##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarter ended December 31, 2009
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from  to
 Commission file number 000-52429
 CENTRAL IOWA ENERGY, LLC
  Iowa
    
    71-0988301(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 3426 EAST 28TH STREET N.
NEWTON, IOWA 50208
 (641) 791-1010
 þ o
 o Yes o No
  Large Accelerated Filer o
    
    Accelerated filer o
    
    Non-Accelerated Filer þ
    
    Smaller reporting company o
 o þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Unaudited Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls And Procedures
    
    
    27PART II. OTHER INFORMATION
    
    
    27Item 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    30Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Unaudited Financial Statements
 CENTRAL IOWA ENERGY, LLC
  December 31,
    
    
    September 30,2009
    
    
    2009(Unaudited)ASSETSCurrent AssetsCash and equivalents
    
    $
    145,474
    
    
    $
    410,540Due from broker
    
    
    75
    
    
    
    75Trade accounts receivable  related party, less allowance for doubtful
accounts
    
    
    776,859
    
    
    
    161,974Federal incentive receivable
    
    
    1,627
    
    
    
    1,063Prepaid expenses
    
    
    103,688
    
    
    
    141,411Inventories
    
    
    142,095
    
    
    
    226,871Total current assets
    
    
    1,169,818
    
    
    
    941,934Property and EquipmentLand and improvements
    
    
    7,680,111
    
    
    
    7,680,111Office equipment
    
    
    40,603
    
    
    
    40,603Office building
    
    
    629,300
    
    
    
    629,300Plant and process equipment
    
    
    32,748,111
    
    
    
    32,748,11141,098,125
    
    
    
    41,098,125Less accumulated depreciation
    
    
    7,014,148
    
    
    
    6,365,941Net property and equipment
    
    
    34,083,977
    
    
    
    34,732,184Other AssetsFinancing costs, net of amortization
    
    
    138,039
    
    
    
    150,472Restricted cash
    
    
    461,616
    
    
    
    460,188Total other assets
    
    
    599,655
    
    
    
    610,660Total Assets
    
    $
    35,853,450
    
    
    $
    36,284,778LIABILITIES AND EQUITYCurrent LiabilitiesCurrent maturities of long-term debt
    
    $
    23,956,318
    
    
    $
    23,977,472Revolving line of credit
    
    
    550,000
    
    
    
    550,000Accounts payable
    
    
    504,760
    
    
    
    515,732Accounts payable  related party
    
    
    846,192
    
    
    
    487,660Accrued interest payable
    
    
    113,015
    
    
    
    110,094Accrued expenses
    
    
    271,774
    
    
    
    379,192Total current liabilities
    
    
    26,242,059
    
    
    
    26,020,150Long-Term Debt, less current maturities
    
    
    
    
    
    
    Deferred Grant Financing
    
    
    745,000
    
    
    
    745,000Commitments and ContingenciesMembers EquityMember contributions, net of costs related to capital contributions,
26,672 units outstanding
    
    
    23,849,120
    
    
    
    23,849,120Deficit accumulated
    
    
    (14,982,729
    )
    
    
    (14,329,492
    )Total members equity
    
    
    8,866,391
    
    
    
    9,519,628Total Liabilities and Members Equity
    
    $
    35,853,450
    
    
    $
    36,284,778
   3




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CENTRAL IOWA ENERGY, LLC
  Three Months Ended
    
    
    Three Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)RevenuesSales to related party
    
    $
    2,074,237
    
    
    $
    5,097,513Federal incentives
    
    
    22,902
    
    
    
    600,8562,097,139
    
    
    
    5,698,369Cost of Goods Sold
    
    
    2,116,859
    
    
    
    7,485,160Gross Loss
    
    
    (19,720
    )
    
    
    (1,786,791
    )Operating ExpensesProfessional fees
    
    
    143,244
    
    
    
    136,759General and administrative
    
    
    241,337
    
    
    
    433,958Total
    
    
    384,581
    
    
    
    570,717Operating Loss
    
    
    (404,301
    )
    
