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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 FOR THE QUARTERLY PERIOD ENDED March 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM      TO
 COMMISSION FILE NUMBER: 000-52033
 RED TRAIL ENERGY, LLC
  NORTH DAKOTA
    
    76-0742311(State or other jurisdiction 
of incorporation or organization)
    
    (IRS Employer
Identification No.)
 
 
 þ o
  o o þ
 o þ




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##### 



PagePART I  FINANCIAL INFORMATION
    
    
    1Item 1. Condensed Financial Statements (Unaudited)
    
    
    1Condensed Balance Sheets
    
    
    1Condensed Statements of Operations
    
    
    2Condensed Statements of Cash Flows
    
    
    3Notes to Condensed Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Cautionary Statement Regarding Forward-Looking Statements
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    20PART II  OTHER INFORMATION
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22CERTIFICATIONSLong Term Revolving NoteVariable Rate NoteFixed Rate NoteCoal Sales OrderCoal Sales Order302 Certification of Chief Executive Officer302 Certification of Chief Financial OfficerSection 906 CertificationSection 906 Certification
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
  RED TRAIL ENERGY, LLC
 
  March 31, 2007
    
    
    December 31, 2006(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETSCash and equivalents
    
    $
    2,552,590
    
    
    $
    421,722Accounts receivable
    
    
    3,214,494
    
    
    
    Derivative instrument
    
    
    37,512
    
    
    
    320,341Prepaid expenses
    
    
    77,275
    
    
    
    63,782Inventory
    
    
    6,705,251
    
    
    
    3,956,129Total current assets
    
    
    12,587,122
    
    
    
    4,761,974PROPERTY AND EQUIPMENTLand
    
    
    300,602
    
    
    
    300,602Equipment
    
    
    73,468,072
    
    
    
    151,851Land improvements
    
    
    8,062,442
    
    
    
    Buildings
    
    
    5,312,996
    
    
    
    313,295Construction in progress
    
    
    
    
    
    
    83,290,00887,144,112
    
    
    
    84,055,756Less accumulated depreciation
    
    
    1,433,322
    
    
    
    16,016Total property and equipment, net
    
    
    85,710,790
    
    
    
    84,039,740OTHER ASSETSDebt issuance costs, net of amortization
    
    
    928,364
    
    
    
    982,574Deposits
    
    
    80,000
    
    
    
    80,000Total other assets
    
    
    1,008,364
    
    
    
    1,062,574Total Assets
    
    $
    99,306,276
    
    
    $
    89,864,288LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESCurrent maturities of long-term debt
    
    $
    2,910,099
    
    
    $
    2,909,228Accounts payable
    
    
    9,823,934
    
    
    
    4,437,601Accrued expenses
    
    
    1,380,629
    
    
    
    2,323,476Market value  interest rate swap
    
    
    198,023
    
    
    
    110,935Total current liabilities
    
    
    14,312,685
    
    
    
    9,781,240OTHER LIABILTIIESContracts payable
    
    
    275,000
    
    
    
    275,000Long-term debt, net of current maturities
    
    
    50,016,195
    
    
    
    46,878,960MEMBERS EQUITY
    
    
    34,702,396
    
    
    
    32,929,088Total Liabilities and Members Equity
    
    $
    99,306,276
    
    
    $
    89,864,288
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RED TRAIL ENERGY, LLC
 
  Quarter Ended
    
    
    Quarter EndedMarch 31,
    
    
    March 31,2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    18,934,975
    
    
    $
    Cost of goods sold
    
    
    15,118,165
    
    
    
    Gross Profit
    
    
    3,816,810
    
    
    
    General and administrative expenses
    
    
    847,796
    
    
    
    156,235Operating income (loss)
    
    
    2,969,014
    
    
    
    (156,235
    )Other Income (Expense)Grant income
    
    
    27,750
    
    
    
    Unrealized gain (loss) on derivative instruments
    
    
    (87,088
    )
    
