RED TRAIL ENERGY, LLC - FORM 10-Q

CONDENSED STATEMENTS OF OPERATIONS

CONDENSED BALANCE SHEETS

	September 30, 2009
	(Unaudited)		December 31, 2008
ASSETS
Current Assets
Cash and equivalents	$	11,139,135	$	4,433,839
Restricted cash - collateral		750,000		―
Restricted cash - margin account		1,541,673		1,498,791
Accounts receivable		3,208,552		2,697,695
Inventory		5,414,949		3,353,592
Prepayments of corn purchases		―		4,398,046
Prepaid expenses		298,330		41,767
Total current assets		22,352,639		16,423,730

Property, Plant and Equipment
Land		351,280		351,280
Plant and equipment		79,194,431		79,898,657
Land improvements		3,947,694		3,939,294
Buildings		5,312,995		5,312,995
Construction in progress		―		33,679
		88,806,400		89,535,905

Less accumulated depreciation		15,954,170		11,525,863
Net property, plant and equipment		72,852,230		78,010,042

Other Assets
Debt issuance costs, net of amortization		―		567,385
Investment in RPMG		605,000		605,000
Patronage equity, at fair value		192,207		116,296
Deposits		80,000		80,000
Total other Assets		877,207		1,368,681

Total Assets	$	96,082,076	$	95,802,453

LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Current maturities of long-term debt	$	51,339,702	$	49,063,201
Accounts payable		6,005,915		5,720,764
Accrued expenses		2,842,838		1,845,101
Derivative instruments, at fair value		768,325		1,051,052
Accrued loss on firm purchase commitments		218,000		1,426,800
Interest rate swaps, at fair value		2,598,900		2,861,530
Total current liabilities		63,773,680		61,968,448

Other Liabilities
Contracts payable		275,000		275,000

Commitments and Contingencies

Members' Equity		32,033,396		33,559,005

Total Liabilities and Members' Equity	$	96,082,076	$	95,802,453

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

RED TRAIL ENERGY, LLC

	Quarter Ended September 30, 2009 (Unaudited)			Quarter Ended September 30, 2008 (Unaudited)			Nine Months Ended September 30, 2009 (Unaudited)			Nine Months Ended September 30, 2008 (Unaudited)
Revenues
Ethanol, net of derivative fair value changes	$	21,119,497		$	30,314,248		$	57,486,329		$	89,483,214
Distillers grains		4,127,699			5,733,213			12,289,311			15,676,567
Total Revenue		25,247,196			36,047,461			69,775,640			105,159,781

Cost of Goods Sold
Cost of goods sold, net of changes in fair value of derivative instruments		20,932,722			33,554,054			60,983,797			88,849,261
(Gain)/loss on firm purchase commitments		(477,000	)		3,140,000			218,000			3,140,000
Lower of cost or market adjustment for inventory on hand		221,500			512,000			1,464,500			512,000
Depreciation		1,449,900			1,438,264			4,390,783			4,270,804
Total Cost of Goods Sold		22,127,122			38,644,318			67,057,080			96,772,065

Gross Margin (Deficit)		3,120,074			(2,596,857	)		2,718,560			8,387,716

General and Administrative		758,489			666,866			2,240,835			2,332,795

Operating Income (Loss)		2,361,585			(3,263,723	)		477,725			6,054,921

Interest Expense		1,211,111			1,116,343			3,082,549			3,493,487

Other Income, net		678,845			835,179			1,123,516			1,693,922

Net Income (Loss)	$	1,829,319		$	(3,544,887	)	$	(1,481,308	)	$	4,255,356

Wtd Avg Units Outstanding - Basic		40,193,973			40,187,995			40,190,676			40,178,681

Net Income (Loss) Per Unit - Basic	$	0.05		$	(0.09	)	$	(0.04	)	$	0.11

Wtd Avg Units Outstanding - Diluted		40,193,973			40,187,995			40,190,676			40,223,681

Net Income (Loss) Per Unit - Diluted	$	0.05		$	(0.09	)	$	(0.04	)	$	0.11

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

RED TRAIL ENERGY, LLC

CONDENSED STATEMENTS OF CASH FLOWS

	Nine months ended September 30, 2009 (Unaudited)			Nine months ended September 30, 2008 (Unaudited)
Cash Flows from Operating Activities
Net income (loss)	$	(1,481,308	)	$	4,255,356
Adjustment to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation		4,428,307			4,311,913
Amortization and write-off of debt financing costs		567,385			150,768
Change in fair value of derivative instruments		(282,727	)		188,967
Change in fair value of interest rate swap		377,058			9,703
Equity-based compensation		3,334			15,000
Equity-based compensation non-cash write-off		(52,635	)		―
Noncash patronage equity		(75,911	)		(116,296	)
Grant income applied to long-term debt		―			(59,874	)
Loss on lower of cost or market adjustment		1,464,500			512,000
Unrealized loss on firm purchase commitments		(1,208,800	)		3,140,000
Changes in assets and liabilities
Restricted cash - margin account		(42,882	)		2,954,220
Accounts receivable		(510,857	)		3,402,900
Inventory		(3,525,857	)		1,618,836
Prepaid expenses		4,141,483			(25,722	)
Accounts payable		454,261			(975,575	)
Accrued expenses		997,737			(436,732	)
Cash settlements on interest rate swap		(639,688	)		265,845
Net cash provided by operating activities		4,613,400			19,211,309
Cash Flows from Investing Activities
Investment in RPMG		(169,110	)		(354,087	)
Refund of sales tax on fixed assets		763,630			―
Capital expenditures		(34,125	)		(1,967,019	)
Net cash provided by (used in) investing activities		560,395			(2,321,106	)
Cash Flows from Financing Activities
Debt repayments		(1,297,007	)		(17,873,214	)
Restricted cash - collateral		(750,000	)		―
Treasury units issued		5,000			―
Proceeds from long-term debt		3,573,508			3,160,500
Net cash provided by (used in) financing activities		1,531,501			(14,712,714	)

