10-K/A 1 d841053d10ka.htm 10-K/A 10-K/A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-K/A

Amendment No. 1

 

 

(Mark One)

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

For the Fiscal Year Ended December 31, 2013

OR

 

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

For the Transition Period from                      to                     

Commission File No. 001-35334

 

 

RENTECH NITROGEN PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   45-2714747

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

10877 Wilshire Boulevard, Suite 600

Los Angeles, California

  90024
(Address of principal executive offices)   (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  x    No  ¨

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.  ¨

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

 

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 28, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $457.5 million (based upon the closing price of the common units on June 28, 2013, as reported by the New York Stock Exchange).

As of February 28, 2014, the registrant had 38,888,849 common units outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page  
PART II   

ITEM 8. Financial Statements and Supplementary Data

     4   

ITEM 9A. Controls and Procedures

     38   
PART IV   

ITEM 15. Exhibits and Financial Statement Schedules

     39   

Signatures

     44   

 

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EXPLANATORY NOTE

Rentech Nitrogen Partners, L.P. (“the Partnership,” “RNP,” “we,” “us” and “our”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2014 (the “Original 10-K”), to: (i) reissue the Report of Independent Registered Public Accounting Firm to revise the firm’s opinion regarding the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2013; and (ii) revise management’s conclusions regarding the Partnership’s disclosure controls and procedures and internal control over financial reporting as of December 31, 2013. Accordingly, the Partnership hereby amends and replaces in its entirety Items 8 and 9A in the Original 10-K.

As required by Rule 12b-15, our principal executive officer and principal financial officer are providing updated certifications. In addition, we are filing a new consent of our independent registered public accounting firm, PricewaterhouseCoopers LLP. Accordingly, we hereby amend Item 15 in the Original 10-K to reflect the filing of the new certifications and the consent.

Except as indicated above, this Amendment does not purport to reflect any information or events subsequent to the filing date of the Original 10-K. As such, this Amendment speaks only as of the date the Original 10-K was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original 10-K to give effect to any subsequent events. Accordingly, this Amendment should be read in conjunction with the Original 10-K and any documents filed by us with the SEC subsequent to the Original 10-K, including our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014.

 

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PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

RENTECH NITROGEN PARTNERS, L.P.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

     Page  

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

  

Report of Independent Registered Public Accounting Firm

     5   

Consolidated Balance Sheets

     7   

Consolidated Statements of Income

     8   

Consolidated Statements of Comprehensive Income

     9   

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

     10   

Consolidated Statements of Cash Flows

     11   

Notes to Consolidated Financial Statements

     13   

 

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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 accompanying consolidated balance sheets as of December 31, 2013 and 2012 and the related consolidated statements of income, of comprehensive income, of stockholder’s equity (deficit) / partners’ capital and of cash flows for each of the two years in the period ended December 31, 2013, three months ended December 31, 2011 and fiscal year ended September 30, 2011 present fairly, in all material respects, the financial position of Rentech Nitrogen Partners, L.P. and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2013, the three months ended December 31, 2011, and the fiscal year ended September 30, 2011 in conformity with accounting principles generally accepted in the United States of America. Management and we previously concluded that the Partnership maintained effective internal control over financial reporting as of December 31, 2013. However, management has subsequently determined that material weaknesses in internal control over financial reporting existed as of that date related to the Partnership not designing and maintaining effective controls over (i) the review of the cash flow forecasts used in the accounting for goodwill, (ii) the determination of the goodwill impairment charge in accordance with generally accepted accounting principles, and (iii) maintaining documentation supporting management’s review of events and changes in circumstances that indicate it is more likely than not that a goodwill impairment has occurred between annual impairment tests existed as of that date. Accordingly, management’s report has been restated and our present opinion on internal control over financial reporting, as presented herein, is different from that expressed in our previous report. In our opinion, the Partnership did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2013 based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because material weaknesses in internal control over financial reporting related to (i) the review of the cash flow forecasts used in the accounting for goodwill, (ii) the determination of the goodwill impairment charge in accordance with generally accepted accounting principles, and (iii) maintaining documentation supporting management’s review of events and changes in circumstances that indicate it is more likely than not that a goodwill impairment has occurred between annual impairment tests existed as of that date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2013 consolidated financial statements, and our opinion regarding the effectiveness of the Partnership’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. 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 integrated audits. 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.

 

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/s/ PricewaterhouseCoopers LLP

Los Angeles, California

March 17, 2014, except with respect to our opinion on internal control over financial reporting insofar as it relates to the effects of the matter described in the sixth paragraph of Management’s Annual Report on Internal Control Over Financial Reporting, as to which the date is December 29, 2014

 

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RENTECH NITROGEN PARTNERS, L.P.

Consolidated Balance Sheets

(Amounts in thousands, except per share data)

 

     As of December 31,  
     2013      2012  
ASSETS      

Current assets

     

Cash

   $ 34,060       $ 55,799   

Accounts receivable

     7,434         9,705   

Inventories

     31,102         27,140   

Prepaid expenses and other current assets

     4,942         2,228   

Other receivables, net

     2,227         2,626   
  

 

 

    

 

 

 

Total current assets

     79,765         97,498   
  

 

 

    

 

 

 

Property, plant and equipment, net

     234,359         128,340   
  

 

 

    

 

 

 

Construction in progress

     33,531         61,147   
  

 

 

    

 

 

 

Other assets

     

Goodwill

     27,202         56,592   

Intangible assets

     22,298         26,185   

Debt issuance costs

     8,404         6,458   

Other assets

     785         425   
  

 

 

    

 

 

 

Total other assets

     58,689         89,660   
  

 

 

    

 

 

 

Total assets

   $ 406,344       $ 376,645   
  

 

 

    

 

 

 
LIABILITIES AND PARTNERS’ CAPITAL      

Current liabilities

     

Accounts payable

   $ 9,793       $ 15,144   

Payable to general partner

     5,353         4,247   

Accrued liabilities

     18,444         14,271   

Deferred revenue

     20,365         29,660   

Current portion of long term debt

     —          7,750   

Accrued interest

     4,622         142   

Asset retirement obligation

     —          2,776   

Other

     —          290   
  

 

 

    

 

 

 

Total current liabilities

     58,577         74,280   
  

 

 

    

 

 

 

Long-term liabilities

     

Debt

     320,000         185,540   

Asset retirement obligation

     2,822         313   

Earn-out consideration

     —          4,920   

Other

     1,820         2,188   
  

 

 

    

 

 

 

Total long-term liabilities

     324,642         192,961   
  

 

 

    

 

 

 

Total liabilities

     383,219         267,241   
  

 

 

    

 

 

 

Commitments and contingencies (Note 9)

     

Partners’ capital

     

Common unitholders — 38,889 and 38,839 units issued and outstanding at December 31, 2013 and 2012, respectively

     21,816         109,238   

Accumulated other comprehensive income

     1,309         166   

General partner’s interest

     —          —    
  

 

 

    

 

 

 

Total partners’ capital

     23,125         109,404   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 406,344       $ 376,645   
  

 

 

    

 

 

 

See Accompanying Notes to Consolidated Financial Statements.

 

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RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Income

(Amounts in thousands, except per unit data)

 

     For the Calendar Years Ended
December 31,
    For the Three Months Ended
December 31,
    For the Fiscal
Year Ended
September 30,
 
     2013     2012     2011     2011     2010     2011  
                 (unaudited)           (unaudited)        

Revenues

   $ 311,375      $ 261,635      $ 199,909      $ 63,014      $ 42,962      $ 179,857   

Cost of sales

     240,021        129,796        113,911        37,460        26,835        103,286   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     71,354        131,839        85,998        25,554        16,127        76,571   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

            

Selling, general and administrative expense

     17,285        18,376        7,690        3,336        1,431        5,786   

Depreciation and amortization

     4,077        1,390        374        77        112        409   

Agrifos goodwill impairment

     30,029        —         —         —         —         —    

Other

     806        510        16        (507           522   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     52,197        20,276        8,080        2,906        1,543        6,717   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     19,157        111,563        77,918        22,648        14,584        69,854   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net

            

Interest expense

     (14,098     (1,469     (12,788     (1,947     (2,912     (13,752

Loss on debt extinguishment

     (6,001     (2,114     (19,486     (10,263     (4,593     (13,816

Fair value adjustment to earn-out consideration

     4,920        —         —         —         —         —    

Other income (expense), net

     (6     (674     56        17        17        55   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expenses, net

     (15,185     (4,257     (32,218     (12,193     (7,488     (27,513
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     3,972        107,306        45,700        10,455        7,096        42,341   

Income tax (benefit) expense

     (96     303        14,643        —         2,772        17,415   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 4,068      $ 107,003      $ 31,057      $ 10,455      $ 4,324      $ 24,926   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

       $ 11,331      $ 11,331       
      

 

 

   

 

 

     

Net income per common unit allocated to common unitholders subsequent to initial public offering—Basic

   $ 0.10      $ 2.78      $ 0.30      $ 0.30       

Net income per common unit allocated to common unitholders subsequent to initial public offering—Diluted

   $ 0.10      $ 2.78      $ 0.30      $ 0.30       

Weighted-average units used to compute net income per common unit:

            

Basic

     38,850        38,350        38,250        38,250       

Diluted

     38,945        38,352        38,255        38,255       

See Accompanying Notes to Consolidated Financial Statements.

 

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RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Comprehensive Income

(Amounts in thousands)

 

     For the Calendar Years Ended
December 31,
     For the Three Months Ended
December 31,
     For the Fiscal
Year Ended
September 30,
 
     2013      2012      2011      2011      2010      2011  
                   (unaudited)             (unaudited)         

Net income

   $ 4,068       $ 107,003       $ 31,057       $ 10,455       $ 4,324       $ 24,926   

Other comprehensive income:

                 

Pension and postretirement plan adjustments

     1,143         166         —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income

     1,143         166         —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income

   $ 5,211       $ 107,169       $ 31,057       $ 10,455       $ 4,324       $ 24,926   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

See Accompanying Notes to Consolidated Financial Statements.

 

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RENTECH NITROGEN PARTNERS, L.P.

