United States
Environmental Protection
Agency
Office of Air Quality
Planning and Standards
Research Triangle Park, NC 27711
EPA^52/R-96-010
May 1996
Air
EPA Economic Impact Analysis for the
Printing and Publishing NESHAP
FINAL
-------
This report has been reviewed by the Air Quality Strategies &
Standards and the Emission Standards Divisions of the Office of
Air Quality Planning and Standards, U.S. EPA, and approved for
publication. Mention of trade names or commercial products is
not intended to constitute endorsement or recommendation for use.
Copies of this report are available through the Library Services
Office (MD-35), U.S. Environmental Protection Agency, Research
Triangle Park, NC, 27711, or from the National Technical
Information Services, 5285 Port Royal Road, Springfield, VA
22161. It is also available through the U.S. EPA's Technology
Transfer Network (TTN).
-------
TABLE OF CONTENTS
Section Page
List of Figures v
List of Tables vii
Executive Summary ix
1 INTRODUCTION 1-1
1.1 Scope and Purpose 1-1
1.2 Data Sources 1-2
1.3 Organization of the Report 1-2
2 INDUSTRY PROFILE 2-1
2.1 OVERVIEW OF PRINTING PROCESSES 2-3
2.1.1 Gravure Printing Process 2-7
2.1.1.1 Gravure Printing Substrates ... 2-9
2.1.1.2 Gravure Inks, Coatings, and
Solvents 2-10
2.1.1.3 Gravure Printed Products .... 2-10
2.1.1.4 HAP Emissions from Gravure
Printing Process 2-11
2.1.2 Flexographic Printing Process 2-13
2.1.2.1 Flexographic Printing Substrates . 2-14
2.1.2.2 Flexographic Inks, Coatings, and
Solvents 2-15
2.1.2.3 Flexographic Printed Products . . 2-15
2.1.2.4 HAP Emissions from Flexographic
Printing Process 2-16
2.1.3 Binding, Finishing, and Converting
Processes 2-17
2.2 PRODUCTS AND MARKETS 2-18
2.2.1 Foreign Trade 2-22
2.2.2 Future Projections 2-23
2.3 MANUFACTURING PLANTS 2-26
2.3.1 Publication and Packaging/Product Gravure
Plants 2-26
2.3.1.1 Location, Presses, and Products
Printed. 2-26
2.3.2 Flexography Plants 2-30
2.3.2.1 Location, Presses, and Products
Printed 2-34
2.3.3 Employment at Printing Plants 2-37
2.4 FIRM CHARACTERISTICS 2-38
2.4.1 Ownership 2-50
2.4.2 Size Distribution 2-50
2.4.3 Issues of Vertical and Horizontal
Integration 2-58
2.5 REFERENCES 2-59
ill
-------
TABLE OF CONTENTS (continued)
Section Page
3 REGULATORY CONTROL OPTIONS AND COSTS OF COMPLIANCE . . 3-1
3.1 CONTROL OPTIONS 3-1
3.2 COSTS OF CONTROLS 3-4
4 ECONOMIC IMPACT ANALYSIS 4-1
4.1 CONCEPTUAL OVERVIEW 4-2
4.2 OPERATIONAL MARKET MODEL 4-8
4.2.1 Model Dimensions 4-8
4.2.2 Production 4-8
4.2.3 Consumption 4-12
4.2.4 Model Parameterization 4-14
4.2.5 Incorporating Regulatory Control Costs . . 4-23
4.2.6 Market Equilibria 4-24
4.3 MARKET IMPACTS 4-25
4.3.1 Price and Quantity Impacts 4-25
4.3.2 Economic Welfare Impacts 4-26
4.4 REFERENCES 4-30
5 FIRM-LEVEL ANALYSIS 5-1
5.1 ANALYZE OWNERS' RESPONSE OPTIONS 5-2
5.2 IMPACTS OF THE REGULATION 5-5
5.2.1 Profitability Analysis 5-10
5.2.2 Bankruptcy Analysis 5-13
5.3 REFERENCES 5-18
Appendix A: Market Model of the Printing and Publishing
Industry: Summary A-l
IV
-------
LIST OF FIGURES
Number Page
2-1 Basic flow diagram of the printing process 2-6
2-2 Comparison of growth in printing industries with
U.S. gross domestic product: 1987-1991 2-23
2-3 Location of publication rotogravure printing
plants, U.S 2-27
2-4 Location of U.S. flexography printing plants 2-36
2-5 Gravure printing facilities by number of
employees, 1987 2-37
2-6 Flexography printing facilities by number of
employees, 1989 2-38
2-7 Chain of ownership 2-39
2-8 Comparison of the legal form of organization
for firms in the U.S., gravure, and other printing
segments of the printing industry, 1987 2-52
4-1 Multimarket relationship 4-4
4-2 Imposition of regulatory costs on market for
printing input, X 4-7
4-3 Diagram summary of production model 4-11
5-1 Characterization of owner responses to regulatory
actions 5-3
-------
LIST OF TABLES
Number Page
2-1 Description, Applications, and Percentage Distribution
of Major Printing Processes 2-8
2-2 Value of Product Shipments for Publication Printing
and Printed Publications, 1987-1991 ($106) 2-19
2-3 Value of Product Shipments for Packaging Materials,
1987-1991 ($106) 2-20
2-4 Value of Product Shipments for Products That Are
Printed,1987-1991 ($106) 2-21
2-5 Value of Exports and Imports for Products Related to
Printing,1989-1991 ($10?) 2-24
2-6 U.S. Printing Industry Forecast 1990 to 2000 2-25
2-7 Publication Rotogravure Plants 2-28
2-8 Number of Gravure Web Presses in the Publication
Gravure Industry, 1989 2-29
2-9 Packaging and Product Rotogravure Plants 2-31
2-10 Number of Gravure Web Presses and Summary Press
Characteristics for the U.S Packaging and Product
Gravure Industry, 1989 2-35
2-11 Number of Plants Owned and Primary Printing Categories
for Publication Gravure Firms, 1993 2-40
2-12 Number of Plants Owned and Primary Printing Categories
for Packaging/Product Gravure Printing Firms 2-41
2-13 Number of Plants Owned and Primary Printing Categories
for Flexographic Printing Firms, 1993 2-44
2-14 Legal Form of Firm Organization in the Commercial
Printing Industry, 1987 2-51
2-15 Small Business Administration Size Standards by SIC
Code for Companies That Have Gravure or Flexographic
Printing Capabilities 2-53
2-16 Number of Plants Owned, Sales, Employment, and Type of
Ownership for Commercial Printing Firms 2-55
3-1 Control Options for Publication Rotogravure Plants . . 3-2
3-2 Control Options for Packaging and Product Rotogravure
Plants 3-2
3-3 Control Options for Flexographic Printing Plants . . . 3-3
3-4 Summary of Control Costs for Three Industry Segments:
Publication Gravure, Packaging/Product Gravure, and
Flexography 3-5
4-1 Printing Processes Commonly Employed for Publications
and Packaging 4-5
4-2 Final Products Included in the Market Model 4-9
4-3 1992 Census of Manufactures Data by SIC for Final
Products 4-15
4-4 Baseline Market Price and Output Observation for
Final Products and Printing Inputs 4-21
4-5 Price and Quantity Adjustments Due to Regulation:
Printing Inputs and Final Products 4-27
4-6 Reallocation of Capital and Labor in Production of
Printing Inputs Due to Regulation 4-28
VII
-------
LIST OF TABLES (continued)
Number Page
5-1 Calculations Required to Set up With-Regulation
Financial Statements 5-6
5-2 Measures of Compliance Costs as a Percentage of
Baseline Total Costs by Size and Type of Firm 5-8
5-3 Key Measures of Profitability 5-11
5-4 Summary Statistics for Key Measures of Profitability
in Baseline and With-Regulation by Firm Size Category . 5-12
5-5 Baseline Bankruptcy Prediction 5-15
5-6 With-Regulation Baseline Bankruptcy Prediction .... 5-17
Vlll
-------
EXECUTIVE SUMMARY
The U.S. Environmental Protection Agency (EPA or the
Agency) is developing an air pollution regulation for reducing
emissions in the publication gravure, packaging and product
gravure, and flexographic segments of the printing and
publishing industry. A National Emission Standard for
Hazardous Air Pollutants (NESHAP) has been developed for these
industry segments under Title III of the 1990 Amendments to
the Clean Air Act (CAA). The Innovative Strategies and
Economics Group (ISEG) of EPA contributes to this effort by
providing analyses and supporting documents that describe the
likely economic impacts of the standards on directly and
indirectly affected entities.
ES.l SCOPE AND PURPOSE
This report evaluates the economic impacts of additional
pollution control requirements for the printing and publishing
industry that are designed to control releases of hazardous
air pollutants (HAPs) to the atmosphere. The Clean Air Act's
purpose is "to protect and enhance the quality of the Nation's
air resources" (Section 101[b]). Section 112 of the Clean Air
Act as amended in 1990 establishes the authority to set
national emission standards for 189 hazardous air pollutants.
NESHAPs are industry-specific. For HAPs, the Agency
establishes Maximum Achievable Control Technology (MACT)
standards. The term "MACT floor" refers to the minimum
control technology on which MACT can be based. For existing
sources, the MACT floor is the average emissions limitation
achieved by the best performing 12 percent of sources (if
there are 30 or more sources in the category or subcategory,
or best performing five sources (if there are fewer than 30
sources in the category or subcategory). MACT can be more
stringent than the floor considering costs, non-air quality
health and environmental impacts, and energy requirements.
ix
-------
ES.2 INDUSTRY PROFILE
The printing industry is involved in the printing of
materials such as books, magazines, containers, and other
packaging. Printing can be grouped into publication,
packaging, or product printing and is performed using
primarily one of the following five printing processes:
letterpress, flexography, gravure, offset lithography, and
screen printing. The flexographic and gravure printing
processes release HAPs through the application of ink or other
materials to the substrate (material to be printed), as well
as during the cleaning process, where solvents are used to
clean the printing presses. EPA estimates that, in 1992,
17,500 tons of HAPs were emitted from publication gravure
plants and as much as 18,000 tons from product and packaging
gravure plants.1
The printing industry is a very diversified and
sophisticated industry because of the multiplicity of printing
processes used and products produced. Gravure and flexography
compete with offset lithography as the dominant processes.
The regulation will potentially affect all entities that use
gravure and flexographic printing processes as part of their
overall production processes, whether they consider themselves
as part of the commercial printing industry or some other
industry. Printing may be performed by the commercial
printing industry or by in-house captive operations classified
in other industries.
Publications are printed largely with offset lithography,
with some gravure and flexography, while package printing is
mostly performed by flexography, with some offset, gravure,
and other processes. Publication printing is covered for the
most part by the commercial printing industries identified by
Standard Industrial Classification (SIC) codes 2752, Commer-
cial Printing—Lithography; 2754, Commercial Printing—Gravure;
and 2759, Commercial Printing—not elsewhere classified, which
includes letterpress, flexographic, screen, and other
-------
processes. The 1991 value of commercial printing was $51.8
billion.- Package printing is the application of inks or
coating material to a package directly or with a label. It
often includes in-line converting operations in addition to
the reproduction of the image. It is estimated that the 1990
value of package production in the U.S. was roughly $73
billion, of which $58 billion represents packaging with
printing.3
ES.3 REGULATORY CONTROL OPTIONS AND COSTS OF COMPLIANCE
MACT standards are technology-based regulations.
Although a facility that is a source of emission need not
install any specific pollution control technology, the
regulatory requirements must be based on a technology that can
achieve the specified limits. The Background Information
Document (BID) details the technology basis for MACT
standards. Model plants were developed to evaluate the
effects of various control options on the printing and
publishing industry. Selection of control options was based
on the application of presently available control devices and
varying levels of capture consistent with different levels of
overall control. The BID presents a summary of the control
options for each of the three industry segments—publication
gravure, packaging/product gravure, and flexography. Table
ES-l summarizes the compliance costs associated with the
regulatory requirements for each segment.
XI
-------
TABLE ES-1.
SUMMARY OF CONTROL COSTS FOR THREE INDUSTRY SEGMENTS: PUBLICATION GRAVURE,
PACKAGING/PRODUCT GRAVURE, AND FLEXOGRAPHY (103 $1993)
Segment
Publication gravure
Packaging /produce
gravure
Flexography
Total
Total
capital
costs
$92,
$48,
$7,
$148,
289
904
170
364
.0
.7
.7
.4
Annualized
capital
costs
$12,292
$6,514
$955
$19,762
.9
.1
.1
.1
Operating
expense
$8,595
$17,913
$2,584
$29,093
.0
.8
.5
.3
Monitoring Total
and annual
recordkeeping cost
$216.
$636.
$64.
$916.
0
0
0
0
$21,
$25,
$3,
$49,
103.9
063.9
603.7
771.5
-------
1
1 ES.4 ECONOMIC IMPACT ANALYSIS
A variety of approaches may be used to assess the impacts
of the regulatory action; they reflect a variety of underlying
paradigms. Typically, an economic model is developed to
assess the facility- and market-level impacts of the
regulations, including price, quantity, employment, business
closure, and foreign competition impacts. Such models are
firmly rooted in neoclassical economic theory and require
market-level data on price and quantity for potentially
affected products and detailed production data at the facility
level. In the case of the printing and publishing industry;
however, this information is not available at the facility- or
market-level. Furthermore, this regulation affects a service
(printing and publishing) as opposed to a manufactured good or
product. Service industries cause problems related to
identifying and differentiating the affected commodities
(markets), quantifying the level of the service provided to
other industries or final consumers, and identifying the
producers and consumers of the service. Nevertheless, RTI
developed a market model of the printing and publishing
industry to assess the regulatory impacts of the NESHAP.
Printing is basically the reproduction of original type
or artwork for publications, packaging materials, and
products. The demand for printing derives from its use as an
input into the production of publications, packaging, and
printed products. The production process for publications,
packaging, and products may be broken into stages so that at
each stage some inputs are used to make an intermediate input
that is then used with other inputs to produce the final
product. Although there are five major printing processes,
only two are directly affected by the regulation—flexography
and gravure. The other processes (offset, letterpress, and
screen) are not covered by the regulation. Therefore, this
analysis includes three printing inputs: flexography,
xiii
-------
gravure, and a composite printing input that includes offset,
letterpress, and screen. Publications, packaging, and printed
products are the final product that employ printing inputs so
that 22 final products are included in the market model.
International trade is not included in this model, so all of
these products are consumed and produced domestically.