Net Increase in Cash and Equivalents		6,705,296			2,177,489
Cash and Equivalents - Beginning of Period		4,433,839			8,231,709
Cash and Equivalents - End of Period	$	11,139,135		$	10,409,198

Supplemental Disclosure of Cash Flow Information
Interest paid	$	2,216,077		$	3,252,713

SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES

Capital expenditures included in accounts payable	$	―		$	230,000
Write-off of debt issuance costs	$	517,823		$	―
Investment in RPMG included in accounts payable	$	169,110		$	250,913

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

The accompanying condensed unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the year ended December 31, 2008, contained in the Company’s Annual Report on Form 10-K.

In the opinion of management, the interim condensed financial statements reflect all adjustments considered necessary for fair presentation. The adjustments made to these statements consist only of normal recurring adjustments. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Red Trail Energy, LLC, a North Dakota limited liability company (the “Company”), owns and operates a 50 million gallon annual name-plate production ethanol plant near Richardton, North Dakota (the “Plant”).

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment; valuation of derivatives, inventory, patronage equity and purchase commitments; analysis of intangibles impairment, the analysis of long-lived assets impairment and other contingencies. Actual results could differ from those estimates.

Reclassifications

The presentation of certain items in the financial statements for the three and nine months ended September 30, 2008 has been changed to conform to the classifications used in 2009. These reclassifications had no effect on members’ equity, net income (loss) or operating cash flows as previously reported.

Restricted Cash

During June 2009, the Company was required to restrict cash for use as collateral on two letters of credit issued in relation to its distilled spirits and grain warehouse bonds. As of September 30, 2009 and December 31, 2008, the total amount of restricted cash related to these bonds was $750,000 and $0, respectively. The Company also had cash restricted to meet its hedge account requirements. The total amount of cash restricted in its hedge account was approximately $1.5 million as of both September 30, 2009 and December 31, 2008.

Debt Issuance Costs

Debt issuance costs were amortized over the term of the related debt by use of the effective interest method. Amortization commenced June 2006 when the Company began drawing on the related bank loan. Due to the uncertainties with our loan agreements described in Note 2 and Note 5, the Company wrote off the remaining balance (approximately $517,000) of its debt issuance costs during the first quarter of 2009. Amortization and impairment expense totaled $0 and $567,000 (including the write-off of $517,000) for the three and nine months ended September 30, 2009, respectively, and $50,000 and $151,000 for the three and nine months ended September 30, 2008, respectively. The amortization and debt issuance cost impairment expense is included in interest expense.

Net Income (Loss) Per Unit

Net Income (Loss) per unit are calculated on a basic and fully diluted basis using the weighted average units outstanding during the period. Diluted units outstanding include 0 and 45,000 units as of September 30, 2009 and 2008, respectively, for the vested equivalents of restricted member units issued to management. For the nine months ended September 30, 2009 and the three months ended September 30, 2008, these equivalent units are not included in fully diluted earnings per units as their effects would be anti-dilutive.

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

Subsequent Events

The Company has evaluated subsequent events through November 13, 2009, the date which the financial statements were available to be issued.

Fair Value of Financial Instruments

The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, and derivative instruments approximate their carrying value. It is not currently practicable to estimate the fair value of the Company’s long-term debt and contracts payable since the terms are uncertain as of September 30, 2009. As such, there are no readily determinable similar instruments on which to base an estimate of fair value of each item.

Recently Adopted Accounting Principles

In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”). The Codification became the single source for all authoritative GAAP recognized by the FASB and has been applied to financial statements issued for periods ending after September 15, 2009. The Codification does not change GAAP and will not have an effect on our financial position, results of operations or liquidity.

Going Concern and Management’s Plans

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has determined that the following factors raise substantial doubt about its ability to continue as a going concern:

The Company was profitable and had positive cash flows during the third quarter of 2009. Prior to this quarter, however, poor market conditions in the ethanol industry led the Company to incur operating losses and negative operating cash flow since August 2008.

The Company first violated certain of its loan covenants at December 31, 2008 and was granted a waiver of the violations, as of that date, by its senior lender, First National Bank of Omaha (the “Bank” or “FNBO”). The Company was also found to be in violation of the same loan covenants at March 31, 2009, June 30, 2009 and September 30, 2009 and has not been granted a waiver of those violations by the Bank.

With the improvement in market conditions, the Company projects that it may come back in compliance with some, but not all of its loan covenants as early as December 31, 2009. However, it cannot be certain that it will regain compliance and has not been granted a waiver of any future projected covenant violations. Please see the following paragraphs for a discussion of these factors.

