Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

for the transition period from                  to                 .

COMMISSION FILE NUMBER 001-32922

AVENTINE RENEWABLE ENERGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

(309) 347-9200

(Registrant’s Telephone Number, including Area Code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) YES o NO o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

Indicate the number of shares outstanding of each class of Common Stock, as of the latest practicable date

Table of Contents

FORM 10-Q

QUARTERLY REPORT

TABLE OF CONTENTS

Table of Contents

PART I.                 FINANCIAL INFORMATION

Item 1.                    Financial Statements

Aventine Renewable Energy Holdings, Inc. and Subsidiaries

(Debtor-in-Possession)

Condensed Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents

Aventine Renewable Energy Holdings, Inc. and Subsidiaries

(Debtor-in-Possession)

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

Aventine Renewable Energy Holdings, Inc. and Subsidiaries

(Debtor-in-Possession)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

Aventine Renewable Energy Holdings, Inc. and Subsidiaries

(Debtor-in-Possession)

Notes to Unaudited Condensed Consolidated Financial Statements

(1)                                 Basis of Reporting for Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of Aventine Renewable Energy Holdings, Inc. and its subsidiaries, which are collectively referred to as “Aventine”, the “Company”, “we”, “our” or “us”, unless the context otherwise requires.  All significant intercompany transactions have been eliminated in consolidation.

We have prepared the unaudited condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.  These financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2008.

The accompanying unaudited condensed consolidated financial statements presented herewith reflect all adjustments (consisting of only normal and recurring adjustments unless otherwise disclosed) which, in the opinion of management, are necessary for a fair presentation of the results of operations for the three and six month periods ended June 30, 2009 and 2008.  The results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from those estimates.

As of June 30, 2009, the Company’s Summary of Critical Accounting Policies for the year ended December 31, 2008, which are detailed in the Company’s Annual Report on Form 10-K, have not changed, except for the application of American Institute of Certified Public Accountants’ Statement of Position (“SOP”) 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, in preparing the consolidated financial statements as a result of our bankruptcy filing (See Note 2).

In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 165, Subsequent Events (“SFAS 165”).  SFAS 165 establishes general standards of accounting for disclosing events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued.  SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009.  We adopted FAS No. 165 in the second quarter of 2009.  The adoption of FAS No. 165 did not have a material impact on our financial statements.

In April 2009, the FASB issued FASB Staff Position (“FSP”) No. FAS 107-1 and APB 28-1 (“FSP No. 107-1 and APB 28-1”), Interim Disclosures about Fair Value of Financial Instruments, which requires disclosures about fair value of financial instruments for interim reporting periods.  This guidance

4

Table of Contents

is effective for interim or annual reporting periods ending after June 15, 2009.  We adopted FAS No. 107-1 and APB 28-1 in the second quarter of 2009.  The adoption of FAS No. 107-1 and APB 28-1 did not have a material impact on our financial statements.

The accompanying consolidated financial statements for the prior period contain certain reclassifications to conform to the presentation used in the current period.  The reclassifications had no impact on stockholders’ equity, working capital, gross profit or net loss.

(2)                                 Chapter 11 Bankruptcy Proceedings

On April 7, 2009 (the “Petition Date”), Aventine Renewable Energy Holdings, Inc. and all of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (collectively, the “Bankruptcy Filing”) under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).  The Chapter 11 cases are being jointly administered by the Bankruptcy Court as Case No. 09-11214 (KG) (collectively, the “Bankruptcy Cases”).  The Debtors specifically are (i) Aventine Renewable Energy Holdings, Inc.; (ii) Aventine Renewable Energy, LLC, a Delaware limited liability company; (iii) Aventine Renewable Energy, Inc., a Delaware corporation; (iv) Aventine Renewable Energy — Mt. Vernon, LLC, a Delaware limited liability company; (v) Aventine Renewable Energy — Aurora West, LLC, a Delaware limited liability company; (vi) Aventine Power, LLC, a Delaware limited liability company, and (vii) Nebraska Energy, LLC, a Kansas limited liability company.

Subject to certain specific exceptions under the Bankruptcy Code, the Bankruptcy Filing automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date.  Thus, for example, most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the property of the Debtors, or to collect on or otherwise exercise rights or remedies with respect to a pre-petition claim are enjoined unless and until the Bankruptcy Court lifts the automatic stay.

