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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 September 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)
 
 þ o
 o o
  Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ(Do not check if a smaller reporting company)

Smaller reporting company o
 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
    
    
    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
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Removed and Reserved
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22Exhibit 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
 September 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    13,409
    
    
    $
    12,099Accounts receivable, net
    
    
    9,024
    
    
    
    5,457Inventory
    
    
    7,008
    
    
    
    6,290Prepaid expenses
    
    
    1,775
    
    
    
    1,579Other current assets
    
    
    1,816
    
    
    
    1,276Total current assets
    
    
    33,032
    
    
    
    26,701Property and equipment, net
    
    
    144,196
    
    
    
    148,709Deferred financing costs, net
    
    
    1,049
    
    
    
    1,259Restricted cash
    
    
    20
    
    
    
    20Other assets
    
    
    525
    
    
    
    595Total assets
    
    $
    178,822
    
    
    $
    177,284Liabilities and equity:Current liabilities:Accounts payable, trade
    
    $
    1,724
    
    
    $
    1,016Current portion of long-term debt
    
    
    8,265
    
    
    
    8,089Accrued real estate taxes
    
    
    707
    
    
    
    1,930Derivative financial instruments
    
    
    2,101
    
    
    
    1,413Other current liabilities
    
    
    1,973
    
    
    
    1,332Total current liabilities
    
    
    14,770
    
    
    
    13,780Long-term liabilities:Long-term debt
    
    
    72,601
    
    
    
    89,910Derivative financial instruments
    
    
    4,482
    
    
    
    3,818Total long-term liabilities
    
    
    77,083
    
    
    
    93,728Commitments and contingenciesEquity:Members capital (13,781 units issued and outstanding in
2010 and 2009)
    
    
    65,215
    
    
    
    65,215Retained earnings
    
    
    21,754
    
    
    
    4,561Total members equity
    
    
    86,969
    
    
    
    69,776Total liabilities and equity
    
    $
    178,822
    
    
    $
    177,284
   3




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ONE EARTH ENERGY, LLC
Condensed Statements Of Operations
Unaudited
 Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands, Except Per Share Amounts)Revenues
    
    $
    55,594
    
    
    $
    45,607
    
    
    $
    159,179
    
    
    $
    45,607Cost of sales
    
    
    47,338
    
    
    
    40,775
    
    
    
    135,674
    
    
    
    41,381Gross profit
    
    
    8,256
    
    
    
    4,832
    
    
    
    23,505
    
    
    
    4,226Selling, general and administrative expenses
    
    
    (241
    )
    
    
    (195
    )
    
    
    (819
    )
    
    
    (637
    )Operating income
    
    
    8,015
    
    
    
    4,637
    
    
    
    22,686
    
    
    
    3,589Interest and other income
    
    
    32
    
    
    
    18
    
    
    
    80
    
    
    
    86Interest expense
    
    
    (708
    )
    
    
    (921
    )
    
    
    (2,132
    )
    
    
    (1,071
    )Losses on derivative financial instruments, net
    
    
    (1,068
    )
    
    
    (1,278
    )
    
    
    (3,441
    )
    
    
    (217
    )Net income
    
    $
    6,271
    
    
    $
    2,456
    
    
    $
    17,193
    
    
    $
    2,387Weighted average units outstanding  basic and diluted
    
    
    14
    
    
    
    14
    
    
    
    14
    
    
    
    14Basic and diluted net income per unit
    
    $
    447.93
    
    
    $
    175.43
    
    
    $
    1,228.07
    
    
    $
    170.50
   4




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##### Table of Contents



ONE EARTH ENERGY, LLC
Condensed Statements Of Cash Flows
Unaudited
 Nine Months EndedSeptember 30,2010
    
    
    2009(In Thousands)Cash flows from operating activities:Net income
    
    $
    17,193
    
    
    $
    2,387Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    7,350
    
    
    
    2,431Derivative financial instruments
    
    
    1,352
    
    
    
    217Changes in assets and liabilities:Accounts receivable
    
    
    (3,567
    )
    