1. Market Conditions

Prior to the current quarter, the Company had incurred operating losses and negative operating cash flow since August 2008. As of September 30, 2009, market conditions in the ethanol industry, and for the Company, have improved relative to the market conditions in place earlier this year and during the last quarter of 2008, to the point where operating cash flows are positive and the Company recorded a profit for the third quarter of 2009. The Company projects that, if current market conditions continue through the fourth quarter of 2009, it will also be profitable in the fourth quarter and will be around break even for the year. The Company anticipates that some of the production capacity that was shutdown or slowed down earlier this year, due to the poor market conditions, will come back on line in order to take advantage of the improved margins. The Company cannot predict when, or if, this will happen but the Company believes that the ethanol industry could return to the oversupply situation that, in part, helped create the poor margin conditions during late 2008 and early 2009.

While the cost saving and revenue enhancing measures implemented by the Company earlier this year have been effective, the financial results of the Company are highly dependent on the spread between ethanol and corn prices. The spread between ethanol and corn prices has improved which is largely why the Company recorded a profit in the third quarter of 2009. In an effort to better insulate the Company from potential future downturns in the ethanol industry, the Company is still in the process of developing a corn procurement program that would essentially allow it to purchase corn in exchange for cash, equity, a deferred payable and an incentive to be paid in the future based on the Company’s financial performance. The Company believes that such a program would have a positive impact on the long-term viability of its operations.

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

2. Long-Term Debt

The Company received a waiver for violations of its loan covenants for the period ended December 31, 2008. The Company has been notified by the Bank that it is in violation of certain of the covenants in its loan agreements at March 31, 2009, June 30, 2009 and September 30, 2009. The Company has not been granted a waiver of those violations. While the Bank has reserved its rights to declare the Company in default of its loan agreements, as of November 13, 2009 the Bank has not declared the Company to be in default of its loan agreements and considers the Company to be in good standing with its loan agreements. The Company is currently projecting that, with the current improved margins, it may regain compliance with some, but not all, of its loan covenants as early as December 31, 2009. Due to the current and projected covenant violations, the Bank has the ability to call the Company’s debt due and payable during 2009 which has resulted in the reclassification of the Company’s long-term debt to a current liability.

The Company has maintained a good working relationship with the Bank and continues to have conversations with the Bank about potentially restructuring its debt load and recasting its loan covenants to match the current economics in the ethanol industry. The sixth amendment to the Company’s construction loan agreement (the “Sixth Amendment”) allowed the Company to forgo its April 16, 2009 and July 16, 2009 principal payments. The Company did make its regularly scheduled principal and interest payment on October 16, 2009.

The Company’s line of credit with the Bank (the “Line of Credit”) expired on July 16, 2009 and was not renewed. The Company continues to work with the Bank to restore this line of credit currently does not have any options for borrowing short term capital. The Company believes that the potential restructuring mentioned above would include reinstatement of its Line of Credit. The Company projects that it will not need any short term borrowings to meet is obligations through December 31, 2009.

3. Going Concern

While the Company was profitable during the third quarter of 2009 and projects that, under current market conditions, it will also be profitable in the fourth quarter, there is uncertainty surrounding how long margins will remain positive. Those uncertainties in market conditions along with the status of the Company’s long-term debt and weakened balance sheet condition, due to losses sustained, raise substantial doubt about the Company’s ability to continue as a going concern. Realization of assets is dependent upon continued operations of the Company, which in turn is dependent upon management’s plans to meet its financing requirements and the Bank’s participation in working through the Company’s difficult economic situation and the success of its future operations. The ability of the Company to continue as a going concern is dependent on improving the Company’s profitability and cash flow, possibly securing additional financing or raising additional equity, and working with the Bank to structure debt payment terms that are reasonably achievable given current and applicable operating conditions. While the Company believes in the viability of its strategies to maintain a positive cash flow and remain profitable, there can be no assurances to that effect. These financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Please see Note 2 for further detail on these items along with management’s plans to mitigate the effect of these items.

2. NATURE OF CURRENT OPERATIONS

Market Conditions

During the third quarter of 2009, corn and ethanol prices continued to trade within a relatively narrow range compared to the extremes experienced during the year ended December 31, 2008. For example, the September corn contract closing prices for the third quarter of 2009 traded within a range that included a high of approximately $3.60 per bushel and a low of approximately $3.00 per bushel. In comparison, corn prices during 2008 ranged from a low of approximately $4.00 per bushel to a high near $8.00 per bushel. Industry margins improved significantly during the third quarter relative to margins through June 2009. The Company’s margins also improved significantly during the third quarter and the Company realized a net income of approximately $1.8 million. Ethanol prices strengthened relative to corn prices during the quarter due to an increase in demand for ethanol related to new blending markets opening up and winter blending requirements.

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

During the third quarter of 2009, the Company operated with near market corn prices – the result of decreased volatility in the corn markets and the Company’s efforts to implement a strategy to limit the number of bushels under fixed price contracts and in inventory on hand. Having corn under firm purchase commitments which had a cost very near market prices allowed the Company to record a recovery of a portion of the previously accrued unrealized loss on firm purchase commitments related to its fixed price corn contracts of $477,000 as the contracted prices were much closer to market prices. The Company did not record any lower of cost or market write downs on its corn inventory during the third quarter of 2009 as its average cost of corn on hand was lower than market prices. The Company did record a lower of cost or market adjustment write down related to its ethanol inventory on hand at September 30, 2009 of $221,500. The Company had approximately 1.4 million bushels under fixed price contract at September 30, 2009.

While the Company has worked to limit its exposure to market fluctuations, it cannot completely eliminate its exposure to those fluctuations. Due to the location of the Plant along with the logistics of corn movement in its region, the Company believes it will always have to procure a certain amount of corn under fixed price contracts to ensure an adequate supply of corn to efficiently operate the Plant.