The Bankruptcy Filing constituted an event of default under both the Company’s secured revolving credit facility and its 10% senior unsecured notes due 2017 (see Note 7), and those debt obligations became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law.  As a result, the accompanying Condensed Consolidated Balance Sheet as of June 30, 2009 includes reclassifications of $315.6 million to reflect as “pre-petition liabilities subject to compromise” amounts owed to holders of our 10% senior unsecured notes due 2017 (“Notes”), including pre-petition accrued interest, that, absent the stay, would have become automatically and immediately due and payable.  The Company classifies “pre-petition liabilities subject to compromise” as a long-term liability because management does not believe the Company will use existing current assets or create additional current liabilities to fund these obligations.  Amounts owed under the Debtors’ pre-petition secured revolving credit facility have not been included in “pre-petition liabilities subject to compromise” as the secured debt is adequately collateralized.

Chapter 11 Process

The Debtors are currently operating as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court, and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.  In general, as debtors-in-possession, the Debtors are authorized under the Bankruptcy Code to continue to operate as an ongoing business, but may not engage in transactions outside of the ordinary course of business without the approval of the Bankruptcy Court.

5

Table of Contents

On April 7, 2009, certain of the Company’s bondholders (the “DIP Lenders”) entered into a term sheet (the “DIP Term Sheet”) for a $30 million Debtor-in-Possession Credit Facility with the Debtors.  The DIP Term Sheet provides, subject to certain conditions as described in the Debtor in Possession Credit Facility Term Sheet filed as Exhibit 10.1 to our Form 8-K filed on April 13, 2009 for a first priority debtor-in-possession financing (the “DIP Facility”) comprised of a term loan facility made available to certain of Aventine’s subsidiaries in a maximum aggregate principal amount of up to $30 million.  Proceeds of the DIP Facility are being used to, among other things, (i) fund the working capital and general corporate needs of the Debtors and the costs of the Bankruptcy Cases in accordance with an approved budget, and (ii) provide adequate protection, in accordance with the terms of the DIP Facility, to the pre-petition agent and pre-petition lenders under the Company’s existing credit facilities.  The DIP Facility bears interest at 16.5% per annum.  The maturity date of the DIP Facility is April 6, 2010, or upon the occurrence of certain pre-defined events.  The DIP Facility is secured by a super-priority administrative claim on our assets.  On May 5, 2009, the Bankruptcy Court overruled objections from the Debtors’ pre-petition secured lenders and approved the DIP Facility on a final basis.

At a hearing held on April 9, 2009, the Bankruptcy Court granted the Debtors’ “First Day Motions”.  The relief granted by the Bankruptcy Court through the First Day Motions was designed to stabilize the Company’s operations and business relationships with vendors, lenders, employees and others, minimize the effects of the commencement of the Bankruptcy Cases and preserve the value of the Debtors’ assets.   The First Day Motions allowed, among other things, the payment of vendors and other providers in the ordinary course for goods and services ordered pre-petition but received on or after the Petition Date and other business-related payments necessary to maintain the operation of our businesses.  The First Day Motions also included the payment of pre-petition employee wages, salaries and benefits.  The Debtors have retained, with Bankruptcy Court approval, legal and financial professionals to advise the Debtors on the bankruptcy proceedings and certain other “ordinary course” professionals.  From time to time, the Debtors may seek Bankruptcy Court approval for the retention of additional professionals.

On or about April 29, 2009, the Debtors caused notice of the commencement of the Bankruptcy Cases to be served on all known or potential creditors and other parties in interest.  Vendors are being paid for goods furnished and services provided after the Petition Date in the ordinary course of business.

As required by the Bankruptcy Code, the United States Trustee for Delaware (the “US Trustee”) appointed an official committee of unsecured creditors (the “Creditors’ Committee”). The Creditors’ Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Debtors.  There can be no assurance that the Creditors’ Committee will support the Debtors’ positions on matters to be presented to the Bankruptcy Court in the future or on any plan of reorganization.  Disagreements between the Debtors and the Creditors’ Committee could protract the Bankruptcy Cases, negatively impact the Debtors’ ability to operate, and delay the Debtors’ emergence from the Chapter 11 proceedings.

