 2011 PSUs held by Mr. Ramsbottom vested in full on such date) and (B) the relevant change in control occurred on December 31, 2011 (and, accordingly, the unvested Management Stock Purchase Plan RSUs held by Mr. Ramsbottom vested in full on such date).

⁽⁸⁾	Represents the aggregate value of 86,378 unvested Management Stock Purchase Plan RSUs held by Mr. Ramsbottom that would have vested on an accelerated basis upon a change in control of Rentech.

⁽⁹⁾	Represents the aggregate value of 10,951 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Ramsbottom’s termination of employment for any reason.

⁽¹⁰⁾	Value of options determined by multiplying the fair market value of Rentech’s common stock ($1.31) on December 30, 2011, less the applicable exercise price, by the number of accelerating options.

⁽¹¹⁾	Represents the aggregate value of 247,333 unvested 2010 Options held by Mr. Ramsbottom that would have vested on an accelerated basis upon Mr. Ramsbottom’s termination due to death or disability on December 31, 2011.

⁽¹²⁾

Represents the aggregate value of 247,333 unvested 2010 Options held by Mr. Ramsbottom that would have vested on an accelerated basis if Mr. Ramsbottom terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after the change in control.

⁽¹³⁾	Value of 2011 IPO Units and 2011 Time-Vest Units determined by multiplying the number of accelerating Partnership units by the fair market value of the Partnership’s common unit ($16.35) on December 30, 2011.

⁽¹⁴⁾	Represents the aggregate value of 33,273 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Ramsbottom’s termination without cause or for good reason on December 31, 2011.

⁽¹⁵⁾	Represents the aggregate value of 33,273 unvested 2011 IPO Units held by Mr. Ramsbottom that would have vested on an accelerated basis upon Mr. Ramsbottom’s termination due to death or disability on December 31, 2011.

⁽¹⁶⁾

Represents the aggregate value of 33,273 unvested 2011 IPO Units held by Mr. Ramsbottom that would have vested on an accelerated basis if Mr. Ramsbottom terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after the change in control.

⁽¹⁷⁾	Represents the aggregate value of 1,580 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Ramsbottom termination of employment for any reason.

⁽¹⁸⁾

Represents the cost of Company-paid continuation health benefits for eighteen months (in the case of the Shared NEOs) or twelve months (in the case of the Non-Shared NEOs), based on our estimated costs to provide such coverage. For purposes of continuation health benefits, a “qualifying termination in connection with a change in control” means: (i) for Mr. Ramsbottom, a termination without cause, for good reason or due to Rentech’s non-renewal of his employment agreement within three months before or two years after a change in control of Rentech, and (ii) for Mr. Cohrs, a termination without cause or for good reason within three months before or two years after a change in control of Rentech.

116

⁽¹⁹⁾

Represents tax gross-up payments to compensate for excise taxes imposed by Section 4999 of the Internal Revenue Code on the payments and benefits provided (as well as any related taxes on such payment). The assumptions used to calculate the excise tax gross-up include the following: an excise tax rate of 20%, a federal tax rate of 25%, California state tax rate of 8.0929% (in the case of Mr. Ramsbottom) or 7.3846% (in the case of Mr. Cohrs) and a Medicare tax rate of 1.45%.

⁽²⁰⁾	Represents the executive’s annual base salary, payable over the one-year period after his termination date, plus (i) with respect to Messrs. Cohrs, Ambrose and Bahl, their target annual incentive bonuses and (ii) with respect to Mr. Wallis, a bonus equal to 100% of his annual base salary.

⁽²¹⁾	Represents executive’s annual base salary, payable over the one-year period after his termination date.

⁽²²⁾	Represents Mr. Cohrs’ annual base salary plus target bonus, payable in a lump sum upon termination.

⁽²³⁾	Represents the aggregate value of 136,275 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Cohrs’ termination without cause or for good reason on December 31, 2011.

⁽²⁴⁾

Represents the aggregate value of 136,275 unvested 2011 IPO RSUs, 88,172 unvested 2011 Time-Vest RSUs, 179,015 unvested 2011 PSUs, 52,941 unvested 2010 RSUs, 27,750 unvested 2009 Time-Vest RSUs, unvested 7,381 Management Stock Purchase Plan RSUs held by Mr. Cohrs that would have vested on an accelerated basis upon Mr. Cohrs’ termination due to death or disability on December 31, 2011. We have assumed for purposes of this calculation that all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Cohrs vested in full on such date).

⁽²⁵⁾

Represents the aggregate value of (i) 136,275 unvested 2011 IPO RSUs, 88,172 unvested 2011 Time-Vest RSUs, 179,015 unvested 2011 PSUs, 52,941 unvested 2010 RSUs, 27,750 unvested 2009 Time-Vest RSUs and 315,000 unvested 2009 Performance-Vest RSUs that would have vested on an accelerated basis if Mr. Cohrs terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after a change in control of Rentech, and (ii) 7,381 unvested Management Stock Purchase Plan RSUs. We have assumed for purposes of this calculation that (A) all performance criteria applicable to the 2009 Performance-Vest RSUs and 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2009 Performance-Vest RSUs and 2011 PSUs held by Mr. Cohrs vested in full on such date) and (B) the relevant change in control occurred on December 31, 2011 (and, accordingly, the unvested Management Stock Purchase Plan RSUs held by Mr. Cohrs, in each case, vested in full on such date).

⁽²⁶⁾	Represents the aggregate value of 7,381 unvested Management Stock Purchase Plan RSUs held by Mr. Cohrs that would have vested on an accelerated basis upon a change in control of Rentech.

⁽²⁷⁾	Represents the aggregate value of 6,472 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Cohrs’ termination of employment for any reason.

⁽²⁸⁾	Represents the aggregate value of 123,530 unvested 2010 Options held by Mr. Cohrs that would have vested on an accelerated basis upon Mr. Cohrs’ termination due to death or disability on December 31, 2011.

⁽²⁹⁾

Represents the aggregate value of 123,530 unvested 2010 Options held by Mr. Cohrs that would have vested on an accelerated basis if Mr. Cohrs terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after the change in control.

⁽³⁰⁾	Represents the aggregate value of 23,158 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Cohrs’ termination without cause or for good reason on December 31, 2011.

⁽³¹⁾	Represents the aggregate value of 23,158 unvested 2011 IPO Units held by Mr. Cohrs that would have vested on an accelerated basis upon Mr. Cohrs’ termination due to death or disability on December 31, 2011.

⁽³²⁾

Represents the aggregate value of 23,158 unvested 2011 IPO Units held by Mr. Cohrs that would have vested on an accelerated basis if Mr. Cohrs terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after the change in control.

⁽³³⁾	Represents the aggregate value of 1,100 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Cohrs’ termination of employment for any reason.

117

⁽³⁴⁾	Represents the aggregate value of 145,990 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Ambrose’s termination without cause or for good reason on December 31, 2011.