Banking Update

The Company continues to maintain a good working relationship with its Bank and also continues to converse with the Bank about possibly restructuring its current long-term debt and loan covenants to match the current and projected market conditions in the ethanol industry.

The Company was notified by the Bank that it was in violation of its loan covenants at September 30, 2009 and that it had not received a waiver of those covenant violations. While the Bank has reserved its rights to declare the Company in default of its loan agreements, as of November 13, 2009, the Bank has not declared the Company in default of its loan agreements and considers the Company to be in good standing.

The Sixth Amendment allowed the Company to forgo its April 16, 2009 and July 16, 2009 principal payments. The Company did make its next scheduled note payment on October 16, 2009.

Based on current industry margins and a projection of near breakeven for 2009, the Company projects that it will regain compliance with certain (not all) of its loan covenants as early as December 31, 2009.

Company Initiatives

In an effort to mitigate the effect of potential future negative (or very small positive) cash flow and secure a supply of corn from local farmers, the Company is in the process of developing a corn purchasing strategy that would allow it to purchase corn for a combination of cash, equity and a deferred payable in exchange for repayment of such deferred amounts and payment of future incentives, to those that participate in the program, if the Plant is able to operate with positive cash flows sufficient enough to support the payments along with applicable debt service. The Company views this strategy as a way of partnering with its corn supply chain to enhance its prospects to remain a viable company. The program has taken longer than anticipated to develop and the Company now anticipates that, if successfully implemented, it will be in place during the first quarter of 2010.

The Company captured an increased yield during the second quarter of 2009 vs. the first quarter of 2009 and was able to maintain that higher yield during the third quarter of 2009. If maintained for a consecutive twelve month period, this higher yield would result in using approximately 600,000 fewer bushels of corn over that time which would result in an approximately $2.4 million savings if corn averaged $4 per bushel during that time.

The Company maintained its production rate at approximately 110% of nameplate capacity during the third quarter of 2009 as margins continued to improve. The Company continues to evaluate, on an on-going basis, the capacity at which to operate the Plant, including possibly shutting down. The rate is being monitored in conjunction with industry margins to determine the best rate at which to operate the Plant.

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

The Company continues to evaluate other cost cutting/revenue enhancing measures including the installation of corn oil extraction equipment.

The Company had to extend its normal fall maintenance outage by approximately 13 days during October to repair some previously unnoticed damage in one area of the Plant. The Plant was back operating at full capacity as of October 22. While the Company believes this additional downtime will have a negative impact on its earnings for the fourth quarter of 2009, the Company anticipates that it will still be profitable for the quarter.

3. DERIVATIVE INSTRUMENTS

From time to time the Company enters into derivative transactions to hedge its exposures to interest rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.

The Company provides qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.

As of September 30, 2009, the Company had entered into interest rate swap agreements along with corn and ethanol derivative instruments. The Company records its derivative financial instruments as either assets or liabilities at fair value in the statement of financial position. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. Based upon the exposure being hedged, the Company designates its hedging instruments as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The Company formally documents, designates, and assesses the effectiveness of transactions that receive hedge accounting initially and on an on-going basis. The Company does not currently have any derivative instruments that are designated as effective hedging instruments for accounting purposes.

Commodity Contracts

As part of its hedging strategy, the Company may enter into ethanol and corn commodity-based derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices in order to protect gross profit margins from potentially adverse effects of market and price volatility on ethanol sales and corn purchase commitments where the prices are set at a future date. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Ethanol derivative fair market value gains or losses are included in the results of operations and are classified as revenue and corn derivative changes in fair market value are included in cost of goods sold.

As of September 30, 2009

Contract Type	# of Contracts	Notional Amount (Qty)			Fair Value
Corn futures	394		1,970,000	bushels	$	376,000
Ethanol swap contracts	250		3,600,000	gallons		392,000
Total fair value (classified as a liability)					$	768,000

None of the commodity contracts in place at September 30, 2009 were designated as effective hedges for accounting purposes. As such, the change in fair value of the commodity contracts in place at September 30, 2009 has been recorded in the results of operations and classified as stated above.

Interest Rate Contracts

The Company manages its floating rate debt using interest rate swaps. The Company has entered into fixed rate swaps to alter its exposure to the impact of changing interest rates on its results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce the Company’s risk of the possibility of increased interest costs. Interest rate swap contracts are therefore used by the Company to separate interest rate risk management from the debt funding decision.

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

At September 30, 2009, the Company had approximately $32 million of notional amount outstanding in swap agreements that exchange variable interest rates (one-month LIBOR and three-month LIBOR) for fixed interest rates over the terms of the agreements. At September 30, 2009, the fair value of the interest rate swaps totaled approximately $2.6 million and is included in current liabilities. These agreements are not designated as an effective hedge for accounting purposes and the change in fair market value and associated net settlements are recorded in interest expense. The swaps mature in April 2012.

The Company recorded net settlements of approximately $306,000 and $640,000 for the three and nine months ended September 30, 2009, respectively, and $192,000 and $266,000 for the three and nine months ended September 30, 2008, respectively. See Note 5 for a description of these agreements.

