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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 June 30, 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. Financial Statements (Unaudited)
    
    
    1Balance Sheets
    
    
    1Statements of Operations
    
    
    2Statements of Cash Flows
    
    
    3Notes to Unaudited Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Disclosure Regarding Forward-Looking Statements
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    20PART II - OTHER INFORMATION
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22SIGNATURES
    
    
    23Exhibit Index
    
    
    24Coal Sales OrderCoal Sales Order302 Certification of Chief Executive Officer302 Certification of Chief Financial OfficerSection 906 CertificationSection 906 Certification
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PART I  FINANCIAL INFORMATION
 
  RED TRAIL ENERGY, LLC
 
  June 30, 2007
    
    
    December 31, 2006(Unaudited)ASSETSCURRENT ASSETSCash and equivalents
    
    $
    11,540,822
    
    
    $
    421,722Accounts receivable
    
    
    4,300,430
    
    
    
    Derivative instrument at fair value
    
    
    10,925
    
    
    
    320,341Prepaid expenses
    
    
    35,191
    
    
    
    63,782Inventory
    
    
    7,817,610
    
    
    
    3,956,129Interest Rate Swap at fair value
    
    
    274,060
    
    
    
    Total current assets
    
    
    23,979,038
    
    
    
    4,761,974PROPERTY AND EQUIPMENTLand
    
    
    300,602
    
    
    
    300,602Equipment
    
    
    77,996,393
    
    
    
    151,851Land improvements
    
    
    3,879,911
    
    
    
    Buildings
    
    
    5,312,995
    
    
    
    313,295Construction in progress
    
    
    
    
    
    
    83,290,00887,489,901
    
    
    
    84,055,756Less accumulated depreciation
    
    
    2,843,507
    
    
    
    16,016Total property and equipment, net
    
    
    84,646,394
    
    
    
    84,039,740OTHER ASSETSDebt issuance costs, net of amortization
    
    
    875,611
    
    
    
    982,574Deposits
    
    
    80,000
    
    
    
    80,000Total other assets
    
    
    955,611
    
    
    
    1,062,574Total Assets
    
    $
    109,581,043
    
    
    $
    89,864,288LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESCurrent maturities of long-term debt
    
    $
    3,424,216
    
    
    $
    2,909,228Accounts payable
    
    
    8,946,972
    
    
    
    4,437,601Accrued expenses
    
    
    2,285,995
    
    
    
    2,323,476Market value  interest rate swap
    
    
    
    
    
    
    110,935Total current liabilities
    
    
    14,657,183
    
    
    
    9,781,240OTHER LIABILTIIESContracts payable
    
    
    275,000
    
    
    
    275,000Long-term debt, net of current maturities
    
    
    57,491,348
    
    
    
    46,878,960MEMBERS EQUITY
    
    
    37,157,512
    
    
    
    32,929,088Total Liabilities and Members Equity
    
    $
    109,581,043
    
    
    $
    89,864,288
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RED TRAIL ENERGY, LLC
 
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    30,247,829
    
    
    $
    
    
    
    
    49,182,704
    
    
    
    Cost of goods sold
    
    
    25,877,011
    
    
    
    
    
    
    
    40,980,764
    
    
    
    Gross Profit
    
    
    4,370,818
    
    
    
    
    
    
    
    8,201,940General and administrative expenses
    
    
    881,109
    
    
    
    246,523
    
    
    
    1,728,774
    
    
    $
    402,755Operating income (loss)
    
    
    3,489,709
    
    
    
    (246,523
    )
    
    
    6,473,166
    
    
    
    (402,755
    )Other Income (Expense)Grant income
    
    
    
    
    
    
    
    
    
    
    27,750
    
    
    
    Interest expense
    
    
    (1,116,752
    )
    
    
    302,951
    
    
    
    (2,363,801
    )
    
    
    706,664Interest income
    
    
    81,455
    
    
    
    37,792
    
    
    
    90,684
    
    
    
    178,811Other
    
    
    604
    
    
    
    

    
    
    
    525
    
    
    
    Total other income (expense)
    
    
    (1,034,693
    )
    
    
    340,743
    
    
    
    (2,244,842
    )
    
    
    885,475Net Income
    
    $
    2,455,016
    
    
    $
    94,220
    
    
    $
    4,228,324
    
    
    $
    482,720Weighted Average Units Outstanding
    
    
    40,373,970
    
    
    
    40,373,970
    
    
    
    39,873,872
    
    
    
    38,866,794Net Income Per Unit  basic and diluted
    
    $
    0.06
    
    
    $
    0.00
    
    
    $
    0.11
    
    
    $
    0.01
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RED TRAIL ENERGY, LLC
 
  Six Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 30, 2006(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet income
    
    $
    4,228,324
    
    
    $
    482,720Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
    
    
    2,827,491
    
    
    
    Change in derivative instrument fair value
    
    
    309,515
    
    
    
    Amortization
    
    
    106,963
    
    
    
    Non-cash compensation
    
    
    10,000
    
    
    
    Change in fair value of interest rate swap
    
    
    (384,995
    )
    
