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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 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, 2010
 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 333-135729
 
 ONE EARTH ENERGY, LLC
 (Exact name of registrant as specified in its charter)
 
 Illinois
    
    20-3852246(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 202 N. Jordan Drive, Gibson City, Illinois 60936
(Address of principal executive offices) (Zip Code)
 (217) 784-5321
(Registrants telephone number, including area code)
 
 o þ
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



INDEX
 PagePART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATION
    
    
    20Item 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Removed and Reserved
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ONE EARTH ENERGY, LLC

Condensed Balance Sheets

Unaudited
 June 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    14,662
    
    
    $
    12,099Accounts receivable, net
    
    
    5,780
    
    
    
    5,457Inventory, net
    
    
    5,161
    
    
    
    6,290Prepaid expenses
    
    
    1,615
    
    
    
    1,579Other current assets
    
    
    1,764
    
    
    
    1,276Total current assets
    
    
    28,982
    
    
    
    26,701Property and equipment, net
    
    
    144,163
    
    
    
    148,709Deferred financing costs, net
    
    
    1,119
    
    
    
    1,259Restricted cash
    
    
    20
    
    
    
    20Other assets
    
    
    525
    
    
    
    595Total assets
    
    $
    174,809
    
    
    $
    177,284Liabilities and equity:Current liabilities:Accounts payable, trade
    
    $
    1,915
    
    
    $
    1,016Current portion of long-term debt
    
    
    8,628
    
    
    
    8,089Accrued real estate taxes
    
    
    1,438
    
    
    
    1,930Derivative financial instruments
    
    
    1,900
    
    
    
    1,413Other current liabilities
    
    
    1,385
    
    
    
    1,332Total current liabilities
    
    
    15,266
    
    
    
    13,780Long-term liabilities:Long-term debt
    
    
    74,550
    
    
    
    89,910Derivative financial instruments
    
    
    4,295
    
    
    
    3,818Total long-term liabilities
    
    
    78,845
    
    
    
    93,728Commitments and contingenciesEquity:Members capital (13,781 units issued and outstanding in
2010 and 2009)
    
    
    65,215
    
    
    
    65,215Retained earnings
    
    
    15,483
    
    
    
    4,561Total members equity
    
    
    80,698
    
    
    
    69,776Total liabilities and equity
    
    $
    174,809
    
    
    $
    177,284
   3




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ONE EARTH ENERGY, LLC

Condensed Statements Of Operations

Unaudited
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands, Except Per Share Amounts)Revenues
    
    $
    50,346
    
    
    $
    
    
    
    $
    103,585
    
    
    $
    Cost of sales
    
    
    43,672
    
    
    
    472
    
    
    
    88,336
    
    
    
    606Gross profit (loss)
    
    
    6,674
    
    
    
    (472
    )
    
    
    15,249
    
    
    
    (606
    )Selling, general and administrative expenses
    
    
    (284
    )
    
    
    (335
    )
    
    
    (578
    )
    
    
    (442
    )Operating income (loss)
    
    
    6,390
    
    
    
    (807
    )
    
    
    14,671
    
    
    
    (1,048
    )Interest and other income
    
    
    28
    
    
    
    28
    
    
    
    48
    
    
    
    68Interest expense
    
    
    (703
    )
    
    
    (150
    )
    
    
    (1,424
    )
    
    
    (150
    )(Losses) gains on derivative financial instruments, net
    
    
    (1,304
    )
    
    
    1,214
    
    
    
    (2,373
    )
    
    
    1,061Net income (loss)
    
    $
    4,411
    
    
    $
    285
    
    
    $
    10,922
    
    
    $
    (69
    )Weighted average units outstanding  basic and diluted
    
    
    14
    
    
    
    14
    
    
    
    14
    
    
    
    14Basic and diluted net income (loss) per unit
    
    $
    315.07
    
    
    $
    20.36
    
    
    $
    780.14
    
    
    $
    (4.93
    )
   4




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ONE EARTH ENERGY, LLC

Condensed Statements Of Cash Flows

Unaudited
 Six Months EndedJune 30,2010
    
    
    2009(In Thousands)Cash flows from operating activities:Net income (loss)
    