The following tables provide details regarding the Company’s derivative financial instruments at September 30, 2009:

Derivatives not designated as hedging instruments for accounting purposes

Balance Sheet - as of September 30, 2009	Asset			Liability
Derivative instruments, at fair value		$	―		$	768,325
Interest rate swaps, at fair value			―			2,598,900
Total derivatives not desingated as hedging instruments for accounting purposes		$	0		$	3,367,225

Statement of Operations (Income)/expense	Location of change in fair value recognized in income	Change in fair value recognized in income during three months ended September 30, 2009		Change in fair value recognized in income during three months ended September 30, 2008			Change in fair value recognized in income during nine months ended September 30, 2009			Change in fair value recognized in income during nine months ended September 30, 2008
Corn derivative instruments	Cost of Goods Sold	$	110,185	$	(1,653,852	)	$	(603,934	)	$	(6,783,307	)
Ethanol derivative instruments	Revenues		360,325		(891,661	)		360,325			2,340,621
Interest rate swaps	Interest Expense		86,895		168,636			(262,630	)		275,548
Total		$	557,405	$	(2,376,877	)	$	(506,239	)	$	(4,167,138	)

4. INVENTORY

Inventory is valued at lower of cost or market. Inventory values and associated lower of cost or market adjustments as of September 30, 2009 and December 31, 2008 were as follows:

Inventory values as of:	September 30, 2009		December 31, 2008
Raw materials, including corn, chemicals and supplies	$	3,819,001	$	1,636,631
Work in process		596,823		681,187
Finished goods, including ethanol and distillers grains		999,125		1,035,774
Total inventory	$	5,414,949	$	3,353,592

Lower of cost or market adjustments for the periods ended:	For the three months ended September 30, 2009			For the three months ended September 30, 2008		For the nine months ended September 30, 2009		For the nine months ended September 30, 2008
Loss on firm purchase commitments	$	(477,000	)	$	3,140,000	$	218,000	$	3,140,000
Lower of cost or market adjustment for inventory on hand		221,500			512,000		1,464,500		512,000
Total lower of cost or market adjustments	$	(255,500	)	$	3,652,000	$	1,682,500	$	3,652,000

RED TRAIL ENERGY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

The Company has entered into forward corn purchase contracts under which it is required to take delivery at the contract price. At the time the contracts were created, the price of the contract price approximated market price. Subsequent changes in market conditions could cause the contract prices to become higher or lower than market prices. As of September 30, 2009, the average price of corn purchased under fixed price contracts, that had not yet been delivered, was above market price but closer to market prices than at June 30, 2009. Based on this information, the Company recorded a recovery of $477,000 of the previously accrued estimated loss during the three months ended September 30, 2009. The Company recorded losses on these purchase commitments of approximately $218,000 for the nine months ended September 30, 2009 and the Company also recorded a loss on these purchase commitments of approximately $3.1 million for both the three and nine month periods ended September 30, 2008. The loss is recorded in “Loss on firm purchase commitments” on the statement of operations. The amount of the loss was determined by applying a methodology similar to that used in the impairment valuation with respect to inventory. Given the uncertainty of future ethanol prices, this loss may or may not be recovered, and further losses on the outstanding purchase commitments could be recorded in future periods.

The Company recorded inventory valuation impairments of $221,500 and $1,464,500 for the three and nine months ended September 30, 2009, respectively and $512,000 for both the three and nine month periods ended September 30, 2008, respectively. The impairments were attributable primarily to decreases in market prices of corn and ethanol. The inventory valuation impairment was recorded in “Lower of cost or market adjustment for inventory on hand” on the statement of operations.

5. BANK FINANCING

Long-term debt consists of the following:

As of	September 30, 2009		December 31, 2008
Notes under loan agreement payable to bank, see details below	$	45,746,936	$	43,436,721
Subordinated notes payable, see details below		5,525,000		5,525,000
Capital lease obligations (Note 7)		67,766		101,480
Total Long-Term Debt		51,339,702		49,063,201
Less amounts due within one year*		51,339,702		49,063,201
Total Long-Term Debt Less Amounts Due Within One Year	$	0	$	0

* - The Company is out of compliance with certain of its bank covenants as of September 30, 2009. Based on current market conditions, the Company projects that it may regain compliance with some (but not all) of its loan covenants as early as December 2009, but it has not been able to secure a waiver from the bank for violations as of September 30, 2009 or the projected future violations. While the Bank has reserved its rights under the Construction Loan Agreement as of November 13, 2009, the Bank has not declared the Company in default of the Construction Loan Agreement and considers the Company in good standing. Due to the current and projected future covenant violations, however, the Company is required to show all of its debt subject to those covenant violations as a current liability. The Company has shown the scheduled debt maturities below, absent any effects of possibly being declared in default of the Construction Loan Agreement, taking into account the terms of the Sixth Amendment and under the assumption that it will resume its scheduled note payments under the original terms of the Construction Loan Agreement in October 2009. The Company did make its scheduled note payment in October 2009.

Scheduled maturities for the twelve months ended September 30,
2010	$	4,930,814
2011		10,776,365
2012		35,596,704
2013		33,655
2014		2,164
Thereafter		―
Total	$	51,339,702

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

The Company is subject to a number of covenants and restrictions in connection with its credit facilities, including:

	•		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 the Company’s business or tax structure;

	•		Needing Bank approval for capital expenditures in excess of $500,000; and

	•		Limiting the Company’s ability to make distributions to members.

The Construction Loan Agreement with the Bank also contains a number of events of default (including violation of our loan covenants) which, if any of them were to occur, would give the Bank certain rights, including but not limited to:

	•		Declaring all the debt owed to the Bank immediately due and payable; and

	•		Taking possession of all of the Company’s assets, including any contract rights.