⁽³⁵⁾

Represents the aggregate value of 145,990 unvested 2011 IPO RSUs, 16,459 unvested 2011 Time-Vest RSUs, 33,416 unvested 2011 PSUs, 17,647 unvested 2010 RSUs and 16,666 unvested 2009 Time-Vest RSUs held by Mr. Ambrose that would have vested on an accelerated basis upon either (i) Mr. Ambrose’s termination due to death or disability on December 31, 2011, or (ii) Mr. Ambrose’s termination without cause or for good reason within one month before or one year after a change in control of the Partnership. We have assumed for purposes of this calculation that all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Ambrose vested in full on such date).

⁽³⁶⁾

Represents the aggregate value of 145,990 unvested 2011 IPO RSUs, 16,459 unvested 2011 Time-Vest RSUs, 33,416 unvested 2011 PSUs, 17,647 unvested 2010 RSUs, and 16,666 unvested 2009 Time-Vest RSUs that would have vested on an accelerated basis if Mr. Ambrose terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after a change in control of Rentech. We have assumed for purposes of this calculation that (A) all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Ambrose vested in full on such date) and (B) the relevant change in control occurred on December 31, 2011.

⁽³⁷⁾	Represents the aggregate value of 6,933 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Ambrose’s termination of employment for any reason.

⁽³⁸⁾

Represents the aggregate value of 41,177 unvested 2010 Options held by Mr. Ambrose that would have vested on an accelerated basis upon either (i) Mr. Ambrose’s termination due to death or disability on December 31, 2011, or (ii) Mr. Ambrose’s termination without cause or for good reason within one month before or one year after a change in control of the Partnership, in each case.

⁽³⁹⁾	Represents the aggregate value of 11,164 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Ambrose’s termination without cause or for good reason on December 31, 2011.

⁽⁴⁰⁾	Represents the aggregate value of 11,164 unvested 2011 IPO Units and2,494 unvested 2011 Time-Vest Units held by Mr. Ambrose that would have vested on an accelerated basis upon Mr. Ambrose’s termination due to death or disability on December 31, 2011.

⁽⁴¹⁾

Represents the aggregate value of (i) 2,494 unvested 2011 Time-Vest Units held by Mr. Ambrose that would have vested on an accelerated basis if Mr. Ambrose terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after the change in control, and (ii) 11,164 unvested 2011 IPO Units that would have vested on an accelerated basis if Mr. Ambrose terminated employment without cause or for good reason on December 31, 2011.

⁽⁴²⁾	Represents the aggregate value of 530 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Ambrose’s termination of employment for any reason.

⁽⁴³⁾	Represents the aggregate value of 134,760 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Bahl’s termination without cause or for good reason on December 31, 2011.

⁽⁴⁴⁾

Represents the aggregate value of 134,760 unvested 2011 IPO RSUs, 10,973 unvested 2011 Time-Vest RSUs, 22,277 unvested 2011 PSUs, 7,059 unvested 2010 RSUs and 10,000 unvested 2009 Time-Vest RSUs held by Mr. Bahl that would have vested on an accelerated basis upon either (i) Mr. Bahl’s termination due to death or disability on December 31, 2011, or (ii) Mr. Bahl’s termination without cause or for good reason within one month before or one year after a change in control of the Partnership. We have assumed for purposes of this calculation that all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Bahl vested in full on such date).

⁽⁴⁵⁾

Represents the aggregate value of 134,760 unvested 2011 IPO RSUs, 10,973 unvested 2011 Time-Vest RSUs, 22,277 unvested 2011 PSUs, 7,059 unvested 2010 RSUs, and 10,000 unvested 2009 Time-Vest RSUs that would have vested on an accelerated basis if Mr. Bahl terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after a change in control of Rentech. We have assumed for purposes of this calculation that (A) all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Bahl vested in full on such date) and (B) the relevant change in control occurred on December 31, 2011.

118

⁽⁴⁶⁾	Represents the aggregate value of 6,400 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Bahl’s termination of employment for any reason.

⁽⁴⁷⁾

Represents the aggregate value of 16,471 unvested 2010 Options held by Mr. Bahl that would have vested on an accelerated basis upon either (i) Mr. Bahl’s termination due to death or disability on December 31, 2011, or (ii) Mr. Bahl’s termination without cause or for good reason within one month before or one year after a change in control of the Partnership.

⁽⁴⁸⁾	Represents the aggregate value of 10,306 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Bahl’s termination without cause or for good reason on December 31, 2011.

⁽⁴⁹⁾	Represents the aggregate value of 10,306 unvested 2011 IPO Units and1,663 unvested 2011 Time-Vest Units held by Mr. Bahl that would have vested on an accelerated basis upon Mr. Bahl termination due to death or disability on December 31, 2011.

⁽⁵⁰⁾

Represents the aggregate value of (i) 1,663 unvested 2011 Time-Vest Units held by Mr. Bahl that would have vested on an accelerated basis if Mr. Bahl terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after the change in control, and (ii) 10,306 unvested 2011 IPO Units that would have vested on an accelerated basis if Mr. Bahl terminated employment without cause or for good reason on December 31, 2011.

⁽⁵¹⁾	Represents the aggregate value of 489 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Bahl’s termination of employment for any reason.

⁽⁵²⁾	Represents the aggregate value of 123,530 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Wallis’ termination without cause or for good reason on December 31, 2011.

⁽⁵³⁾

Represents the aggregate value of 123,530 unvested 2011 IPO RSUs, 6,270 unvested 2011 Time-Vest RSUs, 12,730 unvested 2011 PSUs, 5,883 unvested 2010 RSUs and 8,334 unvested 2009 Time-Vest RSUs held by Mr. Wallis that would have vested on an accelerated basis upon either (i) Mr. Wallis’ termination due to death or disability on December 31, 2011, or (ii) Mr. Wallis’ termination without cause or for good reason within one month before or one year after a change in control of the Partnership. We have assumed for purposes of this calculation that all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Wallis vested in full on such date).

⁽⁵⁴⁾

Represents the aggregate value of 123,530 unvested 2011 RSUs, 6,270 unvested 2011 Time-Vest RSUs, 12,730 unvested 2011 PSUs, 5,883 unvested 2010 RSUs, and 8,334 unvested 2009 Time-Vest RSUs that would have vested on an accelerated basis if Mr. Wallis terminated employment without cause or for good reason on December 31, 2011 and, in either case, such termination occurred within sixty days prior to or one year after a change in control of Rentech. We have assumed for purposes of this calculation that (A) all performance criteria applicable to the 2011 PSUs were attained on December 31, 2011 (and, accordingly, the unvested 2011 PSUs held by Mr. Wallis vested in full on such date) and (B) the relevant change in control occurred on December 31, 2011.

⁽⁵⁵⁾	Represents the aggregate value of 5,866 unvested 2011 IPO RSUs that would have vested on an accelerated basis upon Mr. Wallis’ termination of employment for any reason.

⁽⁵⁶⁾

Represents the aggregate value of 13,725 unvested 2010 Options held by Mr. Wallis that would have vested on an accelerated basis upon either (i) Mr. Wallis’ termination due to death or disability on December 31, 2011, or (ii) Mr. Wallis’ termination without cause or for good reason within one month before or one year after a change in control of the Partnership.