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

(Amounts in thousands)

 

    Common
Stock
    Additional
Paid-in
Capital
    Receivable
from
Parent
Company
    Retained
Earnings
(Accumulated
Deficit)
    Total
Stockholder’s
Equity
    Number of
Common
Units
    Common
Unitholders
    Accumulated
Other
Comprehensive
Income
    General
Partner
    Total
Partners’
Capital
 
    Shares     Income                    

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   

Common units issued for acquisition

    —          —          —          —          —          —          539        20,000        —          —          20,000   

Common units

    —          —          —          —          —          —          50        (736     —          —          (736

Distributions to common unitholders —affiliates

    —          —          —          —          —          —          —          (71,610     —          —          (71,610

Distributions to common unitholders —non-affiliates

    —          —          —          —          —          —          —          (47,205     —          —          (47,205

Unit-based compensation expense

    —          —          —          —          —          —          —          2,827        —          —          2,827   

Net income

    —          —          —          —          —          —          —          107,003        —          —          107,003   

Other comprehensive income

    —          —          —          —          —          —          —          —          166        —          166   

Other

    —          —          —          —          —          —          —          (232     —          —          (232
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2012

    —        $ —        $ —        $ —        $ —        $ —          38,839      $ 109,238      $ 166      $ —        $ 109,404   

Common units

    —          —          —          —          —          —          50        (519     —          —          (519

Distributions to common unitholders —affiliates

    —          —          —          —          —          —          —          (55,102     —          —          (55,102

Distributions to common unitholders —non-affiliates

    —          —          —          —          —          —          —          (37,329     —          —          (37,329

Unit-based compensation expense

    —          —          —          —          —          —          —          1,460        —          —          1,460   

Net income

    —          —          —          —          —          —          —          4,068        —          —          4,068   

Other comprehensive income

    —          —          —          —          —          —          —          —          1,143        —          1,143   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2013

    —        $ —        $ —        $ —        $ —        $ —          38,889      $ 21,816      $ 1,309      $ —        $ 23,125   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Accompanying Notes to Consolidated Financial Statements.

 

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RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Cash Flows

(Amounts in thousands)

 

     For the Calendar Years Ended
December 31,
    For the Three Months Ended
December 31,
    For the Fiscal
Year Ended
September 30,
 
     2013     2012     2011     2010     2011  
                       (unaudited)        

Cash flows from operating activities

          

Net income

   $ 4,068      $ 107,003      $ 10,455      $ 4,324      $ 24,926   

Adjustments to reconcile net income to net cash provided by (used in) operating activities

          

Depreciation and amortization

     17,312        12,460        3,287        2,600        10,021   

Utilization of spare parts

     3,778        2,042        309        380        1,698   

Write-down of inventory

     12,360        —          —          —          —     

Non-cash interest expense

     961        387        357        496        1,632   

Agrifos goodwill impairment

     30,029        —          —          —          —     

Loss on debt extinguishment

     6,001        2,114        10,263        4,593        13,816   

(Gain) loss on interest rate swaps

     (17     929        —          —          —     

Unit-based compensation

     1,460        2,827        —          —          —     

Deferred income taxes

     —          —          —          —          (718

Payment of call premium fee

     —          —          (2,933     —          (8,261

Other

     1,779        (118     (435     8        376   

Changes in operating assets and liabilities:

          

Accounts receivable

     2,271        999        (2,883     (7,034     4,962   

Other receivables

     399        2        194        91        (137

Inventories

     (16,190     8,727        11,164        1,451        (9,218

Other assets

     (767     2,807        (1,409     303        955   

Prepaid expenses and other current assets

     (1,515     (90     161        (482     (1,118

Accounts payable

     (5,289     1,020        (682     266        402   

Deferred revenue

     (9,295     (3,972     (13,750     17,028        19,608   

Due to parent company

     —          —          (18,395     —          20,073   

Accrued interest

     3,780        119        (41     10        18   

Accrued liabilities, accrued payroll and other

     (6,667     (4,710     (1,641     (317     4,633   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     44,458        132,546        (5,979     23,717        83,668   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities

          

Payment for acquisition, net of cash acquired

     (290     (128,596     —          —          —     

Capital expenditures

     (90,288     (57,571     (11,656     (2,212     (17,411

Other items

     38        (658     90        —          25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (90,540     (186,825     (11,566     (2,212     (17,386
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

          

Proceeds from issuance of notes

     320,000        —          —          —          —     

Payment of offering costs

     (972     —          —          —          —     

Proceeds from initial public offering, net of costs

     —          (245     276,007        —          —     

Proceeds from credit facilities and term loan, net of original issue discount

     15,600        222,780        —          50,960        200,960   

Proceeds from bridge loan from parent

     —          5,860        —          —          —     

Payment of bridge loan to parent

     —          (5,860     —          —          —     

Payments and retirement of debt

     (208,890     (30,490     (146,668     (22,987     (120,664

Payment of debt issuance costs

     (8,964     (7,788     (904     (290     (8,747

Payment of bridge loan fee to parent, net

     —          (200     —          —          —     

Payment of dividends

     —          —          (117,426     (50,857     (122,811

Net receipts from parent company

     —          —          —          3,356        1,418   

Distributions to common unitholders – affiliates

     (55,102     (71,610     —          —          —     

See Accompanying Notes to Consolidated Financial Statements.

 

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RENTECH NITROGEN PARTNERS, L.P.

Consolidated Statements of Cash Flows—Continued

(Amounts in thousands)

 

     For the Calendar Years Ended
December 31,
    For the Three Months Ended
December 31,
    For the Fiscal
Year Ended
September 30,
 
     2013     2012     2011     2010     2011  
                       (unaudited)        

Distributions to common unitholders – non-affiliates

     (37,329     (47,205     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     24,343        65,242        11,009        (19,818     (49,844
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash

     (21,739     10,963        (6,536     1,687        16,438   

Cash and cash equivalents, beginning of period

     55,799        44,836        51,372        34,934        34,934   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 34,060      $ 55,799      $ 44,836      $ 36,621      $ 51,372   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

For the years ended December 31, 2013 and 2012, the three months ended December 31, 2011 and 2010 and the fiscal year ended September 30, 2011, the Partnership made certain cash payments as follows:

 

     For the Calendar Years Ended
December 31,
     For the Three Months Ended
December 31,
     For the Fiscal
Year Ended
September 30,
 
     2013      2012      2011      2010      2011  
                          (unaudited)         

Cash payments of interest, net of capitalized interest of $3,243 (Dec 2013), $701 (Dec 2012) and $0 for all other periods

   $ 9,674       $ 964       $ 1,631       $ 2,406       $ 12,102   

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

 

     For the Calendar Years Ended
December 31,
     For the Three Months Ended
December 31,
     For the Fiscal
Year Ended
September 30,
 
     2013      2012      2011      2010      2011  
                          (unaudited)         

Purchase of insurance policies financed with notes payable

   $ —         $ —         $ 679       $ 428       $ 1,537   

Receivable from parent company reclassified as dividend

     —           —           —           —           112,740   

Receivable for sales of property, plant and equipment in other receivables

     —           —           741         —           325   

Purchase of property, plant, equipment and construction in progress in accounts payable and accrued liabilities

     10,509         5,223         2,329         792         9,605   

Current deposits transferred into construction in progress

     —           1,505         —           —           —     

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         —           —     

Units issued for acquisition

     —           20,000         —           —           —     

See Accompanying Notes to Consolidated Financial Statements.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements

Note 1 — Description of Business

Description of Business

Rentech Nitrogen Partners, L.P. (“RNP”, “the Partnership,” “we,” “us” or “our”) owns and operates two fertilizer facilities: our East Dubuque Facility and our Pasadena Facility. Our East Dubuque Facility is located in East Dubuque, Illinois, and has been in operation since 1965. We produce primarily ammonia and urea ammonium nitrate solution (“UAN”) at our East Dubuque Facility, using natural gas as the facility’s primary feedstock. Our Pasadena Facility, which we acquired in November 2012, is located in Pasadena, Texas, and has been in operation producing various products since the 1940s. In 2011, our Pasadena Facility was converted to the production of high-quality granulated synthetic ammonium sulfate, and began selling ammonium sulfate and ammonium thiosulfate as its primary products. We produce ammonium sulfate, ammonium thiosulfate and sulfuric acid at our Pasadena Facility, using ammonia and sulfur as the facility’s primary feedstocks.

In fiscal year 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 represented 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, owned the remaining 60.8% of the Partnership common units outstanding as of the closing of the Offering 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 consisted as of the closing of the Offering of all of the equity interests of REMC, which owned the East Dubuque Facility. At the Offering, REMC was converted into a limited liability company, Rentech Nitrogen, LLC (“RNLLC”).

On November 1, 2012, the Partnership completed its acquisition of 100% of the membership interests of Agrifos LLC (“Agrifos”) from Agrifos Holdings Inc. (the “Seller”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”). Upon the closing of this transaction (the “Agrifos Acquisition”), Agrifos became a wholly-owned subsidiary of the Partnership and its name changed to Rentech Nitrogen Pasadena Holdings, LLC. Rentech Nitrogen Pasadena Holdings, LLC owns all of the member interests in Rentech Nitrogen Pasadena, LLC (“RNPLLC”), formerly known as Agrifos Fertilizer, LLC, which owns and operates the Pasadena Facility. For information on the Agrifos Acquisition refer to Note 3 Agrifos Acquisition.

Change in Fiscal Year End and Basis of Presentation

On February 1, 2012, the Partnership changed its fiscal year end from September 30 to December 31. References to any of the Partnership’s calendar years mean the twelve-month period ended December 31 of that calendar year. References to our fiscal year means the fiscal year ended September 30, 2011. The statement of income for the calendar year ended December 31, 2011 was derived by deducting the statement of income for the three months ended December 31, 2010 from the statement of income for the fiscal year ended September 30, 2011 and then adding the statement of income for the three months ended December 31, 2011. The statements of income for calendar year ended December 31, 2011 and the three months ended December 31, 2010, while not required, are presented for comparison purposes. Financial information in these notes with respect to calendar year 2011 and 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 subsidiaries. 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 following its acquisition 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.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Intercompany loans and advances from REMC to Rentech were recorded in a contra-equity account receivable from parent company. No interest was 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 Rentech human resources, legal, information systems, accounting and finance, investor relations and other Rentech personnel has been reflected in REMC’s statements of income. 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. 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 consolidated financial statements. Total operating expenses allocated to REMC were $2.0 million for the fiscal year ended September 30, 2011. The entries relating to income taxes were determined on a separate return basis.

Subsequent Events

The Partnership has evaluated events occurring between December 31, 2013 and the date of these consolidated financial statements to ensure that such events are properly reflected in these statements.

Use of Estimates

The preparation of consolidated 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 as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

East Dubuque and Pasadena Policy

Revenues are recognized when customers take ownership upon shipment from the East Dubuque Facility, Pasadena Facility, East Dubuque Facility’s leased facility or Pasadena Facility’s distributors’ facilities and (i) assumes risk of loss, (ii) there are no uncertainties regarding customer acceptance, (iii) collection of the related receivable is probable, (iv) persuasive evidence of a sale arrangement exists and (v) 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 by the East Dubuque Facility 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 sales were approximately $3.4 million, $1.1 million and $0.1 million for 2013, 2012 and 2011, respectively.