Given a single producer of each final product, each
determines its use of factors in a sequence of stages, through
a nested CES production function.3 First, producers have
fixed requirements of printing services and all other inputs
per unit of output. Second, they can substitute between
printing processes through a CES function. To facilitate the
analysis, the CES function is limited to two printing
processes for each final product. In the third production
stage, each printing process has fixed requirements of
intermediate inputs (like substrates and printing inks) and
value added (labor and capital). In the fourth stage, within
each printing process, we allowed for substitution between
labor and capital through a CES value-added function.
As a result of regulation, the relative cost of the
available printing processes will change. This in turn will
force final producers to alter their production decisions and
to substitute away from regulated processes (more costly)
toward unregulated processes (less costly) to the extent
existing production technologies allow. Thus, the regulations
on the printing and publishing industry are incorporated into
the model like a per-unit tax on the use of the printing
inputs with statutory incidence on the buyers. The new post-
compliance equilibrium is the result of a series of iterations
between producer and consumer responses and market adjustments
until a stable market price arises where total market supply
"The CES, or constant elasticity of substitution, production function
is one of the most frequently employed functional forms in modern economic
analysis. As implied by its name, the elasticity of substitution between
factors of production is expressed as some constant value. The Cobb-
Douglas function is a special case of the CES production function with an
elasticity of substitution equal to 1.
xiv
-------
TABLE ES-2. PRICE AND QUANTITY ADJUSTMENTS DUE TO REGULATION:
PRINTING INPUTS AND FINAL PRODUCTS
Elasticity of substitution3
0.5 1.5
Percentage change Percentage change
in in
Product
Printing inputs
Flexography
Gravure
Otherb
Publications ,
total
Packaging, total
Products, total
Price
-0.06
0.41
-0.07
0.03
-0.01
0.07
Quantity
0.04
-0.29
0.04
-0.03
0.01
-0.07
Price
-0.05
0.41
-0.06
0.04
-0.01
0.07
Quantity
0.07
-0.53
0.08
-0.04
0.01
-0.07
a The elasticity of substitution between printing processes in final
production is assumed to be the same across all final products.
b Other printing input is a composite input that includes lithography,
letterpress, and screen printing processes.
different assumed values for the elasticity of substitution
between printing processes of 0.5 and 1.5 across all final
products. Percentage change in market prices and quantities
is significantly below 1 percent across all final products and
printing inputs. The percentage increase in the market price
of gravure is predicted to be 0.4 percent in response to the
regulation, while the market price of flexography is predicted
to decline by a negligible amount of 0.06 percent. The model
results predict substitution away from gravure to flexography
and other printing inputs but at a very low level as indicated
by the output adjustments. Although the percentage change in
market price of printing inputs does not vary by specification
of elasticity of substitution, the percentage change in output
with a value of 1.5 for each printing input is almost double
those observed with a value of 0.5. This outcome is expected
XV
-------
to decline by a negligible amount of 0.06 percent. The model
results predict substitution away from gravure to flexography
and other printing inputs but at a very low level as indicated
by the output adjustments. Although the percentage change in
market price of printing inputs does not vary by specification
of elasticity of substitution, the percentage change in output
with a value of 1.5 for each printing input is almost double
those observed with a value of 0.5. This outcome is expected
as a result of the higher sensitivity of input substitution
given higher values of the elasticity of substitution.
ES.5 REGULATORY FLEXIBILITY ANALYSIS
Environmental regulations such as the NESHAP for the
printing and publishing industry affect all businesses, large
and small, but small businesses may have special problems in
complying with such regulations. The Regulatory Flexibility
Act (RFA) of 1980, the 1992 revised EPA guidelines for
implementing the Regulatory Flexibility Act, and the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)
requires that special consideration be given to small entities
affected by Federal regulation. Under the 1992 revised EPA
guidelines for implementing the Regulatory Flexibility Act, an
initial regulatory flexibility analysis (IRFA) and a final
regulatory flexibility analysis (FRFA) will be performed for
every rule subject to the Act that will have any economic
impact, however small, on any small entities that are subject
to the rule, however few, even though EPA may not be legally
required to do so. Therefore, the firm-level analysis
specifically addresses the RFA requirements by measuring the
impacts on small entities associated with the regulations on
the printing and publishing industry.
The analysis evaluates the change in financial status by
first computing the with-regulation financial ratios of
potentially affected firms and then comparing them to the
corresponding baseline ratios. Although there are a variety
XVI
-------
of possible financial ratios providing individual indicators
of a firm's health, they may not all give the same signals.
Therefore, for this analysis, the focus is on changes in key
measures of profitability (return on sales, return on assets,
and return on equity). Furthermore, a composite of financial
ratios (i.e., the Z-score)4 is employed to measure financial
viability and determine the likelihood that regulatory
compliance will result in financial failure (bankruptcy) of
the owning firm.
Potentially affected firms include entities that own
plants employing gravure or flexographic printing processes.
Based on financial information from Dun and Bradstreet and
from Dow Jones Business Information Services, this analysis
characterizes the financial status of 45 firms potentially
affected by the regulation. The firms in this analysis
include 4 of the 6 in publication gravure, 20 of the 64 in
packaging and product gravure, and only 21 of the 500 to 1,000
firms involved in flexographic printing. With regulation, the
change in measures of profitability are minimal with no
overall disparity across small and large firms, while the
likelihood of financial failure is unaffected for both small
and large firms. Therefore, there is no evidence of any
disproportionate impacts on small entities due to the NESHAP
on the printing and publishing industry.
ES.6 REFERENCES
1. U.S. Environmental Protection Agency. Engineering Draft
Report for the Printing and Publishing Industry.
Prepared by Research Triangle Institute. 1994. Chapter
2.
2. U.S. Department of Commerce. 1991 Annual Survey of
Manufactures. Value of Product Shipments. Washington,
DC, U.S. Government Printing Office. 1992. Table 1.
3. Eldred, Nelson R. Package Printing. Plainview, NY,
Jelmar Publishing Co., Inc. 1993. pp. xiii-xiv.
4. Altman, Edward. Corporate Financial Distress. New York,
John Wiley and Sons, 1983.
xvii
-------
SECTION 1
INTRODUCTION
The U.S. Environmental Protection Agency (EPA or the
Agency) is developing an air pollution regulation for reducing
emissions in the publication gravure, packaging and product
gravure, and flexographic segments of the printing and pub-
lishing industry. A National Emission Standard for Hazardous
Air Pollutants (NESHAP) has been developed for these industry
segments under Title III of the 1990 Amendments to the Clean
Air Act. The Innovative Strategies and Economics Group (ISEG)
of EPA contributes to this effort by providing analyses and
supporting documents that describe the likely economic impacts
of the standards on directly and indirectly affected entities.
1.1 SCOPE AND PURPOSE
This report evaluates the economic impacts of additional
pollution control requirements for the printing and publishing
industry that are designed to control releases of hazardous
air pollutants (HAPs) to the atmosphere. The Clean Air Act's
purpose is "to protect and enhance the quality of the Nation's
air resources" (Section 101 [b]). Section 112 of the Clean Air
Act as amended in 1990 establishes the authority to set
national emission standards for 189 HAPs, which are industry-
specific. For HAPs, the Agency establishes Maximum Achievable
Control Technology (MACT) standards. The term "MACT floor"
refers to the minimum control technology on which MACT can be
based. For existing sources, the MACT floor is the average
emissions limitation achieved by the best performing 12
percent of sources (if there are 30 or more sources in the
category or subcategory) or best performing five sources (if
there are fewer than 30 sources in the category or sub-
category). MACT can be more stringent than the floor when
1-1
-------
considering costs, nonair quality health and environmental
impacts, and energy requirements.
1.2 DATA SOURCES
Where possible, the Agency used publicly available data
in this analysis. These information sources included U.S.
Department of Commerce documents, such as the Annual Survey of
Manufactures and the 1992 Census of Manufactures, and industry
data, such as the Gravure Association of America (GAA)
periodic compilation of statistics in Profile of the U.S.
Gravure Industry and the market forecasts included in SRI
International's Printing 2000. In addition, journal articles
and previous work by the Agency provided information necessary
to profile the industry and complete this analysis.
To determine the equipment and costs associated with a
particular set of pollution controls at a potentially affected
establishment, EPA engineers must be familiar with the
existing printing and publishing technologies and equipment
currently employed at those establishments. Although detailed
information at the facility level is not publicly available,
the Agency is authorized by Section 114 of the Clean Air Act
to collect such information for regulatory development.
Therefore, the EPA collected facility- and company-specific
information through a survey of the industry or an Information
Collection Request (ICR). This information assisted the
economic analysis as well as the engineering analysis by
identifying potential affected facilities, product markets,
and companies.
1.3 ORGANIZATION OF THE REPORT
The remainder of this report is divided into four
sections that support and provide details on the methodology
and results of this analysis. The sections include the
following:
1-2
-------
Section 2 provides a summary profile of the printing
and publishing industry. This section is based on the
industry profile prepared by Research Triangle
Institute (RTI) for EPA. It begins with an overview
of the industry and the major printing processes.
Data are presented on products and markets, production
facilities, and the companies that own and operate the
facilities.
Section 3 reviews the regulatory control options and
associated costs of compliance. This section is based
on the draft Background Information Document (BID)
prepared by RTI in support of the national emission
standards for the printing and publishing industry.
Section 4 details the economic impact methodology for
assessing the market-level effects of the regulation.
This section presents the price and output adjustments
for affected markets associated with the additional
pollution control costs.
Section 5 describes the methodology for assessing the
company-level impacts of the regulation including an
initial regulatory flexibility analysis to evaluate
the small business effects of the regulation.
1-3
-------
SECTION 2
INDUSTRY PROFILE
The printing industry is involved in the printing of
materials, such as books, magazines, containers, and other
packaging. Printing can be grouped into publication,
packaging, or product printing and is performed using
primarily one of the following five printing processes:
letterpress, flexography, gravure, offset lithography, and
screen printing." The flexographic and gravure printing
processes release hazardous air pollutants (HAPs) through the
application of the ink or other materials to the substrate
(material to be printed), as well as during the cleaning
process, where solvents are used to clean the printing
presses. EPA estimates that, in 1992, 17,500 tons of HAPs
were emitted from publication gravure plants and as much as
18,000 tons from product and packaging gravure plants.1
The printing industry is a very diversified and
sophisticated industry because of the multiplicity of printing
processes used and products produced. Gravure and flexography
compete with offset lithography as the dominant processes.
The regulation will potentially affect all entities that use
gravure and flexographic printing processes as part of their
overall production processes, whether they consider themselves
as part of the commercial printing industry or some other
industry. Printing may be performed by the commercial
printing industry or by in-house captive operations classified
in other industries.
The U.S. Department of Commerce compiles industry data
based on Standard Industrial Classification (SIC) codes
assigned to specific industries and the products they produce.
Most Census data are reported at the four-digit SIC level,
"Screen printing is a fifth process that is mainly used to print
surfaces that are difficult to print by other methods such as bottles,
tubes, and shirts and, therefore, is only briefly mentioned in this report.
2-1
-------
with some product data at the five-digit level. The
commercial printing industry is defined by SIC codes 2752,
Commercial Printing-Lithography; 2754, Commercial Printing-
Gravure; and 2759, Commercial Printing, not elsewhere
classified (n.e.c.), which includes letterpress, flexographic,
screen, and other commercial printing. Other four-digit codes
under major SIC code 27 cover other printing-related
industries such as publishing, book printing, and printing-
related service trades. Because the regulation would apply to
all producers employing the gravure or flexographic printing
processes, not just those whose primary business involves
these processes, potentially any entities classified under the
major SIC code 27 industries may be affected. Furthermore,
entities classified under packaging industries (major SIC
codes 26, 30, 32, and 34) may also be affected.
Publications are printed largely with offset lithography,
with some gravure and flexography, while package printing is
mostly performed by flexography, with some offset, gravure,
and other processes. Publication printing is covered for the
most part by the commercial printing industries identified
above with the exception of book printing (SIC 2732), which
mainly uses lithography. The 1991 value of commercial
printing was $51.8 billion.2
Package printing is the application of inks or coating
material to a package directly or with a label. It often
includes in-line converting operations in addition to the
reproduction of the image. It is estimated that the 1990
value of package production in the U.S. was roughly $73
billion, of which $58 billion represents packaging with
printing.3
The remainder of this section provides a brief
introduction to the diverse printing and publishing industry.
The purpose is to give the reader a general understanding of
the technical and economic aspects of the industry that must
be addressed in the economic impact analysis. Section 2.1
provides an overview of the printing processes employed by the
2-2
-------
industry with an emphasis on those affected directly by the
1 regulation — gravure and flexography. Section 2.2 presents
historical data on the various products of the industry and
their markets. Section 2.3 summarizes the number of printing
facilities by market segment, location, and other parameters,
while Section 2.4 provides general information on the
potentially affected companies that own printing facilities.
2.1 OVERVIEW OF PRINTING PROCESSES
There are five main types of printing processes:
letterpress, flexography, gravure, offset lithography, and
screen printing. All of these printing methods are contact or
impression processes, which use an inked printing plate or
image carrier to produce numerous reproductions of an original
on paper or other substrates using a printing press, on which
pressure is used to transfer the inked image to the paper.4
The image carrier consists of two areas, the print or image
area to which ink is applied and those areas that remain ink-
free. The five printing processes are distinguished by the
method of image transfer employed, which can be classified as
one of four types:
• the relief method of printing from a raised surface as
characterized by letterpress and flexography,
• the intaglio method of printing from recessed areas as
characterized by gravure,
• the planographic method of printing from a flat
surface as characterized by lithography, and
• the stencil method of printing through a porous
surface as characterized by screen printing.
In addition, printing processes may be classified as
direct, where the ink is transferred directly to the
substrate, or offset, where the ink is transferred from the
inked plate to an intermediate cylinder covered with a rubber
2-3
-------
blanket that transfers it to the substrate. Letterpress,
flexography, gravure, and screen printing are almost always
direct, and lithography is almost exclusively offset, thus
referred to as offset lithography.1* Another way of
distinguishing printing processes is by the system of feeding
the substrate to the printing press: sheet-fed (individual
sheets) or web-fed (continuous roll). Web printing presses
have largely displaced sheet-fed presses in most processes
because of the ease of placing converting operations in line
with the press.5
Some of the printing processes have major subprocesses
based on the substrate or products being printed. These major
subprocesses include the following:
• publication printing, which includes printed materials
that are not further processed into some form of
packaging or nonpublication finished product;
• packaging printing, consisting of printed materials
that are further processed into boxes, containers,
bags, and other forms that package consumer goods; and
• product printing, covering printing done to enhance or
design a product that is not used to package or
display something else and is not a publication.
Gravure may be divided into three subprocesses: publication
gravure, packaging gravure, and product gravure. Flexography
consists mainly of publication flexography and packaging
flexography, with some product printing. Offset lithography
includes sheetfed offset, heatset web offset, and non-heatset
web offset.