The Bank could then sell all of the Company’s assets or business and apply any proceeds to repay their loans. The Company would continue to be liable to repay any loan amounts still outstanding.

The Company has been notified by FNBO that it is in violation of certain of the covenants at September 30, 2009 and that it has not been granted a waiver of those violations. These include the covenants requiring a minimum working capital balance, minimum net worth and a minimum fixed charge coverage ratio. Please see Note 2 for further discussion of the covenant violations and future projected waiver requests.

Credit Agreement

In December 2005, the Company entered into a credit agreement with the Bank providing for a total credit facility of approximately $59,712,000 for the purpose of funding the construction of the Plant. The Construction Loan Agreement requires the Company to maintain certain financial ratios and meet certain non-financial covenants. The Construction Loan Agreement is secured by substantially all of the assets of the Company and includes the terms as described below. Interest expense as shown on the statement of operations is composed of the following:

Interest Expense	For the three months ended September 30, 2009		For the three months ended September 30, 2008		For the nine months ended September 30, 2009			For the nine months ended September 30, 2008
Interest expense on long-term debt	$	817,829	$	705,321	$	2,138,105		$	2,801,327
Amortization/write-off of deferred financing costs		―		50,256		567,386			150,768
Change in fair value of interest rate swaps		86,895		168,636		(262,630	)		275,548
Net settlements on interest rate swaps		306,387		192,130		639,688			265,844
Total interest expense	$	1,211,111	$	1,116,343	$	3,082,549		$	3,493,487

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

Construction Loan

The Company had four long-term notes (collectively the “Term Notes” or each a “Term Note”) in place as of September 30, 2009. Three of the Term Notes were established in conjunction with the termination of the original Construction Loan Agreement on April 16, 2007. The fourth Term Note was entered into during December 2007 (the “December 2007 Fixed Rate Note”) when the Company entered into a second interest rate swap agreement which effectively fixed the interest rate on an additional $10 million of debt. The Construction Loan Agreement requires the Company to maintain certain financial ratios and meet certain non-financial covenants. Each Term Note has specific interest rates and terms as described below. The estimated principal payments along with the interest rates shown below reflect the terms of the Sixth Amendment.

Term Notes - Construction Loan

	Outstanding Balance (Millions)				Interest Rate
Term Note	September 30, 2009		December 31, 2008		September 30, 2009			December 31, 2008			Range of Estimated Quarterly Principal Payment Amounts				Estimated Final Payment (millions)		Notes
Fixed Rate Note	$	24.10	$	24.70		6.00	%		5.79	%	$	530,000 -	$	650,000	$	18.30		1, 2, 4
Variable Rate Note		2.50		3.00		6.00	%		6.04	%	$	447,000 -	$	475,000		0.21		1, 2, 3, 5
Long-Term Revolving Note		10.00		6.40		6.00	%		5.74	%	$	297,000 -	$	511,000		7.70		1, 2, 6, 7
2007 Fixed Rate Note		9.00		9.20		6.00	%		6.19	%	$	196,000 -	$	233,000		6.80		1, 2, 5

1 - The scheduled maturity date is April 2012

2 - Range of estimated quarterly principal payments is based on principal balances and interest rates as of September 30, 2009

3 - Quarterly payments of $634,700 are applied first to interest on the Long-Term Revolving Note, next to accrued interest on the Variable Rate Note and finally to principal on the Variable Rate Note. Variable Rate Note is estimated to be paid off in January 2011.

4 - Interest rate based on 3.0% over three-month LIBOR with a 6% minimum, reset quarterly

5 - Interest rate based on 3.4% over three-month LIBOR with a 6% minimum, reset quarterly

6 - Interest rate based on 3.4% over one-month LIBOR with a 6% minimum, reset monthly

7 - Principal payments would be made on the Long-Term Revolving Note once the Variable Rate Note is paid in full.

Revolving Line of Credit

The Company’s $3.5 million line of credit was not renewed as of July 16, 2009. Interest is payable quarterly and charged on all borrowings at a rate of 3.4% over the one-month LIBOR rate with a minimum rate of 6%. As of September 30, 2008, the rate charged was 5.73813%. The Company had no outstanding borrowings on this note at December 31, 2008.

Interest Rate Swap Agreements

In December 2005, the Company entered into an interest rate swap transaction that effectively fixed the interest rate at 8.08% on the outstanding principal of the Fixed Rate Note. In December 2007, the Company entered into a second interest rate swap transaction that effectively fixed the interest rate at 7.695% on the outstanding principal of the December 2007 Fixed Rate Note.

The interest rate swaps were not designated as either a cash flow or fair value hedge. Fair value adjustments and net settlements are recorded in interest expense.

Letters of Credit

The Construction Loan Agreement provides for up to $137,000 in letters of credit with the Bank to be used for any future line of credit requested by a supplier to the Plant. The letter of credit expires on December 1, 2009. The Construction Loan Agreement requires the Company to pay a quarterly commitment fee of 2.25% of all outstanding letters of credit. The balance outstanding on this letter of credit was $137,000 as of September 30, 2009 and December 31, 2008, respectively.

The Company also issued two new letters of credit during the second quarter of 2009 in conjunction with the issuance of its grain warehouse and distilled spirits bonds. The letters of credit were issued in the amount of $500,000 and $250,000, respectively.