East Dubuque Contracts

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 East Dubuque Facility, 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 East Dubuque Facility. 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 calendar years ended December 31, 2013 and 2012, the three months ended December 31, 2011 and the fiscal year ended September 30, 2011, the Distribution Agreement accounted for 79%, 83%, 92% and 83%, respectively, of net revenues from product sales for the East Dubuque Facility. Receivables from Agrium accounted for 84% and 73% of the total accounts receivable balance of the East Dubuque Facility as of December 31, 2013 and 2012, respectively. RNP negotiates sales with other customers and these transactions are not subject to the terms of the Distribution Agreement.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Under the Distribution Agreement, the East Dubuque Facility 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 calendar years ended December 31, 2013 and 2012, the three months ended December 31, 2011 and the fiscal year ended September 30, 2011, the effective commission rate associated with sales under the Distribution Agreement was 3.6%, 2.7%, 2.6% and 4.3%, respectively. The commission expense was recorded in cost of sales for all periods.

Pasadena Contracts

We sell substantially all of our Pasadena Facility’s products through marketing and distribution agreements. Pursuant to an exclusive marketing agreement we have entered into with Interoceanic Corporation (“IOC”), IOC has the exclusive right and obligation to market and sell all of our Pasadena Facility’s ammonium sulfate product. Under the marketing agreement, IOC is required to use commercially reasonable efforts to market the product to obtain the most advantageous price. We compensate IOC for transportation and storage costs relating to the ammonium sulfate product it markets through the pricing structure under the marketing agreement. The marketing agreement has a term that ends December 31, 2016, but automatically renews for subsequent one-year periods (unless either party delivers a termination notice to the other party at least 210 days prior to an automatic renewal). The marketing agreement may be terminated prior to its stated term for specified causes. During the calendar year ended December 31, 2013 and the period beginning November 1, 2012 through December 31, 2012, the marketing agreement with IOC accounted for 100% of our Pasadena Facility’s revenues from the sale of ammonium sulfate. In addition, we have an arrangement with IOC that permits us to store 59,500 tons of ammonium sulfate at IOC-controlled terminals, which are located near end customers of our Pasadena Facility’s ammonium sulfate. This arrangement currently is not governed by a written contract. We also have marketing and distribution agreements to sell other products that automatically renew for successive one year periods.

Deferred Revenue

A significant portion of the revenue recognized during any period may be related to product prepayment contracts or products stored at IOC facilities, 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, 2013 and 2012, deferred revenue was approximately $20.4 million and $29.7 million, respectively. At the East Dubuque Facility, we record 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. At the Pasadena Facility, IOC pre-pays a portion of the sales price for shipments received into its storage facilities. The Partnership recognizes revenue related to the product prepayment contracts or products stored at IOC facilities and relieves the liability for deferred revenue when products are shipped (including shipments to end customers from IOC facilities).

Cost of Sales

Cost of sales are comprised of manufacturing costs related to the Partnership’s fertilizer products and processing costs for services. Cost of sales expenses include direct materials (such as natural gas, ammonia, sulfur and sulfur acid), direct labor, indirect labor, employee fringe benefits, depreciation on plant machinery, electricity 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. The Partnership anticipates that it will physically receive the contract quantities and use them in the production of fertilizer. The Partnership believes 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 East Dubuque Facility, are recorded at the point of delivery into the pipeline system.

Accounting for Derivative Instruments

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

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

We elect the normal purchase normal sale exemption for our commodity-based derivative instruments. As such, we do not recognize the unrealized gains or losses related to these derivative instruments in our consolidated financial statements. For interest rate swaps, the Partnership did not use hedge accounting; however, the Partnership reflected the instruments at fair value and any change in value was recorded in other expense, net on the consolidated statement of income. The Partnership terminated the interest rate swaps in calendar year 2013.

Cash

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

Accounts and Other Receivables

Trade receivables are recorded at net realizable value. 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.

At December 31, 2013, the Partnership has recorded an insurance receivable of approximately $1.7 million for losses incurred at a November 2013 fire at the East Dubuque Facility. The receivable is not in dispute, and recovery is probable due to a legally enforceable insurance policy.

Inventories

Inventories consist of raw materials and finished goods. The primary raw material used by the East Dubuque Facility in the production of its nitrogen products is natural gas. The primary raw materials used by the Pasadena Facility in the production of its products are ammonia and sulfur. Raw materials also include certain chemicals used in the manufacturing process. Finished goods include the products stored at each plant that are ready for shipment along with any inventory that may be stored at remote facilities. 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, 2013 and 2012, inventories on the balance sheets included depreciation of approximately $1.2 million and $1.0 million, 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 its net realizable value. If the carrying amount exceeds the estimated net realizable value, the carrying amount is reduced to the estimated net realizable value.

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, except for platinum catalyst, as follows:

 

Type of Asset

   Estimated Useful Life  

Building and building improvements

     20-40 years   

Land improvements

     10-20 years   

Machinery and equipment

     7-10 years   

Furniture, fixtures and office equipment

     5-10 years   

Computer equipment and software

     3-5 years   

Vehicles

     3-5 years   

Ammonia catalyst

     3-10 years   

Platinum catalyst

     Based on units of production   

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Expenditures during turnarounds or at other times for improving, replacing or adding to RNP’s assets are capitalized. Expenditures for the acquisition, construction or development of new assets to maintain RNP’s operating capacity, or to comply with environmental, health, safety or other regulations, are also capitalized. Costs of general maintenance and repairs are expensed.

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 each facility to reduce the length of possible interruptions in plant operations from an infrastructure breakdown at the facility. The spare parts may be held for use for years before the spare parts are used. As a result, they are capitalized as a fixed asset at cost. When spare parts are utilized, the book values of the assets are charged to earnings as a cost of production. 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.

The Partnership has recorded asset retirement obligations (“AROs”) related to future costs associated with (i) the removal of contaminated material at the former phosphorous plant at the Pasadena Facility and handling (ii) disposal of asbestos at the East Dubuque Facility. The fair value of a liability for an ARO is recorded in the period in which it is incurred and the cost of such liability increases the carrying amount of the related long-lived asset by the same amount. The liability is accreted each period through charges to operating expense and the capitalized cost is depreciated over the remaining useful life of the asset. The liability at December 31, 2013 and 2012 was approximately $2.8 million and $3.1 million.

Construction in Progress

We also capitalize costs for improvements to the existing machinery and equipment at our facilities 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.

Acquisition Method of Accounting

The Partnership accounts for business combinations using the acquisition method of accounting, which requires, among other things, that assets acquired, liabilities assumed and earn-out consideration be recognized at their fair values as of the acquisition date. The Partnership has recognized goodwill and intangibles related to its acquisition as described in Note 3 Agrifos Acquisition. The earn-out consideration will be measured at each reporting date with changes in its fair value recognized in the consolidated statements of income.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business acquisition. The Partnership tests goodwill assets for impairment annually, or more often if an event or circumstance indicates that impairment may have occurred. The analysis of the potential impairment of goodwill is a two step process. Step one of the impairment test consists of comparing the fair value of the reporting unit with the aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, step two must be performed to determine the amount, if any, of the goodwill impairment. Step one of the goodwill impairment test involves a high degree of judgment and consists of a comparison of the fair value of a reporting unit with its book value. The fair value of the Pasadena reporting unit is based upon various assumptions and is based on the discounted cash flows that the business can be expected to generate in the future (the “Income Approach”). The Income Approach valuation method requires the Company to make projections of revenue and operating costs over a multi-year period. Additionally, the Partnership made an estimate of a weighted average cost of capital that a market participant would use as a discount rate.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

If the fair value of the reporting unit is less than its carrying value, step two of the impairment test is performed. Step two of the goodwill impairment test consists of comparing the implied fair value of the reporting unit’s goodwill against the carrying value of the goodwill. Determining the implied fair value of goodwill requires the valuation of a reporting unit’s identifiable tangible and intangible assets and liabilities as if the reporting unit had been acquired in a business combination on the testing date. The valuation of assets and liabilities in step two is performed only for purposes of assessing goodwill for impairment. See Note 7 Goodwill.

Intangible Assets

Intangible assets arose in conjunction with the Agrifos Acquisition (See Note 3 Agrifos Acquisition) and consist of technology to produce ammonium sulfate and the Pasadena Facility’s marketing agreement with IOC.

Intangible assets consist of the following at December 31, 2013 and 2012 (amounts in thousands):

 

     2013     2012     Average Life  

Technologies to produce fertilizers

   $ 23,680      $ 23,680        20   

Fertilizer marketing agreements

     3,088        3,088        1.5   
  

 

 

   

 

 

   

Intangibles, gross

   $ 26,768      $ 26,768     

Less: accumulated amortization

     (4,470     (583  
  

 

 

   

 

 

   

Intangibles, net

   $ 22,298      $ 26,185     
  

 

 

   

 

 

   

The amortization of the assets will result in amortization expense of approximately $1.2 million for each of the next five years.

Income Taxes

We are not a taxable entity for federal income tax purposes. As such, we do not directly pay federal income tax. Our taxable income or loss, which may vary substantially from the net income or net loss we report in our consolidated statement of income, is includable in the federal income tax returns of each partner. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined as we do not have access to information about each partner’s tax attributes in us.

Net Income Per Common Unit

The Partnership’s net income is allocated wholly to the common unitholders since the General Partner has a non-economic interest. The net income per common unit for the three months and year ended December 31, 2011 on the Consolidated Statement of Income 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.

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

Comprehensive Income

Comprehensive income includes all changes in partners’ capital during the period from non-owner sources. To date, accumulated other comprehensive income is comprised of adjustments to the defined benefit pension plans and the postretirement benefit plan.

Quarterly Distributions of Available Cash

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 be calculated as the cash it generates during the quarter, less cash needed for maintenance capital expenditures not funded by capital proceeds, debt service and other contractual

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

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, its subsidiaries and the General Partner are obligated to reimburse Rentech for (i) all costs, excluding share-based compensation, incurred by Rentech or its affiliates in connection with the employment of its employees who are seconded to the Partnership and who provide the Partnership services under the agreement on a full-time basis; (ii) a prorated share of costs, excluding share-based compensation, incurred by Rentech or its affiliates in connection with the employment of its employees, excluding seconded personnel, who provide the Partnership services under the agreement on a part-time basis, with such prorated share determined by Rentech on a commercially reasonable basis, based on the estimated percent of total working time that such personnel are engaged in performing services for the Partnership; (iii) a prorated share of certain administrative costs, in accordance with the agreement, including office costs, services by outside vendors, other general and administrative costs; and (iv) any taxes (other than income taxes, gross receipt taxes and similar taxes) incurred by Rentech or its affiliates for the services provided under the agreement. During the calendar years ended December 31, 2013 and 2012, Rentech, in accordance with the services agreement, billed the Partnership approximately $18.6 million and $14.1 million, respectively.