⁽⁵⁷⁾	Represents the aggregate value of 9,447 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Wallis’ termination without cause or for good reason on December 31, 2011.

⁽⁵⁸⁾	Represents the aggregate value of 9,447 unvested 2011 IPO Units and 950 unvested 2011 Time-Vest Units held by Mr. Wallis that would have vested on an accelerated basis upon Mr. Wallis termination due to death or disability on December 31, 2011.

⁽⁵⁹⁾	Represents the aggregate value of (i) 950 unvested 2011 Time-Vest Units held by Mr. Wallis that would have vested on an accelerated basis if Mr. Wallis terminated employment without cause or for good reason on December 31, 2011 and, in either

119

case, such termination occurred within sixty days prior to or one year after the change in control, and (ii) 9,447 unvested 2011 IPO Units that would have vested on an accelerated basis if Mr. Wallis terminated employment without cause or for good reason on December 31, 2011.

⁽⁶⁰⁾	Represents the aggregate value of 449 unvested 2011 IPO Units that would have vested on an accelerated basis upon Mr. Wallis’ termination of employment for any reason.

Director Compensation

We and our general partner were formed in July 2011 and have not yet developed or implemented a compensation program for our non-employee directors. Prior to our formation, directors of REMC were not separately compensated for their service on REMC’s board of directors. We are currently considering a compensation program for our non-employee directors for future implementation that may consist of some or all of annual retainer fees, committee chair retainer fees and/or long-term equity awards; however, there can be no assurance at this time that such a program will be implemented or that it will consist of the components noted here. Directors who are also employees of our general partner and/or Rentech will not receive fees for service on our board of directors. We have not made any payments to our non-employee directors or director nominees to date.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS

The following table presents information regarding beneficial ownership of our common units as of February 29, 2012 by:

•

our general partner;

•

each of our general partner’s directors;

•

each of our general partner’s named executive officers;

•

each unitholder known by us to beneficially hold five percent or more of our outstanding common units; and

•

all of our general partner’s executive officers and directors as a group.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Unless indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all common units beneficially owned, subject to community property laws where applicable. Except as otherwise indicated, the business address for each of our beneficial owners is c/o Rentech Nitrogen Partners, L.P., 10877 Wilshire Boulevard, Suite 600, Los Angeles, California 90024.


Name and Address of Beneficial Owner	Amount and Nature of Common Units Beneficially Owned ⁽¹⁾		Percentage of Total Common Units ⁽²⁾
Rentech Nitrogen GP, LLC ⁽³⁾		—		—
RNHI ⁽⁴⁾		23,250,000		60.8	%
D. Hunt Ramsbottom		—		—
Dan J. Cohrs		—		—
John H. Diesch		—		—
John A. Ambrose		—		—
Wilfred R. Bahl, Jr.		—		—
Marc E. Wallis		—		—
Halbert S. Washburn		—		—
Michael F. Ray		—		—
Michael S. Burke		—		—
James F. Dietz		4,428		—
Keith B. Forman		—		—
All directors and executive officers as a group (11 persons)		4,428		—

120

*	Less than 1%.

(1)	The Security Ownership table above does not include unvested phantom units held by NEOs that will vest assuming the continued employment of the NEO beyond each applicable vesting date:

•

D. Hunt Ramsbottom – 33,273 phantom units;

•

Dan J. Cohrs – 23,158 phantom units;

•

John A. Ambrose – 13,658 phantom units;

•

Wilfred R. Bahl, Jr. – 11,969 phantom units; and

•

Marc E. Wallis – 10,397 phantom units.

(2)	Based on 38,250,000 common units outstanding as of February 29, 2012.

(3)	Our general partner, a wholly owned subsidiary of RNHI, manages and operates our business and has a non-economic general partner interest.

(4)	RNHI is an indirect wholly owned subsidiary of Rentech.

The following table sets forth, as of February 29, 2012, the number of shares of common stock of Rentech owned by each of the named executive officers and directors of our general partner and all executive officers and directors of our general partner as a group.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Unless indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares of common stock beneficially owned, subject to community property laws where applicable. Except as otherwise indicated, the business address for each of the following persons is c/o Rentech Nitrogen Partners, L.P., 10877 Wilshire Boulevard, Suite 600, Los Angeles, California 90024.


Name and Address of Beneficial Owner	Amount and Nature of Common Stock Beneficially Owned ⁽¹⁾⁽²⁾		Percentage of Total Common Stock ⁽¹⁾⁽³⁾
D. Hunt Ramsbottom ⁽⁴⁾⁽⁵⁾		1,745,110		*
Dan J. Cohrs		509,180		*
John H. Diesch		268,964		*
John A. Ambrose		73,738		*
Wilfred R. Bahl, Jr.		143,395		*
Marc E. Wallis		52,393		*
Halbert S. Washburn		314,600		*
Michael F. Ray ⁽⁶⁾		441,337		*
Michael S. Burke		297,600		*
James F. Dietz		—		*
Keith B. Forman		—		*
All directors and executive officers as a group (11 persons)		3,846,317		1.7	%

*	Less than 1%

(1)

If a person has the right to acquire shares of common stock subject to options or other convertible or exercisable securities within 60 days of February 29, 2012, then such shares (including certain restricted stock units which are fully vested but will not be yet paid out until the earlier of the recipient’s termination and three years from the applicable award date, subject to any required payment delays arising under applicable tax laws) are deemed outstanding for purposes of computing the percentage ownership of that person, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. The following shares of common stock subject to stock options and warrants may be acquired within 60 days of February 29, 2012 and are included in the table above:

•

D. Hunt Ramsbottom—373,750 under warrants and 483,333 under options;

•

Dan J. Cohrs—137,255 under options;

•

John H. Diesch—94,902 under options;

•

John A. Ambrose—20,588 under options;

•

Wilfred R. Bahl, Jr.—38,235 under options;

•

Marc E. Wallis—6,863 under options;

•

Halbert S. Washburn—86,500 under options;

•

Michael F. Ray—86,500 under options;

121

•

Michael S. Burke—91,500 under options; and

•

all directors and executive officers as a group—373,750 under warrants and 1,045,676 under options.

(2)	The Security Ownership table above does not include the following:

(A) PSUs held by NEOs that vest upon the value weighted average price for Rentech stock equaling $3.00 or higher on or before October 12, 2014:

•

Dan J. Cohrs — 397,812 PSUs

•

D. Hunt Ramsbottom — 800,625 PSUs;

•

John H. Diesch — 190,000 PSUs;

•

John A. Ambrose — 33,416 PSUs;

•

Wilfred R. Bahl, Jr. — 22,277 PSUs; and

•

Marc E. Wallis — 12,730 PSUs.

(B) unvested RSUs and/or options held by NEOs or directors, as applicable that will vest assuming the continued employment of the officer or director beyond each applicable vesting date:

•

Dan J. Cohrs — 694,487 RSUs and 274,510 options;

•

D. Hunt Ramsbottom — 1,274,949 RSUs and 466,667 options;

•

John H. Diesch — 416,587 RSUs and 109,804 options;

•

John A. Ambrose — 196,763 RSUs and 41,177 options;

•

Wilfred R. Bahl, Jr. — 162,791 RSUs and 16,471 options;

•

Marc E. Wallis — 144,016 RSUs and 13,727 options;

•

Halbert S. Washburn — 27,500 RSUs;

•

Michael F. Ray — 27,500 RSUs; and

•

Michael S. Burke — 27,500 RSUs.