In general, the printing process begins with the text,
design, photography, or artwork to be printed and ends with
the final printed publication, packaging material, or product.
bOffset presses may use letterpress or flexo plates or gravure
cylinders, thus combining lithography with technology from these other
printing processes (Foundation of Flexographic Technical Association, Inc.
Flexography Principles and Practices, 4th Ed. Ronkonkoma, NY, Foundation
of Flexographic Technical Association, Inc. 1991. p. 22.)
2-4
-------
Several steps go into the entire print job, whether it is done
on a contract basis as with most publication printing or by
in-house captive operations as with much packaging and product
printing. These individual steps include
• prepress operations,
• proofing operations,
• printing, and
• binding or finishing and converting.
A detailed discussion of each individual step is beyond the
scope of this report, but the general process and product
flows are diagrammed in Figure 2-1. All of the production
steps illustrated in Figure 2-1 may be performed at different
locations by contract platemakers, printers, and
finishers/converters, or performed in-house by an integrated
producer.
Printing is accomplished by presses that perform the
following procedures:
• mounting plates or image carriers on a bed or cylinder
(or, with gravure, the actual cylinder);
• inking the plates;
• feeding the substrate and adjusting the tension (web
presses);
* transferring the inked image to the paper; and
• delivering the printed matter as sheets in a pile, or
otherwise folding, rewinding on a roll, or other
finishing and converting operations.6
As mentioned above, printing presses may print using a direct
or offset method and can be either sheet-fed or web-fed.
The printing operations may be performed by either a
contract printer or in-house. Contract printers purchase
inputs like substrates and inks to produce printed matter,
2-5
-------
which is then transformed into the finished product through
separate binding or finishing and converting operations. In
the case of in-house printing, the integrated producer would
be equipped with printing presses and perform the printing
operation as part of the overall production process. In many
cases the printing operations of integrated producers are a
relatively small part of the overall production process.
Table 2-1 provides a summary of the five printing
processes, including a brief description of each, their major
applications, and projected market shares.7 Gravure and
flexographic printing processes are the focus of this section.
Binding, converting, and finishing operations are discussed
independently of the types of printing presented in the
following sections.
2.1.1 Gravure Printing Process
Gravure is a printing process in which the ink is
directly transferred to the substrate using engraved copper-
plated cylinders. The cylinders are engraved with minute
cells, or wells, that carry the ink to the substrate. Deeply
engraved wells tend to carry more ink than a raised surface,
thus producing darker values. Shallow wells are engraved to
produce lighter values. The surface of the printing plate is
flat except for the series of recessed wells. The minute
cells form dot patterns that combine to represent the letters
or solid areas to be printed. Three types of cylinder-making
systems are used for gravure—conventional, where the cells are
the same size but vary in depth, giving a long scale of
reproduction used for high-quality printing of photographs;
direct transfer or variable area, used for packaging; and
variable area-variable depth, used for magazine and catalog
printing.8
There are two main types of gravure printing press
designs: (1) sheet-fed, or flat-plate, gravure press and (2)
web gravure press (rotogravure). Almost all gravure printing
is done by rotogravure; therefore, rotogravure is the focus of
2-7
-------
Process
TABLE 2-1. DESCRIPTION, APPLICATIONS, AND PERCENTAGE DISTRIBUTION OF
MAJOR PRINTING PROCESSES
Projected percentage
distribution
1991 1995 2000 2025
Description
Major applications
Lithography
Gravure
CO
Flexography
Letterpress
Silkscreen
Indirect (or offset)
printing using an
intermediate element
(blanket) between
image carrier and
substrate
Printing method based
on photographs and
photo-mechanics
capable of reproducing
continuous- tone
pictures
Direct transfer of an
image from an inked
flexible plate,
frequently used on a
rotary press
Image transferred
under pressure
directly to paper from
inked plate
Ink is passed through
unblocked part of
porous plate to form
printed image
Magazines,
newspapers, books,
stationery,
advertising,
containers
Packaging,
advertising, greeting
cards, art books
Packaging,
newspapers,
magazines,
directories
Magazines,
newspapers, books,
stationery,
advertising
Signs, electronics,
wallpaper, greeting
cards, ceramics,
decals, banners
47
19
47
18
45
17
35
16
17 18 19 21
11 8 5 4
333
Source: U.S. EPA, Office of Pollution Prevention and Toxics.
Industry. Washington, DC, May 1992. p. 7.
Use Cluster Analysis of the Printing
-------
this description.0 Gravure presses may be divided into
lightweight presses for flexible packaging, gift wraps, paper
and foil labels, and decorative films and heavyweight presses
for folding cartons and vinyl sheeting.9 The type of gravure
presses commonly used to print packaging materials include
narrow web, in-line presses for labels and wrappers and wide
and narrow web, in-line presses for folding cartons and
flexible packaging.
2.1.1.1 Gravure Printing Substrates. The web stock, or
substrate, is an important input to the gravure process. A
smooth, flat printing surface is best for the gravure process
to make satisfactory contact with the gravure cylinder.
Coated papers and board, foils, and extruded polymer films
work extremely well with rotogravure. Although the substrate
must be smooth, it does not need to be strong or stiff.
Gravure is able to print on low basis weight papers, even
tissue papers.10
The GAA estimates that eight different paper types were
used by the publication gravure printing industry in 1987,
with a total estimated use of 2.2 million tons.
Packaging gravure substrates include those used at plants
printing folding cartons, flexible packaging, and label and
wrapper packaging. Film types reported for gravure flexible
packaging include polyester, metalized polyester,
polypropylene, polyethylene, polystyrene, nylon, cellophane,
vinyl, and poly/foil/poly laminates.11
Product gravure prints on paper and foil substrates for
gift wraps in addition to substrates that consist of several
layers of materials, one of which is vinyl. Products printed
include wallcovering, upholstery, tablecloths, shower
curtains, floor coverings, and adhesive-backed decorative
film.
'Exceptions include embossing presses or special presses used to
print money with actual engraved plates.
2-9
-------
2.1.1.2 Gravure Inks. Coatings, and Solvents. The
gravure process requires a thin, watery ink that can be easily
drawn from the plate cells to the web surface at high print
speeds. It is also helpful if the ink has a strong affinity
to the substrate and can be drawn into the porous surface. In
addition to ink, other materials including adhesives, primers,
coatings, and varnishes may be applied with gravure
cylinders.12 In a multicolor process it is important that the
ink or other coating dry quickly between each station;
therefore, the ink vehicle must contain a volatile portion to
be evaporated. Organic solvents and alcohol are mainly used
as the volatile portion, but water-based inks are becoming
more popular because of their lower cost and less potential
for air pollution.13 However, a single press is not
compatible for use with either system. Water-based inks
require more drying capacity and a different cell design.
Data are available from the GAA for ink consumption by
publication and packaging/product gravure printers.
Publication gravure presses in the U.S. use toluene/xylene-
based (solvent-based) ink systems exclusively.14 Toluene is
the primary solvent used in the U.S. publication rotogravure
ink systems, and some plants also use xylenes and ethyl
benzene in the solvent blend. All of these compounds are
HAPs. Types of packaging/product gravure inks are identified
by GAA and include nitrocellulose and water-based inks.
Inks contain solvents, while additional solvents may be
mixed into the ink to obtain the desired viscosity.
Publication gravure plants recover a large portion of spent
solvents from their ink, some of which is reused and some
excess which is sold back to the ink suppliers. Some virgin
solvent, which has the same composition as the solvent in the
inks, is purchased for replenishment purposes, and a small
amount is used for cleaning the presses.
2.1.1.3 Gravure Printed Products. Publication gravure
prints mainly for the magazine and periodical, catalog and
directory, and advertising printing markets. Many consumer
2-10
-------
magazines as well as Sunday magazines, which are inserted into
Sunday newspapers, are printed by publication gravure.
Catalogs and directories printed by publication gravure
include merchandise catalogs and telephone directories.
Gravure advertising printing consists mainly of direct mail
advertising and newspaper inserts. In addition to these three
main markets, publication gravure prints other types of
commercial printing, such as decalcomanias, pressure-sensitive
products, and other general commercial printing.
Packaging gravure is used to print mainly folding
cartons, flexible packaging, and labels and wrappers.11
Folding cartons are used for packaging retail products as well
as for containing other packages. Gravure and offset are the
major processes used to print folding boxboard.15 Flexography
may also be used.16 Flexible packaging is made from paper,
paperboard, plastic film, and foils to package food and other
products and for lining other types of containers and for bags
and sacks. Flexography is more common than gravure for
printing flexible packaging. Labels and wrappers can be
wrapped or adhered to other types of packaging, or they may be
part of the package itself. For printing labels, manufac-
turers may use combination gravure/flexo presses. The gravure
cylinder prints the halftone material and applies non-ink
coatings and the flexographic cylinder prints typographic
material that might have frequent changes.
Product gravure printing decorates a variety of paper,
tissue, and vinyl products. Examples of gravure printed
products include gift wraps, wallcoverings, vinyl products,
floor coverings, tissue products, and decorative laminates.
2.1.1.4 HAP Emissions from Gravure Printing Process.
The evaporated components of the ink, other coatings, and
solvents may contain HAPs. HAPs may also be present in the
solvents used to clean the presses and press components. The
^Labels and wrappers are sometimes classified as a type of flexible
packaging, and these two product categories often overlap.
2-11
-------
rotogravure process used for publication includes a solvent
recovery system. During the drying process ink is heated,
releasing the HAPs into the heated air. Capture systems may
vary depending on the age of the press; however, the majority
of the solvent is captured from the dryer exhausts, combined
with solvent-laden air captured from other presses, and routed
to the solvent recovery system. HAP emissions result from
incomplete recovery of captured HAP and from incomplete
capture. As the printed substrate passes through the dryers,
most of the HAPs are captured in the exhaust systems of the
dryers. However, some of these emissions escape. For
example, HAPs are emitted from the ink fountains, the web as
it is swept from the dryer to the next station, the web after
it leaves the last dryer and moves on to further processing,
and the printed product as it leaves the plant.17 HAPs from
proofing presses, cleaning operations, ink storage tanks, and
ink mixing operations are relatively minor compared to the
emissions during the printing process, but they do contribute
to overall emissions.
HAPs in packaging and product gravure processes are
contained in the inks and other coatings applied by the
gravure presses. The predominant type of ink used is based on
nitrocellulose resin. Some polyamide inks are also used.
Solvent systems include aromatic, aliphatic, and oxygenated
hydrocarbon solventborne inks as well as water-based inks.
Specific HAPs that may be contained in the product/packaging
gravure inks include toluene, hexane, methyl ethyl ketone,
methyl isobutyl ketone, methanol, and glycol ethers. The
specific type of ink used depends on the nature of the
substrate printed, the type of product or package printed, the
age of the press, and existing air pollution regulations and
permit requirements related to volatile organic compound (VOC)
emissions.18
Capture systems in use at product/packaging gravure
facilities include combinations of dryer exhausts, floor
sweeps, collection ducting, hoods, press enclosures, total
2-12
-------
enclosures, room enclosures, negative pressure pressrooms,
partial enclosures, and ink pan covers. Air pollution is
controlled using either carbon adsorption, thermal
incineration, or catalytic incineration. A fourth strategy
involves using waterborne technologies. However, waterborne
inks may still contain HAPs (e.g., glycol ethers, methanol).19
Furthermore, some solventborne inks are HAP free. HAP-free
inks are available and are currently in use at product/pack-
aging gravure facilities. Pollution can also be prevented by
using the inks that contain low percentages of HAPs. Low-HAP
inks contain a small proportion of glycol ethers, which
function to reduce surface tension and improve flow
characteristics and are used mainly by facilities that print
paper and cardboard packaging.20
Because of the wide variety of substrates printed and
products produced by product/packaging gravure facilities,
printers must use a wide variety of inks with different
performance characteristics and hundreds of different colors.
Low-HAP inks may not be available in the many different ink
types and colors required to meet the performance standards of
the customer. The existing control devices, which in most
cases are designed and operated for VOC control, may not be
compatible with low HAP formulations. Therefore, some
facilities that are operating efficient VOC control systems
may have little incentive to reduce the HAP content of their
inks.
2.1.2 Flexographic Printing Process
Flexography is a printing process in which the ink is
printed directly on the substrate from raised portions of the
plate cylinder. Flexography plates, as the name implies, are
made of a soft, flexible material. Most flexo plates today
are made by one of many ultraviolet-cured polymer processes,
which are compatible with computer typesetting processes.
The web is fed between an impression cylinder and the coated
plate cylinder. The inking system transfers the ink onto an
anilox, or engraved, roller that meters the ink and prevents
2-13
-------
too much from being transferred to the plate cylinder. As in
gravure, the anilox roll is scraped with a doctor blade.
Because of the metering anilox roller, flexography is capable
of high-quality half-tone printing, which is demonstrated in
many flexible packaging applications where flexo is used to
print on plastic films.
The many types of flexographic presses include wide web
(greater than 18 inches), narrow web, in-line, common
impression, and stack presses. All flexographic presses use
flexible plates, fluid inks, and anilox-roll inking systems.
Packaging products, by the type of flexographic presses
commonly used, include the following:
• labels with narrow web in-line, stack, and common
impression (CI);
• flexible packaging and paper sacks with wide web CI,
stack, and in-line;
• folding cartons with narrow and wide web in-line or
stack;
• sanitary food containers, beverage containers, and
laminations with wide web in-line or CI;
• corrugated liners with wide web CI-stack combinations;
• fiber cans and tubes with narrow and wide web in-line
or CI; and
• corrugated boxes with sheet-fed printer slotters.21
2.1.2.1 Flexographic Printing Substrates. An important
characteristic of flexographic printing is its ability to
print on a wide variety of materials: rough or smooth, coated
or uncoated, paper or board, as well as plastic and metal.22
Substrates used in flexographic presses include plastics,
polyolefins, polystyrene, polyesters; various paper and
paperboard stocks, glassine, tissue, sulfite, kraft, folding
carton type board, corrugated board, and cup and container
board; and metals and aluminum foil. Additionally, corrugated
2-14
-------
cartons are one of the few substrates printed by sheet-fed
flexography.
2.1.2.2 Flexographic Inks. Coatings, and Solvents. The
ink used in flexography is of low viscosity because the ink
must be fluid to print properly. Many of the inks are water-
based, but alcohol or other low-viscosity, volatile liquids
are also used as the ink base. Most flexographic printing
(including all flexographic newspaper and corrugated carton
printing) is done with waterborne inks.23 Solvents used must
be compatible with the rubber or polymeric plates; thus,
aromatic solvents are not used. Some of the components of
solvent-based flexographic ink include ethyl, n-propyl, and i-
propyl alcohols; glycol ethers; aliphatic hydrocarbons;
acetates; and esters.24 Low-viscosity ink does not hold the
dot pattern as well as the high-viscosity inks used in
letterpress printing.25
When flexography is used to print corrugated board and
most paperboard, the ink used can dry by penetration of the
water into the board because corrugated board and paperboard
can absorb quite a bit of water without it significantly
distorting the surface. However, fast drying inks are
required for plastic films and packaging papers so the web can
be rewound or processed into the final product on the end of
the press. Flexography is becoming popular for printing
pressure-sensitive labels, a process in which the ink must dry
quickly without penetration. Use of inks that dry by exposure
to ultraviolet radiation have been used in label printing with
much success.