    
    (5,219
    )Inventory
    
    
    (718
    )
    
    
    (4,293
    )Other assets
    
    
    (666
    )
    
    
    (1,664
    )Accounts payable, trade
    
    
    708
    
    
    
    (6,408
    )Other liabilities
    
    
    (582
    )
    
    
    1,193Net cash provided by (used in) operating activities
    
    
    21,070
    
    
    
    (11,356
    )Cash flows from investing activities:Capital expenditures
    
    
    (2,627
    )
    
    
    (24,472
    )Restricted cash
    
    
    
    
    
    
    (20
    )Net cash used in investing activities
    
    
    (2,627
    )
    
    
    (24,492
    )Cash flows from financing activities:Payments of long-term debt
    
    
    (17,133
    )
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    43,974Net cash (used in) provided by financing activities
    
    
    (17,133
    )
    
    
    43,974Net increase in cash and cash equivalents
    
    
    1,310
    
    
    
    8,126Cash and cash equivalents, beginning of period
    
    
    12,099
    
    
    
    16Cash and cash equivalents, end of period
    
    $
    13,409
    
    
    $
    8,142Non cash investing activities  Accrued capital expenditures
    
    $
    
    
    
    $
    2,000
   5




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
 Note 1. Condensed Financial Statements
   Note 2. Accounting Policies
  Revenue Recognition
  Quarter Ended
    
    
    Nine Months EndedSeptember 30, 2010
    
    
    September 30, 2010Ethanol
    
    $
    46,180
    
    
    $
    132,064Dried distillers grains
    
    
    9,366
    
    
    
    26,974Wet distillers grains
    
    
    48
    
    
    
    141Total
    
    $
    55,594
    
    
    $
    159,179
 Quarter Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2009Ethanol
    
    $
    38,784
    
    
    $
    38,784Dried distillers grains
    
    
    6,773
    
    
    
    6,773Wet distillers grains
    
    
    50
    
    
    
    50Total
    
    $
    45,607
    
    
    $
    45,607
  6




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
 Cost of Sales
  Selling, General and Administrative Expenses
  Interest Cost
  Financial Instruments
 Derivatives and Hedging,
 Income Taxes
   7




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
 Inventories
  September 30,
    
    
    December 31,2010
    
    
    2009Ethanol and other finished goods
    
    $
    1,466
    
    
    $
    1,558Work in process, net
    
    
    1,510
    
    
    
    1,235Grain and other raw materials
    
    
    4,032
    
    
    
    3,497Total
    
    $
    7,008
    
    
    $
    6,290
 Property and Equipment
  Impairment or Disposal of Long-Lived Assets
 Deferred Financing Costs
  Years Ended December 31,
    
    AmortizationRemainder of 2010
    
    $
    1052011
    
    
    2862012
    
    
    2482013
    
    
    2132014
    
    
    197Total
    
    $
    1,049
 Comprehensive Income
  Accounting Changes and Recently Issued Accounting Standards
   8




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
 Fair Value
Measurements and Disclosures
 Note 3. Members Equity
      9




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
 Note 4. Property and Equipment
  September 30,
    
    
    December 31,2010
    
    
    2009Land and improvements
    
    $
    14,338
    
    
    $
    14,318Machinery and equipment
    
    
    117,534
    
    
    
    117,442Buildings and improvements
    
    
    21,251
    
    
    
    21,237Furniture and fixtures
    
    
    600
    
    
    
    518Construction in progress
    
    
    2,443
    
    
    
    24Property and equipment, gross
    
    
    156,166
    
    
    
    153,539Less: accumulated depreciation
    
    
    (11,970
    )
    
    
    (4,830
    )Property and equipment, net
    
    $
    144,196
    
    
    $
    148,709
 Note 5. Long-Term Debt
     10




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
  Years Ended December 31,
    
    MaturitiesRemainder of 2010
    
    $
    2,1442011
    
    
    9,6392012
    
    
    10,7912013
    
    
    11,2292014
    
    
    47,063Total
    
    $
    80,866
  Note 6. Fair Value
 Fair Value Measurements and
Disclosures
      11




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueDerivative liabilities
    
    $
    
    
    
    $
    6,583
    
    
    $
    
    
    
    $
    6,583
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueDerivative liabilities
    
    $
    
    
    
    $
    5,231
    
    
    $
    
    
    
    $
    5,231
 Note 7. Financial Instruments
     Notional
    
    
    Fair ValueAmount
    
    
    LiabilityInterest rate swaps
    
    $
    69,508
    
    
    $
    6,583
  12




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ONE EARTH ENERGY, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 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 Nine Months Ended September 30, 2010 and 2009
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Average selling price per gallon of ethanol
    
    $
    1.68
    
    
    $
    1.57
    
    
    $
    1.65
    
    
    $
    1.57Average selling price per ton of dried
distiller grains
    
    $
    118.53
    
    
    $
    98.11
    
    
    $
    116.94
    
    
    $
    98.11Average
selling price per ton of wet distiller grains
    
    $
    21.80
    
    
    $
    30.95
    
    
    $
    24.85
    
    
    $
    30.95Average cost per bushel of grain
    
    $
    3.66
    
    
    $
    3.54
    
    
    $
    3.60
    
    
    $
    3.57Average cost of natural gas (per mmbtu)
    
    $
    4.69
    
    
    $
    3.52
    
    
    $
    4.88
    
    
    $
    3.58
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Ethanol
    
    $
    46,180
    
    
    $
    38,784
    
    
    $
    132,064
    
    
    $
    38,784Dried distiller grains
    
    
    9,366
    
    
    
    6,773
    
    
    
    26,974
    
    
    
    6,773Wet distiller grains
    
    
    48
    
    
    
    50
    
    
    
    141
    
    
    
    50Total
    
    $
    55,594
    
    
    $
    45,607
    
    
    $
    159,179
    
    
    $
    45,607
  15




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16




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Trends and Uncertainties Impacting the Ethanol Industry and Our Operations
  Economic Downturn
  Corn Prices
   Blending Wall
    17




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Ethanol Industry Competition
  Distillers Grains Marketing
  Technology Developments
   Government Legislation and Regulations
   18




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Liquidity and Capital Resources
        
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
   19




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Commodity Price Risk
   ApproximateVolume for the quarter
    
    
    
    
    
    
    Hypothetical
    
    
    Adverseended September 30,
    
    
    
    
    
    
    Adverse Change
    
    
    Change to2010
    
    
    Unit of Measure
    
    
    in Price
    
    
    IncomeNatural Gas
    
    
    745,577
    
    
    MMBtu
    
    
    10
    %
    
    $
    338,000Ethanol
    
    
    27,431,288
    
    
    Gallons
    
    
    10
    %
    
    $
    4,647,000Corn
    
    
    9,801,327
    
    
    Bushels
    
    
    10
    %
    
    $
    3,601,000
 ApproximateVolume for the nine
    
    
    
    
    
    
    Hypothetical
    
    
    Adversemonths ended
    
    
    
    
    
    
    Adverse Change
    
    
    Change toSeptember 30, 2010
    
    
    Unit of Measure
    
    
    in Price
    
    
    IncomeNatural Gas
    
    
    2,260,424
    
    
    MMBtu
    
    
    10
    %
    
    $
    1,079,000Ethanol
    
    
    79,956,062
    
    
    Gallons
    
    
    10
    %
    
    $
    13,240,000Corn
    
    
    28,625,054
    
    
    Bushels
    
    
    10
    %
    
    $
    10,300,000
 
 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.
   20




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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
  
 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.  21




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SIGNATURES
  ONE EARTH ENERGY, LLCDate:  November 15, 2010
    /s/ Steven KellySteven KellyPresident (Principal Executive Officer)Date:  November 15, 2010
    /s/ Larry BreesLarry BreesChief Financial Officer (Principal Financial and
Accounting Officer)  22