(3)	Based on 225,360,551 shares of common stock outstanding as of February 29, 2012.

(4)	Includes a warrant currently held by the Ramsbottom Family Living Trust for 373,750 shares. The warrant fully vested on December 31, 2011. The exercise price of the warrant is $1.82 per share. Mr. Ramsbottom is a trustor and trustee of the Ramsbottom Family Living Trust.

(5)	Includes 55,000 shares held for the benefit of Mr. Ramsbottom’s children as to which Mr. Ramsbottom disclaims beneficial ownership and 10,000 shares held by the L.E. Ramsbottom Living Trust beneficially owned by Mr. Ramsbottom’s spouse as to which Mr. Ramsbottom disclaims beneficial ownership.

(6)	Includes 7,500 shares held by Mr. Ray’s spouse’s IRA as to which Mr. Ray disclaims beneficial ownership.

Equity Compensation Plan Information

The following table provides information as of December 31, 2011 with respect to our compensation plan under which our equity securities are authorized for issuance. On November 2, 2011, the board of directors of our general partner adopted the 2011 LTIP.


Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)			Weighted-average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		163,000	(1)		—	(2)		3,662,000
Equity compensation plans not approved by security holders		—			—			—

Total		163,000			—			3,662,000

(1)

Represents phantom units awarded under the 2011 LTIP.

(2)

Units do not have an exercise price. Payout is based on completing a specified period of employment.

122

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

For a discussion of director independence, see Part III—Item 10 “Directors, Executive Officers and Corporate Governance.”

RNHI, an indirect wholly-owned subsidiary of Rentech, owns (i) 23,250,000 common units, representing 60.8% of our outstanding common units and (ii) all of the member interests in our general partner and our general partner own a general partner interest in us.

Distributions and Payments to Rentech and its Affiliates

The following table summarizes the distributions and payments to be made by us to Rentech and its affiliates (including our general partner) in connection with the ongoing operation and any liquidation of the Partnership. These distributions and payments were or will be determined by and among affiliated entities and, consequently, are not the result of arm’s-length negotiations.


*Operational Stage*

Distributions to RNHI and its affiliates		• We will generally make cash distributions to our unitholders pro rata, including to RNHI, as a holder of common units. RNHI owns 23,250,000 common units, representing 60.8% of our outstanding common units, and would receive a pro rata percentage of the cash available for distribution that we distribute in respect thereof.

Payments to our general partner and its affiliates		• We will reimburse our general partner and its affiliates for all expenses incurred on our behalf. In addition we will reimburse Rentech for certain operating expenses and for the provision of various general and administrative services for our benefit under the services agreement.

*Liquidation Stage*

Liquidation		• Upon our liquidation, our unitholders will be entitled to receive liquidating distributions according to their respective capital account balances.

Transactions between REMC and Rentech

Management Services Agreement

REMC and Rentech entered into a management services agreement on April 26, 2006, as amended on July 29, 2011, pursuant to which Rentech agreed to provide management, consulting and financial planning services to REMC in connection with the operation and growth of REMC in the ordinary course of its business. As compensation for these services, REMC paid Rentech the actual corporate overhead costs incurred by Rentech on behalf of REMC, including, without limitation, compensation expenses for Rentech personnel providing services to REMC, stock-based and incentive bonus compensation expenses of REMC personnel, legal, audit, accounting and tax services expenses, income tax expenses and software expenses. Under the agreement, REMC agreed to indemnify Rentech and its affiliates against losses and liabilities incurred in connection with the performance of services under the agreement, unless such losses or liabilities arise from Rentech’s bad faith or gross negligence. Such charges were accrued during each quarter and due and payable by REMC from time to time upon Rentech’s demand and upon termination of the management services agreement. For the fiscal years ended September 30, 2011, 2010 and 2009, the total corporate overhead costs incurred by Rentech and allocated to REMC were approximately $2.0 million, $1.4 million and $1.6 million, respectively.

The management services agreement terminated in accordance with its terms at the closing of our initial public offering, and upon its termination, REMC paid Rentech any corporate overhead costs owed by REMC under the agreement. The amount of these corporate overhead costs was approximately $19.4 million, which primarily represent estimated income taxes attributable to REMC.

During the period from October 1, 2007 through November 8, 2011, pursuant to the management services agreement, Rentech made payments for corporate overhead costs on behalf of REMC, and used a portion of Rentech’s net operating loss carryforwards to satisfy income taxes attributable to REMC. During this period, Rentech and REMC elected to offset approximately $78.9 million of such corporate overhead costs and net operating loss carryforwards against a portion of intercompany loans. The amount of such offset included approximately $62.9 million of net operating loss carryforwards used to satisfy income taxes attributable to REMC. In June 2011, the remaining approximately $112.7 million of intercompany loans was reclassified as a dividend from REMC to Rentech. On November 9, 2011, we used a portion of the proceeds from our initial public offering to pay Rentech approximately $19.4 million of the balance due pursuant to the management services agreement, and treated the remaining approximately $1.7 million due as a capital contribution from Rentech to us.

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Dividends

In March 2011, REMC paid a dividend to Rentech with cash on hand in the amount of $5.0 million.

In June 2011, REMC refinanced all of its existing term loans with a new $150.0 million term loan and made a dividend to Rentech in the amount of approximately $67.0 million.

At the closing of our initial public offering, REMC distributed all of its cash, in the amount of approximately $39.3 million, to RNHI.

Bridge Loan

In connection with the ammonia expansion project, on December 28, 2011 Rentech entered into the bridge loan agreement as a lender, with us as guarantor, and RNLLC as the borrower. The bridge loan agreement consisted of a commitment by Rentech to lend up to $40.0 million to RNLLC until May 31, 2012, which we refer to as the bridge loan. We intended to use the bridge loan to fund certain capital expenditures and construction costs relating to our ammonia capacity expansion project until a term loan facility for the cost of the entire project could be put in place.

In connection with the bridge loan, the RNLLC also entered into a first amendment to credit agreement, dated as of December 28, 2011, or the first amendment, among itself, us as guarantor, and General Electric Capital Corporation, as administrative agent and lender. The first amendment amended the terms of the 2011 revolving credit facility to permit RNLLC and us to enter into the bridge loan agreement and to incur the bridge loan.

The bridge loan matured on the earlier of three months after the payoff and termination of the 2011 revolving credit facility or six months after the maturity of the 2011 revolving credit facility. All obligations of RNLLC under the bridge loan agreement were unconditionally guaranteed by us. The obligations of RNLLC and us to Rentech under the bridge loan agreement were unsecured and subordinated to the obligations of RNLLC and us under the 2011 revolving credit facility. In the event the 2011 revolving credit facility was terminated, we would have been required to pledge substantially all of our assets to secure the bridge loan if Rentech so requested.