2.1.2.3 Flexographic Printed Products. Wide web
flexographic presses are used to print a variety of
publication and packaging commodities. In the case of
publication printing, flexography is used to print mainly
Sunday magazines, comics, and comic books. Directories are
flexoprinted and, for advertising, flexography is used to
print direct mail advertising and newspaper inserts. Unlike
gravure, flexography is used to print newspapers; financial
2-15
-------
and legal materials such as SEC filing, prospectuses, annual
corporate reports, and bank printing; some business forms;
envelopes; and paperbacks.
Flexography is mainly used, however, for printing
packaging. Most corrugated container printing is done by
flexography. Other flexographically printed packaging
includes folding cartons, beverage carriers (special carriers
for beer and other beverages), sanitary food containers (e.g.,
milk and beverage cartons and sanitary single service cups and
containers), plastic carrier bags, flexible packaging,
multiwall sacks, paper sacks, and rigid paper set-up boxes.
In addition, printed products that use the flexographic
process include gift wrap, paper towels, tissues, vinyl shower
curtains, and wallpaper.
2.1.2.4 HAP Emissions from Flexographic Printing
Process. During the flexographic printing process HAPs are
emitted from the inks and other materials applied with
flexographic plates, including varnishes, primers, and
adhesives. HAPs are also emitted from the solvents used to
clean the flexographic presses and equipment. Additional
converting operations, which are often done at the
flexographic press stations or in-line with the presses, such
as film blowing, laminating, coating, adhesive application,
and cutting, may result in additional HAP emissions.
Waterborne inks that contain no HAPs are available for
some flexographic applications. Other waterborne inks used in
flexography contain relatively low proportions of HAPs,
principally ethylene glycol and glycol ethers. Most of the
solventborne flexographic inks contain little or no HAPs.26
The solvent-based inks used primarily are formulated with non-
HAP solvents that may contain small proportions of ethylene
glycol, glycol ethers and methanol, which are HAPs. Solvent-
based inks that are completely HAP free are available for some
applications.27 The ink choice is influenced by the same
factors that influence ink choice for packaging and product
gravure.
2-16
-------
Air pollution capture and control systems used with
flexographic processes are designed and operated for the
control of VOCs. Capture systems in use at flexographic
printing facilities include combinations of dryer exhausts,
floor sweeps, hoods, and total enclosures. Control devices
are the same as those used at product/packaging gravure
facilities: carbon adsorption, catalytic incinerators, and
thermal incinerators.28 Pollution prevention opportunities
through using HAP-free inks are promising in the flexographic
printing industry especially in corrugated box and newspaper
production, in which HAP-free inks can produce nearly
identical products to those using low-HAP inks. The variety
of products printed by flexography, as with packaging and
product gravure, requires different substrates, and the types
of inks used demand performance requirements that may not be
met by low-HAP ink formulations.
2.1.3 Binding. Finishing, and Converting Processes
The printing process may only be one step in the
production of a finished product. Some printed products, such
as letterheads, handbills, and posters, are ready for shipment
after printing with only some trimming and packaging for
shipment. Most printed products, however, become part of
something else and require further processes called binding,
finishing, and converting operations, which convert the
printed substrate into a final product. Many of the
operations are performed in-line with the printing. Binding
is the work required to convert printed sheets or webs of
paper into books, magazines, catalogs, or folders.29
Finishing and converting operations are required to complete
printed tags, labels, advertising displays, folding boxes, and
flexible packaging. Finishing and converting operations
include mounting, die-cutting, and easeling of displays;
folding, collating, drilling, varnishing or laminating,
embossing, bronzing, flocking, die-stamping, pebbling,
beveling, deckling, gilt and marble edging of printed and
unprinted materials; cutting creasing, stripping and gluing of
2-17
-------
folding paper cartons; and slotting and gluing corrugated
boxes.30
2.2 PRODUCTS AND MARKETS
Because of the multiplicity of printed products and wide
variety of differentiation, printed materials are not
homogeneous products. Printed commodities are one of three
types: publication, packaging, and product. Specific
products of interest by type include the following:
• publication: magazines, catalogs, directories,
printed advertising materials and displays,
newspapers, Sunday magazines;
• packaging: corrugated containers, folding cartons
(used for wet and dry foods, beverages, bakery items,
candy and non-food products such as detergents,
hardware, paper goods, cosmetics, medical products,
tobacco products, and sporting goods) ,31 rigid boxes,
flexible packaging, tags, labels, sanitary food
containers, paper sacks, plastic carrier bags; and
• product: gift wraps, wallcoverings, floor coverings,
decorative laminates used in furniture and
construction, tissue products, upholstery,
tablecloths, and shower curtains.
Tables 2-2, 2-3, and 2-4 present U.S. Department of
Commerce Census data for value of U.S. shipments for these
major product classes. Table 2-2 presents shipments for
publication printing and printed publication products.32 In
1991, the commercial printing segments (2752, 2754, 2759) had
a total of $51.8 billion in shipments. Between 1987 and 1991,
the gravure printing commercial sector grew at an annual
average of 4.3 percent, while flexography grew at an average
yearly rate of 8.6 percent. The total value of shipments for
printed publication products (2711, 2721, 2731, 2741, 2761) in
1991 was $83.4 billion with an average annual growth of 3.5
percent from 1987 to 1991.
2-18
-------
TABLE 2-3. VALUE OF PRODUCT SHIPMENTS FOR PACKAGING MATERIALS, 1987-1991 ($106)
Value
Industry
SIC/product
code Product description
2652
2653
2655
2656
2657
2671
^> 2672
i
to
o
2673
2674
3081
3083
3085
3089
3221
3411
3466
Setup paperboard boxes
Corrugated & solid fiber
boxes
Fiber cans, drums, and
similar
products
Sanitary food containers
Folding paperboard boxes
Paper coated & laminated,
packaging
Paper coated & laminated,
n.e.c.
1987
517.9
15,602.2
1,493.9
1,959.6
5,521.8
2,460.1
5,497.7
26723 Pressure sensitive products 3 , 100 .0
Bags: plastics, laminated
coated
Bags: uncoated paper,
multiwall
Unsupported plastics film
sheet
Laminated plastics
Plastic bottles
Plastics, n.e.c.
30894 Plastics,
packaging
Glass Containers
Metal cans
Crowns & closures
' 3,936.5
2,360.6
&
8,766.7
2,093.9
2,849.6
32,927.6
4,005.9
4,720.7
10,652.5
811.4
Totals 109,278.6
1988
17,
1,
2,
5,
2,
6,
3,
4,
2,
9,
2,
3,
34,
4,
4,
10,
117,
520
335
586
097
865
712
148
642
557
574
610
319
322
237
302
644
944
711
130
.2
.1
.4
.2
.8
.6
.2
.9
.5
.2
.0
.6
.4
.2
.0
.3
.1
.1
.8
of product
1989
573
18,324
1,749
2,308
6,567
2,850
6,674
3,896
5,117
2,638
9,958
2,333
3,730
35,875
5,004
4,760
10,995
733
124,091
.5
.6
.7
.7
.3
.1
.1
.3
.3
.8
.5
.3
.9
.2
.2
.0
.7
.3
.5
shipments"
1990
602.2
17,978.9
1,795.3
2,468.8
6,793.5
2,979.9
6,678.3
3,882.3
5,127.8
2,621.3
10,255.4
2,188.7
3,888.9
37,300.9
5,196.9
4,915.1
12,114.3
745.4
127,533.9
1991
599
17,434
1,801
2,583
7,199
3,069
6,933
4,151
4,806
2,527
9,972
2,049
4,169
37,648
5,467
4,847
12,207
692
128, 161
.4
.4
.5
.4
.6
.6
.2
.7
.4
.9
.8
.3
.6
.1
.6
.3
.3
.6
.7
Average
annual
growth
1987-1991
(%)
3.81
2.97
4.86
7.17
6.90
5.72
6.07
7.76
5.50
1.83
3.37
-0.30
10.09
3.42
8.19
0.69
3.54
-3.67
4.10
" Value of products shipped represents the value of shipments for the product category regardless of
the industry that produces it (i.e., it includes shipments from both primary and secondary
producers).
n.e.c. = Not elsewhere classified.
Source: U.S. Department of Commerce. i^qi nnn,i=i o,,*-.<*-• ~f " *- —
-------
TABLE 2-4. VALUE OF PRODUCT SHIPMENTS FOR PRODUCTS THAT ARE PRINTED, 1987-1991 ($106)
Value of product
to
i
to
H
Industry
SIC/product
code
2676
2677
2678
2679
26791
26792
2771
Product description
Sanitary paper products
Envelopes
Stationery products
Converted paper products,
n.e .c.
Wallcoverings
Gift wraps
Greeting cards
Totals
1987
11,171
2,499
1,115
3,385
530
591
2,034
21,328
.7
.5
.2
.5
.2
.7
.6
.4
1988
11,853.4
2,650.2
1,166.1
3,685.9
533.8
571.1
2,205.8
22,666.3
1989
13,637.2
2,603.7
1,156.8
3,626.9
517.7
591.4
2,534.9
24,668.6
shipments"
1990
14,007
2,602
1,197
3,963
547
621
2,900
25,840
.5
.4
.2
.8
.7
.0
.5
.1
1991
14,755.
2,492.
1,237.
4,122.
557.
626.
2.978.
26,769.
7
3
1
0
6
4
1
2
Average
annual growth
1987-1991 (*)
7.30
0.00
2.65
5.14
1.32
1.49
10.11
5.86
1 Value of products shipped represents the value of shipments for the product category regardless of
the industry that produces it (i.e., it includes shipments from both primary and secondary producers)
n.e.c. = Not elsewhere classified.
Source: U.S. Department of Commerce. 1991 Annual Survey of Manufactures. Value of Product Shipments.
Washington, DC, U.S. Government Printing Office, 1992. Table 1.
-------
Table 2-3 presents value of shipments for packaging
materials.33'6 In 1991, value of shipments for packaging
materials was $128.2 billion. Plastics, n.e.c., had the
greatest value of shipments at $37.6 billion in 1991, with
corrugated and solid fiber boxes ($17 billion) and metal cans
($12 billion) second and third greatest, respectively.
Packaging material products have experienced steady growth
over the 1987 to 1991 period, growing at an average annual
rate of 4.1 percent.
Table 2-4 presents value of shipments for various printed
products.34 These product categories in aggregate have grown
steadily since 1987 with an average annual growth rate of 5.9
percent over this 5-year period. Total shipments for 1991
were $26.8 billion. The leading product category is sanitary
paper products with $14.8 billion in shipments for 1991.
As illustrated in Figure 2-2, the printing industry is
procyclical in that it closely follows the economic
performance of the U.S. as measured by gross domestic product
(GDP). As shown in the figure, the cyclical pattern of growth
for the printing industry mirrors that of the U.S. economy.
Steady growth from 1987 to 1990 was followed by a sharp
decline in growth from 1990 to 1991 as a result of a
recessionary period for the U.S. economy. The average annual
growth in GDP (current dollars) from 1987 to 1991 was 5.74
percent. During this same period, in the printing industry,
the average annual growth rate was 5.86 percent for products,
4.2 percent for publications, and 4.1 percent for packaging.
2.2.1 Foreign Trade
Table 2-5 presents the value of U.S. imports and exports
for printing and printed products for 1989 to 1991.35 The
product categories listed represent printing and printed
products for which data are available. U.S. imports rose by
2.9 percent to reach $2.9 billion from 1990 to 1991. Book
'Shipments for commercially printed labels and wrappers are included
in data in Table 2-2.
2-22
-------
TABLE 2-5.
VALUE OF EXPORTS AND IMPORTS FOR PRODUCTS RELATED TO PRINTING,
1989-1991 ($106)
Exports
SIC
code Product description 1989
2711 Newspapers 28.6
2721 Periodicals 448.0
2731 Book publishing 1,288.0
275 Commercial printing 811.0
2652 Set up paperboard boxes 26.8
2653 Corrugated & solid 225.0
fiber boxes
2655 Fiber cans, drums, and
similar products 10.5
2656 Sanitary food containers 79 .0
2657 Folding paperboard boxes62.5
2672 Paper coated & 337.0
laminated, n.e.c.
2673 Bags-, plastics, 95.5
laminated, coated
2674 Bags: uncoated 32.0
paper, multiwall
2676 Sanitary paper products242 .0
2677 Envelopes 10.0
2678 Stationery products 39.3
2679 Converted paper 328.0
products, n.e.c.
Totals 4,063.2
n.e.c. = Not elsewhere classified.
Source : U.S. Department
Share"
Share"
(%) 1990 (%)
0.1
2.4
9.9
1.6
4 .7
1.2
0.6
3.4
0.9
6.1
1.9
1.2
1.8
0.4
3.4
9.0
2.3
37.
666.
1,428.
772 .
35.
282.
18.
96.
78.
455.
130.
48.
351.
19.
66.
358.
4,841.
7
0
0
0
0
0
2
8
9
0
0
0
0
0
3
0
9
of Commerce .
0.1
3.5
10.0
1.5
5.8
1.6
1.0
3.9
1.2
6.8
2.5
1.8
2.5
0.7
5.5
9.0
2.6
U.S.
Share"
1991 (%)
40
740
1,500
925
80
350
20
90
75
416
195
45
480
22
70
367
5,415
.0
.0
.0
.0
0.1
3.8
9.8
1.8
.0 13.3
.0
.0
.0
.0
.0
.0
.0
.0
.3
.5
.0
.8
Industrial
2.0
1.1
3.5
1.0
6.0
4.1
1.8
3.3
0.9
5.7
8.9
2.9
Imports
Share"
1989 (%)
96
140
746
388
6
30
2
25
75
128
286
59
302
5
45
470
2,806
Outlook,
.1
.0
.0
.0
.0
.6
.8
.6
.5
.0
.0
.6
.0
.1
.5
.0
.8
0.3
0.8
6.0
0.8
1.2
0.2
0.2
1.3
1.3
2.2
6.0
2.3
2.5
0.2
3.9
12.3
1.6
1992.
