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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, 2008
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from  to
 Commission file number 000-52428
 IOWA RENEWABLE ENERGY, LLC
  Iowa
(State or other jurisdiction of 
incorporation or organization)
    
    20-3386000
(I.R.S. Employer Identification No.)
 1701 East 7 th Street, P.O. Box 2, Washington, Iowa 52353
  (319) 653-2890
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 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 Reults of
Operations
    
    
    11Item 3.
Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4.
Controls And Procedures
    
    
    21PART II. OTHER INFORMATION
    
    
    22Item 1.
Legal Proceedings
    
    
    22Item 1A.
Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3.
Defaults Upon Senior Securities
    
    
    22Item 4T.
Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I. FINANCIAL INFORMATION
 
 Item 1. Unaudited Financial Statements
 Iowa Renewable Energy, LLC
 Unaudited Balance Sheets
December 31, 2008 and September 30, 2008
 December 31,
    
    
    September 30,2008
    
    
    2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,614,895
    
    
    $
    189,474Due from broker
    
    
    733,649
    
    
    
    82,182Accounts receivable
    
    
    1,710,311
    
    
    
    4,469,451Derivative financial instruments
    
    
    
    
    
    
    65,141Federal incentive receivable
    
    
    908,876
    
    
    
    747,741Inventory
    
    
    2,663,340
    
    
    
    5,580,906Prepaids and other assets
    
    
    34,147
    
    
    
    43,6317,665,218
    
    
    
    11,178,526Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Plant and processing equipment
    
    
    40,717,902
    
    
    
    40,673,235Office building, furniture and fixtures
    
    
    572,632
    
    
    
    572,632Equipment and vehicles
    
    
    240,241
    
    
    
    226,42441,950,775
    
    
    
    41,892,291Accumulated depreciation
    
    
    (3,976,472
    )
    
    
    (3,313,970
    )37,974,303
    
    
    
    38,578,321Other Assets:Cash, restricted by loan agreement
    
    
    1,444,265
    
    
    
    1,044,817Financing costs, net
    
    
    415,359
    
    
    
    440,7901,859,624
    
    
    
    1,485,607$
    47,499,145
    
    
    $
    51,242,454Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    32,369,566
    
    
    $
    33,345,343Accounts payable and accrued expenses
    
    
    832,818
    
    
    
    2,295,121Derivative financial instruments
    
    
    11,520
    
    
    
    Total current liabilities
    
    
    33,213,904
    
    
    
    35,640,464Long-Term Debt
    
    
    
    
    
    
    CommitmentsMembers Equity:Member contributions,
net of issuance costs, units outstanding 
December 31, 2008 and September 30, 2008 26,331
    
    
    23,165,422
    
    
    
    23,165,422Accumulated (deficit)
    
    
    (8,880,181
    )
    
    
    (7,563,432
    )14,285,241
    
    
    
    15,601,990$
    47,499,145
    
    
    $
    51,242,454
   3




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Iowa Renewable Energy, LLC   Unaudited Statements of Operations
 Three Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007Revenues:Sales
    
    $
    9,901,695
    
    
    $
    11,310,609Federal incentives
    
    
    1,386,287
    
    
    
    1,593,80611,287,982
    
    
    
    12,904,415Cost of sales
    
    
    11,771,075
    
    
    
    13,625,269Gross (loss)
    
    
    (483,093
    )
    
    
    (720,854
    )Operating expenses:General and administrative
    
    
    456,597
    
    
    
    417,273Depreciation
    
    
    9,500
    
    
    
    9,500466,097
    
    
    
    426,773(Loss) before other income (expense)
    
    
    (949,190
    )
    
    
    (1,147,627
    )Other income (expense):Interest income
    
    
    13,099
    
    
    
    27,024Interest expense
    
    
    (380,658
    )
    
    
    (733,282
    )Net (loss)
    
    $
    (1,316,749
    )
    
    $
    (1,853,885
    )Weighted average units outstanding
    
    $
    26,331
    
    
    $
    26,331Net (loss) per unit  basic and diluted
    
    $
    (50.01
    )
    
    $
    (70.41
    )
   4




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Iowa Renewable Energy, LLC   Unaudited Statements of Cash Flows
 Three Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007Cash Flows from Operating Activities:Net (loss)
    
    $
    (1,316,749
    )
    
    $
    (1,853,885
    )Adjustments to
reconcile net (loss) to net cash provided by (used in) operating activities:Depreciation
    
    
    662,502
    
    
    
    662,502Amortization
    
    
    25,431
    
    
    
    25,431Unrealized loss on derivative financial instruments
    
    
    76,661
    
    
    
    1,567,813Change in working capital components:(Increase) in due from broker
    
    
    (651,467
    )
    
    
    (1,379,128
    )Decrease in accounts receivable
    
    
    2,598,005
    
    
    
    1,829,436Decrease in inventory
    
    
    2,917,566
    
    
    
    137,965(Increase) decrease in prepaids and other assets
    
    
    9,484
    
    
    