    
    (706,664
    )Changes in assets and liabilities:(Increase) in accounts receivable
    
    
    (4,300,430
    )
    
    
    (Increase) in inventory
    
    
    (3,861,481
    )
    
    
    Decrease in prepaid expenses
    
    
    28,591
    
    
    
    16,967Increase (decrease) in accounts payable
    
    
    4,965,741
    
    
    
    (1,485,260
    )(Decrease) increase in accrued expenses
    
    
    (47,481
    )
    
    
    43,740Net cash provided by (used in) operating activities
    
    
    3,882,238
    
    
    
    (1,648,497
    )Cash Flows from Investing ActivitiesCapital expenditures
    
    
    (3,890,514
    )
    
    
    (30,235,896
    )Net cash used in investing activities
    
    
    (3,890,514
    )
    
    
    (30,235,896
    )Cash Flows from Financing ActivitiesPayments for debt issuance costs
    
    
        
    
    
    (529,900
    )Payments of debt
    
    
    (11,242
    )Proceeds from long-term debt
    
    
    11,138,618
    
    
    
    6,689,040Member contributions
    
    
    
    
    
    
    6,719,455Net cash provided by financing activities
    
    
    11,127,376
    
    
    
    12,878,595Net Increase (Decrease) in Cash and Equivalents
    
    
    11,119,100
    
    
    
    (19,005,798
    )Cash and Equivalents  Beginning of Period
    
    
    421,722
    
    
    
    19,043,811Cash and Equivalents  End of Period
    
    $
    11,540,822
    
    
    $
    38,013SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the period for interest
    
    $
    2,133,027
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIESDebt issuance costs included in accounts payable
    
    $
    
    
    
    $
    26,078Capital expenditures included in accounts payable
    
    $
    3,841,295
    
    
    $
    7,761,397
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Red Trail Energy, LLC
 
     1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
  Fiscal Reporting Period
  Accounting Estimates
  Reclassifications
  Cash and equivalents
   Derivative Instruments
   4




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Inventory
  June 30, 2007
    
    
    December 31, 2006Raw Materials, including corn, coal, chemicals and supplies
    
    $
    6,061,272
    
    
    $
    3,635,675Work in process
    
    
    602,706
    
    
    
    320,454Ethanol and distillers grain
    
    
    1,153,632
    
    
    
    Total
    
    $
    7,817,610
    
    
    $
    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
  Grants
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Income Taxes
  Organizational and Start Up Costs
  Equity-Based Compensation
   Earnings Per Unit
  Environmental Liabilities
  Revenue Recognition
   Recently Issued Accounting Pronouncements
   6




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2. CONCENTRATIONS
  3. DERIVATIVE INSTRUMENTS
   4. LONG TERM DEBT
  June 30, 2007
    
    
    December 31, 2006Construction loan agreement payable to bank, see below
    
    $
    55,211,740
    
    
    $
    44,060,352Subordinated notes payable, see below
    
    
    5,525,000
    
    
    
    5,525,000Capital lease obligation, see below
    
    
    178,824
    
    
    
    202,836Totals
    
    $
    60,915,564
    
    
    $
    49,788,188Less amounts due within one year
    
    
    3,424,216
    
    
    
    2,909,228Totals
    
    $
    57,491,348
    
    
    $
    46,878,960
  2007
    
    $
    3,424,2162008
    
    
    3,934,4802009
    
    
    4,260,6462010
    
    
    4,566,2382011
    
    
    3,656,371Thereafter
    
    
    41,073,613Total long-term liabilities
    
    $
    60,915,564
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Construction Loan
       Revolving Line of Credit
  Interest Rate Swap Agreement
  Letters of Credit
  Subordinated Debt
  8




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5. LEASES
   December 31,June 30, 2007
    
    
    2006Equipment
    
    $
    216,745
    
    
    $
    216,745Accumulated amortization
    
    
    106,036
    
    
    
    598Totals
    
    $
    110,709
    
    
    $
    216,147
  CapitalOperating Leases
    
    
    Leases2007
    
    $
    27,000
    
    
    $
    61,7012008
    
    
    27,000
    
    
    
    61,7012009
    
    
    27,000
    
    
    
    61,7012010
    
    
    27,000
    
    
    
    15,1452011
    
    
    
    
    
    
    638Total minimum lease commitments
    
    $
    108,000
    
    
    $
    200,888Less amount representing interest
    
    
    
    
    
    
    22,064Present value of minimum lease commitments
included in the preceding long-term
liabilities
    
    
    
    
    
    $
    178,824
 6. MEMBERS EQUITY
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7. GRANTS
     10




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8. COMMITMENTS AND CONTINGENCIES
 Design Build Contract
  Consulting Contracts
    Utility Agreements
    Natural Gasoline Contract
  11




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Marketing Agreements
   Coal Purchase Contract
  Grain Origination Contract
  Chemical Consignment Purchase Contracts
  12




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9. RELATED-PARTY TRANSACTIONS
  June 30, 2007
    
    December 31, 2006Balance SheetAccounts receivable
    
    $
    221,005
    
    
    $
    Accounts payable
    
    
    1,225,623
    
    
    