Share
1990 (%)
62
122
845
393
5
39
3
29
88
124
301
72
152
5
48
531
2,821
.0
.0
.0
.0
.6
.4
.0
.3
.5
.0
.0
.2
.0
.2
.5
.0
.7
0
0
6
0
1
0
0
1
1
2
5
2
1
0
4
13
1
Washington ,
.2
.7
.2
.8
.0
.2
.2
.3
.3
.0
.7
.7
.1
.2
.3
.9
.5 62
DC,
1991
52.7
105.0
925.0
450.0
4.0
40.0
1.2
28.0
90.0
118.0
310.0
65.0
120.0
7.8
49.8
538.0
,904.5
U.S.
Share
(%)
0.2
0.6
6.3
0.9
0.8
0.2
0.1
1.2
1.3
1.8
5.9
2.5
0.9
0.3
4.2
13.0
1.6
Government Printing Office, 1992.
Chapters 10 and 25.
•Reflects export share of U.S. value of shipments.
''Reflects import share of U.S. value of domestic consumption.
-------
£ e
* *
o
kl
o
I
at
n
Printed Publications (4.2%)
1987-88 1988-89 1989-90 1990-91
Y«ar
I VK4.
Figure 2-2. Comparison of growth in printing industries
with U.S. gross domestic product: 1987-1991.
Note: Growth rates reflect annual change in current dollars. Numbers
in parentheses represent average annual change from 1987 to
1991.
publishing represents the largest share of imports, with $925
million in 1991. U.S. exports rose by 32 percent to reach
$5.4 billion from 1990 to 1991. Book publishing represents
the largest share of exports with $1.5 billion in 1991.
However, as shown in Table 2-5, neither exports nor imports
represent a notable share of U.S. value of shipments or
domestic consumption within the industry.
2.2.2 Future Projections
Table 2-6 presents a forecast of market trends in the
U.S. printing industry for the years 1990 through 2000.36
The table shows that growth in the industry is expected to be
between 3.8 and 5.3 percent annually. Markets expected to
2-23
-------
TABLE 2-5.
VALUE OF EXPORTS AND IMPORTS FOR PRODUCTS RELATED TO PRINTING,
1989-1991 ($106)
Exports
SIC
code Product description 1989
2711 Newspapers 28
2721 Periodicals 448.
2731 Book publishing 1,288.
275 Commercial printing 811.
2652 Set up paperboard boxes 26,
2653 Corrugated & solid 225.
fiber boxes
2655 Fiber cans, drums, and
similar products 10 .
M 2656 Sanitary food containers79 .
^ 2657 Folding paperboard boxes62 ,
*> 2672 Paper coated & 337
.6
.0
.0
.0
.8
.0
.5
.0
.5
.0
Share"
(%) 1990
0
2
9
1
4
1
0
3
0
6
.1
.4
.9
.6
.7
.2
.6
.4
.9
.1
37
666
1,428
772
35
282
18
96
78
455
.7
.0
.0
.0
.0
.0
.2
.8
.9
.0
Share"
(%) 1991
0
3
10
1
5
1
1
3
1
6
.1
.5
.0
.5
.8
.6
.0
.9
.2
.8
40
740
1,500
925
80
350
20
90
75
416
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
Share"
0
3
9
1
13
2
1
3
1
6
.1
.8
.8
.8
.3
.0
.1
.5
.0
.0
1989
96
140
746
388
6
30
2
25
75
128
.1
.0
.0
.0
.0
.6
.8
.6
.5
.0
Imports
Shareb
(%) 1990
0
0
6
0
1
0
0
1
1
2
.3
.8
.0
.8
.2
.2
.2
.3
.3
.2
62
122
845
393
5
39
3
29
88
124
.0
.0
.0
.0
.6
.4
.0
.3
.5
.0
Share
(%) 1991
0
0
6
0
1
0
0
1
1
2
.2
.7
.2
.8
.0
.2
.2
.3
.3
.0
52
105
925
450
4
40
1
28
90
118
.7
.0
.0
.0
.0
.0
.2
.0
.0
.0
Share
0
0
6
0
0
0
0
1
1
1
.2
.6
.3
.9
.8
.2
.1
.2
.3
.8
laminated, n.e.c.
2673 Bags: plastics, 95.5
laminated, coated
2674 Bags: uncoated 32.0
paper, multiwall
Sanitary paper products242.0
Envelopes 10.0
Stationery products 39.3
2676
2677
2678
2679
Converted paper
products, n.e.c.
Totals
328.0
1.9 130.0 2.5 195.0
1.2 48.0 1.8 45.0
1.8 351.0 2.5 480.0
0.4 19.0 0.7 22.3
3.4 66.3 5.5 70.5
9.0 358.0 9.0 367.0
4.1 286.0 6.0 301.0 5.7 310.0 5.9
1.8 59.6 2.3 72.2 2.7 65.0 2.5
3.3 302.0 2.5 152.0 1.1 120.0 0.9
0.9 5.1 0.2 5.2 0.2 7.8 0.3
5.7 45.5 3.9 48.5 4.3 49.8 4.2
8.9 470.0 12.3 531.0 13.9 538.0 13.0
4,063.2 2.3 4,841.9 2.6 5,415.8 2.9 2,806.8 1.62,821.7 1.562,904.5 1.6
n.e.c. = Not elsewhere classified.
Source: U.S. Department of Commerce. U.S. Industrial Outlook, 1992.
Government Printing Office, 1992. Chapters 10 and 25.
"Reflects export share of U.S. value of shipments.
""Reflects import share of U.S. value of domestic consumption.
Washington, DC, U.S
-------
TABLE 2-6. U.S. PRINTING INDUSTRY FORECAST 1990 TO 2000
Forecast annual percent
Industry segment growth 1990 - 2000"
Magazines and other 2-3
periodicals
Catalogs and directories 3-4
Direct mail 5-6
Labels and wraps 0-2
Inserts and coupons 3-4
Other advertising and free 8-9
circulation papers
Annual reports and related 4-5
products
Business forms 1-2
Business communications 2-3
Manuals and technical -2-0
documentation
Books 1-2
Printing trade services 3-4
Industry total 3.8-5.3
"Based on constant 1988 dollars.
Source: SRI. Printing 2000. Prepared by SRI International, Menlo Park,
CA, for the Printing 2000 Task Force. Alexandria, VA, Printing
Industries of America. 1990. p. ES-15.
realize particularly strong growth include other advertising
(i.e., printed advertising other than direct mail, coupons,
and inserts) and free circulation papers at 8 to 9 percent
annually and direct mail at 5 to 6 percent annually. The
growth in free circulation papers is expected to bring about
an increase in the use of flexographic presses instead of non-
heatset offset presses that currently dominant this market
segment.37
Moreover, a number of traditional printing markets are
projected to grow below the industry average from 1990 to
2-25
-------
2000. These print markets include book printing and business
form printing at only 1 to 2 percent annually and magazines
and other periodicals at 2 to 3 percent annually. Offset
printing is expected to continue to dominate the magazine and
periodical publishing market.38
2.3 MANUFACTURING PLANTS
EPA conducted a survey of publication rotogravure,
packaging/product gravure, and flexography printing plants
from which the number of manufacturing plants for each of
these market segments are taken. Plant data for each segment
are discussed separately below.
2.3.1 Publication and Packaging/Product Gravure Plants
In 1993, 27 publication rotogravure plants operated in
the U.S.39 EPA estimates that their survey included all
publication rotogravure plants in the U.S. The number of
rotogravure plants have been decreasing over the last decade.
The GAA confirmed that in 1988 at least 545 packaging/product
plants had rotogravure presses.40 For 1987, the U.S.
Department of Commerce reports that 332 plants were classified
in the gravure commercial printing industry (SIC 2754) .41 Of
these 332 facilities, 33 were identified as having publication
gravure printing as their primary line of business, which
supports the 1993 EPA figure of 27 plants. It is also
consistent that the GAA estimate of packaging/product
facilities is greater than the Census estimate because the
former includes gravure printing done by plants that are
classified in other manufacturing industries.
2.3.1.1 Location. Presses, and Products Printed. Figure
2-3 identifies the locations of the 27 facilities in the U.S.
that print publication rotogravure, and Table 2-7 lists each
plant by company name, city, and state.42 EPA surveyed all 27
of these locations and received plant and process description
information. Together these plants operate a total of 159
gravure presses with an average of 8.9 printing units per
2-26
-------
Total number of
plants = 27
Figure 2-3.
Location of publication rotogravure
printing plants, U.S.
Source: U.S. Environmental Protection Agency. Background Information
Document for National Emission Standards for the Printing and
Publishing Industry. Prepared by Research Triangle Institute for
the Office of Air and Radiation, Research Triangle Park, NC.
1994. Table 2-1.
units per press.43 For confidentiality reasons, it
is not possible to report the number of presses by actual
plant from the EPA database.
The GAA conducted its own survey of publication
rotogravure plants in North America and reports 160 to 165
rotogravure presses, with 1,494 printing units.44 Almost
half of the presses for which GAA was able to gather data had
eight units; the second most common was presses having 10
units. The trend appears to be moving away from presses with
fewer than eight units. GAA found that the average age of a
gravure publication press was 16 years and that the industry
is rebuilding and expanding its press equipment to keep even
old presses productive. Gravure publication printers have
2-27
-------
TABLE 2-7. PUBLICATION ROTOGRAVURE PLANTS
Company name
Brown Printing Company
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
R.R. Donnelley and Sons
Quad/Graphics
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Quebecor Printing
Ringier America Inc.
Ringier America Inc.
World Color Press, Inc.
World Color Press, Inc.
City
Franklin
Casa Grande
Lynchburg
Newton
Des Moines
Mattoon
Reno
Warsaw
Spartanburg
Lancaster
Chicago
Gallatin
Lomira
Atglen
Depew
Dallas
Dickson
Baltimore
Memphis
Mt . Morris
Providence
Richmond
San Jose
Corinth
Evans
Salem
Dyersburg
State
KY
AZ
VA
NC
IA
IL
NV
IN
SC
PA
IL
TX
WI
PA
NY
TX
TN
MD
TN
IL
RI
VA
CA
MS
GA
IL
TN
Source: U.S. Environmental Protection Agency. Engineering draft report
for the printing and publishing industry. Prepared by Research
Triangle Institute. 1994. Chapter 2.
2-28
-------
been investing in a substantial amount of new folding
equipment since 1981, and most of the presses today are
equipped with some type of folding machinery. Press running
speeds average 1,977 feet per minute.
Table 2-8 presents data compiled by GAA from U.S. and
Canadian gravure publication plants for number of presses and
units at plants producing particular products as primary,
secondary, and tertiary.45 For each product listed, reading
across the columns indicates the number of presses and units
in plants committed in whole or part to each product line.
The greatest number of presses are used in plants that print
magazines, catalogs, and advertising inserts as their primary
product. Catalogs are the most favored secondary product. It
is necessary to keep in mind that the number of presses listed
by product in Table 2-8 is not necessarily the number devoted
to printing that particular product, but rather the number
TABLE 2-8. NUMBER OF GRAVURE WEB PRESSES IN THE
PUBLICATION GRAVURE INDUSTRY, 1989
Number of presses/units in plants where
product is
Primary
Product
Magazines
Sunday
magazines
Inserts
Catalogs
Advertising
printing
Other
Total
Presses
47
11
44
40
5
0
147
Units
411
105
428
391
40
0
1,375
Secondary"
Presses
17
26
35
52
4
6
140
Units
156
227
359
489
34
54
1,319
Tertiary2
Presses
13
3
20
6
10
2
54
Units
124
33
168
53
87
22
487
• Secondary or tertiary capacity indicates the total numbers at plants that
produce each product as a secondary or tertiary product rather than the
numbers devoted only to production of that product. It is not determined
how much of the secondary or tertiary producers' capacity is devoted to
the product.
Source: Gravure Association of America. Profile Survey of the U.S.
Gravure Industry. New York, GAA. 1989. PRESS-10.
2-29
-------
operated by plants that print those products as either
primary, secondary, or tertiary.
EPA collected survey data from 107 packaging/product
facilities operating rotogravure presses. Table 2-9 lists the
company names, locations, total employees, and products
printed for those plants surveyed.46 Forty-four of these
facilities print on paper and cardboard only, 12 on foil and
film only, and 29 print on paper or cardboard and foil or
film. Another 13 print exclusively on vinyl products and 9
print miscellaneous products.
GAA compiles extensive data on presses at packaging and
product gravure plants and estimates that their database
identifies presses and units for 75 to 90 percent of the total
producers for most packaging and product areas.47 Based on
these data, GAA has developed estimates of the total number of
presses and units operating in the packaging and product
gravure industry. Table 2-10 summarizes the estimated number
of presses and units at U.S. packaging and product gravure
plants by primary and secondary product specialty.48 It
cannot be determined how much of the press capacity at plants
producing a certain product as secondary is devoted to that
product.
2.3.2 Flexography Plants
An estimated 1,587 printing plants in the U.S. have
flexographic presses.49 Most facilities that operate wide web
flexographic presses produce various types of packaging.
Flexible packaging producers often operate both flexographic
and rotogravure presses at the same facilities. Some
equipment may even be a combination flexography/gravure. The
selection of equipment for a particular job depends on the
length of run, quality requirements, and the substrate.
Because the printing portion of the total packaging value is
often rather small, many facilities that produce corrugated
cartons and paper bags may not consider themselves to be
printers .io
2-30
-------
TABLE 2-9. PACKAGING AND PRODUCT ROTOGRAVURE PLANTS
Company name
Alcan Fell Products
Alford Packaging
Allied Stamp Corporation
Alusuisse Flexible Packaging,
Inc .
American Fuji Seal, Inc.
American Fuji Seal, Inc.
American Greetings
AMGRAPH Packaging, Inc.
Avery Dennison
Avery Dennison
Avery Dennison
Avery Dennison
Butler Printing & Laminating,
Inc.
Cello-Foil Products, Inc.
Chiyoda America Inc.
Cleo, Inc.
Columbus Coated Fabrics
Congoleum Corporation
Congoleum Corporation
Constant Services, Inc.
CPS Corporation
Decor Gravure Corporation
Decorating Resources
Decorative Specialties
International, Inc.
Decorative Specialties
Internat ional , Inc .
Decorative Specialties
International, Inc.
Dinagraphics
Dittler Brothers
Dittler Brothers
Dopaco, Inc.
Citv
Louisville
Baltimore
Sana Springs
Shelbyville
Anaheim
Fairf ield
Corbin
Versailles
Cl inter.