Borrowings under the bridge loan initially bore interest at a rate equal to LIBOR plus a margin of 5.5%. On June 1, 2012 the margin over LIBOR would have increased to 6.0%, and on each subsequent six month anniversary thereof, the margin would have increased by an additional one half percent (0.5%). Interest on the bridge loan, if not paid in cash, would have capitalized monthly and added to the principal balance of the bridge loan and would have also bore interest. The principal amount of the bridge loan, including all capitalized interest added to the principal balance of the bridge loan, and any accrued and unpaid interest, would have been due and payable on the maturity of the bridge loan.

Upon signing the bridge loan agreement, RNLLC agreed to pay Rentech a closing fee equal to 2.0% of the committed amount, or $800.0 thousand. In the event the bridge loan was repaid on or prior to March 31, 2012, then 75% of the closing fee would have been credited toward RNLLC’s repayment amount, and if the bridge loan was repaid after March 31, 2012 but prior to June 1, 2012, then 50% of the closing fee would have been credited toward the repayment amount. No credits of the closing fee would have been made if repayment of the bridge loan occurred on or after June 1, 2012. At December 31, 2011, there were no outstanding advances under the bridge loan agreement.

Our Agreements with Rentech

At the closing of our initial public offering, we, our general partner and Rentech entered into the following agreements which govern the business relations among us, our general partner and Rentech. These agreements were not the result of arm’s-length negotiations and the terms of these agreements are not necessarily at least as favorable to each party to these agreements as terms which could have been obtained from unaffiliated third parties.

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Contribution Agreement

At the closing of our initial public offering, we entered into a contribution, conveyance and assignment agreement, which we refer to as the contribution agreement, with Rentech, RDC, RNHI, our general partner and REMC. Under the contribution agreement, the following transactions, among other things, took place upon the closing of our initial public offering in the order they are listed:

•

RDC converted into a corporation organized under the laws of the State of Delaware;

•

RDC contributed the capital stock in REMC to RNHI;

•

REMC converted into a limited liability company organized under the laws of the State of Delaware and changed its name to Rentech Nitrogen, LLC;

•

REMC paid approximately $19.4 million to Rentech and, following such payment, our management services agreement with Rentech terminated in accordance with its terms;

•

REMC’s employees were transferred to, and became employees of, our general partner;

•

REMC distributed to RNHI all of REMC’s cash, which was approximately $39.3 million;

•

RNHI contributed the member interests in REMC to us in exchange for (i) 23,250,000 common units, and (ii) the right to receive from us approximately $34.7 million in cash, in part as a reimbursement for expenditures made by REMC during the two-year period preceding our initial public offering for the expansion and improvement of our facility; for federal income tax purposes, when REMC converted to a limited liability company (as described above), RNHI was treated as having been the party that made such expenditures with respect to our facility;

•

we (i) used approximately $150.8 million of the net proceeds of our initial public offering make a capital contribution to REMC for the repayment in full and termination of REMC’s existing term loan and the payment of related fees and expenses and (ii) used or will use the remainder of the net proceeds as described in Part II—Item 5 “Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Common Units—Use of Proceeds from the Sales of Registered Securities”;

•

we distributed approximately $34.7 million of the net proceeds of our initial public offering to RNHI to reimburse it for expenditures made by REMC during the two-year period preceding our initial public offering for the expansion and improvement of our facility, including expenditures for preliminary work relating to our expansion projects;

•

we used the balance of the net proceeds of our initial public offering to make a distribution to RNHI;

•

our partnership agreement and the limited liability company agreement of our general partner were amended and restated to the extent necessary to reflect the transactions in the contribution agreement; and

•

we redeemed the limited partner interest issued to RDC and subsequently transferred to RNHI and retired such limited partner interest in exchange for a payment of $980 to RNHI.

The agreement also contains a provision whereby, in connection with the transfer of REMC’s employees to our general partner, all related benefit plans and other agreements between REMC and the transferred employees were assigned to us, subject to receipt of any necessary consents from third parties. The agreement also contains an indemnity provision whereby our general partner, as the indemnifying party, will indemnify us and REMC for any losses and liabilities incurred in connection with the transfer and employment of the transferred employees, including the transferred employees represented by collective bargaining agreements, and the then existing collective bargaining agreement covering such employees.

Omnibus Agreement

At the closing of our initial public offering, we entered into an omnibus agreement with our general partner and Rentech. Under the omnibus agreement, Rentech has agreed to indemnify us for:

•

environmental liabilities of REMC (excluding liabilities related to the matter described in Part I—Item 3 “Legal Proceedings” in an amount not to exceed $550,000 and environmental liabilities relating to the potential removal of asbestos at our facility in an amount not to exceed $325,000) to the extent arising out of the ownership or operation of REMC prior to the closing of our initial public offering and that are asserted during the period ending on the third anniversary of the closing of our initial public offering;

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•

liabilities relating to REMC (excluding environmental liabilities, pre-closing income tax liabilities, liabilities reflected on the balance sheet of REMC as of June 30, 2011 and liabilities that have arisen since June 30, 2011 in the ordinary course of business) to the extent arising out of the ownership or operation of REMC prior to the closing of our initial public offering and that are asserted during the period ending on the seventh anniversary of the closing of our initial public offering;

•

pre-closing income tax liabilities that are asserted during the period ending on the 30th day after the expiration of the applicable statute of limitations;

•

our failure, as of the closing of our initial public offering, to be the owner of valid and indefeasible easement rights, contractual rights, leasehold interests and/or fee ownership interests in and to the lands on which our facility or our ammonia storage space in Niota, Illinois are located, and if such failure renders us liable to a third party or unable to use our facility or such ammonia storage space in substantially the same manner they were used and operated immediately prior to the closing of our initial public offering, which failure(s) are identified prior to the fifth anniversary of the closing of our initial public offering; and

•

events and conditions associated with any assets retained by Rentech.

Rentech’s obligation to indemnify us for liabilities described in the first two bullets above will be subject to (i) a $250,000 aggregate annual deductible; and (ii) a $10.0 million aggregate cap. In addition, Rentech is not obligated to indemnify us for liabilities satisfied through the use of net operating loss carry-forwards in accordance with the terms of our management services agreement with Rentech.

We have agreed to indemnify Rentech and any of its direct or indirect subsidiaries (excluding us and any of our direct or indirect subsidiaries) for:

•

liabilities of REMC (excluding post-closing income tax liabilities) to the extent arising out of the ownership or operation of REMC on or after the closing of our initial public offering;

•

post-closing income tax liabilities (excluding pre-closing income tax liabilities and income tax liabilities attributable to Rentech’s indirect ownership of REMC through its ownership in us after the closing of our initial public offering) that are asserted during the period ending on the 30th day after the expiration of the applicable statute of limitations;

•

liabilities related to the matter described in Part I—Item 3 “Legal Proceedings” in an amount not to exceed $550,000;

•

environmental liabilities relating to the potential removal of asbestos at our facility in an amount not to exceed $325,000;

•

any liabilities (excluding environmental liabilities and pre-closing income tax liabilities) to the extent reflected on the balance sheet of REMC as of June 30, 2011; and

•

any liabilities (excluding environmental liabilities and pre-closing income tax liabilities) that have arisen since June 30, 2011 in the ordinary course of business.