    
    403,713Interest expense
    
    
    (1,149,528
    )
    
    
    Interest income
    
    
    9,229
    
    
    
    141,018Other
    
    
    3,931
    
    
    
    Total other income (expense)
    
    
    (1,195,706
    )
    
    
    544,731Net Income
    
    $
    1,773,308
    
    
    $
    388,496Weighted Average Units Outstanding
    
    
    40,373,970
    
    
    
    37,340,846Net Income Per Unit  basic and diluted
    
    $
    .04
    
    
    $
    .01
  2




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RED TRAIL ENERGY, LLC
 
  Quarter Ended
    
    
    Quarter EndedMarch 31, 2007
    
    
    March 31, 2006(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    1,773,308
    
    
    $
    (388,496
    )Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:Depreciation
    
    
    1,417,306
    
    
    
    Amortization
    
    
    54,210
    
    
    
    Non-cash compensation
    
    
    5,000
    
    
    
    Unrealized gain (loss) on non-designated hedge agreement
    
    
    87,088
    
    
    
    (403,713
    )Changes in assets and liabilitiesDecrease in derivative instrument
    
    
    282,829
    
    
    
    (Increase) in accounts receivable
    
    
    (3,214,494
    )
    
    
    (Increase) in inventory
    
    
    (2,749,122
    )
    
    
    (Increase) decrease in prepaid expenses
    
    
    (13,493
    )
    
    
    25,345Increase (decrease) in accounts payable
    
    
    3,291,708
    
    
    
    (1,546,419
    )(Decrease) in accrued expenses
    
    
    (947,847
    )
    
    
    3,795Net cash used in operating activities
    
    
    (13,507
    )
    
    
    (1,532,496
    )Cash Flows from Investing ActivitiesCapital expenditures
    
    
    (993,731
    )
    
    
    (10,953,821
    )Net cash used in investing activities
    
    
    (993,731
    )
    
    
    (10,953,821
    )Cash Flows from Financing ActivitiesPayments for debt issuance costs
    
    
    
    
    
    
    (529,815
    )Payments of debt
    
    
    (12,771
    )
    
    
    Proceeds from long-term debt
    
    
    3,150,877
    
    
    
    Proceeds from stock subscriptions held in escrow
    
    
    
    
    
    
    Member contributions
    
    
    
    
    
    
    6,719,455Net cash provided by financing activities
    
    
    3,138,106
    
    
    
    6,189,640Net Increase (Decrease) in Cash and Equivalents
    
    
    2,130,868
    
    
    
    (6,296,677
    )Cash and Equivalents  Beginning of Period
    
    
    421,722
    
    
    
    19,043,811Cash and Equivalents  End of Period
    
    $
    2,552,590
    
    
    $
    12,747,134SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the period for interest
    
    $
    977,997SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIESCapital expenditures included in accounts payable
    
    $
    2,094,625
    
    
    $
    8,912,264
  3




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Red Trail Energy, LLC
 
 
   1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
  Fiscal Reporting Period
  Accounting Estimates
  Cash and equivalents
   Derivative Instruments
   4




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Inventory
  March 31, 2007
    
    
    December 31, 2006Raw Materials, including corn, coal, chemicals and supplies
    
    $
    4,432,165
    
    
    $
    3,635,675Work in process
    
    
    1,007,059
    
    
    
    320,454Ethanol and distillers grain
    
    
    1,266,027
    
    
    
    Total
    
    $
    6,705,251
    
    
    $
    3,956,129
 Property and Equipment
    Category
    
    Average LifeLand improvements
    
    20 yearsBuildings
    
    40 yearsPlant equipment
    
    
    7 to 15 yearsRailroad and rail equipment
    
    20 yearsOffice equipment
    
    
    5 to 7 years
 Debt Issuance Costs
  Fair Value of Financial Instruments
  5




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Grants
   Income Taxes
  Organizational and Start Up Costs
  Equity-Based Compensation
   Earnings Per Unit
  Environmental Liabilities
  6