Under Section 365 of the Bankruptcy Code, the Debtors may assume, assume and assign, or reject executory contracts and unexpired leases, including real property, railcars and equipment leases, subject to the approval of the Bankruptcy Court and certain other conditions.  Rejection constitutes a court-authorized breach of the lease or contract in question and, subject to certain exceptions, relieves the Debtors of future obligations under such lease or contract, but creates a pre-petition claim for damages caused by such breach or rejection, subject to the Debtors’ right to review and contest such claim.  Parties whose contracts or leases are rejected may file claims against the Debtors for damages.  Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure all prior defaults under such executory contract or unexpired lease, including all pre-petition arrearages, and to provide adequate assurance of future performance.  In this regard, the Debtors’ financial statements

6

Table of Contents

include amounts classified as “pre-petition liabilities subject to compromise” that the Debtors believe that the Bankruptcy Court will allow as claim amounts as a result of the Debtors’ rejection of various executory contracts and unexpired leases.  Additional amounts may be included in “pre-petition liabilities subject to compromise” in future periods if additional executory contracts and unexpired leases are rejected.  Conversely, the Debtors would expect that the assumption of certain executory contracts and unexpired leases may convert certain liabilities shown in future financial statements as subject to compromise to post-petition liabilities.  Due to the uncertain nature of many of the potential claims, the Debtors are unable to project the magnitude of such claims with any degree of certainty.

The Bankruptcy Court has established September 8, 2009 at 4:00 p.m. eastern time as the deadline for the filing of proofs of claim, thereby requiring the Debtors’ creditors to submit claims for alleged liabilities not paid and/or damages incurred arising from or related to periods prior to the Petition Date.  There may be differences between the amounts at which any such liabilities are recorded in the Company’s financial statements and the amount claimed by Aventine’s creditors.  Significant litigation may be required to resolve any such disputes or discrepancies.

In order to successfully exit Chapter 11, the Debtors will need to propose, and obtain confirmation by the Bankruptcy Court of, a plan of reorganization that satisfies the requirements of the Bankruptcy Code.  A plan of reorganization could, among other things, resolve the Debtors’ pre-petition obligations, set forth the revised capital structure of the newly reorganized entity and provide for corporate governance subsequent to exit from bankruptcy.  As provided in the Bankruptcy Code, the Debtors have the exclusive right for 120 days after the Petition Date to file a plan of reorganization and 60 additional days to solicit and obtain necessary acceptances.  Such periods may be extended by the Bankruptcy Court for cause to up to 18 months and 20 months, respectively, after the Petition Date.  If the Debtors’ exclusivity period lapses, any party in interest may file a plan of reorganization for Aventine.  The Debtors, prior to expiration of the exclusive deadline to file a plan of reorganization, have filed a motion with the Bankruptcy Court requesting an extension of the exclusive filing and solicitation deadlines for 60 days and 61 days, respectively.  This request is subject to approval by the Bankruptcy Court at a hearing currently scheduled for August 20, 2009.

Chapter 11 of the Bankruptcy Code provides that unless the terms of section 1129(b) of the Bankruptcy Code are satisfied, for a bankruptcy court to confirm a chapter 11 plan as a consensual plan, the holders of impaired claims against a debtor in each class of impaired claims must accept such plan by the requisite majorities set forth in the Bankruptcy Code.  An impaired class of claims shall have accepted a chapter 11 plan if (a) the holders of at least two-thirds in amount of the claims in such class actually voting on a plan have voted to accept it, and (b) more than one-half in number of the holders in such class actually voting on the plan have voted to accept it.  Pursuant to the provisions of the Bankruptcy Code, only holders of allowed claims or equity interests in classes of claims or equity interests that are impaired and that are not deemed to have rejected a chapter 11 plan are entitled to vote to accept or reject such proposed plan.  Generally, a claim or interest is impaired under a plan if the holder’s legal, equitable or contractual rights are altered under such plan.  Classes of claims or equity interests under a chapter 11 plan in which the holders of claims or equity interests are unimpaired are deemed to have accepted such plan and are not entitled to vote to accept or reject the proposed plan.  In addition, classes of claims or equity interests in which the holders of claims or equity interests will not receive or retain any property on account of their claims or equity interests are deemed to have rejected the plan and are not entitled to vote to accept or reject the plan.  Under circumstances specified in the so-called “cramdown” provisions of Section 1129(b) of the Bankruptcy Code, the Bankruptcy Court may confirm a plan even if such plan has not been accepted by all impaired classes.  The precise requirements and evidentiary showing for confirming a Chapter 11 plan notwithstanding its rejection by one or more impaired classes of claims or equity interests depends upon a number of factors, including the status and

7

Table of Contents

seniority of the claims or equity interests, in the rejecting class — i.e., secured claims or unsecured claims, subordinated or senior claims, or common stock.

Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, post-petition liabilities and pre-petition liabilities must be satisfied in full before stockholders of the Debtors are entitled to receive any distribution or retain any property under a plan of reorganization.  The ultimate recovery, if any, to creditors and stockholders of the Debtors will not be determined until confirmation and consummation of a plan of reorganization.  No assurance can be given as to what values, if any, will be ascribed in the Bankruptcy Cases to each of these constituencies or what types or amounts of distributions, if any, they would receive.  Accordingly, the Debtors urge that appropriate caution be exercised with respect to existing and future investments in any of the Company’s common stock or any of the Company’s liabilities.

Although the Debtors expect to file a Chapter 11 plan that provides for emergence from Chapter 11 some time in the future, there can be no assurance that a Chapter 11 plan will be proposed by the Debtors or confirmed by the Bankruptcy Court, or that any such plan will be consummated.  In order to successfully emerge from bankruptcy, the Debtors will need to, among other things, obtain alternative financing to replace the DIP Facility.

The Debtors have incurred and will continue to incur significant costs associated with the reorganization.  The amount of these costs, which are being expensed as incurred, are expected to significantly affect the Debtors’ results of operations.

Notice and Sell-Down Procedures for Trading Equity Securities

The Bankruptcy Court entered a final order (the “Final Trading Restriction Order”) on May 4, 2009 granting a motion of the Debtors to require beneficial owners of substantial amounts of the Company’s common stock to provide notice of their holdings and restrict, in specified circumstances and subject to specified terms and conditions, acquisitions or dispositions of the Company’s common stock by Substantial Equityholders (as defined below) (the “Common Stock Notice and Transfer Requirements”).

Under the Common Stock Notice and Transfer Requirements, all “Substantial Equityholders” must provide the Debtors, the Debtors’ counsel and the Bankruptcy Court advance notice of their intent to buy or sell the Company’s common stock (including options to acquire common stock, as further specified in the Final Trading Restriction Order) prior to effectuating any such purchase or sale.  A “Substantial Equityholder” under the Final Trading Restriction Order is a person or entity that beneficially owns or, as a result of a transaction, would beneficially own, at least 2.04 million shares (including options to acquire shares, as further specified in the Final Trading Restriction Order) of the Company’s common stock, representing approximately 4.75% of all issued and outstanding shares of the Company’s common stock.  The Common Stock Notice and Transfer Requirements were requested by the Debtors to identify and, where necessary, restrict potential trades of the Company’s common stock that could negatively impact the Debtors’ ability to preserve maximum availability of their accrued net operating losses and other tax attributes under Section 382 of the Code.  Pursuant to the Final Trading Restriction Order, the Debtors have 15 calendar days after notification of a transfer by a Substantial Equityholder to file any objections with the Bankruptcy Court and serve notice on such Substantial Equityholder.  If the Debtors file any objections, the transfer would not become effective unless approved by a final and non-appealable order of the Bankruptcy Court.  In addition, a person or entity that is or becomes a Substantial Equityholder must file with the Bankruptcy Court, and provide the Debtors and their counsel with, notification of such status on or before the later of (a) 15 days after the effective date

8

Table of Contents

of the notice of entry of the Final Trading Restriction Order or (b) ten days after becoming a Substantial Equityholder.

Going Concern Matters

The ability of the Company to continue as a going concern is dependent upon, among other things, (i) the Company’s ability to comply with the terms and conditions of its DIP financing; (ii) the ability of the Company to maintain adequate cash on hand; (iii) the ability of the Company to generate cash from operations; (iv) the ability of the Company to obtain confirmation of and to consummate a plan of reorganization under the Bankruptcy Code; (v) the ability of the Company to complete its unfinished ethanol plants; (vi) the cost and outcome of the reorganization process; (vii) the Company’s ability to obtain alternative financing; and (viii) the Company’s ability to achieve profitability.  Uncertainty as to the outcome of these factors raises substantial doubt about the Company’s ability to continue as a going concern.  The Company is currently evaluating various courses of action to address the issues the Company is facing.  There can be no assurance that any of these efforts will be successful.