Our obligation to indemnify Rentech for liabilities described in the first bullet above will be subject to (i) a $250,000 aggregate annual deductible and (ii) a $10.0 million aggregate cap.

Subject to the terms and conditions of the omnibus agreement, Rentech and its affiliates granted us and our general partner a royalty-free, worldwide, non-exclusive, non-sublicensable and non-transferable (without the prior written consent of Rentech) right and license to use the Rentech corporate logo and the Rentech name.

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Services Agreement

At the closing of our initial public offering, we, our general partner and Rentech entered into a services agreement, pursuant to which we, our general partner and our operating company obtain certain management and other services from Rentech. Under this agreement, our general partner have engaged Rentech to provide certain administrative services to us. Rentech provides us with the following services under the agreement, among others:

•

services from certain of Rentech’s employees in capacities equivalent to the capacities of corporate executive officers, except that those who serve in such capacities under the agreement shall serve us on a shared, part-time basis only, unless we and Rentech agree otherwise;

•

administrative and professional services, including legal, accounting services, human resources, information technology, insurance, tax, credit, finance, payroll, investor and public relations, communications, government affairs and regulatory affairs;

•

recommendations on capital raising activities to the board of directors of our general partner, including the issuance of debt or equity securities, the entry into credit facilities and other capital market transactions;

•

managing or overseeing litigation and administrative or regulatory proceedings, and establishing appropriate insurance policies for us, and providing safety and environmental advice;

•

recommendations regarding the declaration and payment of cash distributions; and

•

managing or providing advice for other projects, including acquisitions, as may be agreed by Rentech and our general partner from time to time.

As payment for services provided under the agreement, we, our general partner, and our operating subsidiary, are obligated to reimburse Rentech for (i) all costs, if any, incurred by Rentech or its affiliates in connection with the employment of its employees who are seconded to us and who provide us services under the agreement on a full-time basis, but excluding share-based compensation; (ii) a prorated share of costs incurred by Rentech or its affiliates in connection with the employment of its employees, excluding the seconded personnel, who provide us services under the agreement on a part-time basis, but excluding share-based compensation, and such prorated share shall be 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 us; (iii) a prorated share of certain administrative costs in accordance with the terms of the agreement, including office costs, services by outside vendors (including employee compensation and benefit plan services), other general and administrative costs; (iv) any costs, expenses and claims related to employee benefits provided to employees of our general partner, us or our operating subsidiary that have been paid by Rentech, but excluding share-based compensation; and (v) 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. We are required to pay Rentech within 30 days for invoices it submits to us under the agreement.

We, our general partner and our operating company are not required to pay any salaries, bonuses or benefits directly to any of Rentech’s employees who provide services to us on a full-time or part-time basis; Rentech will continue to be responsible for their compensation. We expect that personnel performing the actual day-to-day business and operations at our facility will be employed directly by our general partner, and we will bear all salaries, bonuses, employee benefits and other personnel costs for these employees.

Either Rentech or our general partner may temporarily or permanently exclude any particular service from the scope of the agreement upon 180 days’ notice unless such notice is waived in writing by our general partner. At any time, Rentech may temporarily or permanently exclude any employee of Rentech or its affiliates from providing the services under the agreement. Rentech also has the right to delegate the performance of some or all of the services to be provided pursuant to the agreement to one of its affiliates or any other person or entity, though such delegation will not relieve Rentech from its obligations under the agreement. Beginning one year after the closing of our initial public offering, either Rentech or our general partner will have the right to terminate the agreement upon at least 180 days’ notice, but not more than one year’s notice. Furthermore, our general partner will have the right to terminate the agreement immediately if Rentech becomes bankrupt, or dissolves and commences liquidation or winding-up.

In order to facilitate the carrying out of services under the agreement, we, on the one hand, and Rentech and its affiliates, on the other, have granted one another certain royalty-free, non-exclusive and non-transferable rights to use one another’s intellectual property under certain circumstances. However, Rentech did not grant any right to license its alternative energy technology under the agreement.

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The agreement also contains an indemnity provision whereby we, our general partner and our operating company, as indemnifying parties, have agreed to indemnify Rentech and its affiliates (other than the indemnifying parties themselves) against losses and liabilities incurred in connection with the performance of services under the agreement or any breach of the agreement, unless such losses or liabilities arise from a breach of the agreement by Rentech or other misconduct on its part, as provided in the agreement. The agreement also contains a provision stating that Rentech is an independent contractor under the agreement and nothing in the agreement may be construed to impose an implied or express fiduciary duty owed by Rentech, on the one hand, to the recipients of services under the agreement, on the other hand. The agreement prohibits recovery of loss of profits or revenue, or special, incidental, exemplary, punitive or consequential damages from Rentech or certain affiliates.

Indemnification Agreements

At the closing of our initial public offering, we entered into indemnification agreements with each of the directors and executive officers of our general partner. These agreements provide indemnification to these directors and executive officers under certain circumstances for acts or omissions which may not be covered by directors’ and officers’ liability insurance.

Procedures for Review; Approval and Ratification of Related Person Transactions

The board of directors of our general partner adopted a Code of Business Conduct and Ethics in connection with the closing of our initial public offering that provides that the independent members of the board of directors of our general partner or an authorized independent committee of the board of directors periodically will review all transactions with a related person that are required to be disclosed under SEC rules and, when appropriate, initially authorize or ratify all such transactions. In the event that the independent members of the board of directors of our general partner or the authorized independent committee considers ratification of a transaction with a related person and determines not to so ratify, the Code of Business Conduct and Ethics provides that our management will make all reasonable efforts to cancel or annul the transaction.

The Code of Business Conduct and Ethics provides that, in determining whether or not to recommend the initial approval or ratification of a transaction with a related person, the independent members of the board of directors of our general partner or the authorized independent committee should consider all of the relevant facts and circumstances available, including (if applicable) but not limited to: (i) whether there is an appropriate business justification for the transaction; (ii) the benefits that accrue to us as a result of the transaction; (iii) the terms available to unrelated third parties entering into similar transactions; (iv) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director or an entity in which a director or an immediately family member of a director is a partner, shareholder, member or executive officer); (v) the availability of other sources for comparable products or services; (vi) whether it is a single transaction or a series of ongoing, related transactions; and (vii) whether entering into the transaction would be consistent with the Code of Business Conduct and Ethics.

The Code of Business Conduct and Ethics described above was adopted in connection with the closing of our initial public offering, and as a result the transactions described above were not reviewed under such policy.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The charter of the audit committee of the board of directors of our general partner, which is available on our website at www.rentechnitrogen.com, requires the audit committee to pre-approve all audit services and non-audit services (other than de minimis non-audit services as defined by the Sarbanes-Oxley Act of 2002) to be provided by our independent registered public accounting firm. The audit committee pre-approved all fees incurred in the three months ended December 31, 2011 and fiscal year 2011.