Subordinated Debt

As part of the Construction Loan Agreement, the Company entered into three separate subordinated debt agreements totaling approximately $5,525,000 and received funds from these debt agreements during 2006. Interest is charged at a rate of 2.0% over the Variable Rate Note interest rate (a total of 8% and 8.04063% at September 30, 2009 and 2008, respectively) and is due and payable subject to approval by the senior lender, the Bank. Interest is compounding with any unpaid interest converted to principal. Amounts will be due and payable in full in March 2011. The balance outstanding on these loans was $5,525,000 as of September 30, 2009 and December 31, 2008, respectively.

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

6. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market or the price of an identical asset or liability. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data. The Company uses valuation techniques in a consistent manner from year-to-year.

The following table provides information on those assets and liabilities that are measured at fair value on a recurring basis.

					Fair Value Measurement Using
	Carrying Amount as of September 30, 2009		Fair Value as of September 30, 2009		Level 1		Level 2		Level 3
Assets
Money market funds	$	5,001,898	$	5,001,898	$	5,001,898	$	―	$	―
Total	$	5,001,898	$	5,001,898	$	5,001,898	$	―	$	―
Liabilities
Interest rate swaps	$	2,598,900	$	2,598,900	$	―	$	2,598,900	$	―
Derivative instruments		768,325		768,325		768,325		―		―
Total	$	3,367,225	$	3,367,225	$	768,325	$	2,598,900	$	―

The fair value of the money market funds and corn and ethanol derivative instruments is based on quoted market prices in an active market. The fair value of the interest rate swap instruments are determined by using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each instrument. The analysis of the interest rate swap reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs and uses the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates derived from observable market interest rate curves.

7. LEASES

The Company leases equipment under operating and capital leases through 2013. The Company is generally responsible for maintenance, taxes, and utilities for leased equipment. Equipment under operating lease includes a locomotive and rail cars. Rent expense for operating leases was approximately $122,000 and $358,000 for the three and nine months ended September 30, 2009, respectively and $122,000 and $214,000 for the three and nine months ended September 30, 2008, respectively. Equipment under capital leases consists of office equipment and plant equipment.

Equipment under capital leases is as follows at:

	September 30, 2009		December 31, 2008
Equipment	$	219,476	$	216,745
Accumulated amortization		57,436		45,996
Net equipment under capital lease	$	162,040	$	170,749

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

At September 30, 2009, the Company had the following minimum commitments, which at inception had non-cancelable terms of more than one year. Amounts shown below are for the 12 months period ending September 30:

	Operating Leases		Capital Leases
2010	$	489,660	$	60,305
2011		489,660		3,354
2012		415,360		3,354
2013		138,800		3,354
2014		―		2,236
Total minimum lease commitments	$	1,533,480		72,603
Less amount representing interest				4,837
Present value of minimum lease commitments included in the preceding current liabilities			$	67,766

8. MEMBERS’ EQUITY

The Company has one class of membership units, Class A Membership Units (the “Units”), with each Unit representing a pro rata ownership interest in the Company’s capital, profits, losses and distributions. There were 40,193,973 and 40,188,973 Units outstanding as of September 30, 2009 and December 31, 2008, respectively.

9. EQUITY-BASED COMPENSATION

2006 Equity-Based Incentive Plan

During 2006, the Company implemented an equity-based incentive plan (the “Plan”) which provided for the issuance of restricted Units to the Company’s key management personnel, for the purpose of compensating services rendered. As of June 30, 2009, the personnel covered by the Plan had either left employment or given notice that they were going to leave employment. Due to these circumstances, prior recognized equity-based compensation expense related to these grants was written off through compensation expense during the three months ended June 30, 2009. 5,000 units were issued under the terms of the Plan during June 2009. During 2007, the Company exercised an option to repurchase 200,000 Units in association with this Plan. 185,000 Units are still held in treasury and will not be issued under the Plan. While the Company does not have any other equity-based compensation plans currently in place, these Units could be used for that purpose in the future. Equity-based compensation expense was $0 and $-53,334 (approximately $700 of this was shown in interest expense) for the three and nine months ended September 30, 2009, respectively and $5,000 and $15,000 for the three and nine months ended September 30, 2008, respectively. As of September 30, 2009, the total equity-based compensation expense related to nonvested awards not yet recognized was $0.

10. COMMITMENTS AND CONTINGENCIES

Design-Build Agreement

The Company signed a design-build agreement (the “Design-Build Agreement”) with Fagen, Inc. (“Fagen”) in September 2005 to design and build the Plant at a total contract price of approximately $77 million. The Company has remaining payments under the Design-Build Agreement of approximately $3.9 million. This payment has been withheld pending satisfactory resolution of a punch list of items, including a major issue with the coal combustor experienced during start up. The Plant was originally designed to be able to run on lignite coal. During the first four months of operation, however, the Plant experienced numerous shut downs related to running on lignite coal. In April 2007, the Company switched to using Powder River Basin (“PRB”) coal as its fuel source and has not experienced a single shut down related to coal quality. The Company continues to work with Fagen to find a solution to these issues. An amount approximately equal to the final payment has been set aside in a separate money market account. Any amounts remaining in this account after satisfactory resolution of this issue could be used to pay down the Company’s long-term debt, make necessary upgrades to its Plant or be used for operations pending bank approval.

Firm Purchase Commitments for Corn

To ensure an adequate supply of corn to operate the Plant, the Company enters into contracts to purchase corn from local farmers and elevators. At September 30, 2009, the Company had various fixed and basis contracts for approximately 1.4 million bushels of corn. Of the 1.4 million bushels under contract, only approximately 12,000 bushels were under basis contract and did not have a fixed price. Using the stated contract price for the fixed contracts and using market prices, as of September 30, 2009, to price the basis contracts the Company had commitments of approximately $5.2 million related to all 1.4 million bushels under contract.

FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

11. RELATED-PARTY TRANSACTIONS

The Company has balances and transactions in the normal course of business with various related parties for the purchase of corn, sale of distillers grains and sale of ethanol. The related parties include Unit holders, members of the board of governors of the Company, Greenway Consulting, LLC (“Greenway”) and RPMG, Inc. (“RPMG”). RPMG has been considered a related party since January 1, 2008 when the Company became a partial owner in RPMG. The Company also has a note payable to Greenway, and pays Greenway for plant management and other consulting fees (recorded in general and administrative expense). The Chief Manager of Greenway is the Company’s interim CEO and also a member of the Company. Significant related party activity affecting the financial statements are as follows:

					September 30, 2009		December 31, 2008
Balance Sheet
Accounts receivable					$	2,595,055		$	2,198,277
Accounts payable						812,820			788,149
Notes payable						1,525,000			1,525,000

	For the three months ended September 30, 2009		For the three months ended September 30, 2008		For the nine months ended September 30, 2009		For the nine months ended September 30, 2008
Statement of Operations
Revenues	$	22,037,498	$	28,310,003	$	59,737,463		$	93,056,622
Cost of goods sold		706,369		708,659		2,060,175			2,057,626
General and administrative		139,973		170,988		423,656			948,728

Inventory Purchases	$	1,481,245	$	5,958,496	$	4,173,738		$	8,652,958

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three and nine months ended September 30, 2009, compared to the same period of the prior fiscal year. This discussion should be read in conjunction with our interim condensed financial statements and notes included in Item 1 of Part 1 of this Quarterly Report, and the audited condensed financial statements and notes thereto contained in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Exchange Act. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “future,” “hope,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “target,” and similar expressions, and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Forward-looking statements in this Quarterly Report include, but are not limited to, our expectations regarding future revenues and expenses, the effect of state and federal low carbon fuel or ethanol blending regulations on our operations and revenues, Plant downtime, capital expenditures, our compliance with loan covenants, reinstatement of our line of credit, interest costs, interest income, receipt of grant income, receipt of state incentive plan payments, linkage of ethanol and corn prices in the future, ethanol and distillers grain prices, corn costs, increased yields from production, the implementation of our corn procurement program, the possible installation of corn oil extraction equipment, hedging strategies, corn usage and ethanol production, general and administrative costs, chemical and denaturant costs, expected savings from our coal unloading facility, our profit projections for the rest of 2009, and our ability to fund our operations and capital expenditures from our existing cash flows. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Nonetheless, the Company's expectations, beliefs or projections may not be achieved or accomplished. Forward-looking statements are subject to known and unknown risks and uncertainties, including those risks described in “Item 1A - Risk Factors” of our Annual Report on Form 10-K as updated in Part II, Item 1A of this Quarterly Report.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements in this Quarterly Report, including statements contained within “Part II, Item 1A – Risk Factors,” and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and include:

•		Our ability to secure a waiver for future possible violations of our loan covenants or other events of default or renegotiate the terms of our loan agreements with our lenders;

•		Our possible future violations of loan covenants under existing loan agreements with our lenders;

•		Our ability to successfully implement our proposed corn procurement program;

•		Our ability to raise additional capital whether through debt financing, an equity raise or other means of raising capital;

•		Our ability to secure replacement debt financing in the event our Bank calls our loan amounts and requires payment in full.

•		Projected growth, overcapacity or contraction in the ethanol market in which we operate;

Fluctuations in the price and market for ethanol and distillers grains;

Changes in Plant production capacity, variations in actual ethanol and distillers grains production from expectations or technical difficulties in operating the Plant;

Availability and costs of products and raw materials, particularly corn and coal;

Changes in our business strategy, capital improvements or development plans for expanding, maintaining or contracting our presence in the market in which we operate;

Costs of equipment;

Changes in interest rates and the availability of credit to support capital improvements, development, expansion and operations;

Our ability to market and our reliance on third parties to market our products;

Our ability to distinguish ourselves from our current and future competition;

Changes to infrastructure, including:

	-		expansion of rail capacity;

	-		possible future use of ethanol dedicated pipelines for transportation;

	-		increases in truck fleets capable of transporting ethanol within localized markets;

	-		additional storage facilities for ethanol, expansion of refining and blending facilities to handle ethanol;

	-		growth in service stations equipped to handle ethanol fuels; and

	-		growth in the fleet of flexible fuel vehicles capable of using E85 fuel;

Changes in or elimination of governmental laws, tariffs, trade or other controls or enforcement practices such as:

	-		national, state or local energy policy;

	-		federal ethanol tax incentives;

	-		legislation mandating the use of ethanol or other oxygenate additives;

	-		state and federal regulation restricting or banning the use of MTBE;

	-		environmental laws and regulations, specifically carbon regulation, that apply to our plant operations and their enforcement; or

	-		reduction or elimination of tariffs on foreign ethanol.

Increased competition in the ethanol and oil industries;

Fluctuations in U.S. oil consumption and petroleum prices;

Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;

Anticipated trends in our financial condition and results of operations;

The availability and adequacy of our cash flow to meet our requirements, including the repayment of debt and the observance of our loan covenants;

Our liability resulting from litigation;

Our ability to retain key employees and maintain labor relations;