The accompanying consolidated financial statements do not purport to reflect or provide for the consequences of our Chapter 11 proceedings.  In particular, the financial statements do not purport to show (i) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (ii) as to pre-petition liabilities, the amounts that may be allowed for claims or contingencies, or the status and priority thereof; (iii) as to shareowners’ equity accounts, the effect of any changes that may be made in our capitalization; or (iv) as to operations, the effect of any changes that may be made to our business.

In accordance with accounting principles generally accepted in the United States (“GAAP”), we have applied American Institute of Certified Public Accountants’ Statement of Position (“SOP”) 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, in preparing the consolidated financial statements.  SOP 90-7 requires that the financial statements, for periods subsequent to the Chapter 11 filing, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.  Accordingly, certain expenses (including professional fees), realized gains and losses and provisions for losses that are realized or incurred in the bankruptcy proceedings are recorded in reorganization items on the accompanying Condensed Consolidated Statements of Operations.  In addition, pre-petition obligations that may be impacted by the bankruptcy reorganization process have been classified on the Condensed Consolidated Balance Sheet at June 30, 2009 in “pre-petition liabilities subject to compromise”.  These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts.  For information on the bankruptcy reorganization process, see Note 2 - Chapter 11 Bankruptcy Proceedings.

As a result of the Bankruptcy Filing, realization of assets and liquidation of liabilities are subject to uncertainty.  While operating as a debtor-in-possession under the protection of Chapter 11, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Debtors may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the condensed consolidated financial statements.  Further, a plan of reorganization could materially change the amounts and classifications reported in our consolidated financial statements.  Our historical consolidated financial statements do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

The potential adverse publicity associated with the Bankruptcy Filing and the resulting uncertainty regarding the Company’s future prospects may hinder the Company’s ongoing business

9

Table of Contents

activities and its ability to operate, fund and execute its business plan by impairing relations with existing and potential customers; negatively impacting the ability of the Company to attract, retain and compensate key executives and employees and to retain employees generally; limiting the Company’s ability to obtain trade credit; and impairing present and future relationships with vendors and service providers.

(3)           Recent Accounting Pronouncements

In December 2008, the FASB issued FSP No. FAS 132(R)-1 (“FSP No. 132(R)-1”), Employers’ Disclosures about Postretirement Benefit Plan Assets, which requires enhanced disclosures about plan assets in an employer’s defined benefit pension or other postretirement plan.  These disclosures are intended to provide users of financial statements with a greater understanding of how investment allocation decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets and significant concentrations of risk within plan assets.  FSP No. 132(R)-1 will apply to our plan asset disclosures beginning with our fiscal year ending December 31, 2009.  We are in the process of determining the effect that the adoption of this guidance will have on our condensed consolidated financial statements and disclosures.

(4)          Inventories

Inventories are as follows:

(5)           Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are as follows:

10

Table of Contents

(6)                                 Other Assets

Other assets are as follows:

Deferred debt issuance costs are subject to amortization.  In connection with amending our secured revolving credit facility in March 2009, we paid debt issuance costs totaling $0.9 million, which will be amortized utilizing a method which approximates the effective interest method through February 28, 2010 which is the remaining life of the amended secured revolving credit facility.  In connection with our debtor-in-possession debt facility, we paid debt issuance costs totaling $1.0 million in April 2009, which will be amortized utilizing a method which approximates the effective interest method through March 2010 which is the estimated remaining life of the debtor-in-possession credit facility.