    
    (2,357,508
    )Other Income (Expenses)Other income
    
    
    114,248
    
    
    
    4,950Interest expense
    
    
    (363,184
    )
    
    
    (552,170
    )Total
    
    
    (248,936
    )
    
    
    (547,220
    )Net Loss
    
    $
    (653,237
    )
    
    $
    (2,904,728
    )Weighted Average Units Outstanding
    
    
    26,672
    
    
    
    26,672Net Loss Per Unit  Basic and
Diluted
    
    $
    (24.49
    )
    
    $
    (108.91
    )
   4




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##### Table of Contents



CENTRAL IOWA ENERGY, LLC
  Three Months Ended
    
    
    Three Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet loss
    
    $
    (653,237
    )
    
    $
    (2,904,728
    )Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    660,640
    
    
    
    665,984Change in assets and liabilitiesDue from broker
    
    
    
    
    
    
    209,558Accounts receivable
    
    
    (614,885
    )
    
    
    1,015,364Other receivable
    
    
    (564
    )
    
    
    395,885Inventories
    
    
    84,776
    
    
    
    4,931,788Prepaid expenses
    
    
    37,723
    
    
    
    1,335Derivative instruments
    
    
    
    
    
    
    (331,683
    )Accounts payable
    
    
    347,560
    
    
    
    (1,308,684
    )Accrued expenses
    
    
    (107,418
    )
    
    
    (28,088
    )Accrued interest payable
    
    
    2,921
    
    
    
    (14,006
    )Net cash provided by (used in) operating activities
    
    
    (242,484
    )
    
    
    2,632,725Cash Flows from Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    (45,775
    )Increase in restricted cash
    
    
    (1,428
    )
    
    
    (400,000
    )Net cash used in investing activities
    
    
    (1,428
    )
    
    
    (445,775
    )Cash Flows from Financing ActivitiesProceeds (payments) on revolving line of credit, net
    
    
    
    
    
    
    (1,150,000
    )Payments for long-term debt
    
    
    (21,154
    )
    
    
    (581,911
    )Net cash used in financing activities
    
    
    (21,154
    )
    
    
    (1,731,911
    )Net Increase (Decrease) in Cash
    
    
    (265,066
    )
    
    
    455,039Cash and
cash equivalents  Beginning of Period
    
    
    410,540
    
    
    
    690,509Cash and cash equivalents  End of Period
    
    $
    145,474
    
    
    $
    1,145,548Supplemental Disclosure of Cash Flow Information,Cash payments for interest
    
    $
    347,830
    
    
    $
    546,207
   5




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 PRINCIPAL BUSINESS ACTIVITY 
 BASIS OF PRESENTATION 
  USE OF ESTIMATES 
 REVENUE RECOGNITION 
 FEDERAL INCENTIVE PAYMENTS AND RECEIVABLES 
 CASH AND EQUIVALENTS 
  ACCOUNTS
RECEIVABLE 
   6




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
  INVENTORIES

 DERIVATIVE INSTRUMENTS 
   Three Months Ended
    
    
    Three Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008Realized gain
    
    $
    
    
    
    $
    826,742Change in unrealized gain
    
    
    
    
    
    
    331,683Net gain
    
    $
    
    
    
    $
    1,158,425
 PROPERTY
AND EQUIPMENT 
  Land improvements
    
    15-20 yearsOffice building
    
    10-20 yearsOffice equipment
    
    5 yearsPlant and process equipment
    
    10-20 years
   7




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##### Table of Contents



CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
 RESTRICTED CASH 
 FINANCING COSTS 
 FAIR
VALUE OF FINANCIAL INSTRUMENTS 
       DEFERRED GRANT FINANCING 
  8




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
 INCOME TAXES 
 NOTE 2: INVENTORIES
  2009
    
    
    2008Raw materials
    
    $
    108,978
    
    
    $
    272,639Work in process
    
    
    
    
    
    
    34,549Finished goods
    
    
    33,117
    
    
    