Schereville
Framingham
Pasadena
Butler
Battle Creek
Morgantown
Memphis
Columbus
Marcus Hook
Mercerville
Fairf ield
Franklin
Bensenville
Clifton
West
Springfield
Reading
Johnston
Norwood
Atlanta
Oakwood
Downingtown
State
KY
MD
OK
KY
CA
NJ
KY
CT
sc
IN
MA
CA
NJ
MI
PA
TN
OH
PA
NJ
NJ
TN
IL
NJ
MA
PA
RI
OH
GA
GA
PA
Facility
employment
175
49
100
15
7
11
100
13
90
161
298
19
60
100
30
130
97
88
11
45
61
50
50
6
8
155
150
42
42
63
Product
code
F
P
P
M
F
F
P
M
M
V,W
P
W
V
M
P
P
V,F
V
V
V
M
V
F
W
M
P
W
W
W
P
(continued)
2-31
-------
TABLE 2-9. PACKAGING AND PRODUCT ROTOGRAVURE PLANTS
(CONTINUED)
Corr.nar.v name
Dopaco, Inc.
Dopacc , Inc .
DRG Medical Packaging
Engraph, Inc.
Engraph , Inc.
Eskimo Pie Corporation
Federal Paper Board Co., Inc.
Federal Paper Board Co., Inc.
Flenr.g Packaging Corporation
Fres-Co System USA, Inc.
GenCorp Inc.
GenCorp Inc.
GenCorp Polymer Products
Graphic Packaging Corporation
Graphic Packaging Corporation
Gravure Carton & Label
Gravure Packaging, Inc.
Hallmark Cards
Hallmark Cards
Hargro Flexible Packaging
Hargro Packaging
International Label Company
International Label Company
J. W. Fergusson and Sons, Inc.
James River Corporation
James River Paper Corporation
James River Paper Corporation
James River Paper Corporation
James River Paper Corporation
James River Paper Corporation
Jefferson Smurfit Corporation
Jefferson Smurfit Corporation
Citv
Stockton
Saint Claries
Madison
Fulton
Moorestown
Bloomf ield
Durham
Wilmington
Peoria
Telford
Jeannette
Salem
Columbus
Franklin
Paoli
Surgoinsville
Richmond
Kansas City
Leavenworth
Edinburgh
Flemington
Clarksville
Rogersville
Richmond
Hazelwood
Darlington
Fort Smith
Lexington
Portland
Kalamazoo
Jacksonville
Chicago
State
CA
IL
WI
NY
NJ
NJ
NC
NC
IL
PA
PA
NH
MS
OH
PA
TN
VA
MO
KS
IN
NJ
TN
TN
VA
MO
SC
AR
KY
OR
MI
FL
IL
Facility
employment
43
48
24
90
6
29
59
240
C "7
210
22
NA
186
17
29
6
80
10
175
12
38
375
95
98
41
20
25
13
20
375
21
14
Product"
cod*
P
F
M
M
F
M
P
P
K
F
F
V
V
M
P
P
P
P
P
M
M
P
P
M
M
P
P
P
M
P
W
P
2-32
(continuec
-------
TABLE 2-9.
PACKAGING AND PRODUCT ROTOGRAVURE PLANTS
(CONTINUED)
Company name
Johio, Inc.
JSC/CCA
JSC/CCA
JSC/CCA
JSC/CCA
JSC/CCA
Koch Label Company, Inc.
Lamotite, Inc.
Lux Packaging Ltd.
Mannington Mills, Inc.
Mundet-Hermetite Inc.
Newco Inc.
Orchard Decorative Products
Orchard Decorative Products
Package Service Company
Paramount Packaging Corporation
Paramount Packaging Corporation
Paramount Packaging Corporation
Quick Roll Leaf Manufacturing
Company
Reynods Metals Company
Reynolds Metals Company
Reynolds Metals Company
Riverwood International USA, Inc.
Riverwood International USA, Inc.
Riverwood International USA, Inc.
Roslyn Converters Inc.
Scientific Games, Inc.
Scientific Games, Inc.
Shamrock Corporation
Shamrock Corporation
Citv
Dayton
Carol Stream
Stone Mountain
Lockland
Santa Clara
North Wales
Evansville
Cleveland
Waco
Salem
Buena Vista
Newton
Blythewood
St. Louis
Northmoor
Chalfont
Murf reesboro
Longview
Middletown
Richmond
Richmond
Downingtown
West Monroe
Bakersf ield
Cincinnati
Colonial
Heights
Gilroy
Alpharetta
Greensboro
Greensboro
State
OH
IL
GA
OH
CA
PA
IN
OK
TX
NJ
VA
NJ
SC
MO
MO
PA
TN
TX
NY
VA
VA
PA
LA
CA
OH
VA
CA
GA
NC
NC
Facilitv
employment
48
40
17
35
48
44
78
15
48
NA
70
60
80
87
4
7
21
21
9
150
533
150
138
41
50
55
100
40
25
10
Product
code
M
P
P
P
P
P
M
W
P
V
P
V
M
M
M
F
F
F
F
F
M
M
P
P
P
P
W
W
M
P
2-33
(continued)
-------
TABLE 2-9. PACKAGING AND PRODUCT ROTOGRAVURE PLANTS
(CONTINUED)
Company name
Smurfit Flexible Packaging
Smurfit Laminations
Somerville Packaging
Stone Container Corporation
TECHNOGRAPHICS PRINTWORLD
The C. v:. Zumbiel Company
Union Camp Corporation
Union Camp Corporation
Union Camp Corporation
Vernon Plastics Company
Vitex Packaging, Inc.
Waldorf Corporation
Waldorf Corporation
Wrico Packaaina
City
Schaumburg
Elk Grove
Village
Newport News
Louisville
North Monroe
Cincinnati
Englewood
Spartanburg
Asheville
Haverhill
Suffolk
Saint Paul
Chicago
Chicago
State
IL
IL
VA
KY
NC
OH
NJ
SC
NC
MA
VA
MN
IL
IL
Facility
employment
24
40
NA
16
140
52
65
18
100
50
51
123
14
38
Product
code
X
y.
F
F
>;
F
F
r
v
V
M
P
P
K
a Product codes:
F = Film/foil only
M = Paper/cardboard and film/foil
P = Paper/cardboard only
V = Vinyl products
W = Miscellaneous
Source: U.S. EPA. Engineering Draft Report for the Printing and Publishing
Industry. Prepared by Research Triangle Institute. 1994. Chapter
2.3.2.1 Location, Presses, and Products Printed. Figure
2-4 shows the number of estimated flexographic plants for each
state.51 Newspaper production makes up a small proportion of
flexographic printing plants. The U.S. has 35 flexographi-
cally printed newspapers, and numbers are expected to grow as
flexography presses replace aging letterpress equipment.52
EPA surveyed approximately 380 companies thought to operate
flexographic printing presses and received responses from
approximately 500 plants operating wide web flexographic
printing presses and from approximately 100 plants operating
narrow web equipment.
53
2-34
-------
TABLE 2-10. NUMBER OF GRAVURE WEB PRESSES AND SUMMARY PRESS CHARACTERISTICS FOR THE
U.S. PACKAGING AND PRODUCT GRAVURE INDUSTRY, 1989
Number of presses/units in
product is
Segment/
product
Web presses
Packaging
Folding
cartonsa
Flexible
packaging
Labels and
wrappers
Subtotal
packaging
Product
Gift wrap
Floor
kj covering
l Decorative
w laminates
cn
Wood grain
vinyl
fabrics
Wall
coverings
Sanitary
tissue
products
Other
products.
n.e.c.
Subtotal
product
Plants*
92
95
47
234
11
7
24
33
20
54
NA
NA
149
Primary
Presses
189
240
114
543
52
15
35
69
87
176
NA
NA
434
Units
1,216
1,478
677
3,371
236
78
124
300
288
820
NA
NA
1,846
Plants"
7
17
14
38
6
0
3
NA
11
4
NA
NA
24
Secondary
Presses
33
48
8S
166 1
84
0
8
9
91
58
NA
NA
2SO 1,
Units
212
289
596
097
478
0
47
23
520
328
NA
NA
391
plants where
h
Plants'
99
112
61
272
17
7
27
33
31
58
NA
NA
173
Total
Presses Unit •.
222 !, l.'H
288 l,7f,7
199 I,,' 71
709 4,'lf.R
136 711
15 Itt
43 I'.',
78 3,n
178 80R
234 1,MH
25 ?5
245 60.1
954 3,nr,i,
Av ft (i Lie-
number of
uii i ts p«r
V
7
7
5
5
3
5
3
5
1
NA
Summary
character ist icn'"
acj'? of opnial iii'i 1 '|U ipp°'i witli
pi «";s nppfi ••!'• "l i ""•' it !••
lyi I 111 /mini •'•••;! ,t 1°. 1
1 )
17
17
18
NA
17
11
23
10
31
IIA
'•01 SI
(.91 4 .'
PfK> 1 )
!,147 NA
175 flA
100 IIA
317 27
110 HA
316 MA
2,?00 MA
IIA IIA
• The Gravure Association of America did not always distinguish between plants and romp-mies, and they sometimes reported numb
presses without indicating number of companies or plants. Therefore, the plant numt" •< r; pre^entfd ar»? only "Tl. imar.es an>t prob
underestimate the true number of plants.
b Secondary capacity indicates the total number at plants that produce each product n<\ .1 s^rondary product rather than t h« numl>
devoted only for production of that product. It is not determined how much of th" •>••••> >nd.iry produrrrs' capacity is df>y>i p-i i
the product.
c The summary statistics reported are based on GAA's sample estimates.
d GAA estimates that plants manufacturing folding cartons operate 24 sheet-fed gravm •• i i fiior; wild 40 unit';.
NA - Not available.
n.e.r. r Not elsewhere classified.
Source: Gravure Association of America. Profile Survey ot the U.S. Gravur» Industi,. !!••/; \< >t V , >;AA. MR1). |.p. PRESS r.' 11.
r of
-------
Figure 2-4. Location of U.S. flexography printing plants.
Source: U.S. EPA Office of Pollution Prevention and Toxics. Use Cluster
Analysis of the Printing Industry. Washington, DC, U.S.
Government Printing Office. May 1992. Table B-18.
Of the 500 wide web flexographic plants, 125 reported
using no HAPs in their flexographic printing. These
facilities included 49 corrugated box manufacturers, 22 paper
product manufacturers, 2 product manufacturers that made at
least some plastic products, I book manufacturer, and 51
flexible packaging manufacturers. Of the flexible packaging
manufacturers, 15 printed on paper substrates, 19 printed on
foil or film substrates, and the remaining 17 either printed
on both or did not specify.
In addition to the EPA survey, the universe of flexo-
graphic presses can be defined as plants producing corrugated
boxes and folding cartons using data from the Paperboard
Group's Official Container Directory. Paperboard Packaging
compiled these data and reports that in 1993 952 flexo
2-36
-------
prir.ter-slotters and 1,378 flexo folder-gluers operated at a
total cf 1,387 corrugated cox planes (sheet and web plants) in
the U.S.'" Another 176 sheet and web flexo presses were
operating at 480 folding carton plants. Over half of the
flexographic presses are at corrugated box and folding carton
plants in the East North Central, South Atlantic, and Middle
Atlantic (Pennsylvania, New York, New Jersey) regions.
2.3.3 Employment at Prinrino Plants
The printing industry is characterized by plants with a
small number of employees. For the gravure printers, almost
45 percent of the individual plants employ one to four
employees. Less than 2 percent of the gravure plants employ
over 1,000 employees. Figure 2-5 shows the distribution of
gravure plants by average number of employees.55 Figure 2-6
shows the distribution of flexography plants by average number
of employees.56 The flexographic printing plants tend to be
larger than gravure plants.
160 j
140 •
? 120 •
a 100 .
c.
| 80 .
£ 60 .
O
i
z 20
148
53
40 36
20
-••- *O ....
Y ; \. :;.^ ,.A . 10 7 6
i »... i _ . i i i "-^ * i i *- i ^ " ^ i '•• ' i ' •'' i
1-4 5-9 10-19 20-49 50-99 100-249 250-499 500-999 1.000-
2,499
Av*r*g* Numb*r of Employ***
Figure 2-5. Gravure printing facilities by number of
employees, 1987.
Source: U.S. Department of Commerce. 1987 Census of Manufactures.
Industry Series: Commercial Printing and Manifold Business
Forms. Washington, DC, U.S. Government Printing Office.
2-37
-------
400 •
350 •
e- 300 .
£ 250 -
8
"a 200 •
t 150 •
T 100 •
50 •
193
>
'
236
f-
f
-
289
,;
,
373
;% %
,\--^
1 r-. %
198
-t
f ;
X? i
!***
296
\ J^.'
:^
1-4 S-9 10-19 20-49 50-99 100»
Figure 2-6. Flexography printing facilities by number of
employees, 1989.
Source: U.S. EPA, Office of Pollution Prevention and Toxics. Use
Cluster Analysis of the Printing Industry. Washington, DC,
U.S. Government Printing Office. May 1992. p. B-35.
2.4 FIRM CHARACTERISTICS
A regulatory action to reduce HAP emissions from
facilities using gravure or flexographic printing processes
will potentially affect the business entities that own the
regulated plants. Facilities comprise a site of land with
plant and equipment that combine inputs (raw materials, fuel,
energy, and labor) to produce outputs (printed products).
Companies that own these facilities are legal business
entities that have the capacity to conduct business trans-
actions and make business decisions that affect the facility.
The terms facility, establishment, and plant are synonymous in
this analysis and refer to the physical location where prod-
ucts are manufactured. Likewise, the terms company and firm
are synonymous and refer to the legal business entity that
owns one or more facilities. As seen in Figure 2-7, the chain
2-38
-------
Parent Company
Other
Companies or
Legal Entities
Subsidiary
Company
(Direct Owner>
Facility
Parent Company
Subsidiary
Company
{Direct Ovnei
Facility
Parent Company
(Direct Owneri
Facility
Figure 2-7. Cr.ain of ownership.
of ownership may be as simple as one facility owned by one
company or as complex as multiple facilities owned by
subsidiary companies.
Potentially affected firms include entities that own
plants that employ gravure or flexographic printing processes.
The EPA survey indicates that in 1993 six companies owned the
27 publication rotogravure plants.57 Furthermore, 64
companies own the 107 packaging/product rotogravure plants EPA
was able to identify in their survey.58 The EPA survey of
flexographic printers identified 500 companies.59 Tables 2-
11, 2-12, and 2-13 list the U.S. publication gravure,
packaging/product gravure, and flexography companies
identified by the EPA survey.60>61<62-63 All three tables
present the total number of plants for each company that were
identified in the EPA survey, the total number of plants each
2-39
-------
TABLE 2-11.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES
FOR PUBLICATION GRAVURE FIRMS, 1993
Number of plants
K)
1
it*
O
Company name
R.R. Donnelley
4 Sons
Brown Printing
Company
Quad/Graphics
Quebecor
Printing
Ringier
Amer ica, Inc.
World Color
Press, Inc.