In conjunction with the construction of our new ethanol plant at Mt. Vernon, Indiana, the Company was required (beginning in 2007) to extend an existing natural gas pipeline to the new Mt. Vernon facility.  To secure repayment of the construction costs of pipeline, the Company, under its secured revolving credit facility, issued a letter of credit to the natural gas utility pipeline company in the amount of $9 million.  We will be able to offset future natural gas transportation charges of up to $9 million assuming the Mt. Vernon facility begins operations.  As a result of our suspending construction and our Bankruptcy Filing, the natural gas pipeline company drew the full amount of the letter of credit.  We have recorded a $9 million long-term asset to reflect this event and increased the amount owed under our secured revolving credit facility accordingly.  We expect that this asset will provide a benefit in terms of reduced cash outlays for natural gas transportation to us or a potential buyer once the Mt. Vernon facility has been completed and is operational.  Should the Mt. Vernon facility not be completed, we may be unable to recover any amounts and would be required to reduce the value of this asset to zero.

(7)           Debt

The following table summarizes the Company’s outstanding debt:

Secured Revolving Credit Facility

As of June 30, 2009, $9.6 million in letters of credit and $27.8 million in revolving loans were outstanding under our pre-petition amended secured revolving credit facility.  As a result of our Bankruptcy Filing, all the commitments under the Company’s pre-petition secured revolving credit facility with JP Morgan Chase Bank, N.A., as administrative agent and a lender, automatically terminated, and the principal of the loans and the reimbursement obligations then outstanding, together

11

Table of Contents

with accrued interest thereon and any unpaid fees and all other obligations of the borrowers accrued under the applicable loans documents, became immediately due and payable, subject to the automatic stay provisions of Section 362 of the Bankruptcy Code.  As a result, there is no longer any liquidity available to us under this facility.  Amounts owed under the Company’s pre-petition secured revolving credit facility have not been included in “pre-petition liabilities subject to compromise” as the secured debt is adequately collateralized.

Debtor-in-possession Debt Facility

As of June 30, 2009, the Company has drawn $15 million of its $30 million DIP Facility.  The DIP Facility provides for a first priority term loan in a maximum aggregate principal amount of up to $30 million.  Proceeds of the DIP Facility can be used, among other things, to (i) fund the working capital and general corporate needs of the Debtors and the costs of the Bankruptcy Cases in accordance with an approved budget, and (ii) provide adequate protection, in accordance with the terms of the DIP Facility, to the pre-petition agent and pre-petition lenders under the Company’s existing credit facilities.  The DIP Facility bears interest at 16.5%.  The maturity date of the DIP Facility is April 6, 2010, or upon the occurrence of certain pre-defined events.  The DIP Facility is secured by a super-priority administrative expense claim on our assets.  As of June 30, 2009, the Debtors are in compliance with the terms of its DIP Facility.

Senior Notes

At June 30, 2009, the Company had outstanding $300 million aggregate principal amount of Notes.  The Notes were issued pursuant to an indenture between us and Wells Fargo Bank, N.A., as trustee and were subsequently exchanged for registered notes with the same terms.  The Notes are general unsecured obligations of the Company and certain of its guarantor subsidiaries.  In April 2009, Deutsche Bank National Trust Company replaced Wells Fargo Bank as Successor Indenture Trustee.  As a result of the Bankruptcy Filing, the outstanding principal amount of, and accrued interest thereon, under the Company’s indenture governing the Notes became immediately due and payable, and the Notes have been reclassified to “pre-petition liabilities subject to compromise” (See Note 12).

(8)           Other Current Liabilities

Other current liabilities are as follows:

12

Table of Contents

(9)           Other Long-Term Liabilities

Other long-term liabilities are as follows:

(10)         Fair Value Measurements

SFAS 157

SFAS 157 establishes a framework for measuring fair value and expands disclosure about fair value measurements.  The statement requires that fair value measurements be classified and disclosed in one of the following three categories:

·      Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

·      Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

·      Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table summarizes the valuation of our financial instruments which are carried at fair value by the above SFAS 157 pricing levels as of June 30, 2009:

The Company did not hold any financial assets requiring the use of Level 2 or Level 3 inputs at June 30, 2009.

The Company held no outstanding derivative positions as of June 30, 2009.  The Company recorded net gains of $1.2 million for the six month period ended June 30, 2009 and net losses of $14.1 million and $12.3 million, respectively, for the three and six month periods ended June 30, 2008, under “other non-operating income (loss)” in the unaudited Condensed Consolidated Statements of Operations for the changes in the fair value of its derivative financial instrument positions it held during the respective three and six month periods.