The following table presents fees billed and expected to be billed for professional audit services rendered by PricewaterhouseCoopers LLC for the three months ended December 31, 2011 and fiscal years 2011 and 2010 and fees billed and expected to be billed for other services rendered by PricewaterhouseCoopers LLC for the three months ended December 31, 2011 and fiscal years 2011 and 2010.

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	Three Months Ended December 31,		Fiscal Year		Fiscal Year
	2011		2011		2010
PricewaterhouseCoopers LLP:
Audit Fees (1)	$	400,000	$	1,516,918	$	491,402
Audit-Related Fees		—		—		—
Tax Fees (2)		179,944		—		81,153
All Other Fees		—		—		—

Total	$	579,944	$	1,516,918	$	572,555

(1)

Represents the aggregate fees billed and expected to be billed for professional services rendered for the audit of REMC’s financial statements for the three months ended December 31, 2011 and fiscal years ended September 30, 2011 and 2010, assistance with Securities Act filings and related matters, consents issued in connection with Securities Act filings, and consultations on financial accounting and reporting standards arising during the course of the audit for the three months ended December 31, 2011 and fiscal years 2011 and 2010. Also includes REMC’s portion of aggregate fees billed and expected to be billed to Rentech for its consolidated financial statements for the fiscal years end September 30, 2011 and 2010, and for the audit of Rentech’s internal control over financial reporting and for reviews of the consolidated financial statements included in Rentech’s quarterly reports on Form 10-Q.

(2)	Represents REMC’s portion of aggregate fees billed to Rentech for its 2010 consolidated tax return and tax consultation regarding various issues including our structure.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) and (2) Financial Statements and Schedules.

The information required by this Item is included in Part II—Item 8 “Financial Statements and Supplementary Data” of this report.

(b) Exhibits.

See Exhibit Index starting on page 130.

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EXHIBIT INDEX



3.1		Certificate of Limited Partnership of Rentech Nitrogen Partners, L.P. (incorporated by reference to Exhibit 3.1 to the Form S-1 filed by the Registrant on August 5, 2011).

3.2		Second Amended and Restated Agreement of Limited Partnership of Rentech Nitrogen Partners, L.P., dated as of November 9, 2011 (including form of common unit certificate) (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on November 9, 2011).

3.3		Certificate of Formation of Rentech Nitrogen GP, LLC (incorporated by reference to Exhibit 3.3 to the Form S-1 filed by the Registrant on August 5, 2011).

3.4		Second Amended and Restated Limited Liability Company Agreement of Rentech Nitrogen GP, LLC, dated November 9, 2011 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Registrant on November 9, 2011).

3.5*		Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Rentech Nitrogen Partners, L.P., dated as of February 1, 2012.

10.1		Distribution Agreement, dated April 26, 2006, between Royster-Clark Resources LLC and Rentech Development Corporation (incorporated by reference to Exhibit 10.1 to the Form S-1 filed by the Registrant on August 5, 2011).

10.2		Amendment to Distribution Agreement, dated October 13, 2009, among Rentech Energy Midwest Corporation, Rentech Development Corporation and Agrium U.S.A., Inc. (incorporated by reference to Exhibit 10.2 to the Form S-1 filed by the Registrant on August 5, 2011).

10.3		Assignment and Assumption Agreement, dated as of September 29, 2006, by and between Royster-Clark, Inc., Agrium U.S.A., Inc., and Rentech Development Corporation (incorporated by reference to Exhibit 10.3 to the Form S-1 filed by the Registrant on August 5, 2011).

10.4		Credit Agreement, dated January 29, 2010, by and among Rentech Energy Midwest Corporation, as the borrower, Rentech, Inc. and Credit Suisse AG, Cayman Islands Branch, individually and as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on February 1, 2010).

10.5		Guarantee and Collateral Agreement, dated January 29, 2010, by and among Rentech Energy Midwest Corporation, Rentech, Inc., the subsidiaries of Rentech, Inc. listed therein and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on February 1, 2010).

10.6		Real Estate Mortgage, Assignment of Rents, Security Agreement and UCC Fixture Filing, dated January 29, 2010, by and among Rentech Energy Midwest Corporation, Rentech, Inc. and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on February 1, 2010).

10.7		Amendment to Credit Agreement, Waiver and Collateral Agent Consent, dated July 21, 2010, among Rentech Energy Midwest Corporation, Rentech, Inc., certain subsidiaries of Rentech, Inc., the Lenders party thereto and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on July 26, 2010).

10.8		Incremental Loan Assumption Agreement, dated July 21, 2010, among Rentech Energy Midwest Corporation, Rentech, Inc., certain subsidiaries of Rentech, Inc., the Incremental Lenders party thereto and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on July 26, 2010).

10.9		Second Amendment to Credit Agreement, Waiver and Collateral Agent Consent, dated November 24, 2010, among Rentech Energy Midwest Corporation, Rentech, Inc., certain subsidiaries of Rentech, Inc., the Lenders party thereto and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on November 29, 2010).

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10.10		Second Incremental Loan Assumption Agreement, dated November 24, 2010, among Rentech Energy Midwest Corporation, Rentech, Inc., certain subsidiaries of Rentech, Inc., the Incremental Lenders party thereto and Credit Suisse AG, Cayman Islands Branch (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on November 29, 2010).

10.11		Credit Agreement, dated June 10, 2011, by and among Rentech Energy Midwest Corporation, as the borrower, Rentech, Inc., the lenders party thereto, Credit Suisse AG, Cayman Islands Branch, individually and as Administrative Agent and Collateral Agent and Credit Suisse Securities (USA) LLC as Sole Bookrunner, Sole Syndication Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on June 14, 2011).

10.12		Guarantee and Collateral Agreement, dated June 10, 2011, by and among Rentech Energy Midwest Corporation, Rentech, Inc., the subsidiaries of Rentech, Inc. listed therein and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on June 14, 2011).

10.13		Real Estate Mortgage, Assignment of Rents, Security Agreement and UCC Fixture Filing, dated June 10, 2011, by and among Rentech Energy Midwest Corporation, Rentech, Inc. and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on June 14, 2011).

10.14		Agreement, dated November 1, 2010, between Northern Illinois Gas Company, d/b/a Nicor Gas Company and Rentech Energy Midwest (incorporated by reference to Exhibit 10.14 to the Form S-1 filed by the Registrant on August 5, 2011).

10.15		Services Agreement, dated as of November 9, 2011, by and among Rentech Nitrogen Partners, L.P., Rentech Nitrogen GP, LLC and Rentech, Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Registrant on November 9, 2011).

10.16		Contribution, Conveyance and Assignment Agreement, dated as of November 9, 2011, by and among Rentech, Inc., Rentech Development Corporation, Rentech Nitrogen Holdings, Inc., Rentech Nitrogen GP, LLC, Rentech Nitrogen Partners, L.P. and Rentech Energy Midwest Corporation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 9, 2011).

10.17		Omnibus Agreement, dated as of November 9, 2011, by and among Rentech, Inc., Rentech Nitrogen GP, LLC and Rentech Nitrogen Partners, L.P. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on November 9, 2011).