Recent Accounting Pronouncements

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

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

Note 3 — Agrifos Acquisition

On November 1, 2012, the Company acquired all of the membership interest of Agrifos. The purchase price for Agrifos and its subsidiaries consisted of an initial purchase price of $136.3 million in cash, less working capital adjustments, and $20.0 million in common units representing limited partnership interests in the Partnership (the “Common Units”), which reduced Rentech’s ownership interest in the Partnership at the time from 60.8% to 59.9%, as well as potential earn-out consideration of up to $50.0 million to be paid in Common Units or cash at the Partnership’s option based on the amount by which the two-year Adjusted EBITDA, as defined in the Purchase Agreement, of the Pasadena Facility exceeds certain thresholds. Among other terms, the Seller is required to indemnify us for a period of six years after the closing for certain environmental matters relating to the Pasadena Facility, which indemnification obligations are subject to important limitations including a deductible and an overall cap. We deposited with an escrow agent in several escrow accounts a portion of the initial consideration consisting of an aggregate of $7.25 million in cash, and 323,276 Common Units, representing a value of $12.0 million, which amounts may be used to satisfy certain indemnity claims upon the occurrence of certain events. Any earn-out consideration would be paid after April 30, 2015 and the completion of the relevant calculations in either common units or cash at our option.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

This business combination has been accounted for using the acquisition method of accounting, which requires, among other things, that most assets acquired, liabilities assumed and earn-out consideration be recognized at their fair values as of the acquisition date.

The purchase price consisted of the following (amounts in thousands):

 

Cash (through borrowings under the Second 2012 Credit Agreement) less working capital adjustments

   $ 136,308   

Fair market value of 538,793 Common Units issued

     20,000   

Estimate of potential earn-out consideration(1)

     4,920   
  

 

 

 

Total purchase price

   $ 161,228   
  

 

 

 

 

(1) The amount of earn-out consideration reflected in the table above reflects the Partnership’s estimate, as of November 1, 2012, of the amount of the earn-out consideration it will be required to pay pursuant to the Purchase Agreement, as defined in Note 4 Fair Value. The earn-out consideration will be measured at each reporting date with changes in its fair value recognized in the consolidated statements of operations. As of December 31, 2013, the fair value of the potential earn-out consideration was $0.

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

 

Cash

   $ 2,622   

Accounts receivable

     3,204   

Inventories

     30,373   

Prepaid expenses and other current assets

     566   

Property, plant and equipment

     68,688   

Construction in progress

     7,011   

Intangible assets (Technology—$23,680 and Marketing Agreement—$3,088)

     26,768   

Goodwill

     57,231   

Other assets

     73   

Accounts payable

     (10,638

Accrued liabilities

     (6,640

Customer deposits

     (13,301

Asset retirement obligation

     (2,776

Other long-term liabilities

     (1,953
  

 

 

 

Total purchase price

   $ 161,228   
  

 

 

 

During the calendar year ended December 31, 2013, the Partnership and the Seller finalized the working capital adjustments which resulted in an increase in the preliminary purchase price of approximately $0.3 million. The working capital adjustments receivable was recorded separately from the purchase price allocation shown above. The finalization and recording of the cash receipt resulted in cash increasing by approximately $2.2 million and other receivables decreasing by approximately $2.5 million. During the calendar year ended December 31, 2013, the Partnership recognized adjustments to the preliminary purchase price allocation with an increase in fair value to goodwill of approximately $0.6 million and accrued liabilities of approximately $0.3 million.

The operations of Agrifos are included in the consolidated statement of income effective November 1, 2012. During the calendar year ended December 31, 2012, the Partnership recorded revenue and net loss related to Agrifos of approximately $37.4 million and $2.6 million, respectively. Acquisition related costs for this acquisition totaled approximately $4.1 million for the calendar year ended December 31, 2012 and have been included in the consolidated statements of income within selling, general and administrative expense.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Pro Forma Information

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

 

     For the Calendar Year Ended December 31, 2012  
     As Reported      Pro Forma
Adjustments
    Pro Forma  
     (in thousands)  

Revenues

   $ 261,635       $ 126,484      $ 388,119   

Net income

   $ 107,003       $ (1,497   $ 105,506   

Net income per common unit

   $ 2.78       $ (0.07   $ 2.71   

Note 4 — Fair Value

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

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

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

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

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

Fair values of cash, deposits, other current assets, accounts payable, accrued liabilities and other current liabilities are assumed to approximate carrying value since they are short term and can be settled on demand.

The following table presents the financial instruments that require fair value disclosure as of December 31, 2013.

 

     Fair Value      Carrying Value  
            (in thousands)         
     Level 1      Level 2      Level 3         

Liabilities

           

Notes

   $ 318,400       $ —        $ —        $ 320,000   

 

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

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

 

     Fair Value      Carrying Value  
            (in thousands)         
     Level 1      Level 2      Level 3         

Liabilities

           

Credit facilities and term loan

   $ —        $ 193,290       $ —        $ 193,290   

Interest rate swaps

     —          929         —          929   

Earn-out consideration

     —          —          4,920         4,920   

Notes

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

Credit Facilities and Term Loan

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

Interest Rate Swaps

In 2012, RNLLC entered into two forward starting interest rate swaps in notional amounts which covered a portion of its outstanding borrowings. The interest rate swaps were deemed to be Level 2 financial instruments because the measurements were based on observable market data. The Partnership used a standard swap contract valuation method to value its interest rate derivatives, and the inputs it used for present value discounting included forward one-month and three-month LIBOR rates, risk-free interest rates and an estimate of credit risk. The change in fair value was recorded in other expense, net on the consolidated statement of income. The realized loss represents the cash payments required under the interest rate swaps.

Net gain (loss) on interest rate swaps:

 

     For the Calendar Years Ended
December 31,
 
     2013     2012  
     (in thousands)  

Realized loss

   $ (24   $ (22

Unrealized gain (loss)

     17        (929
  

 

 

   

 

 

 

Total net loss on interest rate swaps

   $ (7   $ (951
  

 

 

   

 

 

 

During the calendar year ended December 31, 2013, the Partnership paid approximately $0.9 million to terminate the interest rate swaps as described above.

Earn-out Consideration

The earn-out consideration relates to potential additional consideration the Partnership may be required to pay under the Purchase Agreement relating to the Agrifos Acquisition. The earn-out consideration is deemed to be a Level 3 financial instrument because the measurement is based on unobservable inputs. The fair value of earn-out consideration was determined based on the Partnership’s analysis of various scenarios involving the achievement of certain levels of Adjusted EBITDA, as defined in the Purchase Agreement, over a two year period. The scenarios, which included a weighted probability factor, involved assumptions relating to the market prices of the Partnership’s products and feedstocks, as well as product profitability and production. The earn-out consideration will be measured at each reporting date with changes in its fair value recognized in the consolidated statements of income. For the calendar year ended December 31, 2013, the fair value of the liability decreased by approximately $4.9 million. At December 31, 2013, the fair value of the potential earn-out consideration relating to the Agrifos Acquisition was $0. The decrease in fair value was a result of lower than expected profitability in 2013 due primarily to unfavorable weather and increased Chinese exports, as well as a reduced outlook for longer-term profitability due to reduced levels of nitrogen fertilizer prices. Due to an unusually wet spring, there was a shortened planting season which resulted in lower ammonium sulfate revenues during the calendar year ended December 31, 2013. In addition, significant volumes of urea were exported from China and this supply suppressed global urea and other nitrogen fertilizer prices.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

The levels within the fair value hierarchy at which the Partnership’s financial instruments have been evaluated have not changed for any of the Partnership’s financial instruments during the years ended December 31, 2013 and 2012.

Note 5 — Inventories

Inventories consisted of the following:

 

     As of December 31,  
     2013      2012  
     (in thousands)  

Finished goods

   $ 26,690       $ 21,756   

Raw materials

     4,193         5,269   

Other

     219         115   
  

 

 

    

 

 

 

Total inventory

   $ 31,102       $ 27,140   
  

 

 

    

 

 

 

During the year ended December 31, 2013, the Partnership wrote down the value of the Pasadena Facility’s ammonium sulfate, sulfur and sulfuric acid inventory by $12.4 million to market value. This expense is reflected in cost of goods sold.

Note 6 — Property, Plant and Equipment

Property, plant and equipment consisted of the following:

 

     As of December 31,  
     2013     2012  
     (in thousands)  

Land and land improvements

   $ 22,540      $ 22,386   

Buildings and building improvements

     27,307        22,149   

Machinery and equipment and catalysts

     246,963        134,979   

Furniture, fixtures and office equipment

     258        232   

Computer equipment and computer software

     3,759        2,675   

Vehicles

     186        186   

Other

     210        210   
  

 

 

   

 

 

 
     301,223        182,817   

Less: accumulated depreciation

     (66,864     (54,477
  

 

 

   

 

 

 

Total property, plant and equipment, net

   $ 234,359      $ 128,340   
  

 

 

   

 

 

 

The construction in progress balance at December 31, 2013 and 2012 of approximately $33.5 million and $61.1 million, which includes $0.7 million and $0.9 million, respectively, of capitalized interest costs, represents primarily the costs associated with the ammonia production and storage capacity expansion project.

Note 7 — Goodwill

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

 

Balance at December 31, 2011

   $ —    

Agrifos Acquisition

     56,592   
  

 

 

 

Balance at December 31, 2012 – Pasadena

   $ 56,592   

Increase attributable to Pasadena

     639   

Goodwill impairment – Pasadena

     (30,029
  

 

 

 

Balance at December 31, 2013 – Pasadena

   $ 27,202   
  

 

 

 

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

The goodwill resulting from the Agrifos Acquisition is deductible for tax purposes.

The inventory impairment (see Note 5 – Inventories), negative gross margin and EBITDA in the calendar year ended December 31, 2013 and revised cash flow projections developed during the calendar year ended December 31, 2013 indicated that an impairment of the goodwill related to the Pasadena Facility was probable.

Ammonium sulfate is the primary product of the Pasadena Facility. Results for the calendar year ended December 31, 2013 and our projections of future cash flow from the production and sale of this product are worse than the results originally projected in late 2012, when the Partnership acquired Agrifos. The expected results and cash flows as of 2012 were utilized to allocate the purchase price of the Agrifos Acquisition, as described in Note 3 – Agrifos Acquisition. The primary cause of the reduction in the estimated fair value of the Pasadena reporting unit is the decline in the cash flow expected to be generated from the sale of ammonium sulfate, compared to the expectations at the time of the acquisition. A major cause of the lower expected cash flows is a decline in the level of prices, and expected prices, for nitrogen fertilizer caused by, among other things, lower corn prices, poor weather conditions for fertilizer application throughout the United States in 2013 and increased supply of urea from China.