The Company recorded gains of $1.3 million and $1.7 million, respectively, for the three and six month periods ended June 30, 2009 under “other accumulated comprehensive loss” in the unaudited Condensed Consolidated Balance Sheet for the changes in the fair value of its available for sale securities.  The total cumulative gains recorded on available for sale securities as of June 30, 2009 was $1.7 million.  The Company did not hold any available for sale securities in the second quarter of 2008.

13

Table of Contents

The carrying value of other financial instruments, including cash, accounts receivable and accounts payable and accrued liabilities approximate fair value due to their short maturities or variable-rate nature of the respective balances.  The following table presents the other financial instruments that are not carried at fair value but which require fair value disclosure as of June 30, 2009 and December 31, 2008.

The Company’s investments at December 31, 2008 accounted for under the cost method consisted of minority positions in equity securities of other ethanol operating companies.  These equity investments were recorded at cost, and it was not practical to estimate a fair value for these non-publicly traded companies.  The Company had redeemed all of its cost investments during the first quarter of 2009.

(11)         Reorganization Items

SOP 90-7 requires separate disclosure of reorganization items such as realized gains and losses from the settlement of pre-petition liabilities, provisions for losses resulting from the reorganization and restructuring of the business, as well as professional fees directly related to the process of reorganizing the Debtors under Chapter 11.  The Debtors’ reorganization items for the three and six months ended June 30, 2009 consist of the following:

(a)           Professional fees directly related to the reorganization include post—petition fees associated with advisors to the Debtors, the statutory committee of unsecured creditors and certain secured creditors. Professional fees are estimated by the Debtors and will be reconciled to actual invoices when received.

(b)           Other includes gains on the settlement of pre—petition critical vendor claims for less than amounts owed.

(12)         Pre-petition Liabilities Subject To Compromise

Pre-petition liabilities subject to compromise refers to unsecured obligations that will be accounted for under a plan of reorganization.  Generally, actions to enforce or otherwise effect payment of pre-Chapter 11 liabilities are stayed.  SOP 90-7 requires pre-petition liabilities that are subject to

14

Table of Contents

compromise to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts.  These liabilities represent the estimated amount expected to be allowed on known or potential claims to be resolved through the Chapter 11 process, and remain subject to future adjustments arising from negotiated settlements, actions of the Bankruptcy Court, rejection of executory contracts and unexpired leases, the determination as to the value of any potential collateral securing the claims, proofs of claim, or other events.  Pre-petition liabilities subject to compromise also include certain items that may be assumed under the plan of reorganization, and as such, may be subsequently reclassified to liabilities not subject to compromise.  At hearings held in April 2009, the Court granted final approval of many of the Debtors’ First Day Motions covering, among other things, human capital obligations, supplier relations, insurance, customer relations, business operations, certain tax matters, cash management, utilities, case management and retention of professionals.  Obligations associated with these matters are not classified as pre-petition liabilities subject to compromise.

In accordance with SOP 90-7, debt issuance costs associated with borrowing classified as pre-petition liabilities subject to compromise should be viewed as valuation adjustments to the related debt.  When the debt has become an allowed claim and the allowed claim differs from the net carrying amount of the debt, the recorded amount should be adjusted to the amount of the allowed claim (thereby adjusting existing debt issuance costs to the extent necessary to report the debt at this allowed amount).  Through June 30, 2009, the Bankruptcy Court had not classified any of the Debtors’ outstanding debt as allowed claims. Therefore, the Company has classified the Debtors’ Notes as “pre-petition liabilities subject to compromise” on the Condensed Consolidated Balance Sheet.  The Company has not adjusted debt issuance costs, totaling $5.8 million at June 30, 2009, related to the Debtors’ Notes, but has classified these costs as “pre-petition liabilities subject to compromise”.  The Company may be required to expense these amounts or a portion thereof upon determination of the allowed claim by the Bankruptcy Court.