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Revenue Recognition
   Recently Issued Accounting Pronouncements
  2. CONCENTRATIONS
  3. DERIVATIVE INSTRUMENTS
   4. LONG TERM DEBT
  March 31, 2007
    
    
    December 31, 2006Construction loan agreement payable to bank, see below
    
    $
    47,210,358
    
    
    $
    44,060,352Subordinated notes payable, see below
    
    
    5,525,000
    
    
    
    5,525,000Capital lease obligation, see below
    
    
    190,936
    
    
    
    202,836Totals
    
    $
    52,926,294
    
    
    
    49,788,188Less amounts due within one year
    
    
    2,910,099
    
    
    
    2,909,228Totals
    
    $
    50,016,195
    
    
    $
    46,878,960
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2007
    
    $
    2,910,0992008
    
    
    4,132,0802009
    
    
    4,461,5352010
    
    
    4,772,6772011
    
    
    5,110,106Thereafter
    
    
    31,539,797Total long-term liabilities
    
    $
    52,926,294
  Construction Loan
       Revolving Line of Credit
  Interest Rate Swap Agreement
   8




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Letters of Credit
  Subordinated Debt
  5 LEASES
   March 31, 2007
    
    
    December 31, 2006Equipment
    
    $
    216,745
    
    
    $
    216,745Accumulated amortization
    
    
    6,272
    
    
    
    598Totals
    
    $
    210,473
    
    
    $
    216,147
  Operating Leases
    
    
    Capital Leases2007
    
    $
    27,000
    
    
    $
    56,7722008
    
    
    27,000
    
    
    
    61,7012009
    
    
    27,000
    
    
    
    61,7012010
    
    
    27,000
    
    
    
    34,8612011
    
    
    6,750
    
    
    
    1,277Total minimum lease commitments
    
    $
    114,750
    
    
    $
    216,312Less amount representing interest
    
    
    
    
    
    
    25,376Present value of minimum lease
commitments included in
the preceding long-term
liabilities
    
    
    
    
    
    $
    190,936
 9




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6. MEMBERS EQUITY
        7. GRANTS
   10




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8. COMMITMENTS AND CONTINGENCIES
 Design Build Contract
  Consulting Contracts
     11




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Utility Agreements
    Natural Gasoline Contract
  Marketing Agreements
   Coal Purchase Contract
   12




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Grain Origination Contract
   Chemical Consignment Purchase Contracts
  9. RELATED-PARTY TRANSACTIONS
  March 31, 2007
    
    December 31, 2006Balance SheetAccounts receivable
    
    $
    164,698
    
    
    $
    Accounts payable
    
    
    2,022,048
    
    
    
    46,281Accrued liabilities
    
    
    
    
    
    
    1,525,000Corn purchases
    
    
    2,283,208
    
    
    
    172,176Statement of OperationsRevenues
    
    $
    645,039
    
    
    $
    Expenses
    
    
    7,746
    
    
    
    
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PART 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Disclosure Regarding Forward-Looking Statements
  
    
    The availability and adequacy of our cash flow to meet its requirements, including
payment of loans;
    
    Economic, competitive, demographic, business and other conditions in our local, regional
and national markets;
    
    Changes or developments in laws, regulations or taxes in the ethanol, agricultural or
energy industries;
    
    Actions taken or not taken by third parties, including our suppliers and competitors, as
well as legislative, regulatory, judicial and other governmental authorities;
    
    Competition in the ethanol industry;
    
    The loss of any license or permit;
    
    The loss of our plant due to casualty, weather, mechanical failure or any extended or
extraordinary maintenance or inspection that may be required; and
    
    Changes in our business strategy, capital to support capital improvements and
development.
  Summary
  14




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Liquidity and Capital Resources
 Overview
       Quarter Ended
    