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

Based upon its analysis of the value of the Pasadena reporting unit using the Income Approach, the Partnership recorded an estimated impairment to goodwill of $30.0 million during the quarter ended September 30, 2013. During the fourth quarter the Partnership performed a “step 2” analysis of goodwill and determined no adjustment to the initial goodwill impairment charge was necessary. There are significant assumptions involved in determining a goodwill impairment charge, which includes discount rates, terminal growth rates, future prices of end products and raw materials, terminal values and production volumes. The various valuation methods used (income approach, replacement cost, market approach) are also weighted in determining fair market value. Changes to any of these assumptions could increase or decrease the fair value of the Pasadena reporting unit. At December 31, 2013 the fair value of the Pasadena reporting unit is essentially equal to its carrying value and any adverse change to the critical assumptions used to measure discounted cash flows could result in a diminution in fair value that may result in additional goodwill impairment charges. If gross margins on sales of products were to decline 5 percent from our expectations, an impairment charge of approximately $15.0 million would be required at December 31, 2013. If the discount rate were to increase by 100 basis points from our expectations, an impairment charge of approximately $16.5 million would be required at December 31, 2013.

Note 8 — Debt

The Partnership’s debt obligations at December 31, 2013 consist of $320.0 million of Notes, as defined below. The Partnership’s debt obligations at December 31, 2012 consisted of approximately $193.3 million in outstanding advances under its Second 2012 Credit Agreement, as defined below. Debt premium, discount and issuance expenses incurred in connection with financing are deferred and amortized on a straight line basis.

First and Second 2012 Credit Agreements

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

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

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

The Second 2012 Credit Agreement had a maturity date of October 31, 2017. Borrowings under the Second 2012 Credit Agreement bore 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 was two business days prior to the first day of such interest period. The applicable margin for borrowings under the Second 2012 Credit Agreement was 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. Additionally, RNLLC were required to pay a fee to the lenders under the CapEx 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 was required to pay customary letter of credit fees on issued letters of credit.

Notes Offering

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

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

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

2013 Credit Agreement

On April 12, 2013, the Partnership and Finance Corporation (collectively the “Borrowers”) entered into a new credit agreement (the “2013 Credit Agreement”). The 2013 Credit Agreement consists of a $35.0 million senior secured revolving credit facility (the “Credit Facility”). The Borrowers may use the 2013 Credit Agreement to fund their working capital needs, to fund capital expenditures, to issue letters of credit and for other general partnership purposes. The 2013 Credit Agreement also includes a $10.0 million letter of credit sublimit. The commitment under the Credit Facility may be increased by up to $15.0 million upon the Borrowers’ request at the discretion of the lenders and subject to certain customary requirements. As of December 31, 2013, borrowings under the Credit Facility were strictly limited if the Partnership exceeded a Secured Leverage Ratio of 3.75 to 1.00. As of December 31, 2013, the Partnership’s Secured Leverage Ratio was 4.71 to 1.00, and on such date there were no outstanding advances under the Credit Facility.

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

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

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

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

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

As of December 31, 2013, the Partnership was in compliance with all covenants under the Notes and the 2013 Credit Agreement.

Debt consists of the following:

 

     As of December 31,  
     2013      2012  
     (in thousands)  

Debt

   $ 320,000       $ 193,290   

Less: current portion

     —          7,750   
  

 

 

    

 

 

 

Debt, long term portion

   $ 320,000       $ 185,540   
  

 

 

    

 

 

 

Future maturities of the Notes and the 2013 Credit Agreement are as follows (in thousands):

 

For the Calendar Years Ending December 31,

      

2014

   $ —    

2015

     —    

2016

     —    

2017

     —    

2018

     —    

Thereafter

     320,000   
  

 

 

 
   $ 320,000   
  

 

 

 

The payoff of the Second 2012 Credit Agreement resulted in a loss on debt extinguishment, for the calendar year ended December 31, 2013, of approximately $6.0 million. The entry into the Second 2012 Credit Agreement and the payoff of the First 2012 Credit Agreement resulted in a loss on debt extinguishment of approximately $2.1 million for the calendar year ended December 31, 2012. The entry into a credit agreement and the payoff of the previous credit agreements resulted in a loss on debt extinguishment, for the three months ended December 31, 2011, of approximately $10.3 million. The entry into and payoff of various credit agreements, resulted in a loss on debt extinguishment for the fiscal year ended September 30, 2011 of approximately $13.8 million.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Note 9 — Commitments and Contingencies

Natural Gas Forward Purchase Contracts

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

     As of December 31,  
     2013      2012  
     (in thousands, except weighted average rate)  

MMBtus under fixed-price contracts

     2,071         1,955   

MMBtus under index-price contracts

     81         143   
  

 

 

    

 

 

 

Total MMBtus under contracts

     2,152         2,098   
  

 

 

    

 

 

 

Commitments to purchase natural gas

   $ 8,571       $ 7,531   

Weighted average rate per MMBtu based on the fixed rates and the indexes applicable to each contract

   $ 3.98       $ 3.59   

Subsequent to December 31, 2013 through February 28, 2014, the Partnership entered into additional fixed-quantity forward purchase contracts at fixed and indexed prices for various delivery dates through March 31, 2014. The total MMBtus associated with these additional forward purchase contracts are approximately 0.5 million and the total amount of the purchase commitments are approximately $4.5 million, resulting in a weighted average rate per MMBtu of approximately $9.27 in these new commitments. The Partnership is required to make additional prepayments under these forward purchase contracts in the event that market prices fall below the purchase prices in the contracts.

Operating Leases

The Partnership has various operating leases of real and personal property which expire through March 2018. Total lease expense for the calendar years ended December 31, 2013 and 2012, the three months ended December 31, 2011 and the fiscal year ended September 30, 2011 was $1.0 million, $1.1 million, $0.3 million and $0.8 million, respectively.

Future minimum lease payments as of December 31, 2013 are as follows (in thousands):

 

For the Calendar Years Ending December 31,

      

2014

   $ 1,047   

2015

     1,007   

2016

     501   

2017

     2   

2018

     1   
  

 

 

 
   $ 2,558   
  

 

 

 

Contractual Obligations

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

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Litigation

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

Regulation

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

The Partnership entered into a settlement agreement with the Illinois Environmental Protection Agency in August 2013 requiring it to connect a device at the East Dubuque Facility to an ammonia safety flare by December 1, 2015. The Partnership estimates the cost of the project required by the settlement agreement as being approximately $300,000.

Note 10 — Partners’ Capital and Partnership Distributions

The Partnership’s policy is to distribute all of the cash available for distribution which it generates each quarter. Cash available for distribution for each quarter will be determined by the board of directors (the “Board”) of the General Partner following the end of each quarter. The Partnership expects that cash available for distribution for each quarter will generally be calculated as the cash it generates during the quarter, less cash needed for maintenance capital expenditures not funded by capital proceeds, debt service and other contractual obligations, and reserves for future operating or capital needs that the Board of the General Partner deems necessary or appropriate. The Partnership does not intend to maintain excess distribution coverage for the purpose of maintaining stability or growth in its quarterly distribution or otherwise to reserve cash for distributions, nor does it intend to incur debt to pay quarterly distributions. The Partnership has no legal obligation to pay distributions. Distributions are not required by the Partnership’s partnership agreement and the Partnership’s distribution policy is subject to change at any time at the discretion of the Board of the General Partner. Any distributions made by the Partnership to its unitholders will be done on a pro rata basis. At December 31, 2013 and 2012, the Partnership had outstanding 193,632 and 154,938 unit-settled phantom units, respectively. Each phantom unit entitles the holder to payments in amounts equal to the amounts of any distributions made to an outstanding unit by the Partnership. Payments to outstanding phantom units are not subtracted from operating cash flow in the calculation of cash available for distribution, but the payments made to phantom unitholders are recorded as distributions for accounting purposes. For information on the announcement of cash distributions refer to Note 17 — Subsequent Events.

The following is a summary of cash distributions paid to common unitholders and holders of phantom units during the calendar years ended December 31, 2013 and 2012 for the respective quarters to which the distributions relate:

 

     December 31,
2012
     March 31,
2013
     June 30,
2013
     September 30,
2013
     Total Cash
Distributions
Paid in 2013
 
     (in thousands, except for per unit amounts)  

Distribution to common unitholders — affiliates

   $ 17,437       $ 11,626       $ 19,762       $ 6,277       $ 55,102   

Distribution to common unitholders — non-affiliates

     11,809         7,873         13,393         4,254         37,329   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total amount paid

   $ 29,246       $ 19,499       $ 33,155       $ 10,531       $ 92,431   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Per common unit

   $ 0.75       $ 0.50       $ 0.85       $ 0.27       $ 2.37   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Common and phantom units outstanding

     38,996         38,995         39,004         39,003      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

     December 31,
2011
     March 31,
2012
     June 30,
2012
     September 30,
2012
     Total Cash
Distributions
Paid in 2012
 
     (in thousands, except for per unit amounts)  

Distribution to common unitholders — affiliates

   $ 12,322       $ 12,323       $ 27,203       $ 19,762       $ 71,610   

Distribution to common unitholders — non-affiliates

     8,041         8,041         17,763         13,360         47,205   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total amount paid

   $ 20,363       $ 20,364       $ 44,966       $ 33,122       $ 118,815   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Per common unit

   $ 0.53       $ 0.53       $ 1.17       $ 0.85       $ 3.08   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Common and phantom units outstanding

     38,422         38,422         38,432         38,970      
  

 

 

    

 

 

    

 

 

    

 

 

    

Shelf Registration Statement

On April 4, 2013, the Partnership and Finance Corporation filed a shelf registration statement with the SEC, which allowed the Partnership or any selling securityholder to offer and sell up to $500.0 million in aggregate initial offering price of common units or debt securities. In March 2014, the partnership post-effectively amended the shelf registration statement. Once the post-effective amendment has been declared effective, the shelf registration statement will allow for the offer and sell of up to $500 million in the aggregate of securities comprised of (i) $265.5 million of common units and debt securities to be offered and sold by the Partnership in primary offerings and (ii) up to 12.5 million common units to be offered and sold by RNHI in secondary offerings. The debt securities may be issued by the Partnership and co-issued by Finance Corporation, and may be guaranteed by one or more of the Partnership’s subsidiaries. Each subsidiary guarantor of the debt securities would be exempt from reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) pursuant to Rule 12h-5 under the Exchange Act. The Partnership has no independent assets or operations, the guarantees of its subsidiary guarantors are joint and several and full and unconditional, subject to customary automatic release provisions. The Partnership’s subsidiaries other than its subsidiary guarantors are minor and there are no significant restrictions on the Partnership’s ability or the ability of any subsidiary guarantor to obtain funds from its subsidiaries.