The Debtors have rejected certain pre-petition executory contracts and unexpired leases with respect to the Debtors’ operations with the approval of the Bankruptcy Court and may reject additional agreements in the future.  Damages resulting from rejection of executory contracts and unexpired leases are generally treated as general unsecured claims and will be classified as “pre-petition liabilities subject to compromise”.  Holders of pre-petition claims (excluding governmental claims) are required to file proofs of claims by the “general bar date”, which is September 8, 2009.  A bar date is the date by which certain claims against the Debtors must be filed if the claimants wish to receive any distribution in the Chapter 11 cases.  Creditors have been notified of the general bar date and the requirement to file a proof of claim with the Bankruptcy Court.  Differences between liability amounts estimated by the Debtors and claims filed by creditors will be investigated and, if necessary, the Bankruptcy Court will make a final determination of the allowable claim.  The determination of how liabilities will ultimately be treated cannot be made until the Bankruptcy Court approves a Chapter 11 plan of reorganization.  Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

Pre-petition liabilities subject to compromise consist of the following:

15

Table of Contents

Pre-petition liabilities subject to compromise include trade accounts payable related to pre-petition purchases.  As a result, the Company’s cash flows from operations were favorably affected by the stay of payment related to these accounts payable.  Accrued interest represents amounts due on the Notes as of the Petition Date.  No interest has been accrued on the Notes subsequent to the Petition Date because such amounts are not expected to become part of an allowed claim.

(13)         Stock-Based Compensation Plans

The Company values its share-based payment awards using a form of the Black-Scholes option-pricing model (the “option pricing model”).  The determination of fair value of share-based payment awards on the date of grant using the option pricing model is affected by our stock price as well as the input of other subjective assumptions.  The option-pricing model requires a number of assumptions, of which the most significant are expected stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire).  Expected volatility is normally calculated based upon actual historical stock price movements over the expected option term.  Since we have a very short-term history of stock price volatility as a public company, we calculate volatility by considering, among other things, the expected volatilities of public companies engaged in similar industries.  Pre-vesting forfeitures are currently estimated using an approximate 11% forfeiture rate.  The expected option term is calculated using the “simplified” method permitted by SAB 107.  Our options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

Pre-tax stock-based compensation expense for the three month periods ended June 30, 2009 and 2008 was approximately $0.3 million and $2.0 million, respectively.  For the three month period ended June 30, 2009, $0.2 million was charged to selling, general and administrative (“SG&A”) expense and $0.1 million was charged to cost of goods sold.  For the three month period ended June 30, 2008, $1.9 million was charged to SG&A expense and $0.1 million was charged to cost of goods sold.  Stock-based compensation expense reduced earnings per share by less than $0.01 per basic and fully diluted share for the three month period ended June 30, 2009 and reduced earnings per share by $0.03 per basic and fully diluted share for the three month periods ended June 30, 2008.  Pre-tax stock-based compensation expense for the six month periods ended June 30, 2009 and 2008 was approximately $1.6 million and $3.9 million, respectively.  For the six month period ended June 30, 2009, $1.4 million was charged to SG&A expense and $0.2 million was charged to cost of goods sold.  For the six month period ended June 30, 2008, $3.7 million was charged to SG&A expense and $0.2 million was charged to cost of goods sold.  Stock-based compensation expense reduced earnings per share by $0.02 per basic and fully diluted share for the six month period ended June 30, 2009 and by $0.06 per basic and fully diluted share for the six month period ended June 30, 2008.  The Company recognized a tax benefit on its condensed consolidated statement of income from stock-based compensation expense in the amount of $0.1 million and $0.7 million for the three month periods ended June 30, 2009 and 2008, respectively, all of which was offset by establishing valuation allowances equaling the amount of the tax benefit recognized.  For the six month period ended June 30, 2009 and 2008, the Company recognized a tax benefit on its condensed consolidated statement of income from stock-based compensation expense in the amount of $0.5 million and $1.5 million, respectively.  The Company recorded pre-tax stock-based compensation expense for the three and six month periods ended June 30, 2009 and 2008 as follows:

16

Table of Contents

As of June 30, 2009 and 2008, the Company had not yet recognized compensation expense on the following non-vested awards:

The Company did not grant any stock options during the quarters ended June 30, 2009 and 2008.

The following table summarizes stock options outstanding and changes during the six month period ended June 30, 2009:

The range of exercise prices of the exercisable options and outstanding options at June 30, 2009 are as follows:

17

Table of Contents

Restricted stock award activity for the six months ended June 30, 2009 is summarized below:

Restricted stock unit award activity for the six months ended June 30, 2009 is summarized below:

(14)         Interest Expense

The following table summarizes interest expense: