The SkunK took this shot at sunrise looking across the entire Pacific. You can only do that from Asia, (I thinK). We got a little place here and some of you may have remembered I posted some pictures when I was here last May. Its not hot, but a lot warmer than what I escaped. I finally got my fishing poles in the mail, so now its fishing in the morning and site seeing/shopping in the afternoon. The New Years Sumo Tournament comes on TV from 4-6pm and I am hooked. Eleventh Day of the 15 day match. I've been here about a week now and I have not been the first to post some of the great GERS news that has broken lately. We are 16 hours ahead of eastern time, so if I am ready to roll at 5am, I can watch the last hour of trading. Needless to say, I cannot always catch breaking news from here. However, great place for a vacation!
Will this be the year that the building blocks finally slide together in GERS land?
The recent Shareholder Letter has a link to a study of the 25% rule. One key thing I picked up from my quick read:
"The 25 Per Cent Rule is an allocation(or splitting) of operating profits. Explicit consideration is given to all of the costs, including non-manufacturing overhead, that are needed to support a product or are driven by the product. The Rule is not a split of gross profits."
Greenshift estimates that a customer's Corn Oil extraction System (COES) expense will be less than 10% of revenues from the corn oil. The SkunK believes that Greenshift therefore set its license fee from the standard 25% to 20% to account for the difference between the operating profits and the corn oil revenues.
For example, say a customer sold $100 of corn oil from a newly installed COES. For argument - lets say it cost him $10 to produce it (GERS claims the cost is much less), leaving a $90 operating profit. The 25% rule would be 25% of $90 (not $100) - or $22.50 going to GERS. Using the GERS license fee offfering the company would pay GERS $20 based on 20% of the $100. Since every producer is different in its efficiencies, all would have different costs. Some might be $90 while others are $95 operating profit. FEW of them would want to open their books to allow GERS to confirm the proper fee. On the other hand it is easy to meter a fluid and determine exactly how much corn oil is produced. Let the Ethanol company profit from increasing efficiencies, round the number off and tie it to an easy to verify product - the corn oil itself. Both companies are incentivize to increase production. In any case that's how I read why we are asking for a 20% royalty (on corn oil revenues) while quoting the 25% rule (pertaining to operating profits). It seems like a good, enforceable, simple, win-win solution. Besides us stakeholders, the other audiences here include potential customers and the courts. Such a generous offer on GERS part would seem to lessen the chance a court would want to step into this later and change the offering. Lets see how the industry - and eventually the courts - react.
SkunK
Operating Profit:
A measure of a company's earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes. also called EBIT (earnings before interes and taxes) or operating income.
Gross Profit:
Calculated as sales minus all costs directly related to those sales. These costs can include manufacturing expenses, raw materials, labor, selling, marketing and other expenses.
RevenueFor a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period.
Will this be the year that the building blocks finally slide together in GERS land?
The recent Shareholder Letter has a link to a study of the 25% rule. One key thing I picked up from my quick read:
"The 25 Per Cent Rule is an allocation(or splitting) of operating profits. Explicit consideration is given to all of the costs, including non-manufacturing overhead, that are needed to support a product or are driven by the product. The Rule is not a split of gross profits."
Greenshift estimates that a customer's Corn Oil extraction System (COES) expense will be less than 10% of revenues from the corn oil. The SkunK believes that Greenshift therefore set its license fee from the standard 25% to 20% to account for the difference between the operating profits and the corn oil revenues.
For example, say a customer sold $100 of corn oil from a newly installed COES. For argument - lets say it cost him $10 to produce it (GERS claims the cost is much less), leaving a $90 operating profit. The 25% rule would be 25% of $90 (not $100) - or $22.50 going to GERS. Using the GERS license fee offfering the company would pay GERS $20 based on 20% of the $100. Since every producer is different in its efficiencies, all would have different costs. Some might be $90 while others are $95 operating profit. FEW of them would want to open their books to allow GERS to confirm the proper fee. On the other hand it is easy to meter a fluid and determine exactly how much corn oil is produced. Let the Ethanol company profit from increasing efficiencies, round the number off and tie it to an easy to verify product - the corn oil itself. Both companies are incentivize to increase production. In any case that's how I read why we are asking for a 20% royalty (on corn oil revenues) while quoting the 25% rule (pertaining to operating profits). It seems like a good, enforceable, simple, win-win solution. Besides us stakeholders, the other audiences here include potential customers and the courts. Such a generous offer on GERS part would seem to lessen the chance a court would want to step into this later and change the offering. Lets see how the industry - and eventually the courts - react.
SkunK
Operating Profit:
A measure of a company's earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes. also called EBIT (earnings before interes and taxes) or operating income.
Gross Profit:
Calculated as sales minus all costs directly related to those sales. These costs can include manufacturing expenses, raw materials, labor, selling, marketing and other expenses.
RevenueFor a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period.
Posts