Note 11 — Long-Term Incentive Equity Awards and Other Equity Based Compensation

On November 2, 2011, the Board 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 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.

The accounting guidance requires all share-based payments, including grants of stock options, to be recognized in the statement of income, based on their fair values. Some grants under the 2011 LTIP are marked-to market at each reporting date. 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. Equity based compensation expense that the Partnership records is included in selling, general and administrative expense.

During the calendar years ended December 31, 2013 and 2012 and the three months ended December 31, 2011, charges associated with all equity-based grants issued by RNP under the 2011 LTIP were recorded as follows:

 

     For the Calendar
Year Ended
December 31,
     For the Three
Months
Ended
December 31,
 
     2013      2012      2011  
     (in thousands)  

Unit-based compensation expense

   $ 1,460       $ 2,827       $ 63   
  

 

 

    

 

 

    

 

 

 

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Phantom unit transactions during the calendar years ended December 31, 2013 and 2012 and the three months ended December 31, 2011 are summarized as follows:

     Number
of
Shares
    Weighted
Average
Grant Date Fair
Value
    Aggregate
Intrinsic
Value
 

Granted

     163,388      $ 18.40     
  

 

 

     

Outstanding at December 31, 2011

     163,388        18.40     

Granted

     54,059        34.86     

Vested and Settled in Shares

     (42,350     (15.68  

Vested and Surrendered for Withholding Taxes Payable

     (20,040     (18.40  

Canceled / Expired

     (119     (18.40  
  

 

 

     

Outstanding at December 31, 2012

     154,938        23.78     

Granted

     116,508        18.71     

Vested and Settled in Shares

     (49,409     (23.42  

Vested and Surrendered for Withholding Taxes Payable

     (27,127     (21.75  

Canceled / Expired

     (1,278     (35.14  
  

 

 

     

Outstanding at December 31, 2013

     193,632      $ 20.97      $ 3,407,929   
  

 

 

     

During the calendar year ended December 31, 2013, the Partnership issued 116,508 unit-settled phantom units (which entitle the holder to distribution rights during the vesting period) covering the Partnership’s common units. 108,218 of the phantom units are time-vested awards that vest in three equal annual installments. 2,780 of the phantom units were time-vested awards issued to the directors that vested on the one-year anniversary of the Offering. The phantom unit grants resulted in unit-based compensation expense of $1.2 million for the calendar year ended December 31, 2013.

As of December 31, 2013, there was $3.0 million 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 2.2 years.

During the calendar year ended December 31, 2013, the Partnership issued a total of 5,510 common units which were fully vested at date of grant. The common units were issued to the directors and resulted in unit-based compensation expense of $0.3 million.

Rentech Awards

During the year ended December 31, 2013 and 2012, the three months ended December 31, 2011 and the fiscal year ended September 30, 2011, charges associated with all Rentech equity-based grants issued to RNP employees were recorded as follows:

 

     For the
Calendar
Years Ended
December 31,
     For the Three
Months
Ended
December 31,
    

For the Fiscal

Year Ended
September 30,

 
     2013      2012      2011      2011  
     (in thousands)  

Stock based compensation expense

   $ —        $ —        $ 18       $ 173   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 12 — Employee Benefit Plans

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 on the first of the month following 60 days and share in the employer matching contribution. During 2013, Rentech matched 100% of the first 3% and 50% of the next 3% 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 at the East Dubuque Facility hired before

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

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 $0.8 million, $0.5 million, $0.1 million and $0.5 million to the plans for the calendar years ended December 31, 2013 and 2012, the three months ended December 31, 2011 and the fiscal year ended September 30, 2011, respectively. Additionally, the Partnership has a savings and profit sharing plan for the benefit of qualified employees at the Pasadena Facility. The plan cost for the calendar year ended December 31, 2013 and for the period November 1, 2012 through December 31, 2012 was approximately $0.1 million and $9,000 respectively.

Pension Plans

Reporting and disclosures related to pension and other postretirement benefit plans require that companies include an additional asset or liability on the balance sheet to reflect the funded status of retirement and other postretirement benefit plans, and a corresponding after-tax adjustment to accumulated other comprehensive income.

The Partnership has two noncontributory pension plans (the “Pension Plans”), which cover either hourly paid employees represented by collective bargaining agreements in effect at its Pasadena Facility or hourly employees at its Pasadena Facility who have 1,000 hours of service during a year of employment.

Postretirement Benefits

The Partnership has a postretirement benefit plan (the “Postretirement Plan”) for certain employees at its Pasadena Facility. The plan provides a fixed dollar amount to supplement payment of eligible medical expenses. The amount of the supplement under the plan is based on years of service and the type of coverage elected (single or family members and spouses). Participants are eligible for supplements at retirement after age 55 with at least 20 years of service to be paid until the attainment of age 65 or another disqualifying event, if earlier.

The Pension Plans and the Postretirement Plan were acquired as part of the Agrifos Acquisition. The following tables summarize the projected benefit obligation, the assets and the funded status of the Pension Plans and the Postretirement Plan at December 31, 2013 and 2012:

 

     As of December 31, 2013     As of December 31, 2012  
     Pension     Postretirement     Pension     Postretirement  
     (in thousands)  

Projected benefit obligation

        

Benefit obligation at beginning of year

   $ 4,841      $ 1,136      $ 5,213      $ 863   

Service cost

     137        43        29        4   

Interest cost

     194        43        31        5   

Amendment

     —         —         —         332   

Actuarial (gain) loss

     (528     (233     (412     (54

Actual benefit paid

     (139     (136     (20     (14
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit obligation at end of year

     4,505        853        4,841        1,136   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of plan assets

        

Fair value of plan assets at beginning of year

     4,333        —         4,279        —    

Actual return on plan assets

     624        —         74        —    

Employer contributions

     109        136        —         14   

Actual benefit paid

     (139     (136     (20     (14
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of plan assets at end of year

     4,927        —         4,333        —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Funded status at end of year

     422        (853   $ (508   $ (1,136
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts recognized in the consolidated balance sheet

        

Noncurrent assets

   $ 422      $ —       $ —       $ —    

Current liabilities

     —         (86     —         (95

Noncurrent liabilities

     —         (767     (508     (1,041
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 422      $ (853   $ (508   $ (1,136
  

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2013 and 2012, the accumulated benefit obligation equaled the projected benefit obligation.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income are as follows for the calendar year ended December 31, 2013 and for two-month period ended December 31, 2012:

 

     For the Calendar Year Ended
December 31, 2013
    For the Two-Month Period Ended
December 31, 2012
 
     Pension     Postretirement     Pension     Postretirement  
     (in thousands)  

Net Periodic Benefit Cost

        

Service cost

   $ 137      $ 43      $ 29      $ 4   

Interest cost

     194        43        31        5   

Expected return on plan assets

     (260     —          (42     —     

Amortization of prior service cost

     —          22        —          —     

Amortization of net gain

     (5     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension costs

   $ 66      $ 108      $ 18      $ 9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other changes in plan assets and benefit obligations recognized in other comprehensive income

        

Net actuarial gain

   $ (893   $ (233   $ (444   $ (54

Recognized actuarial gain

     5        —          —          —     

Prior service cost

     —          —          —          332   

Recognized prior service cost

     —          (22     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recognized in other comprehensive (income) loss

   $ (888   $ (255   $ (444   $ 278   
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated other comprehensive income (loss) at December 31, 2013 and 2012 consists of the following amounts that have not yet been recognized in net periodic benefit cost:

 

     As of December 31, 2013     As of December 31, 2012  
     Pension     Postretirement     Pension     Postretirement  
     (in thousands)  

Net (gain) loss

   $ (1,332   $ (287   $ (444   $ (54

Prior service costs

     —          310        —          332   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (1,332   $ 23      $ (444   $ 278   
  

 

 

   

 

 

   

 

 

   

 

 

 

The expected portion of the accumulated other comprehensive (income) loss expected to be recognized as a component of net periodic benefit cost in 2014 is approximately $(56,000) and $6,000 for the Pension Plans and Postretirement Plan, respectively.

Weighted average assumptions used to determine benefit obligations:

 

     As of December 31, 2013     As of December 31, 2012  
     Pension     Postretirement     Pension     Postretirement  

Discount rate

     4.8     4.7     4.1     4.0

Weighted average assumptions used to determine net pension cost:

 

     For The Year Ended
December 31, 2013
    For The Year Ended
December 31, 2012
 
     Pension     Postretirement     Pension     Postretirement  

Discount rate

     4.1     4.0     3.6     3.6

Expected rate of return on assets

     6.0     N/A        6.0     N/A   

 

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

     Postretirement
As of December 31,
 
     2013     2012  

Health care cost trend: initial

     7.25     7.50

Health care cost trend: ultimate

     5.00     5.00

Year ultimate reached

     2023        2023   

As the Postretirement Plan provides a fixed dollar amount to participants, increasing or decreasing the health care cost trend rate by 1% would not have a material impact on the December 31, 2013 and 2012 obligation.

 

     As of December 31, 2013     As of December 31, 2012  
     Target
Allocation
    Percentage of
Pension Plan
Assets 2013
    Target
Allocation
    Percentage of
Pension Plan
Assets 2012
 

Asset Category

        

Equity securities

     50     52     50     51

Debt securities

     50     48     50     49

The pension plan assets, which are deemed to be Level 1, measured at fair value consist of the following at December 31, 2013 and 2012 (in thousands):

 

     As of December 31,  
     2013      2012  

Mutual funds — equity

   $ 2,560       $ 2,193   

Mutual funds — fixed income

     2,356         2,134   

Cash

     11         6   
  

 

 

    

 

 

 

Fair value of plan assets

   $ 4,927       $ 4,333   
  

 

 

    

 

 

 

The Partnership expects to contribute $0 and approximately $88,000 to Pension Plans and a Postretirement Plan, respectively, in 2014.

Expected Future Benefit Payments:

 

     Pension      Postretirement  
     (in thousands)  

2014

   $ 193       $ 88   

2015

     206         79   

2016

     211         58   

2017

     223         68   

2018

     228         63   

2019-2023

     1,259         226   

Note 13 — Income Taxes

For the year ended December 31, 2013, the Partnership recorded a state income tax benefit of approximately $0.1 million on income attributable to the Partnership, $0.2 million of which is attributable to replacement tax for the Illinois Department of Revenue partially offset by approximately $0.1 million of tax expense attributable to Texas Margin Tax due to the Texas Comptroller.

For the year ended December 31, 2012, the Partnership recorded a state income tax provision of approximately $303,000 on income attributable to the Partnership, $800 of which is attributable to annual minimum franchise tax due to California Franchise Tax Board, $257,000 is attributable to replacement tax due to Illinois Department of Revenue and $45,000 is attributable to Texas Margin Tax due to the Texas Comptroller.

