##### Table of Contents



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 fiscal quarter ended September 30, 2009
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For
the transition period from  to
.
 Commission file number 000-53202
 HOMELAND ENERGY SOLUTIONS, LLC
  Iowa
    
    20-3919356(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 2779 Highway 24, Lawler, Iowa, 52154
 (563) 238-5555
 þ o
 Yes o
No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company þ
 o þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATION
    
    
    30Item 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    31Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Homeland Energy Solutions, LLC
 Balance Sheets
September 30, 2009 and December 31, 2008
 9/30/2009
    
    
    12/31/2008Unaudited
    
    
    AuditedASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    
    
    
    $
    44,599Accounts receivable
    
    
    5,309,399
    
    
    
    Inventory
    
    
    6,156,291
    
    
    
    Due from broker
    
    
    900,532
    
    
    
    Prepaid and other
    
    
    1,411,152
    
    
    
    115,867Total current assets
    
    
    13,777,374
    
    
    
    160,466PROPERTY AND EQUIPMENTLand and improvements
    
    
    22,437,848
    
    
    
    3,705,585Buildings
    
    
    4,859,131
    
    
    
    Equipment
    
    
    129,595,163
    
    
    
    58,963Construction in progress
    
    
    411,117
    
    
    
    136,065,515157,303,259
    
    
    
    139,830,063Less accumulated depreciation
    
    
    5,783,987
    
    
    
    7,886Total property and equipment
    
    
    151,519,272
    
    
    
    139,822,177OTHER ASSETSLoan fees, net of amortization 2009 $362,074; 2008 $229,382
    
    
    810,898
    
    
    
    943,590Restricted cash
    
    
    10,215,033
    
    
    
    10,044,677Assets held for sale
    
    
    250,000
    
    
    
    Utility rights, net of amortization 2009
$78,672; 2008 $0
    
    
    2,639,496
    
    
    
    2,085,708Total other assets
    
    
    13,915,427
    
    
    
    13,073,975TOTAL ASSETS
    
    $
    179,212,073
    
    
    $
    153,056,6189/30/2009
    
    
    12/31/2008LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESChecks issued in excess of bank balance
    
    $
    1,540,162
    
    
    $
    Accounts payable
    
    
    2,034,414
    
    
    
    2,877,051Derivative instruments
    
    
    450,670
    
    
    
    Retainage payable
    
    
    607,856
    
    
    
    6,532,576Interest payable
    
    
    234,562
    
    
    
    Property tax payable
    
    
    41,852
    
    
    
    6,424Payroll payable
    
    
    140,676
    
    
    
    20,870Current maturities of long term liabilities
    
    
    4,933,336
    
    
    
    20,000Total current liabilities
    
    
    9,983,528
    
    
    
    9,456,921COMMITMENTS AND CONTINGENCIES (NOTE 6)LONG-TERM DEBT, less current maturities
    
    
    73,128,527
    
    
    
    51,636,807MEMBERS EQUITYCapital units, less syndication costs
    
    
    89,572,744
    
    
    
    89,572,744Retained earnings
    
    
    6,527,274
    
    
    
    2,390,146Total members equity
    
    
    96,100,018
    
    
    
    91,962,890TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    179,212,073
    
    
    $
    153,056,618
   3




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Homeland
Energy Solutions, LLC
 Statements of Operations (Unaudited)
 Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded 9/30/09
    
    
    Ended 9/30/08
    
    
    Ended 9/30/09
    
    
    Ended 9/30/08REVENUE, NET OF SHIPPING COSTS
    
    $
    52,934,845
    
    
    $
    
    
    
    $
    92,497,563
    
    
    $
    COSTS OF GOODS SOLD
    
    
    47,307,748
    
    
    
    
    
    
    
    85,441,326
    
    
    
    GROSS PROFIT
    
    
    5,627,097
    
    
    
    
    
    
    
    7,056,237
    
    
    
    OPERATING EXPENSESStart-up costs
    
    
    