    46,281Accrued liabilities
    
    
    1,525,000
    
    
    
    1,525,000Corn purchases
    
    
    4,814,768
    
    
    
    172,176Statement of OperationsRevenues
    
    $
    1,277,029
    
    
    $
    Cost of Sales
    
    $
    4,814,768
    
    
    $
    
 
 PART 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
 Disclosure Regarding Forward-Looking Statements
 
    
    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
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maintenance or inspection that may be required;
    
    Changes in our business strategy, capital to support capital improvements and development;
    
    Our ability to maintain a favorable relationship with our lender and comply with the covenants in our
loan agreements;
    
    Energy market movements, crop prospects and weather (including the price of ethanol relative to
gasoline);
    
    Changes in the price of corn or to our estimated corn usage; and
    
    The status of our coal supply contracts, the price of coal, and our ability to use lignite in our coal
combustor.
  Summary
  Liquidity and Capital Resources
 Overview
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Construction loan agreements
  Construction Loan
         
    
    Providing the bank with current and accurate financial statements;
    
    Maintaining certain financial ratios, minimum net worth, and working capital;
    
    Maintaining adequate insurance;
    
    Not making or allowing to be made, any significant change in our business or tax structure; and
    
    Limiting our distributions to members.
  15




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
    
    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
  Cash Flows
  Six Months Ended
    
    Three Month Ended
    
    Six Months Ended
    
    Three Month EndedJune 30, 2007
    
    June 30, 2007
    
    June 30, 2006
    
    June 30, 2006(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Cash Flows from Operating
Activities
    
    
    3,882,238
    
    
    
    1,332,641
    
    
    
    (1,648,497
    )
    
    
    (116,001
    )Cash Flows used in Investing
Activities
    
    
    (3,890,514
    )
    
    
    (345,791
    )
    
    
    (30,235,896
    )
    
    
    (19,282,075
    )Cash Flows from Financing Activities
    
    
    11,127,376
    
    
    
    8,001,382
    
    
    
    12,878,595
    
    
    
    6,688,955
 Cash Flow From Operations
  Cash Flow From Investing Activities
  16




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Cash Flow From Financing Activities
  17




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Results of Operations
  Three Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Amount
    
    
    Amount
    
    
    Amount
    
    
    AmountRevenues
    
    $
    30,247,829
    
    
    $
    
    
    
    $
    49,182,704
    
    
    $
    Costs of Sales
    
    
    25,877,011
    
    
    
    
    
    
    
    40,980,764
    
    
    
    Gross Margin
    
    
    4,370,818
    
    
    
    
    
    
    
    8,201,940
    
    
    
    Operating expenses
    
    
    881,109
    
    
    
    246,523
    
    
    
    1,728,774
    
    
    
    402,755Operating income (loss)
    
    
    3,489,709
    
    
    
    (246,523
    )
    
    
    6,473,166
    
    
    
    (402,755
    )Other Income (Expense)
    
    
    (1,034,693
    )
    
    
    340,743
    
    
    
    (2,244,842
    )
    
    
    885,475Net Income
    
    $
    2,455,016
    
    
    $
    94,220
    
    
    $
    4,228,324
    
    
    $
    482,720
 Results of Operations for the Quarter and Six Months Ended June 30, 2007 as Compared to the
Quarter and Six Months Ended June 30, 2006
 Revenues
  Cost of Sales
  Operating Expenses
  Other Income, Net
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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
  
 ITEM 1A. RISK FACTORS
  Risks related to termination of lignite coal contract with General Industries.
  Risks related to potential ongoing use of
Powder River Basin coal.
  The Company has experience problems
using lignite coal in the coal combustor and may face increased
operating costs if it does not resume using lignite.
  The Company has withheld $3.8 million from its design-builder, Fagen, Inc., related to the coal
combustor.
  21




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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
     Number of Votes For
    
    Length of Initial TermGroup ITim Meuchel
    
    
    46,018,256.66
    
    
    3 yearsFrank Kirschenheiter
    
    
    38,584,579.66
    
    
    3 yearsRoger Berglund
    
    
    26,032,325.33
    
    
    3 yearsGroup IIMike Appert
    
    
    25,845,540
    
    
    2 yearsWilliam Price
    
    
    22,575,997
    
    
    2 yearsGroup IIIJody Hoff
    
    
    21,938,671.33
    
    
    1 yearRonald Aberle
    
    
    21,776,729
    
    
    1 year
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBTS
  22




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SIGNATURES
  RED TRAIL ENERGY, LLCDate: August 14, 2007
    
    By:
    
    /s/ Mick J. MillerMick J. MillerPresident and Chief Executive Officer
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EXHIBIT INDEX
 RED TRAIL ENERGY, LLC
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2007
 10.1*
    
    Coal Sales Order between the Company and
Westmoreland Coal Sales Company dated April 18,
2007 (as disclosed in our Current Report on Form
8-K filed April 23, 2007)10.2*
    
    Coal Sales Order between the Company and
Westmoreland Resources, Inc. dated April 18,
2007 (as disclosed in our Current Report on Form
8-K filed April 23, 2007)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. 24