    2,537,496Total
    
    $
    142,095
    
    
    $
    2,844,684
 NOTE 3: RELATED PARTY TRANSACTIONS
     9




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
   NOTE 4: REVOLVING LINE OF CREDIT
   10




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
  NOTE 5: LONG-TERM DEBT
  2009
    
    
    2008Mortgage Term Note payable to F & M Bank  Iowa  See details below
    
    $
    18,616,732
    
    
    $
    18,802,899Iowa Department of Economic Development  See details below
    
    
    302,987
    
    
    
    355,000Term Revolving Note payable to F & M Bank  Iowa  See details below
    
    
    5,000,000
    
    
    
    5,000,000Equipment capital lease, due in monthly installments of $3,345
through August 2010 with a final option payment of $11,500 for the
purchase of the equipment.
    
    
    36,599
    
    
    
    72,046$
    23,956,318
    
    
    $
    24,229,945
       11




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##### Table of Contents



CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
    NOTE 6: RETIREMENT PLAN
  NOTE 7: COMMITMENTS AND CONTINGENCIES
 Utility Contracts
     12




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
 Contingencies
   NOTE 8: GOING CONCERN
     13




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2009 and 2008
   
    
    Raising equity through one or more private placement offerings or state registered
offering of the Companys membership units;
    
    Seeking additional sources of short-term debt financing and credit facilities;
    
    Refinancing the current debt financing and credit facilities; or
    
    Seeking strategic business opportunities, including with other biodiesel plants;
   NOTE 9: SUBSEQUENT EVENTS
   14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary Statements Regarding Forward Looking Statements
 RISK FACTORS
 
    
    Changes in interest rates or the availability, terms and conditions of credit;
 
    
    Our ability to cure our defaults under our financing agreements, and our lenders willingness to refrain
from exercising its remedies in response to our defaults thereunder;
 
    
    Our ability to generate free cash flow to invest in our business and service our debt;
 
    
    Our ability to raise additional equity capital proceeds;
 
    
    Overcapacity within the biodiesel industry resulting in increased competition and costs for feedstock
and/or decreased prices for our biodiesel and glycerin;
 
    
    Decrease in the demand for biodiesel;
 
    
    Actual biodiesel and glycerin production varying from expectations;
 
    
    Availability and cost of products and raw materials, particularly soybean oil, animal fats, and methanol;
 
    
    Changes in the price and market for biodiesel and its co-products, such as glycerin;
 
    
    Our ability to market and our reliance on third parties to market our products;
 
    
    Changes in or elimination of governmental laws, tariffs, trade or other controls or enforcement
practices such as:
 
    
    national, state or local energy policy;
    
    federal and state biodiesel tax incentives;
    
    legislation establishing a renewable fuel standard or other legislation mandating the use of
biodiesel or other lubricity additives; or
    
    environmental laws and regulations that apply to our plant operations and their enforcement;
 
    
    Total U.S. consumption of diesel fuel and biodiesel, fuel prices, and consumer attitudes regarding the
use of biodiesel;
 
    
    Fluctuations in petroleum and diesel prices;
 
    
    Changes in our business strategy, capital improvements or development plans;
 
    
    Results of our hedging strategies;
 
    
    Our liability resulting from litigation;
 
    
    Our ability to retain key employees and maintain labor relations;
 
    
    Changes and advances in biodiesel production technology;
 
    
    Competition from alternative fuels and alternative fuel additives;
 
    
    The occurrence of events of default under our financing agreement, our failure to comply with loan
covenants contained in our financing agreements and the response of our lender to such defaults and
non-compliance;
 
    
    Our ability to continue to export our biodiesel and the European Commissions imposition of tariffs or
other duties on biodiesel imported from the U.S.;
 
    
    Current unfavorable domestic and international economic conditions;
 
    
    Our ability to enter into toll processing agreements or other arrangements that shift responsibility for
feedstock procurement and costs to other parties;
 
    
    Changes in plant production capacity or technical difficulties in operating the plant for any reason,
including changes due to events beyond our control or as a result of intentional reductions in
production or plant shutdowns;
 
    
    The closing, or the failure to close, of the transaction contemplated by the Amended and Restated Asset
Purchase Agreement entered into by the Company with REG and certain other parties affiliated with REG;
 
    
    Our ability to generate profits;
 
    
    Our reliance on REG for management, marketing and procurement services and our ability to successfully
operate the plant in light of REGs intent to terminate our current Management and Operational Services
Agreement; and
 
    
    Other factors described elsewhere in this report.
  15




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Overview
     16




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Proposed Consolidation With REG
    17




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Results of Operations for the Three Months Ended December 31, 2009 and 2008
  Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Unaudited)Statement of Operations Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    2,097,139
    
    
    
    100.00
    %
    
    $
    5,698,369
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    2,116,859
    
    
    
    100.94
    %
    
    
    7,485,160
    
    
    
    131.36
    %Gross (Loss)
    
    
    (19,720
    )
    
    
    (0.94
    )%
    
    
    (1,786,791
    )
    
    
    (31.36
    )%Operating Expenses
    
    
    384,581
    
    
    
    18.34
    %
    
    
    570,717
    
    
    
    10.01
    %Operating (Loss)
    
    
    (404,301
    )
    
    
    (19.28
    )%
    
    
    (2,357,508
    )
    
    
    (41.37
    )%Other Income (Expense)
    
    
    (248,936
    )
    
    
    (11.87
    )%
    
    
    (547,220
    )
    
    
    (9.60
    )%Net (Loss)
    
    
    (653,237
    )
    
    
    (31.15
    )%
    
    
    (2,904,728
    )
    
    
    (50.97
    )%
 Revenues
  Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    46,634
    
    
    
    2.22
    %
    
    $
    4,909,981
    
    
    
    86.16
    %Glycerin, Fatty Acid and Soap
Stock Sales
    
    
    289,912
    
    
    
    13.82
    %
    
    
    187,532
    
    
    
    3.29
    %Toll Processing Service Fees
    
    
    1,737,691
    
    
    
    82.86
    %
    
    
    0
    
    
    
    0.00
    %Federal Incentives
    
    
    22,902
    
    
    
    1.10
    %
    
    
    600,856
    
    
    
    10.54
    %Total Revenues
    
    
    2,097,139
    
    
    
    100.00
    %
    
    $
    5,698,369
    
    
    
    100.00
    %
  18




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19




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Cost of Goods Sold
    Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008(Unaudited)
    
    
    (Unaudited)Component of Cost of Goods Sold
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentFeedstock and Chemical Inputs
    
    $
    636,283
    
    
    
    30.06
    %
    
    
    7,059,214
    
    
    
    94.31
    %Plant Wages and Salaries
    
    
    245,974
    
    
    
    11.62
    %
    
    
    285,188
    
    
    
    3.81
    %Utilities
    
    
    373,514
    
    
    
    17.64
    %
    
    
    326,069
    
    
    
    4.36
    %Fees-Procurement, Operation
Management
    
    
    0
    
    
    
    0
    %
    
    
    15,398
    
    
    
    0.21
    %(Gain) on Derivative Financial
Instruments
    
    
    0
    
    
    
    0
    %
    
    
    (1,158,425
    )
    
    
    15.48
    %Depreciation
    
    
    648,207
    
    
    
    30.62
    %
    
    
    646,013
    
    
    
    8.63
    %Freight
    
    
    10,727
    
    
    
    0.51
    %
    
    
    220,099
    
    
    
    2.94
    %Maintenance, Supplies and
Other Expenses
    
    
    202,154
    
    
    
    9.55
    %
    
    
    91,064
    
    
    
    1.22
    %Total
    
    
    2,116,859
    
    
    
    100.00
    %
    
    
    7,485,160
    
    
    
    100.00
    %
   20




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Operating Expenses
  Other Income (Expenses)
  Changes in Financial Condition for the Three Months Ended December 31, 2009
  December 31, 2009
    