The components of income taxes included in the year ended December 31, 2011 were for REMC prior to its conversion to a partnership.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

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

     For the Three Months Ended
December 31,
    For the Fiscal
Year Ended
September 30,
 
     2011      2010     2011  
     (unaudited)  
     (in thousands)  

Current:

       

Federal

   $ —         $ 2,436      $ 15,540   

State

     —           312        2,593   
  

 

 

    

 

 

   

 

 

 

Total Current

     —           2,748        18,133   
  

 

 

    

 

 

   

 

 

 

Deferred:

       

Federal

   $ —         $ 54      $ (764

State

     —           (30     46   
  

 

 

    

 

 

   

 

 

 

Total Deferred

     —           24        (718
  

 

 

    

 

 

   

 

 

 
   $ —         $ 2,772      $ 17,415   
  

 

 

    

 

 

   

 

 

 

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

 

 

     For the Three Months Ended
December 31,
   

For the Fiscal

Year Ended
September 30,

 
     2011      2010     2011  
     (unaudited)  
     (in thousands)  

Federal income tax benefit calculated at the federal statutory rate

   $ —         $ 2,483      $ 14,754   

State income tax benefit net of federal benefit

     —           320        2,466   

Permanent. True ups, other

     —           6        22   

Change in state tax rate

     —           (37     173   
  

 

 

    

 

 

   

 

 

 

Income tax expense

   $ —         $ 2,772      $ 17,415   
  

 

 

    

 

 

   

 

 

 

Note 14 —  Segment Information

Prior to the Agrifos Acquisition, the Partnership operated in only one business segment. After the Agrifos Acquisition, the Partnership operates in two business segments, as described below.

 

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

 

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

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

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

 

     For the Calendar Years Ended
December 31,
 
     2013     2012  
     (in thousands)  

Revenues

    

East Dubuque

   $ 177,700      $ 224,205   

Pasadena

     133,675        37,430   
  

 

 

   

 

 

 

Total revenues

   $ 311,375      $ 261,635   
  

 

 

   

 

 

 

Gross profit (loss)

    

East Dubuque

   $ 80,883      $ 133,543   

Pasadena

     (9,529     (1,704
  

 

 

   

 

 

 

Total gross profit

   $ 71,354      $ 131,839   
  

 

 

   

 

 

 

Selling, general and administrative expense

    

East Dubuque

   $ 4,576      $ 6,242   

Pasadena

     4,764        361   
  

 

 

   

 

 

 

Total selling, general and administrative expense

   $ 9,340      $ 6,603   
  

 

 

   

 

 

 

Depreciation and amortization

    

East Dubuque

   $ 191      $ 807   

Pasadena

     3,886        583   
  

 

 

   

 

 

 

Total depreciation and amortization recorded in operating expenses

   $ 4,077      $ 1,390   
  

 

 

   

 

 

 

East Dubuque

     9,048        10,690   

Pasadena

     4,187        380   
  

 

 

   

 

 

 

Total depreciation and amortization recorded in cost of sales

   $ 13,235      $ 11,070   
  

 

 

   

 

 

 

Total depreciation and amortization

   $ 17,312      $ 12,460   
  

 

 

   

 

 

 

Other operating expenses

    

East Dubuque

   $ 806      $ 510   

Pasadena

     30,029        —     
  

 

 

   

 

 

 

Total other operating expenses

   $ 30,835      $ 510   
  

 

 

   

 

 

 

Operating income (loss)

    

East Dubuque

   $ 75,310      $ 125,984   

Pasadena

     (48,208     (2,648
  

 

 

   

 

 

 

Total operating income

   $ 27,102      $ 123,336   
  

 

 

   

 

 

 

Interest expense

    

East Dubuque

   $ —        $ 194   

Pasadena

     8        —     
  

 

 

   

 

 

 

Total interest expense

   $ 8      $ 194   
  

 

 

   

 

 

 

Net income (loss)

    

East Dubuque

   $ 75,244      $ 123,721   

Pasadena

     (48,357     (2,648
  

 

 

   

 

 

 

Total segment net income

   $ 26,887      $ 121,073   
  

 

 

   

 

 

 

Reconciliation of segment net income to consolidated net income:

    

Segment net income

   $ 26,887      $ 121,073   

Partnership and unallocated expenses recorded as selling, general and administrative expenses

     (7,945     (11,773

Partnership and unallocated income (expenses) recorded as other expense

     (1,081     232   

Unallocated interest expense and loss on interest rate swaps

     (14,096     (2,226

Income tax benefit (expense)

     303        (303
  

 

 

   

 

 

 

Consolidated net income

   $ 4,068      $ 107,003   
  

 

 

   

 

 

 

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

     As of December 31,  
     2013      2012  
     (in thousands)  

Total assets

     

East Dubuque

   $ 175,430       $ 125,100   

Pasadena

     188,836         191,279   
  

 

 

    

 

 

 

Total segment assets

   $ 364,266       $ 316,379   
  

 

 

    

 

 

 

Reconciliation of segment total assets to consolidated total assets:

     

Segment total assets

   $ 364,266       $ 316,379   

Partnership and other

     42,078         60,266   
  

 

 

    

 

 

 

Consolidated total assets

   $ 406,344       $ 376,645   
  

 

 

    

 

 

 

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

Note 15 — Net Income Per Common Unit

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

     For the Calendar Years
Ended December 31,
     For the Period
November 9, 2011
Through December 31,
 
     2013      2012      2011  

Numerator:

        

Net income

   $ 4,068       $ 107,003       $ 11,331   

Less: Income allocated to unvested units

     366         491         48   
  

 

 

    

 

 

    

 

 

 

Net income allocated to common unitholders

   $ 3,702       $ 106,512       $ 11,283   
  

 

 

    

 

 

    

 

 

 

Denominator:

        

Weighted average common units outstanding

     38,850         38,350         38,250   

Effect of dilutive units:

        

Phantom Units

     95         2         5   
  

 

 

    

 

 

    

 

 

 

Diluted units outstanding

     38,945         38,352         38,255   
  

 

 

    

 

 

    

 

 

 

Basic net income per common unit

   $ 0.10       $ 2.78       $ 0.30   
  

 

 

    

 

 

    

 

 

 

Diluted net income per common unit

   $ 0.10       $ 2.78       $ 0.30   
  

 

 

    

 

 

    

 

 

 

For the years ended December 31, 2013 and 2012, 0 and approximately 149,000 phantom units, respectively, were excluded from the calculation of diluted net income per common unit because their inclusion would have been anti-dilutive. For the period November 9, 2011 through December 31, 2011, no phantom units were excluded from the calculation of diluted net income per common unit.

 

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RENTECH NITROGEN PARTNERS, L.P.

Notes to Consolidated Financial Statements — Continued

 

Note 16 — Selected Quarterly Financial Data (Unaudited)

Selected unaudited condensed financial information for the calendar years ended December 31, 2013 and 2012 is presented in the tables below (in thousands).

     First
Quarter
     Second
Quarter
     Third
Quarter
    Fourth
Quarter
 

For the 2013 Calendar Year

          

Revenues

   $ 59,564       $ 103,956       $ 93,279      $ 54,576   

Gross profit (loss)

   $ 22,719       $ 39,848       $ 16,820      $ (8,033

Operating income (loss)

   $ 17,015       $ 34,046       $ (18,335   $ (13,569

Income (loss) before income taxes

   $ 15,089       $ 28,846       $ (22,022   $ (17,941

Net income (loss)

   $ 15,009       $ 28,721       $ (22,255   $ (17,407

Net income (loss) per common unit—Basic

   $ 0.38       $ 0.74       $ (0.57   $ (0.45

Net income (loss) per common unit—Diluted

   $ 0.38       $ 0.74       $ (0.57   $ (0.45
     First
Quarter
     Second
Quarter
     Third
Quarter
    Fourth
Quarter
 

For the 2012 Calendar Year

          

Revenues

   $ 38,473       $ 70,643       $ 60,112      $ 92,407   

Gross profit

   $ 22,572       $ 45,646       $ 35,035      $ 28,586   

Operating income

   $ 19,457       $ 41,604       $ 29,200      $ 21,302   

Income before income taxes

   $ 19,373       $ 41,228       $ 28,848      $ 17,857   

Net income

   $ 19,373       $ 41,228       $ 28,848      $ 17,554   

Net income per common unit—Basic

   $ 0.51       $ 1.08       $ 0.75      $ 0.44   

Net income per common unit—Diluted

   $ 0.51       $ 1.08       $ 0.75      $ 0.44   

The gross loss during the three months ended December 31, 2013 was primarily attributable to (i) turnaround expenses at the East Dubuque Facility and the Pasadena Facility of approximately $7.8 million and $1.7 million, respectively, (ii) a write-down of the Pasadena Facility’s inventory of approximately $5.1 million, (iii) fixed operating costs while the East Dubuque Facility was idle of approximately $4.2 million, and (iv) the $1.0 million insurance deductible for the fire which occurred in November 2013 at the East Dubuque Facility.

Note 17 — Subsequent Events

On February 13, 2014, the Partnership announced a cash distribution to its common unitholders for the period October 1, 2013 through and including December 31, 2013 of $0.05 per common unit which resulted in total distributions in the amount of approximately $2.0 million, including payments to phantom unitholders. The cash distribution was paid on February 28, 2014 to unitholders of record at the close of business on February 24, 2014.

On March 7, 2014 the Borrowers entered into the First Amendment to the 2013 Credit Agreement (the “First Amendment”). In certain circumstances the First Amendment replaces the financial test that the Partnership must satisfy for any borrowing from the Secured Leverage Ratio to a Fixed Charge Coverage Ratio (each as defined in the 2013 Credit Agreement) for the period from the date of the amendment until immediately prior to the time the Partnership reports its fiscal year 2014 annual results (the “FCCR End Date”). The Fixed Charge Coverage Ratio that the Partnership has to meet from the date of the First Amendment through the date immediately prior to reporting the Partnership’s 2014 first quarter results is 2.00 to 1.00, and thereafter through the FCCR End Date is 2.25 to 1.00. For the year ended December 31, 2013, the Partnership’s Fixed Charge Coverage Ratio was 3.27 to 1.00.

The First Amendment also modifies for a specified period the financial test applicable to the announcement or payment of a distribution. In the event that the Partnership has no amounts outstanding under the 2013 Credit Agreement on the date of the announcement or payment of a distribution, the minimum Fixed Charge Coverage Ratio that it has to meet in order to pay distributions in the period from the date of the First Amendment through the date immediately prior to reporting the Partnership’s 2014 first quarter results is 2.00 to 1.00, and thereafter through the FCCR End Date is 2.25 to 1.00. If there is any amount outstanding under the 2013 Credit Agreement on the date of the announcement or payment of a distribution from the period beginning with the date of the First Amendment through the FCCR End Date, the Partnership must have a Secured Leverage Ratio not in excess of 3.75 to 1.00. Following the FCCR End Date, to announce or pay a distribution the Partnership must have a Secured Leverage Ratio not in excess of 3.75 to 1.00. In addition, before the Partnership can make distributions, the Partnership must have at least $8.75 million available to be drawn under the 2013 Credit Agreement on a pro forma basis.