10.18†		Amended and Restated Employment Agreement by and between Rentech, Inc. and D. Hunt Ramsbottom, dated December 31, 2008 (incorporated by reference to Exhibit 10.43 to Amendment No. 1 to Annual Report on Form 10-K/A (File No. 001-15795) filed by Rentech, Inc. on January 28, 2009).

10.19†		Employment Agreement by and between Rentech, Inc. and Daniel J. Cohrs, dated October 22, 2008 (incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K for the fiscal year ended September 30, 2008 (File No. 001-15795) filed by Rentech, Inc. on December 15, 2008).

10.20†		Employment Agreement by and between Rentech, Inc. and John H. Diesch, dated November 3, 2009 (incorporated by reference to Exhibit 10.20 to the Form S-1 filed by the Registrant on August 5, 2011).

10.21†		Change in Control Severance Benefits Agreement by and between Rentech Energy Midwest Corporation and John A. Ambrose, dated August 1, 2010 (incorporated by reference to Exhibit 10.21 to the Form S-1 filed by the Registrant on August 5, 2011).

10.22†		Change in Control Severance Benefits Agreement by and between Rentech Energy Midwest Corporation and Wilfred R. Bahl, Jr., dated May 10, 2011 (incorporated by reference to Exhibit 10.22 to the Form S-1 filed by the Registrant on August 5, 2011).

10.23†		Change in Control Severance Benefits Agreement by and between Rentech Energy Midwest Corporation and Marc E. Wallis, dated August 12, 2008 (incorporated by reference to Exhibit 10.23 to the Form S-1 filed by the Registrant on August 5, 2011).

10.24†		Amended and Restated Rentech, Inc. 2006 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on March 29, 2007).

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10.25†		First Amendment to Rentech, Inc. Amended and Restated 2006 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on November 6, 2009).

10.26†		Rentech, Inc. 2009 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on May 22, 2009).

10.27†		First Amendment to Rentech, Inc. 2009 Incentive Award Plan (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 001-15795) filed by Rentech, Inc. on November 6, 2009).

10.28†		Rentech Nitrogen Partners, L.P. 2011 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 8, 2011).

10.29†		Form of Rentech Nitrogen Partners, L.P. 2011 Long-Term Incentive Plan Phantom Unit Agreement (incorporated by reference to Exhibit 10.34 to Form S-1 filed by the Registrant on October 26, 2011).

10.30†		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.30 to the Form S-1 filed by the Registrant on October 28, 2011).

10.31†		Employment Agreement, dated as of October 15, 2011 by and between Rentech Nitrogen GP, LLC and John A. Ambrose (incorporated by reference to Exhibit 10.31 to the Form S-1 filed by the Registrant on October 20, 2011).

10.32†		Employment Agreement, dated as of October 15, 2011 by and between Rentech Nitrogen GP, LLC and Wilfred R. Bahl, Jr. (incorporated by reference to Exhibit 10.32 to the Form S-1 filed by the Registrant on October 20, 2011).

10.33†		Employment Agreement, dated as of October 16, 2011 by and between Rentech Nitrogen GP, LLC and Marc E. Wallis (incorporated by reference to Exhibit 10.33 to Form S-1 filed by the Registrant on October 20, 2011).

10.34		Credit Agreement, dated as of November 10, 2011, among Rentech Nitrogen, LLC, as borrower, Rentech Nitrogen Partners, L.P., as guarantor, General Electric Capital Corporation, as administrative agent, and the other lender parties thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 15, 2011).

10.35		Guaranty and Security Agreement, dated as of November 10, 2011, among Rentech Nitrogen, LLC, as borrower, Rentech Nitrogen Partners, L.P., as guarantor and General Electric Capital Corporation, as administrative agent (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on November 15, 2011).

10.36		Indemnification Agreement dated November 9, 2011, by and between Rentech Nitrogen Partners, L.P. and D. Hunt Ramsbottom (all other Indemnification Agreements, which are substantially identical in all material respects, except as to the parties thereto and the dates of execution, are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K) (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K filed by the Registrant on December 14, 2012).

10.37		Credit Agreement, dated as of December 28, 2011, among Rentech Nitrogen, LLC, as borrower, Rentech Nitrogen Partners, L.P., as guarantor, and Rentech, Inc. as Lender (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on January 4, 2012).

10.38		First Amendment to Credit Agreement, dated as of December 28, 2011 among Rentech Nitrogen, LLC, as borrower, Rentech Nitrogen Partners, L.P., as guarantor and General Electric Capital Corporation, as administrative agent for the Lender and as a Lender (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on January 4, 2012).

10.39		Amended and Restated Credit Agreement, dated as of February 28, 2012 among Rentech Nitrogen, LLC, as borrower, Rentech Nitrogen Partners, L.P., as guarantor, General Electric Capital Corporation, as administrative agent and bookrunner, BMO Harris Bank, N.A., as syndication agent, and the other lender parties thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on March 2, 2012).

21.1*		List of Subsidiaries of Rentech Nitrogen Partners, L.P.

23.1*		Consent of Independent Registered Public Accounting Firm.

132



31.1*		Certification of Registrant’s Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).

31.2*		Certification of Registrant’s Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).

32.1*		Certification of Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350. This certification is being furnished solely to accompany this Annual Report on Form 10-K and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company.

32.2*		Certification of Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350. This certification is being furnished solely to accompany this Annual Report on Form 10-K and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company.

101		The following financial information from the Partnership’s Annual Report on Form 10-K for the three month transition period ended December 31, 2011 formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Partners’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

*	Included with this filing.

†	Management contract or compensatory plan or arrangement.

133

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

R ENTECH N ITROGEN P ARTNERS , L.P.

B Y : R ENTECH N ITROGEN GP, LLC, ITS GENERAL PARTNER

/s/ D. Hunt Ramsbottom

D. Hunt Ramsbottom,

Chief Executive Officer

Date: March 15, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/S/ D. H UNT R AMSBOTTOM D. Hunt Ramsbottom	Chief Executive Officer and Director of Rentech Nitrogen GP, LLC (Principal Executive Officer)	March 15, 2012

/ S / D AN J. C OHRS Dan J. Cohrs	Chief Financial Officer of Rentech Nitrogen GP, LLC (Principal Financial Officer)	March 15, 2012

/ S / J EFFREY R. S PAIN Jeffrey R. Spain	Senior Vice President and Treasurer of Rentech Nitrogen GP, LLC (Principal Accounting Officer)	March 15, 2012

/ S / J OHN H. D IESCH John H. Diesch	President and Director of Rentech Nitrogen GP, LLC	March 15, 2012

/ S / H ALBERT S. W ASHBURN Halbert S. Washburn	Director of Rentech Nitrogen GP, LLC	March 15, 2012

/ S / M ICHAEL S. B URKE Michael S. Burke	Director of Rentech Nitrogen GP, LLC	March 15, 2012

/ S / J AMES F. D IETZ James F. Dietz	Director of Rentech Nitrogen GP, LLC	March 15, 2012

/ S / K EITH B. F ORMAN Keith B. Forman	Director of Rentech Nitrogen GP, LLC	March 15, 2012

/ S / M ICHAEL F. R AY Michael F. Ray	Director of Rentech Nitrogen GP, LLC	March 15, 2012