    $
    10,922
    
    
    $
    (69
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    4,899
    
    
    
    27Derivative financial instruments
    
    
    964
    
    
    
    (1,062
    )Changes in assets and liabilities:Accounts receivable
    
    
    (323
    )
    
    
    (26
    )Inventory
    
    
    1,129
    
    
    
    (5,641
    )Other assets
    
    
    (454
    )
    
    
    (1,638
    )Accounts payable, trade
    
    
    899
    
    
    
    1,108Other liabilities
    
    
    (439
    )
    
    
    469Net cash provided by (used in) operating activities
    
    
    17,597
    
    
    
    (6,832
    )Cash flows from investing activities:Capital expenditures
    
    
    (213
    )
    
    
    (31,532
    )Restricted cash
    
    
    
    
    
    
    (20
    )Net cash used in investing activities
    
    
    (213
    )
    
    
    (31,552
    )Cash flows from financing activities:Payments of long-term debt
    
    
    (14,821
    )
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    41,205Net cash (used in) provided by financing activities
    
    
    (14,821
    )
    
    
    41,205Net increase in cash and cash equivalents
    
    
    2,563
    
    
    
    2,821Cash and cash equivalents, beginning of period
    
    
    12,099
    
    
    
    16Cash and cash equivalents, end of period
    
    $
    14,662
    
    
    $
    2,837Non cash investing activities  Accrued capital expenditures
    
    $
    
    
    
    $
    2,000
   5




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Note 1. Condensed Financial Statements
   Note 2. Accounting Policies
  Revenue Recognition
  Quarter Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    June 30, 2010Ethanol
    
    $
    41,486
    
    
    $
    85,884Dried distillers grains
    
    
    8,820
    
    
    
    17,608Wet
distillers grains
    
    
    40
    
    
    
    93Total
    
    $
    50,346
    
    
    $
    103,585
 Cost of Sales
   6




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Selling, General and Administrative Expenses
  Interest Cost
  Financial Instruments
 Derivatives and Hedging,
 Income Taxes
  Inventories
  June 30,
    
    
    December 31,2010
    
    
    2009Ethanol and other finished goods, net
    
    $
    1,937
    
    
    $
    1,558Work in process, net
    
    
    1,209
    
    
    
    1,235Grain and other raw materials
    
    
    2,015
    
    
    
    3,497Total
    
    $
    5,161
    
    
    $
    6,290
  7




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Property and Equipment
  Impairment or Disposal of Long-Lived Assets
 Deferred Financing Costs
  Years Ended December 31,
    
    AmortizationRemainder of 2010
    
    $
    1752011
    
    
    2862012
    
    
    2482013
    
    
    2132014
    
    
    197Total
    
    $
    1,119
 Comprehensive Income (Loss)
  Accounting Changes and Recently Issued Accounting Standards
  Fair Value
Measurements and Disclosures
  8




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Note 3. Members Equity
     Note 4. Property and Equipment
  June 30,
    
    
    December 31,2010
    
    
    2009Land and improvements
    
    $
    14,338
    
    
    $
    14,318Machinery and equipment
    
    
    117,529
    
    
    
    117,442Buildings and improvements
    
    
    21,251
    
    
    
    21,237Furniture and fixtures
    
    
    600
    
    
    
    518Construction in progress
    
    
    35
    
    
    
    24Property and equipment, gross
    
    
    153,753
    
    
    
    153,539Less: accumulated depreciation
    
    
    (9,590
    )
    
    
    (4,830
    )Property and equipment, net
    
    $
    144,163
    
    
    $
    148,709
  9




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Note 5. Long-Term Debt
      Years Ended December 31,
    
    MaturitiesRemainder of 2010
    
    $
    4,4562011
    
    
    9,6392012
    
    
    10,7912013
    
    
    11,2292014
    
    
    47,063Total
    
    $
    83,178
   10




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Note 6. Fair Value
 Fair Value Measurements and
Disclosures
      Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueDerivative liabilities
    
    $
    
    
    
    $
    6,195
    
    
    $
    
    
    
    $
    6,195
  11




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueDerivative liabilities
    
    $
    
    
    
    $
    5,231
    
    
    $
    
    
    