 

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Table of Contents

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, or DCP, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our general partners’ principal executive officer, or Chief Executive Officer, and principal financial officer, or Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating DCP, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In the Original 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our DCP were effective as of December 31, 2013. Subsequent to that evaluation, management identified the material weaknesses in internal control over financial reporting, or ICFR, described below, and our Chief Executive Officer and Chief Financial Officer concluded that our DCP were not effective as of December 31, 2013.

Management’s Annual Report on Internal Control Over Financial Reporting (Restated)

Management is responsible for establishing and maintaining adequate ICFR (as defined in Rule 13a-15(f) of the Exchange Act). Our ICFR 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 ICFR 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, ICFR 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. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, the risk.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our ICFR as of December 31, 2013. Management based its assessment on criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

We identified the following material weaknesses that existed at December 31, 2013. A material weakness is a deficiency, or combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We did not design and maintain effective internal controls over (i) the review of the cash flow forecasts used in the accounting for goodwill, (ii) the determination of the goodwill impairment charge in accordance with generally accepted accounting principles, and (iii) maintaining documentation supporting management’s review of events and changes in circumstances that indicate it is more likely than not that a goodwill impairment has occurred between annual impairment tests. Specifically, with respect to (i) and (ii), we did not design and maintain effective internal controls related to determining the carrying value and fair value of reporting units for the purpose of performing goodwill impairment testing, documenting management’s review of assumptions used in the forecasts, and verifying that data contained in reports provided by specialists reconcile to the information provided to those specialists.

These control deficiencies did not result in a material misstatement to our consolidated financial statements for the year ended December 31, 2013. However, these control deficiencies, if unremediated, could, in another reporting period, result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected by the controls. Accordingly, our management has determined that these control deficiencies constitute material weaknesses.

In Management’s Annual Report on Internal Control Over Financial Reporting included in our Original 10-K, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that we maintained effective ICFR as of December 31, 2013. Management subsequently concluded that the material weaknesses described above existed as of December 31, 2013. As a result, we have concluded we did not maintain effective ICFR as of December 31, 2013 based on the criteria in Internal Control – Integrated Framework (1992) issued by COSO. Accordingly, management has restated its report on ICFR.

 

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The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Plan for Remediation of the Material Weaknesses

We have implemented and are continuing to implement a number of measures to address the material weaknesses identified. Specifically, we are designing additional controls over documentation and review of the inputs and results of our cash flow forecasts, the use of the work of specialists and the identification of events and changes in circumstances that may indicate potential impairment of goodwill. These controls are expected to include the implementation of additional review activities by qualified personnel and additional documentation and support of conclusions with regard to accounting for goodwill impairment calculations. We are also designing additional controls around identification and documentation relating to accounting for goodwill impairment. These controls are expected to include the implementation of additional review activities by qualified personnel, additional documentation and the development and use of checklists and procedures related to accounting for goodwill impairment calculations. We are in the process of implementing our remediation plan, and expect the control weaknesses to be remediated in the coming reporting periods. However, we are unable at this time to estimate when the remediation will be completed.

The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our ICFR, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

Changes in Internal Control over Financial Reporting

There were significant changes in our ICFR during the quarter ended December 31, 2013 that materially affected, or are reasonably likely to materially affect, our ICFR. During the quarter ended December 31, 2013, we completed the integration of RNPLLC’s operations, processes, and internal controls.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(b) Exhibits.

See Exhibit Index.

 

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EXHIBIT INDEX

 

  2.1*    Membership Interest Purchase Agreement between Rentech Nitrogen Partners, L.P. and Agrifos Holdings Inc., dated as of October 31, 2012 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Registrant on November 5, 2012).
  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    Third Amended and Restated Agreement of Limited Partnership of Rentech Nitrogen Partners, L.P., dated as of November 1, 2012 (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 5, 2012).
  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).
  4.1    Indenture, dated as April 12, 2013, among Rentech Nitrogen Partners, L.P., Rentech Nitrogen Finance Corporation, the guarantors named therein, Wells Fargo Bank, National Association, as Trustee, and Wilmington Trust, National Association, as Collateral Trustee (incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-35334) filed by the Registrant with the Securities and Exchange Commission on April 16, 2013).
  4.2    Forms of 6.5% Second Lien Senior Secured Notes due 2021 (incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K (File No. 001-35334) filed by the Registrant with the Securities and Exchange Commission on April 16, 2013).
  4.3    Intercreditor Agreement, dated as of April 12, 2013, among Credit Suisse AG, Cayman Islands Branch, as priority lien agent, Wilmington Trust, National Association, as second lien collateral trustee, Rentech Nitrogen Partners, L.P., Rentech Nitrogen Finance Corporation and the subsidiaries of Rentech Nitrogen Partners, L.P. named therein (incorporated by reference from Exhibit 4.3 to the Current Report on Form 8-K (File No. 001-35334) filed by the Registrant with the Securities and Exchange Commission on April 16, 2013).
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    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).
10.5    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).
10.6    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).
10.7    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).
10.8†    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).

 

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10.9†    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).
10.10†    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).
10.11†    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).
10.12†    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).
10.13†    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).
10.14†    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).
10.15†    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).
10.16†    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).
10.17†    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).
10.18†    Employment Agreement, dated as of November 3, 2009 by and between Rentech, Inc. and Colin Morris (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Rentech, Inc. on November 6, 2009).
10.19†    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).
10.20†    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).
10.21†    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).
10.22    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).
10.23    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).
10.24    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).
10.25    Second Amended and Restated Credit Agreement, dated as of October 31, 2012, by and among Rentech Nitrogen, LLC, Agrifos LLC, Agrifos Fertilizer L.L.C. and Agrifos SPA LLC, as borrowers, Rentech Nitrogen Partners, L.P., 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 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 5, 2012).

 

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10.26   First Amendment to Second Amended and Restated Credit Agreement, dated as of November 30, 2012, by and among Rentech Nitrogen, LLC, Rentech Nitrogen Pasadena Holdings, LLC (formerly known as Agrifos LLC), Rentech Nitrogen Pasadena, LLC (formerly known as Agrifos Fertilizer L.L.C.) and Rentech Nitrogen Pasadena SPA, LLC (formerly known as Agrifos SPA LLC), as borrowers, Rentech Nitrogen Partners, L.P., 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 (incorporated by reference to Exhibit 10.32 to the Annual Report on Form 10-K filed by the Registrant on March 18, 2013).
10.27   Second Amendment to Second Amended and Restated Credit Agreement, dated as of December 30, 2012, by and among Rentech Nitrogen, LLC, Rentech Nitrogen Pasadena Holdings, LLC (formerly known as Agrifos LLC), Rentech Nitrogen Pasadena, LLC (formerly known as Agrifos Fertilizer L.L.C.) and Rentech Nitrogen Pasadena SPA, LLC (formerly known as Agrifos SPA LLC), as borrowers, Rentech Nitrogen Partners, L.P., 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 (incorporated by reference to Exhibit 10.33 to the Annual Report on Form 10-K filed by the Registrant on March 18, 2013).
10.28   Third Amendment to Second Amended and Restated Credit Agreement, dated as of January 18, 2013, by and among Rentech Nitrogen, LLC, Rentech Nitrogen Pasadena Holdings, LLC (formerly known as Agrifos LLC), Rentech Nitrogen Pasadena, LLC (formerly known as Agrifos Fertilizer L.L.C.) and Rentech Nitrogen Pasadena SPA, LLC (formerly known as Agrifos SPA LLC), as borrowers, Rentech Nitrogen Partners, L.P., 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 (incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K filed by the Registrant on March 18, 2013).
10.29   Asset Purchase Agreement, dated as of September 10, 1998, by and between ExxonMobil Corporation (formerly known as Mobil Oil Corporation) and Rentech Nitrogen Pasadena, LLC (formerly known as Agrifos Fertilizer L.P.) (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K filed by the Registrant on March 18, 2013).
10.30+   Marketing Agreement, dated as of March 22, 2011, by and between Interoceanic Corporation and Rentech Nitrogen Pasadena, LLC (Agrifos Fertilizer L.L.C.) (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K filed by the Registrant on March 18, 2013).
10.31   Credit Agreement, dated as of April 12, 2013, among Rentech Nitrogen Partners, L.P. and Rentech Nitrogen Finance Corporation, as borrowers, the other parties thereto that are designated as credit parties from time to time, Credit Suisse AG, Cayman Islands Brach, for itself and as agent for all lenders, the other financial institutions party thereto, as lenders, Credit Suisse Securities (USA) LLC, as sole lead arranger and bookrunner, and BMO Harris Bank, N.A., as syndication agent (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on May 9, 2013).
10.32**+   Amended and Restated Marketing Agreement, effective as of January 1, 2014, by and between Interoceanic Corporation and Rentech Nitrogen Pasadena, LLC (Agrifos Fertilizer L.L.C.).
10.33**   First Amendment to Credit Agreement, dated as of March 7, 2014, by and among Rentech Nitrogen Partners, L.P., Rentech Nitrogen Finance Corporation, the subsidiary guarantors party hereto, the lenders party hereto and Credit Suisse AG, Cayman Islands Branch, as agent for the lenders.
10.34**   Assignment of Employment Agreement, dated as of December 30, 2013, by and between Rentech, Inc., Rentech Nitrogen GP, LLC and John Diesch.

 

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21.1**   List of Subsidiaries of Rentech Nitrogen Partners, L.P.
23.1   Consent of Independent Registered Public Accounting Firm.
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 year ended December 31, 2013 formatted in Extensible Business Reporting Language (“XBRL”) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Partners’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements, detailed tagged.

 

* Schedules and exhibits have been omitted from this Exhibit pursuant to Item 601(b)(2) of Regulation S-K and are not filed herewith. The Partnership agrees to furnish supplementally a copy of the omitted schedules and exhibits to the Securities and Exchange Commission upon request.
** Previously filed with the Original 10-K.
Management contract or compensatory plan or arrangement.
+ Certain portions of this Exhibit have been omitted and filed separately under an application for confidential treatment.

 

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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.

 

RENTECH NITROGEN PARTNERS, L.P.
BY: RENTECH NITROGEN GP, LLC, ITS GENERAL PARTNER

/s/ Dan J. Cohrs

Dan J. Cohrs,
Chief Financial Officer

Date: December 29, 2014

 

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