Ethanol is a type of alcohol, produced in the U.S. principally from corn. Ethanol is primarily used as a blend component in the U.S. gasoline fuel market, which approximated 140 billion gallons in 2005 according to the Energy Information Administration, or EIA. Refiners and marketers have historically blended ethanol with gasoline to increase octane and reduce tailpipe emissions.

According to the Renewable Fuels Association, or RFA, 4.0 billion gallons of ethanol were produced in the U.S. in 2005, accounting for approximately 3% of the U.S. gasoline fuel supply. According to the RFA, total U.S. ethanol production capacity increased to more than 4.3 BGY in 2005. The substantial majority of U.S. fuel ethanol produced in 2005 was used as an additive to gasoline.

The Company’s facilities operate on a continuous basis and utilize current dry-milling technology, a production process that results in increased ethanol yield and reduced capital costs compared to wet-milling facilities. In addition to producing ethanol, the Company produces and sells WDGS and DDGS as ethanol co-products, which serve to partially offset its corn costs. In 2005, the Company produced approximately 128.0 million gallons of fuel ethanol and 402,000 tons of distillers grains, reflecting a full year of operations at its Aurora Facility and less than three months of operations at its Fort Dodge Facility.

The Company’s Aurora Facility commenced operations in December 2003 and was the first new-generation dry-mill ethanol plant built with a production capacity of 100 MMGY. The facility is located in Aurora, South Dakota, on a 420-acre site. The Company increased the capacity of its Aurora Facility to 120 MMGY in June 2005, and has incorporated the latest process control systems to increase production yields and quality.

One of the largest ethanol facilities in the U.S. by production, the Company’s Aurora Facility processes more than 43 million bushels of corn per year and produces 120 MMGY of ethanol and approximately 390,000 tons of dry distillers grains per year. The facility is designed to operate on a continuous basis. The facility purchases corn from many different suppliers.

The Company’s 110 MMGY Fort Dodge Facility commenced operations in October 2005 and is located four miles west of Fort Dodge, Iowa at the intersection of the Union Pacific and the Chicago Central and Pacific railroads. The facility is located on a 270-acre site, and its layout and operations are similar to the Company’s Aurora Facility.

The Company’s Fort Dodge Facility has the capacity to process more than 39 million bushels of corn per year and to produce 110 MMGY of ethanol and approximately 350,000 tons of dry distillers grains per year. The facility is designed to operate on a continuous basis.

Incentive income from government programs decreased $6.8 million, or 88.1%, to $0.9 million for the year ended December 31, 2005 from $7.7 million for the year ended December 31, 2004.

Gross profit decreased $4.2 million, or 10.6%, to $35.5 million for the year ended December 31, 2005 from $39.7 million for the year ended December 31, 2004.

Transportation expense increased $6.3 million, or 27.4%, to $29.1 million for the year ended December 31, 2005 from $22.9 million for the year ended December 31, 2004.