    
    
    
    
    
    
    
    70,733
    
    
    
    Asset impairment
    
    
    
    
    
    
    
    
    
    
    480,875
    
    
    
    Professional expenses
    
    
    181,618
    
    
    
    77,777
    
    
    
    384,315
    
    
    
    233,020Filings fees/permits
    
    
    14,853
    
    
    
    
    
    
    
    22,528
    
    
    
    Insurance
    
    
    106,828
    
    
    
    
    
    
    
    228,028
    
    
    
    Office expense
    
    
    25,986
    
    
    
    1,530
    
    
    
    69,392
    
    
    
    6,965Depreciation
    
    
    15,370
    
    
    
    949
    
    
    
    30,707
    
    
    
    2,848Amortization
    
    
    107,004
    
    
    
    
    
    
    
    197,115
    
    
    
    Rent
    
    
    
    
    
    
    2,470
    
    
    
    
    
    
    
    5,105Utilities & communication expense
    
    
    9,900
    
    
    
    898
    
    
    
    27,467
    
    
    
    4,607Wages & benefits
    
    
    129,749
    
    
    
    10,733
    
    
    
    432,023
    
    
    
    32,285Miscellaneous expense
    
    
    93,970
    
    
    
    5,970
    
    
    
    108,831
    
    
    
    16,249TOTAL OPERATING EXPENSES
    
    
    685,278
    
    
    
    100,327
    
    
    
    2,052,014
    
    
    
    301,079OPERATING INCOME (LOSS)
    
    
    4,941,819
    
    
    
    (100,327
    )
    
    
    5,004,223
    
    
    
    (301,079
    )OTHER INCOME (EXPENSE)Interest expense
    
    
    (758,055
    )
    
    
    
    
    
    
    (1,352,253
    )
    
    
    Interest income
    
    
    46,009
    
    
    
    22,156
    
    
    
    185,157
    
    
    
    536,962Grant income
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    (712,046
    )
    
    
    22,156
    
    
    
    (867,096
    )
    
    
    536,962Net income (loss)
    
    $
    4,229,773
    
    
    $
    (78,171
    )
    
    $
    4,137,127
    
    
    $
    235,883Basic & diluted net income (loss) per capital unit
    
    $
    46.25
    
    
    $
    (0.85
    )
    
    $
    45.24
    
    
    $
    2.58Weighted average number of units outstanding for the
calculation of basic & diluted net income per capital unit
    
    
    91,445
    
    
    
    91,445
    
    
    
    91,445
    
    
    
    91,445
   4




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Homeland Energy Solutions, LLC
 Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2009 and 2008
 2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    4,137,127
    
    
    $
    235,883Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    5,972,682
    
    
    
    2,848Unrealized loss (gain) on risk management activities
    
    
    450,670
    
    
    
    Asset impairment
    
    
    480,875
    
    
    
    Increase in restricted cash
    
    
    (170,356
    )
    
    
    Change in working capital components:(Increase) decrease in accounts receivable
    
    
    (5,309,399
    )
    
    
    (Increase) decrease in inventory
    
    
    (6,156,291
    )
    
    
    (Increase) decrease in cash due to (from) broker
    
    
    (900,532
    )
    
    
    (Increase) decrease in prepaid expenses
    
    
    (1,295,285
    )
    
    
    Increase (decrease) in accounts payable
    
    
    1,524,572
    
    
    
    (179,665
    )Increase (decrease) in other current liabilities
    
    
    389,796
    
    
    
    (179,629
    )Net cash (used in) operating activities
    
    
    (876,141
    )
    
    
    (120,563
    )CASH FLOWS FROM INVESTING ACTIVITIESPayments for equipment and construction in progress
    
    
    (26,633,118
    )
    
    
    (66,259,787
    )Payments for other assets
    
    
    (480,558
    )
    
    
    Purchase of land & land options
    
    
    
    
    
    
    (24,374
    )Net cash (used in) investing activities
    
    
    (27,113,676
    )
    
    
    (66,284,161
    )CASH FLOWS FROM FINANCING ACTIVITIESIncrease in outstanding checks in excess of bank balance
    
    
    1,540,162
    
    
    
    3,250Proceeds from long-term borrowing
    
    
    26,592,850
    
    
    
    8,925,248Payments on long-term borrowing
    
    
    (187,794
    )
    
    
    (10,000
    )Payments for rejected subscriptions
    
    
    
    
    
    
    (7,500,000
    )Net cash provided by (used in) financing activities
    
    
    27,945,218
    
    
    
    1,418,498Net (decrease) in cash
    
    $
    (44,599
    )
    
    $
    (64,986,226
    )CASH AND CASH EQUIVALENTSBeginning
    
    
    44,599
    
    
    
    64,986,226Ending
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    1,933,918
    
    
    $
    217,164SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIESAccounts payable related to construction in progress
    
    $
    50,350
    
    
    $
    15,185,160Retainage payable related to construction in progress
    
    
    607,856
    
    
    
    6,379,337Interest capitalized
    
    
    817,183
    
    
    
    38,586Insurance costs capitalized
    
    
    83,423
    
    
    
    216,590Loan fee amortization capitalized
    
    
    58,974
    
    
    
    132,692
   5




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1. Nature of Business and Significant Accounting Policies
   Nature of business
 Significant Accounting Policies:
 Fiscal Reporting Period:
 Accounting Estimates
 Cash and Cash Equivalents
  Accounts Receivable
 Revenue Recognition
  6




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Inventories
 Property and Equipment:
 Estimated Useful
    
    
    
    
    
    
    Net BookLife in Years
    
    
    Cost
    
    
    ValueLand & ImprovementsLand
    
    
    n/a
    
    
    $
    4,772,882
    
    
    
    4,772,882Road Infrastructure
    
    
    20
    
    
    
    13,675,600
    
    
    
    13,334,515General Sitework
    
    
    40
    
    
    
    3,989,366
    
    
    
    3,939,499BuildingsGrain Handling Buildings
    
    
    10-15
    
    
    
    1,492,682
    
    
    
    1,441,832Process Buildings
    
    
    20
    
    
    
    317,122
    
    
    
    309,194Administrative Buildings
    
    
    40
    
    
    
    3,049,327
    
    
    
    3,011,210EquipmentMechanical Equipment
    
    
    15-20
    
    
    
    121,904,632
    
    
    
    116,734,073Rail Handling Equipment
    
    
40
    
    
    
    7,194,277
    
    
    
    7,105,847Administrative &
Maintenance Equipment
    
    
    5-15
    
    
    
    496,254
    
    
    
    459,103Total
    
    
    
    
    
    $
    156,892,142
    
    
    
    151,108,155
  Long-Lived Assets:
   7




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Derivative Instruments
    Intangible Assets
 Loan Fees
    
    
    Utility Rights
    
    
    Total2009
    
    $
    176,923
    
    
    
    245,724
    
    
    
    422,6472010
    
    
    176,923
    
    
    
    245,724
    
    
    
    422,6472011
    
    
    176,923
    
    
    
    207,252
    
    
    
    384,1752012
    
    
    176,923
    
    
    
    168,768
    
    
    
    345,6912013
    
    
    103,206
    
    
    
    168,768
    
    
    
    271,974Thereafter
    
    
    
    
    
    
    1,603,260
    
    
    
    1,603,260Total
    
    $
    810,898
    
    
    
    2,639,496
    
    
    
    3,450,394
 Restricted Cash
  8




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Fair Value
 Grant Income
 Income Taxes
 Net Income (loss) per Unit
 Environmental Liabilities
 Risks and Uncertainties
    9




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Reclassification
 Recently Issued Accounting Standards
    2. Inventory
  September 30, 2009Raw Materials
    
    $
    2,877,045Work in Process
    
    
    1,139,552Finished Goods
    
    
    2,139,694Totals
    
    $
    6,156,291
  10




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3. Debt
 Master Loan Agreement with Home Federal Savings Bank
    Revolving Line of Credit Loan
    11




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Covenants
    4. Members Equity
   5. Related Party Transactions
    12




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6. Commitments, Contingencies and Agreements
  Ethanol, Distillers grain, marketing agreements and major customers
    Three Months
    
    
    Nine MonthsSales ethanol
    
    $
    45,038,000
    
    
    
    77,875,000Sales distiller grains
    
    
    7,896,000
    
    
    
    14,623,000Marketing fees ethanol
    
    
    365,000
    
    
    
    626,000Marketing fees distiller grains
    
    
    167,000
    
    
    
    286,0009/30/09
    
    

    12/31/08Amount due from ethanol marketer
    
    
    4,518,000
    
    
    
    Amount due from distiller marketer
    
    
    746,000
    
    
    
    
   13




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
    
    Refund of sales, service or use taxes paid to contractors and subcontractors during
construction work (estimated at $1,000,000). As of September 30, 2009 the Company has filed
for a refund of sales or use taxes but the funds have not been received or verified. Any
refunds received in the future will be accounted for as a reduction of construction costs.
    
    Investment tax credit (limited to $10,000,000. To be amortized over 5 years). This
Iowa tax credit may be claimed for qualifying expenditures, not to exceed $10,000,000,
directly related to new jobs created by the start-up, location, expansion or modernization
of the company under the program. This credit is to be taken in the year the qualifying
asset is placed into service and is amortized over a 5 year period starting with the 2009
tax return. Since the Company is organized as a limited liability company, under state law
all earnings and tax credits pass through to the members. The investment tax credit will
have no impact on the financial statements.
    
    Local Value-added Property Tax Exemption (estimated at $10,350,000). Chickasaw County
has approved an exemption from taxation on all or a portion of the value added by
improvements to real property directly related to new jobs created by location or expansion
of the company and used in the operations of the company. The property taxes paid on
September 30, 2009 reflected the first portion of the abatement over the 20 year period.
All exemptions will be account for as a reduction of property tax expense.
    2009
    
    $
    3,950,0002010
    
    
    3,950,0002011
    
    
    3,950,0002012
    
    
    3,950,0002013
    
    
    3,870,000Thereafter
    
    
    17,030,000Total anticipated commitments
    
    $
    36,700,000
 7. Lease Obligations
   14




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2009
    
    $
    1,348,5002010
    
    
    1,252,5002011
    
    
    645,7502012
    
    
    66,0002013
    
    
    33,000Total lease commitments
    
    $
    3,345,750
 8. Derivative Instruments
     Balance Sheet
    
    
    Asset Fair
    
    
    Liability FairClassification
    
    
    Value
    
    
    ValueDerivatives not designated as
hedging instruments:Commodity Contracts
    
    Derivative Instruments
    
    
    $
    
    
    
    $
    450,670
  15




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Income Statement
    
    Realized
    
    
    Unrealized
    
    
    Total GainClassification
    
    Gain (Loss)
    
    
    Gain (Loss)
    
    
    (Loss)Derivatives not
designated as
hedging
instruments: Commodity
Contracts for the
three month period
    
    Cost of Goods Sold
    
    $
    1,916,419
    
    
    
    (1,066,032
    )
    
    
    850,387 Commodity
Contracts for the
nine month period
    
    Cost of Goods Sold
    
    $
    3,111,531
    
    
    
    (450,670
    )
    
    
    2,660,861
 9. Fair Value Measurements
      Derivative financial instruments
 Asset held for sale
  Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Other Assets, assets held for sale
    
    $
    250,000
    
    
    $
    
    
    
    $
    
    
    
    $
    250,000Liability, derivative financial
instruments
    
    
    450,670
    
    
    
    450,670
    
    
    
    
    
    
    
    
  16




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Assets heldfor SaleBalance January 1, 2009
    
    $
    Transfers in and/or out of Level 3
    
    
    250,000Ending balance September 30, 2009
    
    $
    250,000
  10. Subsequent Events
   17




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
   
    
    Our ability to satisfy the financial covenants contained in our credit agreements
with our senior lender;
    
    Our ability to operate the ethanol plant profitably and maintain a positive spread
between the price at which we sell our products and our raw materials costs;
    
    Our ability to generate free cash flow to invest in our business and service our
debt;
    
    Volatility of corn, natural gas, ethanol, unleaded gasoline, distillers grain and
other commodities prices and availability;
    
    Changes in general economic conditions or the occurrence of certain events causing
an economic impact in the agriculture, oil or automobile industries;
    
    Changes in interest rates or the lack of credit availability;
    
    Changes in our business strategy, capital improvements or development plans;
    
    Limitations and restrictions contained in the instruments and agreements governing
our indebtedness;
    
    The results of our hedging transactions and other risk management strategies;
    
    Our inelastic demand for and the availability of corn, as it is the only available
feedstock for our plant;
    
    Changes in the environmental regulations or in our ability to comply with the
environmental regulations that apply to our plant site and our anticipated operations;
    
    The effects of mergers, bankruptcies or consolidations in the ethanol industry;
    
    Changes in federal and/or state laws including the Renewable Fuel Standard and
VEETC, or the elimination of any federal and/or state ethanol tax incentives;
    
    Overcapacity within the ethanol industry;
    
    Changes in plant production capacity or technical difficulties in operating the
plant;
    
    Changes and advances in ethanol production technology that may make it more
difficult for us to compete with other ethanol plants utilizing such technology;
    
    Our ability to retain key employees and maintain labor relations;
    
    The development of infrastructure related to the sale and distribution of ethanol;
and
    
    Competition in the ethanol industry and from alternative fuel additives.
  Available Information
 www.homelandenergysolutions.com
  18




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Overview
         19




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Results of Operations for the Three Months Ended September 30, 2009
  Quarter EndedSeptember 30, 2009(Unaudited)Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    52,934,845
    
    
    
    100.00
    %Cost of Goods Sold
    
    $
    47,307,748
    
    
    
    89.37
    %Gross Profit (Loss)
    
    $
    5,627,097
    
    
    
    10.63
    %Operating Expenses
    
    $
    685,278
    
    
    
    1.29
    %Operating Income (Loss)
    
    $
    4,941,819
    
    
    
    9.33
    %Other Income (Expense)
    
    $
    (712,046
    )
    
    
    (1.35
    )%Net Income (Loss)
    
    $
    4,229,773
    
    
    
    7.99
    %
 Revenues
    20




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21




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Cost of Goods Sold
     22




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Operating Expense
  Operating Income (Loss)
   23




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Changes in Financial Condition for the Nine Months Ended September 30, 2009
     Liquidity and Capital Resources
   Nine Months EndedSeptember 30, 2009Net cash (used in) operating activities
    
    $
    (876,141
    )Net cash (used in) investing activities
    
    $
    (27,113,676
    )Net cash provided by financing activities
    
    $
    27,945,218Net decrease in cash
    
    $
    (44,599
    )Cash and cash equivalents, end of period
    
    $
    
   24




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Project Capitalization
       25




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26




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Application of Critical Accounting Estimates and Significant Accounting Policies
     27




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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
   28




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
 
 
 
  Changes in Internal Controls
   29




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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 a Vote of Security Holders
  
 Item 5. Other Information
  
 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.  30




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##### Table of Contents



SIGNATURES
  HOMELAND ENERGY SOLUTIONS, LLCDate: November 12, 2009
    
    /s/ Walter W. Wendland

Walter W. WendlandChief Executive Officer and President(Principal Executive Officer)Date: November 12, 2009
    
    /s/ Christine A. Marchand

Christine A. MarchandChief Financial Officer (Principal Financial
and Accounting Officer)
  31