    (527,085
    )(Decrease) in accounts payable and accrued expenses
    
    
    (1,462,303
    )
    
    
    (506,610
    )Net cash provided by (used in) operating activities
    
    
    2,859,130
    
    
    
    (43,561
    )Cash Flows from Investing Activities:Purchase and construction of property and equipment
    
    
    (58,484
    )
    
    
    Sales tax and utility refund from construction of property and equipment
    
    
    
    
    
    
    813,455(Increase) in cash restricted
    
    
    (399,448
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    (457,932
    )
    
    
    813,455Cash Flows from Financing Activities:Proceeds from long-term borrowings
    
    
    
    
    
    
    1,020,620Payment on long-term borrowings
    
    
    (975,777
    )
    
    
    (10,000
    )Net cash provided by (used in) financing activities
    
    
    (975,777
    )
    
    
    1,010,620Net increase in cash and cash equivalents
    
    
    1,425,421
    
    
    
    1,780,514Cash and cash equivalents:Beginning
    
    
    189,474
    
    
    
    725,522Ending
    
    $
    1,614,895
    
    
    $
    2,506,036Supplemental Disclosure of Cash Flow Information,
cash payments for interest, net of amount capitalized
    
    $
    391,874
    
    
    $
    690,110Supplemental Disclosures of Noncash Operating and
Financing Activities, Construction in process included
in accounts payable
    
    
    
    
    
    
    300,000
   5




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies
 Nature of business:
  Basis of presentation:
  Significant accounting policies:
 Use of estimates
 Concentrations of credit risk
 Cash and cash equivalents
 Restricted cash
 Accounts receivable
 Federal incentive payments and receivables
  6




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Inventory
 Raw material
    
    $
    1,357,068Finished goods
    
    
    1,306,272$
    2,663,340
 Property and equipment
  YearsPlant and process equipment
    
    10  20Office building
    
    10  20Office equipment
    
    3  7Other equipment
    
    3  7
 Derivative instruments Accounting for Derivative Instruments and Hedging Activities
  Three Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007Realized (gain) loss
    
    $
    (610,248
    )
    
    $
    236,072Change in unrealized loss
    
    
    76,661
    
    
    
    1,567,813Net (gain) loss
    
    $
    (533,587
    )
    
    $
    1,803,885
 Financing costs
  7




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Revenue recognition
 Cost of sales
 Three Months Ended December 31,2008
    
    
    2007Cost of Revenue/Sales
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    PercentageInput costs (soybean oil, animal fats,
chemicals, etc.)
    
    $
    10,564,507
    
    
    
    89.75
    %
    
    $
    10,408,209
    
    
    
    76.39
    %Plant wages and salaries
    
    
    196,477
    
    
    
    1.67
    
    
    
    220,513
    
    
    
    1.62Utilities and waste disposal
    
    
    377,747
    
    
    
    3.21
    
    
    
    249,112
    
    
    
    1.83Fees-procurement, operation mgmt
    
    
    48,784
    
    
    
    0.41
    
    
    
    185,513
    
    
    
    1.36(Gain) loss on derivative financial
instruments
    
    
    (533,587
    )
    
    
    (4.53
    )
    
    
    1,803,885
    
    
    
    13.24Depreciation
    
    
    653,002
    
    
    
    5.55
    
    
    
    653,002
    
    
    
    4.79Maintenance, supplies and other expenses
    
    
    464,145
    
    
    
    3.94
    
    
    
    105,035
    
    
    
    0.77Total cost of sales
    
    $
    11,771,075
    
    
    
    100.00
    %
    
    $
    13,625,269
    
    
    
    100.00
    %
 Shipping and handling costs
 Income taxes
 (Loss) per unit
 Note 2. Major Customer
     8




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note 3. Long-Term Debt
  Note payable to Marshall Bank Group for term loan (A)
    
    $
    31,814,135Note payable to the Iowa Department of Economic Development (B)
    
    
    270,000Note payable to the Iowa Department of Transportation (C)
    
    
    285,431$
    32,369,566
 (A)
    
    On October 26, 2006, the Company entered into a $34,715,000 construction-term loan
agreement which was used to complete the biodiesel project. The loan consisted of two
phases: a construction phase where the Company made periodic requests for fund advances
to meet construction obligations and at the completion of construction the loan converted
to a senior debt instrument. The note bears variable interest at prime plus 0.75% ( 4.0%
as of December 31, 2008) and is due in monthly principal and interest payments of $373,000.
 Debt service reserve
 Capital improvements reserve
 Sinking fund
 (B)
    
    The Company has a $300,000 loan agreement and a $100,000 forgivable loan agreement with
the Iowa Department of Economic Development. The $300,000 loan is noninterest-bearing and
due in monthly payments of $5,000 beginning December 2006 for a term of 60 months with a
balance as of December 31, 2008 of $270,000. Borrowings under this agreement are
collateralized by substantially all of the Companys assets and will be subordinate to the
$34,715,000 of financial institution debt. The $100,000 loan is forgivable upon the
completion of 36 months of the 60 month term.
  (C)
    
    The Company has a $132,000 loan agreement and a $168,000 forgivable loan agreement with
the Iowa Department of Transportation/Rail Development. The $132,000 loan bears an interest
rate of 3.67% for five years, due in semi-annual payments of $14,569 beginning December
2008 for a term of five years with a balance as of December 31, 2008 of $117,431. Borrowing
under this agreement is collateralized by substantially all of the Companys assets and is
not subordinate to the $34,715,000 of financial institution debt. The $168,000 loan is
forgivable at the end of the five year term provided all payments were made on the $132,000
loan.
   9




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note 4. Contingencies
  Note 5. Going Concern
    10




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Item 2. Managements Discussion and Analysis or Plan of Operations
 Forward Looking Statements
            
    
    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;
          11




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Overview
   
    
    The inability to obtain adequate amounts of feedstock in a timely manner;
 
    
    The inability to obtain adequate amounts of feedstock at competitive costs;
 
    
    Lack of demand for biodiesel;
 
    
    Lack of biodiesel contracts at profitable margins; and
 
    
    Inadequate funds to obtain feedstock due to having to pay for feedstock while
waiting for payments from our biodiesel sales.
   12




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Results of Operations for the Three Months Ended December 31, 2008 and 2007
  Three Months Ended December 31,
    
    
    Three Months Ended December 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    11,287,982
    
    
    
    100.00
    %
    
    $
    12,904,415
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    11,771,075
    
    
    
    104.28
    %
    
    
    13,625,269
    
    
    
    105.59
    %Gross (Loss)
    
    
    (483,093
    )
    
    
    (4.28
    %)
    
    
    (720,854
    )
    
    
    (5.59
    %)Operating Expenses
    
    
    466,097
    
    
    
    4.13
    %
    
    
    426,773
    
    
    
    3.31
    %Operating (Loss)
    
    
    (949,190
    )
    
    
    (8.41
    %)
    
    
    (1,147,627
    )
    
    
    (8.89
    %)Interest Income
    
    
    13,099
    
    
    
    0.12
    %
    
    
    27,024
    
    
    
    0.21
    %Interest Expense
    
    
    (380,658
    )
    
    
    (3.37
    %)
    
    
    (733,282
    )
    
    
    (5.68
    %)Net (Loss)
    
    
    (1,316,749
    )
    
    
    (11.67
    %)
    
    
    (1,853,885
    )
    
    
    (14.37
    %)
   13




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Revenues
  Three Months Ended December 31,
    
    
    Three Months Ended December 31,2008
    
    
    2007Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    10,964,425
    
    
    
    97
    %
    
    $
    12,590,160
    
    
    
    98
    %Glycerin Sales
    
    $
    255,851
    
    
    
    2
    %
    
    $
    295,672
    
    
    
    2
    %Fatty Acid
and Soapstock Sales
    
    $
    67,706
    
    
    
    1
    %
    
    
    18,583
    
    
    
    0
    %$
    11,287,982
    
    
    
    100
    %
    
    $
    12,904,415
    
    
    
    100
    %
     14




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15




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Cost of Goods Sold
        16




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Operating Expenses
  Other Income (Expenses)
    17




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Changes in Financial Condition
  December 31,
    
    
    September 30,2008
    
    
    2008Current Assets
    
    $
    7,665,218
    
    
    $
    11,178,526Total Assets
    
    $
    47,499,145
    
    
    $
    51,242,454Current Liabilities
    
    $
    33,213,904
    
    
    $
    35,640,464Members Equity
    
    $
    14,285,241
    
    
    $
    15,601,990
 Current Assets
 Current Liabilities
 Members Equity
 Liquidity and Capital Resources
 Cash Flow from Operating Activities .
 Cash Flow used in Investing Activities .
 Cash Flow used in Financing Activities .
 Short-Term and Long-Term Debt Sources
 The Wall Street Journal
  18




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Grants and Government Programs
    19




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Additional Equity Capital and Debt Financing
  
    
    Raising equity through one or more private placement offerings or a state
registered offering of the Companys membership units;
    
    Seeking additional sources of short-term debt financing and credit facilities;
    
    Refinancing our current debt financing and credit facilities; or
    
    Seeking strategic business opportunities, including with other biodiesel plants.
  Commodity Price Risk Protection
    Distribution to Unit Holders
   20




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Critical Accounting Estimates
  Revenue Recognition
  Derivative Instruments and Hedging Activities
  Off-balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T. Controls And Procedures
     21




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to Security Holders.
  
 Item 5. Other Information.
   22




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Item 6. Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing31.1
    
    
    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 1350
    
    *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    *
 (*)
    
    Filed herewith. 
 SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate:      February 17, 2009
    /s/ Michael BohannanMichael BohannanChairman and PresidentDate:      February 17, 2009
    /s/ Todd WillsonTodd WillsonChief Financial Officer  23