    Quarter EndedMarch 31, 2007
    
    March 31, 2006(Unudited)
    
    (Unudited)Cash Flows from Operating Activities
    
    
    (13,507
    )
    
    
    (1,532,496
    )Cash Flows from Investing Activities
    
    
    (993,731
    )
    
    
    (10,953,821
    )Cash Flows from Financing Activities
    
    
    3,138,106
    
    
    
    6,189,640
 Cash Flow From Operations
  15




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Cash Flow From Investing Activities
  Cash Flow From Financing Activities
  Results of Operations for the Three Months Ended March 31, 2007 and March 31, 2006
  Quarter Ended
    
    
    
    
    
    
    Quarter EndedMarch 31, 2007
    
    
    
    
    
    
    March 31, 2006Amount
    
    
    %
    
    
    Amount
    
    
    %Revenues
    
    $
    18,934,975
    
    
    
    100
    
    
    $
    Costs of Sales
    
    
    15,118,165
    
    
    
    79.8
    
    
    
    Gross Margin
    
    
    3,816,810
    
    
    
    20.2
    
    
    
    Operating expenses
    
    
    847,796
    
    
    
    4.5
    
    
    
    156,235Operating income (loss)
    
    
    2,969,014
    
    
    
    15.7
    
    
    
    (156,235
    )Other Income (Expense)
    
    
    (1,195,706
    )
    
    
    (6.3
    )
    
    
    544,731Net Income
    
    $
    1,773,308
    
    
    
    9.4
    
    
    $
    388,496
 Results of Operations
 Revenues
  Cost of Sales
  Operating Expenses
  16




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Other Income, Net
     Construction loan agreements
  Construction Loan
      17




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
    
    Providing the bank with current and accurate financial statements;
    
    Maintaining certain financial ratios, minimum net worth, and working capital;
    
    Maintaining adequate insurance;
    
    Make, or allow to be made, any significant change in our business or tax structure; and
    
    Limiting our ability to make distributions to members.
  
    
    declaring all the debt owed to the bank immediately due and payable; and
    
    taking possession of all of our assets, including any contract rights.
  Revolving Line of Credit
  Interest Rate Swap Agreement
  Letters of Credit
  Subordinated Debt
  18




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Critical Accounting Estimates
  Off-Balance Sheet Arrangements
  Contractual Obligations
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Commodity Price Risk
   19




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  20




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PART II  OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
 None.
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
 None.
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 None.
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 None.
 ITEM 5. OTHER INFORMATION
 None.
 
 Item 6. Exhibits
 10.1*
    
    Long Term Revolving Note
for $10,000,000, dated
April 16, 2007 between
Red Trail Energy, LLC,
as Borrower, and First
National Bank of Omaha,
as Bank.10.2*
    
    Variable Rate Note for
$17,605,870, dated April
16, 2007 between Red
Trail Energy, LLC, as
Borrower, and First
National Bank of Omaha,
as Bank.10.3*
    
    Fixed Rate Note for
$27,605,870, dated April
16, 2007 between Red
Trail Energy, LLC, as
Borrower, and First
National Bank of Omaha,
as Bank.10.4*
    
    Coal Sales Order dated
April 18, 2007 from
Westmoreland Coal Sales
Company to Red Trail
Energy, LLC**10.5*
    
    Coal Sales Order dated
April 18, 2007 from
Westmoreland Resources,
Inc. to Red Trail
Energy, LLC**31.1
    
    Certification by Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rules
13a-14 and 15d-14 of the Securities Exchange Act of
1934).31.2
    
    Certification by Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rules
13a-14 and 15d-14 of the Securities Exchange Act of
1934).32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 
 *
    
    Filed herewith.**
    
    Confidential treatment has been requested for portions of this exhibit.


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SIGNATURES
  RED TRAIL ENERGY, LLCDate:      May 15, 2007
    By:
    /s/ Mick J. MillerMick J. MillerPresident and Chief Executive Officer 22