    
    September 30, 2009Current Assets
    
    $
    1,169,818
    
    
    $
    941,934Current Liabilities
    
    $
    26,242,059
    
    
    $
    26,020,150Members Equity
    
    $
    8,866,391
    
    
    $
    9,519,628
 Current Assets
 Current Liabilities
 Members Equity
  21




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Cash Flows
 Cash Flow from Operating Activities .
 Cash Flow from Investing Activities .
 Cash Flow from Financing Activities .
 Liquidity and Capital Resources
 Short Term and Long-Term Debt Financing Sources
  th Wall Street Journal
     22




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
    
    acceleration of the unpaid principal balance under the financing agreements and all
accrued interest thereon and all other amounts payable thereunder;
 
    
    withholding of any one or more advances to which the Company may otherwise be
entitled under the financing agreements, or termination of the lenders obligation to
make any advances under the financing agreements;
 
    
    appointment of a receiver to take possession of the collateral securing the loans
from our lender, including without limitation, our real estate, plant, and equipment;
 
    
    requiring the Company to pledge to the lender as additional security immediately
available funds equal to the maximum amount available to be drawn under all outstanding
letters of credit under our financing agreements;
 
    
    foreclosure on the lenders mortgage on and security interest in the Companys
property securing our loans, including our real estate, improvements, equipment and
other assets and personal property; and
 
    
    any and all other rights and remedies afforded to our lender under applicable law or
equity.
    23




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Proposed Consolidation With REG
 Government Programs and Grants
   Private Redevelopment Agreement with Jasper County
   24




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Distribution to Unit Holders
  Critical Accounting Estimates
  Revenue Recognition
  Derivative Instruments and Hedging Activities
 Accounting for Derivatives and Hedging
Activities
 Impairment of long-lived assets
  Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   25




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Interest Rate Risk
 Item 2  MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Liquidity and Capital Resources .
  Outstanding Variable Rate Debt at
    
    Interest Rate at
    
    
    Adverse 10% Change in
    
    
    Annual Adverse ChangeDecember 31, 2009
    
    December 31, 2009
    
    
    Interest Rates
    
    
    to Income$18,600,000 Term Loan
    
    
    5.48
    %
    
    
    6.03
    %
    
    $
    102,300$5,000,000 Term Revolving Loan
    
    
    5.48
    %
    
    
    6.03
    %
    
    $
    27,500$550,000 Revolving Line of Credit
    
    
    6.24
    %
    
    
    6.86
    %
    
    $
    3,410
 Commodity Price Risk
      26




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Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
 Loss of or ineligibility for favorable tax benefits for biodiesel production could hinder our
ability to operate at a profit and reduce the value of our units.
 There are doubts about our ability to continue as a going concern and if we are unable to
continue our business, our units may have little or no value.
 Liquidity constraints could require us to cease operations
  27




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The second amended and restated asset purchase agreement entered into by the Company, REG, and
certain other REG affiliates is subject to a variety of closing conditions and may not close.
 Unit holder approval of the Companys dissolution, liquidation and winding up is not a
condition to the closing of the Companys proposed consolidation with REG.
 Our reliance on REG could damage our profitability.
  The European Commission has imposed definitive anti-dumping and countervailing duties on
biodiesel imported into Europe, which may negatively impact biodiesel demand and our revenues.
  28




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We may be required to write down our long-lived assets and these impairment charges would
adversely affect our operating results .
 We do not have sufficient working capital to engage in ordinary biodiesel production
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
   29




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##### Table of Contents



Item 6. Exhibits.
  ExhibitNo.
    
    Description31.1
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)31.2
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 135032.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
 
 SIGNATURES
  CENTRAL IOWA ENERGY, LLCDate: February 16, 2010
    /s/ John E. Van ZeeJohn E. Van ZeePresident and Chief Executive Officer
(Principal Executive Officer)Date: February 16, 2010
    /s/ Kimberly SmithKimberly SmithChief Financial Officer
(Principal Financial and Accounting Officer)  30