    $
    5,231
 Note 7. Financial Instruments
     Notional
    
    
    Fair ValueAmount
    
    
    LiabilityInterest rate swaps
    
    $
    70,846
    
    
    $
    6,195
      12




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ONE EARTH ENERGY, LLC
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2010
 Note 8. Related-Party Transactions
    Note 9. Commitments and Contingencies
   13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Statements
  Critical Accounting Policies and Estimates
  Overview
      14




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Results of Operations
 Comparison of Three Months and Six Months Ended June 30, 2010 and 2009
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Average selling price per gallon of ethanol
    
    $
    1.57
    
    
    $
    
    
    
    $
    1.64
    
    
    $
    Average selling price per ton of dried
distiller grains
    
    $
    117.81
    
    
    $
    
    
    
    $
    121.43
    
    
    $
    Average selling price per ton of wet
distiller grains
    
    $
    30.14
    
    
    $
    
    
    
    $
    26.79
    
    
    $
    Average cost per bushel of grain
    
    $
    3.54
    
    
    $
    
    
    
    $
    3.59
    
    
    $
    Average cost of natural gas (per mmbtu)
    
    $
    4.32
    
    
    $
    
    
    
    $
    4.89
    
    
    $
    
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Ethanol
    
    $
    41,486
    
    
    $
    
    
    
    $
    85,885
    
    
    $
    Dried distiller grains
    
    
    8,820
    
    
    
    
    
    
    
    17,608
    
    
    
    Wet distiller grains
    
    
    40
    
    
    
    
    
    
    
    92
    
    
    
    Total
    
    $
    50,346
    
    
    $
    
    
    
    $
    103,585
    
    
    $
    
   15




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Trends and Uncertainties Impacting the Ethanol Industry and Our Operations
  Economic Downturn
   16




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Corn Prices
   Ethanol Industry Competition
  Distillers Grains Marketing
  Technology Developments
    17




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Government Legislation and Regulations
  Liquidity and Capital Resources
        
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
   18




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Commodity Price Risk
   ApproximateHypothetical
    
    
    AdverseVolume for the quarter
    
    
    
    
    Adverse Change
    
    
    Change toended June 30, 2010
    
    
    Unit of Measure
    

in Price
    
    
    IncomeNatural Gas
    
    
    750,087
    
    
    MMBtu
    
    
    10
    %
    
    $
    324,000Ethanol
    
    
    26,578,135
    
    
    Gallons
    
    
    10
    %
    
    $
    4,148,000Corn
    
    
    9,441,102
    
    
    Bushels
    
    
    10
    %
    
    $
    3,318,000ApproximateHypothetical
    
    
    AdverseVolume for the six
months
    
    
    
    
    Adverse Change
    
    
    Change toended
June 30, 2010
    
    
    Unit of Measure
    

in
Price
    
    
    IncomeNatural Gas
    
    
    1,514,847
    
    
    MMBtu
    
    
    10
    %
    
    $
    740,000Ethanol
    
    
    52,524,774
    
    
    Gallons
    
    
    10
    %
    
    $
    8,597,000Corn
    
    
    18,823,728
    
    
    Bushels
    
    
    10
    %
    
    $
    6,701,000
 
 Item 4. Controls and Procedures
  
    
    Our disclosure controls and procedures did not adequately ensure the timely
filing of our periodic reports on Form 10-Q for the quarters ended March 31, 2010
and June 30, 2010.
    
    We had a material weakness in our internal control over financial reporting
with respect to our controls over reconciliation of member share counts, as
disclosed in our 2009 Annual Report on Form 10-K as filed with the Securities and
Exchange Commission on November 8, 2010.
   19




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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
  Dividend Policy
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
   20




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Item 6. Exhibits
  31.1
    
    
    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. § 1350

*32.2
    
    
    Certificate Pursuant to 18 U.S.C. § 1350.

*
 
 (*)
    
    Filed herewith. 
 SIGNATURES
  ONE EARTH ENERGY, LLCDate: November 15, 2010
    
    /s/ Steven Kelly

Steven KellyPresident (Principal Executive Officer)Date: November 15, 2010
    
    /s/ Larry Brees

Larry BreesChief Financial Officer(Principal Financial and Accounting Officer)
  21