Total plants
Sources: Printing
U.S. EPA
Publ ica-
tion
gravure Total
11
1
1
10
2
2
27
Impressions
Engineering
40
7
8
62
10
13
. "The
Draft 1
Catalogs
35
25
30
11
42
20
Who's Who in
Report for the
Primary printing o<)i.(>'i<>r ies (% of mler;)
Adv.-i 1 I •: I tig
Publications inn°tir: 'irui
and ol hiM pi o
periodicals Di reel m i •-»•: Bookn Specialty prints
17 \f, 11 10 in
65
45 ?.<:•>
26 3r)
34 ?.:\
50 11 19
Printing, Industry 500." Vol. 36, No. 7. pp. 44-72.
Printing and Publishing Industry. Prepared by Resfiarrlt 'I'tMnqle
-------
TABLE 2-12.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
PACKAGING/PRODUCT GRAVURE PRINTING FIRMS
Company name*
Alcan Foil Products
Alford Industries
Allied Stamp Corporation
Alusuisse
Flexible Packaging, Inc.
American Fuji Seal, Inc.
American Greetings
Amgraph Packaging, Inc.
A very Dennison
Borden. Inc.
Butler Printing t
Laminating, Inc.
cello- Foil Products, Inc.
1 chiyoda America Inc.
"** Cleo, Inc.
Congo leum Corporation
Constant Services, Inc.
CPS Corporation
Decor Gravure Corporation
Decorating Resources
Decorative Specialties
International, Inc.
Oinagraphics
Dlttler Brothers
Dopaco, Inc.
DRG Medical Packaging
Engraph, Inc.
Eskimo Pie Corporation
Federal Paper Board Co..
Number of plants Packaging gr.jviif' Pi»l.i-.l !• I'M" i
Grnvureb Tot.il box packaging packaqini pi-kaglnq (%! pi.-.lmi- pi • .
-------
TABLE 2-12. NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
PACKAGING/PRODUCT GRAVURE PRINTING FIRMS (CONTINUED)
Company name*
Fres-Co System USA, Inc.
GenCorp Inc.
Graphic Packaging
Corporation
Gravure Carton i, Label
Gravure Packaging, Inc.
Hallmark Cards
Hargro Flexible Packaging
International Label Company
J. W. Fergusson and Sons,
Inc.
James River Corporation
Jefferson Smurflt
Corporation
1 JSC/CCA
^ Koch Label Company, Inc.
Lamotite, Inc.
Lux Packaging Ltd.
Mannlngton Mills, Inc.
Mundet Inc.
Newco Inc.
Package Service Company
Paramount Packaging
Corporation
Quick Roll Leaf
Manufacturing Company
Reynods Metals Company
Rlverwood International USA,
Inc.
Scientific Games, Inc.
Shamrock Corporation
Number of plants Packaging gtavuto' Pro.lii. i qi nviir"'
Corrugated Paper Plasl i> Mix.'.l r,i.-(.,ig i nq pl.r.i i IMP i
Gravureb Total box packaging packaqinq p.v-Kiqinq (%) pro.|'i'i^
1 X
3
3 X X X X
1 X
1 X
26 ? '»«
26 X
? X
12 X X X 100
7 XXX X
4 X X X X
5 XX
1 ' 1 X X X 100
1 X
1 X
i y
2 X
1 x
13 X 100
3 X
1 X
3 XXX
3 X
2 X
2 XXX
(• III
-------
TABLE 2-12. NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
PACKAGING/PRODUCT GRAVURE PRINTING FIRMS (CONTINUED)
I
£>
UJ
Company name*
Stone Container Corporation
TECHNOGRAPHICS PRINTWORLD
The C. W. Zumbiel Company
Union Camp Corporation
Vitex Packaging, Inc.
Waldorf Corporation
Wrlco Packaging
Number of plants
Gravureb Total
1
1
1
3
1
2
1
Packaging ginvui"' Ptcvlurt qrnvnrr'
Corrugated
box
X
X
X
X
Paper
packaging
X
X
X
X
IM|'"I /
Plastic Mixed C.irKiiqiiig pl.r.i >•' >•>]•• >
packaging [• ir-lMging I s, ) p[."li>.'i •. | i'«lii.-i •;
X
X
X
• Companies listed are those provided in the EPA Packaging/Product Gravure Printers l),it ab.-ine. Th<*y do not. nfcf;-.nr i ly .-o
total universe of packaging/product gravure printing companies. Additional company cl.n,\ mny br g.itli"i"i1 f i ^m i !!<• oil I'-
Container Directory, Fall 1993 and from the 1993 TI.MI Products Guide, Package Printing nnd Convert ing, July riyj.
b Indicates the number of plants for firms listed in the EPA Packaging/Product Gravni" riintc-r-5 rut nb.in".
c Primary printing categories are indicated with an X or a percentage where avallaM"
Sources: EPA. Packaging/Product Gravure Printeis Database. 1993.
Printing Impressions. 'The Who's who in Printing, Industry BOO.' Vol. 16, No. 7. December, 1993. pp. 1. 7.11, No. 4. 1993. pp. r>9-74.
-------
TABLE 2-13.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
FLEXOGRAPHIC PRINTING FIRMS, 1993
Company name*
Abbott Box Co., Inc.
Acorn Corrugated Box Co.
Action Packaging
Advance Packaging Corp.
Akron Beacon Journal
All-Pak, Inc.
All-Size Corrugated Prods.
Alusuisse Flexible Packaging,
Inc.
American Greetings Corp.
American National Can/Food
Plastics
American Packaging Corp.
Amko Plastics, Inc.
Anagram International, Inc.
Arcata Graphlcs\Klngsport
Arcon Coating Mills, Inc.
Arkansas Poly, Inc.
Atlanta Film Converting Co.,
Inc.
Automated Label Systems Co.
Automated Packaging systems.
Inc.
Avery - Denn i son
Bagcraft Corporation of
America
Bancroft Bag, Inc
Banner Packaging, Inc.
Beach Products
Bell Packaging Corp.
Bern Is Company Inc.
Bingo Paper Inc.
Bomarko, Inc.
Bonar Packaging, Inc.
Bryc* Corporation
Primary printing '- .1 I^T''
Number of plants
Flexog-
raphyc Total
1
1
1
2
1
1
1
3 3
2 31
8
4
1
1
1 6
1
1
1
1
1
2
1 4
1
1 1
1
1
16
1
I 4
I
f,
Publication
f lexography
News-
papers Books
X
X
Pa^k.i'i i ti'i f l.^x^qrapy
Corrugated Packaging
box Pap^r Pla-sHe Mixprt I'M
X
X
A
X
X
X
X 100
X X
X
X
X
X
X
V
X
X
x 'on
X
x 100
X
XXX
X
>, 100
X
I'l ...111. I
1 Ifx. .gi.ipliv-
pl.r.l I'' fMpr-r
X X
X
X
to
I
-------
TABLE 2-13.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
FLEXOGRAPHIC PRINTING FIRMS, 1993 (CONTINUED)
Company name*
Buckeye Container
Buckeye Packaging
Burrows Paper Corporation
C.P.C. Packaging, Inc.
Cadillac Products, Inc.
Castle Rock Container Company
Cello-Foil Products, Inc.
Cello-Wrap Printing Company,
Inc.
Central States Diversified,
Inc.
Champion International Corp.
Charleston Packaging Company,
Inc.
Clark Container, Inc.
Cleo, Inc.
Compak, Inc.
W. R. Grace t Co.
Crystal Tissue
Custom Poly Bag, Inc.
Dart Container Corporation
Deco Paper Products, Inc.
Design Containers, Inc.
Dynamic Packaging, Inc.
Eisenhart Wallcoverings Co.
Equitable Bag Co., Inc
Eskimo Pie Corporation
Excelsior Transparent Bag MFC
Corp.
Fabricon Products
Fleet wood Container 4 Display
Flex-Pak, Inc.
Flexo Transparent, Inc.
Focus Packaging, Inc.
Fort Wayne Newspapers
fp Webkote, Inc.
Primary printing cat oqoi i f>s''
Number of plants
Flexog-
raphyc Total
1
1
2
1
3
1
1
1
1
5
1
1
1
1
3
1
1
1
1
1
1
1
1
1
1
3 3
1
1
1
1
1
1
Publ icat ion
f lexography
News-
papers Books
X
Packaging t li-X'igrapy
Corrugated IMckaginq
box Paper Pl.nfic Mix
-------
TABLE 2-13.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
FLEXOGRAPHIC PRINTING FIRMS, 1993 (CONTINUED)
Company name*
Frank C. Meyer Company, Inc.
Gateway Packaging
GPntry Poly Specialties, Inc
Georgia-Pacific Corp.
Gllman Converted Products
Glenroy, Inc.
Graphic Packaging Corp.
Greif Bros. Corp.
Dairy-Mix, Inc.
Gulf States Paper Corp.
H. S. Crocker Co., Inc.
Hallmark Cards
Hargo Flexible Packaging
Corp.
Home Plastics, Inc.
Huntsman Packaging Products,
Corp.
Interf lex
International Paper
Interstate Packaging Corp.
James River Corp.
Jefferson Smurflt Corp.
John H. Harland Company
Kleartone, Inc.
Koch container
Kookaburra USA LTD
Lin Pac, Inc.
bonghorn Packaging, Inc.
Mason Transparent Pkg
Macon Telegraph
Ma f cote Industries
Ma 11 -Mel I Envelope
Primary printing 'Ml pqoi i psh
Number of plants
Flexog-
raphyc Total
1
1
1
44
1
1
2
1
1
1
1 3
2 6
6 ' 4
1
1
1
37
1
17
47
1 49
1
1
1
2
1
1
1
2
1
Publ i cat ion
f lexography
News-
papers Books
X
Pack-ii|iiiq f l^x^qrapy
Corrugated
box P.Tp«-r Pl,v;i ic
X
X
X X
X
X
X
X
X
X
X
X
X X
X
X XX
X X
X
X X
X
X
IMckticj i tig
Mlx°d I* I
y
X
X
X
X 100
X 100
X
X
X
X
X
l-l ••Ill'-l
f 1 "X"iji -iphy
IMP-'I /
pl.T;i i . Pflppr
X
X
X
X
X
X
V
to
I
it*.
en
-------
TABLE 2-13.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
FLEXOGRAPHIC PRINTING FIRMS, 1993 (CONTINUED)
Company name*
Maine Poly, Inc.
Malnove, Inc.
Marglo Packaging Corp.
Mass! lion Container
McClatchy Newspapers
Mead Corporation
Menasha Corporation
Miami Herald Publishing Co.
Mid-West Poly Pale, Inc.
Midwest Film Corp
Milwaukee Container
Mohawk Northern Plastics,
Inc.
Moore, Inc.
NCR Corp.
Neenah Printing
Nichols Paper Products Co.,
Inc.
Owens-Illinois, Inc.
Package Printing Co., Inc.
Package Products Flexible
Corp.
Packaging Corp. of America
Packaging Industries, Inc.
Packaging Materials
Incorporated
Packaging Products Corp.
Packaging Specialties, Inc.
Parquet One Ida, Inc.
Paramount Packaging Corp.
Percy Kent Bag Co., Inc.
Phoenix Products Co., Inc.
Pioneer Balloon Company
Primary printing .-.it ..gc>i ifs1'
Number of plants
Flexog-
raphyc Total
1
1
1
1
2
1
1 9
1
1
1
1
1
1 150
2 29
1
1
1
1
1
43
1
1
3
1
1
4
1
2
1
Publ i cat Ion
f lexography
News-
papers Books
X
X
Pack.i' ( i H'J I 1 ox^'-ii -ipy
Corrugated Packaging
box Paper Pl.i'Uic Mixed m
X
X
X
X 4B»
X
X
X
X
X 10
X
X
X
X
X
X
X
X
X X
X
X
X
X
X X
Pi." Ill' 1
1 l"\<"|i .ipliy
Pap. -r/
pl
-------
TABLE 2-13.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
FLEXOGRAPHIC PRINTING FIRMS, 1993 (CONTINUED)
Company name*
Plastic Packaging Corp.
PI Icon Corp.
Poly Plastic Packaging, Inc.
Polyflex Film 4 Converting,
Inc.
Press Telegram
Procter and Gamble Co.
Providence Journal Company
R. R. Donnelley t Sons
Company
Rand-Whitney Container Corp.
Rex-Rosenlew International,
Inc.
Rock-Tenn Company
Seal right Packaging Co.
Sellg Sealing Products, Inc.
Solar Press
Solo cup Company
Southern Colortype Co., Inc.
Specialty Container
Corporation
Splralkote, Inc.
Standard Packaging 4 Printing
Corp.
Sunrise Packaging, Inc.
Superpac, Inc.
Susan Crane, Inc.
Teepak, Inc.
Tennessee Packaging
Tennessee Press, Inc.
The Robln«tte Company
The Standard Register Company
Toph
Number of plants
Flexoq-
raphyc Total
2
1
2
1
1
4
1
1 40
3
1 2
9
5 ' 6
1
1 S
2
1
1
1
1
1
1
1 35
2
Publication
f lexography
News-
papers Books
X
X
11
Primary printing < .Heqori«v;''
Parknqlnq flpxoqrapy
Corrugated I'.irkaqinq
box Pap«>i rl.nl ic •••
-------
TABLE 2-13.
NUMBER OF PLANTS OWNED AND PRIMARY PRINTING CATEGORIES FOR
FLEXOGRAPHIC PRINTING FIRMS, 1993 (CONTINUED)
Company name*
Unlflex, Inc.
Union Camp Corp.
Vlskase Corp.
Vltex Packaging, Inc.
Wabash Pioneer Container
Corp.
Waldan Paper Services, Inc.
Ward/Kraft, Inc.
Webcor Packaging Corp.
Western Publishing Co., Inc.
Westvaco
Weyerhaeuser Paper Company
Willamette Industries, Inc.
Zlm's Bagging Co., Inc.
Total plants/ firms in
category
Primary printing ( ai <-g >i i f=;h
Number of plants
Flexog-
raphyc Total
1 1
15
1
1
1
1
1
1
1 6
21
5
34
1
500
Publ Irat Ion
f lexography
News-
papers Books
60
7 3
Pack'Kiing f l"X.. >gi .ipliy
P.ip"i /
pi l!:l 1 r P^p<->r
X
X
X
8 20
• Companies listed are those provided In the EPA Flexographlc Printers Database. Thoy do not necessarily comprise the total
universe of flexographic printing companies. Further company data may be gatheied from the official <'ontaiiipr Directoty, Fall
1993 and from the '1993 TUMI Products Guide," Package Printing and Converting, July 1905.
b Primary printing categories are indicated with an X, or a percentage where availnM-*.
e Indicates the number of plants for firms listed in the EPA. Flexographic Printer.-; Uit .il>,v.->.
Sources: EPA. Flexographic Printers Database. 1993.
Printing Impressions. 'The Who's who in Printing, Industry 500.'
Vol. 36, 11'). 7. December 1993. pp. 44-V2.
American Printer. The Foremost Ranking of Top Printing Companies, 1004. V'l. 211, No. 4. 1193. pp. 59-74. (Providfd
company data for Hallmark Cards and American Greetings.)
-------
company owns where available from other sources, and the
primary printing categories in which each company engages.
Although the number of publication gravure companies
includes all the known publication gravure plants, there are
more than 64 packaging/product gravure companies and more than
500 firms using flexography. The U.S. Department of Commerce
identified 304 companies that owned plants classified as
gravure commercial printers in 1987.M The 304 includes both
publication gravure and packaging/product gravure printers and
does not include companies using the gravure printing process
to decorate their manufactured products, which are classified
in a different industry.
2.4.1 Ownership
The legal form of ownership affects the cost of capital,
availability of capital, and effective tax rate faced by the
firm. Business entities that own gravure or flexographic
printing facilities will generally be one of three types of
entities:
• sole proprietorships,
• partnerships, and
• corporations.
Each type has its own legal and financial characteristics that
may influence how firms are affected by the regulatory
alternatives. Table 2-14 provides information about the legal
form of ownership of firms for commercial gravure printers
(SIC 2754) and commercial printers, n.e.c. (SIC 2759), which
includes flexographic printers.65 The majority of commercial
gravure printers and other, n.e.c. printers are single-
facility corporations. Figure 2-8 compares the legal form of
ownership for the commercial gravure and other, n.e.c.
printers to that of all other firms in the U.S.66'67
2.4.2 Size Distribution
Firm size is likely to be a factor in the distribution of
the regulatory action's financial impacts. Grouping the firms
2-50
-------
Partnerships
U.S.
Total Firms = 18.4 million
Corporations
71.3% / Sole
Proprietorships
Partnefswps
Gravure Printing Industry
Total Firms = 304
-^r
\ 694% /Corporations
Sole
Proprietorships
Other Printing
Total Firms = 10,608
Partnership*
Corporal ions
Figure 2-8. Comparison of the legal form of organization for
firms in the U.S., gravure, and other printing segments of the
printing industry, 1987.
Sources: U.S. Department of Commerce. 1987 Census of Manufactures.
Subject Series: Type of Organization. Washington, DC, U.S.
Government Printing Office. 1991. p. 5-33.
U.S. Department of Commerce. 1992 Statistical Abstract of the
United States. Washington, DC, U.S. Government Printing Office.
Table No. 826.
2-52
-------
TABLE 2-15. SMALL BUSINESS ADMINISTRATION SIZE STANDARDS
BY SIC CODE FOR COMPANIES THAT HAVE GRAVURE
OR FLEXOGRAPHIC PRINTING CAPABILITIES
SBA size standard
in number of
employees
SIC code
Industry description
2652 Set up paperboard boxes
2653 Corrugated and solid fiber
boxes
2655 Fiber cans, drums, and
similar products
2656 Sanitary food containers
2657 Folding paperboard boxes
2671 Paper coated and laminated,
packaging
2672 Paper coated and laminated,
n.e.c.
2673 Bags: plastics, laminated,
and coated
2674 Bags: uncoated paper and
multiwall
2676 Sanitary paper products
2677 Envelopes
2678 Stationery products
2679 Converted paper products,
n.e.c,
2732 Book printing
2752 Cpmmercial printing,
lithographic
2754 Commercial printing,
gravure
2759 Commercial printing, n.e.c.
2761 Manifold business forms
2771 Greeting cards
3081 Unsupported plastics film
and sheet
3083 Laminated plastics plate
and sheet
3085 Plastic bottles
3089 Plastics, n.e.c.
3221 Glass containers
3411 Metal cans
3466 Crowns and closures
500
500
500
750
750
500
500
500
500
500
500
500
500
500
500
500
500
500
500
500
500
500
500
750
1,000
500
n.e.c. = Not elsewhere classified.
2-53
-------
are potentially affected by the regulation, are covered by
various SIC codes. The relevant industries potentially
include the commercial printing and book printing industries
under SIC 27, the packaging industries under SICs 26, 30, 32,
and 34, as well industries under SICs 26 and 30 that produce
products with gravure or flexographic printing. The SBA size
standards for all of these industries are based on the number
of employees, and, as Table 2-16 shows, businesses classified
in most of these industries are considered small if they have
fewer than 500 employees; otherwise they would be considered
large.
Table 2-16 lists the companies for which data are
available that will potentially be affected by the regulation
to reduce HAP emissions from gravure and flexographic
printers.68 In addition to company name, Table 2-16
identifies their legal form of organization, total number of
plants (classified in any industry) owned, number of
employees, 1993 sales, and sales per employee. Table 2-16
shows that the potentially affected firms range in size from
fewer than 50 to over 30,000 employees. None of the
publication gravure companies are considered small. For
packaging/product gravure companies included in the EPA
survey, a total of 29 firms, or 48.3 percent, are classified
as small, while the remaining 31 firms, or 51.7 percent, are
classified as large. For flexographic companies, the vast
majority of firms are considered small. In fact, data from
Ward's Business Directory indicate that almost 94 percent of
firms in SIC 2759 (Commercial Printing, n.e.c.) have fewer
than 500 employees.69
Firms may differ in size for one or both of the following
reasons:
• Facilities that print gravure or flexography vary by
size. All else being equal, firms with large plants
are larger than firms with small plants.
• Firms vary in the number of plants they own. All else
being equal, firms with more plants are larger than
2-54
-------
those with fewer plants.
Pollution control economies are typically plant-related rather
than firm-related. For example, a firm with six uncontrolled
plants with average annual receipts of $1 million per plant
may face approximately six times the control capital require-
ments of a firm with one uncontrolled plant whose receipts
total $6 million per year. Alternatively two firms with the
same number of plants facing approximately the same control
capital costs may be financially affected very differently if
the plants of one are larger than those of the other.
2.4.3 Issues of Vertical and Horizontal Integration
The vertical aspects of a firm's size reflect the extent
to which goods and services that can be bought from outside
are produced in house. Vertical integration is a potentially
important dimension in analyzing firm-level impacts because
the regulation could affect a vertically integrated firm on
more than one level. The regulation may affect companies for
whom printing is only one of several processes in which the
firm is involved. For example, a company owning facilities
that have gravure or flexographic printing capacity may
ultimately produce printed and nonprinted corrugated boxes,
folding cartons, flexible packaging, tissue products, or wall
coverings. This firm would be considered vertically
integrated because it is involved in more than one level of
production requiring printing and finished products that are
printed. A regulation that increases the cost of printing
will affect the cost of producing products that are printed
during the manufacturing process.
The horizontal aspect of a firm's size refers to the
scale of production in a single-product firm or its scope in a
multiproduct one. Horizontal integration is also a
potentially important dimension in firm-level impact analyses
for any of the following reasons:
• A horizontally integrated firm may own many facilities
of which only some are directly affected by the
2-58
-------
regulation.
A horizontally integrated firm may own facilities in
unaffected industries. This type of diversification
would help mitigate the financial impacts of the
regulation.
A horizontally integrated firm could be indirectly as
well as directly affected by the regulation. For
example, if a firm is diversified in manufacturing
pollution control equipment (an unlikely scenario),
the regulation could indirectly and favorably affect
it.
Some firms in the printing industry are horizontally
integrated.
2.5 REFERENCES
1. U.S. Environmental Protection Agency. Engineering Draft
Report for the Printing and Publishing Industry.
Prepared by Research Triangle Institute. 1994. Chapter
2.
2. U.S. Department of Commerce. 1991 Annual Survey of
Manufactures. Value of Product Shipments. Washington,
DC, U.S. Goverment Printing Office. 1992. Table 1.
3. Eldred, Nelson R. Package Printing. Plainview, NY,
Jelmar Publishing Co., Inc. 1993. pp. xiii-xiv.
4. Bruno, Michael H. "Principles of Contact (Impression)
Printing Processes." In Printing Fundamentals, Alex
Glassman, ed. Atlanta, TAPPI. 1985. p. 3.
5. Eldred, Nelson R. Package Printing. Plainview, NY,
Jelmar Publishing Co., Inc. 1993. p. 254.
6. Ref. 4, p. 28.
7. U.S. EPA, Office of Pollution Prevention and Toxics. Use
Cluster Analysis of the Printing Industry. Washington,
DC, May 1992. p. 7.
8. Ref. 4, p. 24.
9. Ref. 5, pp. 270-1.
10. Ref. 5, p. 88.
2-59
-------
11. Gravure Association of America Profile Survey of the U.S.
Gravure Industry. New York, GAA. 1989.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
Ref. 1.
Kline, James E. Paper and Paperboard Manufacturing and
Converting Fundamentals. 2nd ed. San Francisco, Miller
Freeman Publications, Inc. 1991. p. 175.
Ref. 1.
Ref. 13, p. 210.
Ref. 1.
Ref. 1.
U.S. Environmental Protection Agency. Engineering Draft
Report for the Printing and Publishing Industry.
Prepared by Research Triangle Institute. 1994. Chapter
3.
Ref. 18.
Ref. 18.
Ref. 5, p. 255.
Ref. 5, p. 73.
Ref. 1.
Ref. 1.
Ref. l.
Ref. 1.
Ref. 18.
Ref. 18.
Ref. 4, p. 37.
Ref. 4, p. 38.
Ref. 1.
U.S. Department of Commerce. 1991 Annual Survey
of
Manufactures. Value of Product Shipments. Washington,
DC, U.S.G.P.O. 1992. Table 1. and U.S. Department of
Commerce. 1987 Census of Manufactures. Industry Series:
Commercial Printing and Manifold Business Forms.
2-60
-------
Washington, DC, U.S.G.P.O. 1990. Table 6a.
33. U.S. Department of Commerce. 1991 Annual Survey of
Manufactures. Value of Product Shipments. Washington,
DC, U.S.G.P.O. 1992. Table 1.
34. Ref. 33.
35. U.S. Department of Commerce. U.S. Industrial Outlook,
1992. Washington, DC, U.S.G.P.O. 1992. Chapters 10 and
25.
36. SRI. Printing 2000. Prepared by SRI International,
Menlo Park, CA for the Printing 2000 Task Force.
Alexandria, VA, Printing Industries of America. 1990.
p. ES-15.
37. U.S. Environmental Protection Agency, Office of Pollution
Prevention and Toxics. May 1992. Use Cluster Analysis
of the Printing Industry. Washington, DC. p. 28.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
Ref.
Ref.
Ref.
37,
1.
11,
p. 26.
p. PRESS -
12.
U.S. Department of Commerce. 1987 Census of
Manufactures, Industry Series: Commercial Printing and
Manifold Business Forms. Washington, DC, U.S. Government
Printing Office. March 1990. p. 27B-14.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
Ref.
U.S.
1.
1.
11,
11,
1.
11,
44.
EPA
pp . PRESS
p. PRESS -
p. PRESS -
Office
-12-34.
10.
15.
of Pollution Prevention and Toxics.
Use Cluster Analysis of the Printing Industry.
Washington, DC, U.S. Government Printing Office. May
1992. p. B-35.
50. Ref. 1.
2-61
-------
51. Ref. 49.
52. Ref. 1.
53. Ref. 1.
54. Paperboard Packaging. U.S. Gains Corrugating/Folding
Carton Plants in 1993. Vol. 79, No. 2. February 1994.
p. 31.
55. Ref. 41, Table 4.
56. Ref. 49.
57. Ref. 1.
58. U.S. EPA Gravure Packaging/Product Plants Database. 1993.
59. U.S. EPA Flexographic Plants Database. 1993.
60. U.S. Environmental Protection Agency. Engineering Draft
Report for the Printing and Publishing Industry.
Prepared by Research Triangle Institute. 1994. Table
2.2.1.2.1.
61. U.S. Environmental Protection Agency. Publication
Gravure, Packaging/Product Gravure, and Flexographic
Plants Databases. 1993.
62. Printing Impressions. "The Who's Who in Printing,
Industry 500." Vol. 36. No. 7. December 1993. pp. 44-
72.
63. American Printer. 1993. The Foremost Ranking of Top
Printing Companies, 100+. Vol. 211, No. 4, pp. 59-74.
64. U.S. Department of Commerce. 1990. 1987 Census of
Manufactures, Industry Series: Commercial Printing and
Manifold Business Forms. Washington, DC, U.S. Government
Printing Office. p. 27B-11.
65. U.S. Department of Commerce. 1991. 1987 Census of
Manufactures Subject Series: Type of Organization.
Washington, DC, U.S. Government Printing Office, p. 5-
33.
66. Ref. 65.
67. U.S. Department of Commerce. 1992. Statistical Abstract
of the United States. Washington, DC, U.S. Government
Printing Office. Table No. 826.
2-62
-------
68. U.S. EPA. Publication Gravure, Packaging/Product
Gravure, and Flexographic Plants Databases. 1993;
Printing Impressions. 1993. "The Who's Who in Printing,
Industry 500." Vol. 36. No. 7 December, pp. 44-72;
American Printer. 1993. The Foremost Ranking of Top
Printing Companies, 100+. Vol. 211, No. 4. pp. 59-74;
Package Printing and Converting. 1993. The TLMI
Products Guide, pp. 33-71; Paperboard Packaging's
Official Container Directory. 1993. Advanstar
Communications, Inc. Vol. 81, No. 2. Fall. PP. 59-150;
and Ward's Business Directory of U.S. Private and Public
Companies. Gale Research, Inc. Washington, DC. 1994.
69. Ward's Business Directory of U.S. Private and Public
Companies. Gale Research Inc. Washington, DC. 1994.
2-63
-------
SECTION 3
REGULATORY CONTROL OPTIONS AND COSTS OF COMPLIANCE
MACT standards are technology-based regulations.
Although a facility that is a source of emission*need not
install any specific pollution control technology, the
regulatory requirements must be based on a technology that can
achieve the specified limits. The BID details the technology
basis for MACT standards. Model plants were developed to
evaluate the effects of various control options on the
printing and publishing industry. Selection of control
options was based on applying presently available control
devices and varying levels of capture consistent with
different levels of overall control. Section 3.1 presents a
summary of the control options for each of the three industry
segments—publication gravure, packaging/product gravure, and
flexography. Section 3.2 summarizes the compliance costs
associated with the regulatory requirements for each segment.
3.1 CONTROL OPTIONS
Control options for publication gravure plants are given
in Table 3-1. Each control option includes the use of solvent
recovery systems as the control device. The systems of
demonstrated effectiveness are composed of fixed-bed activated
carbon absorption units that are cyclically regenerated with
steam. These systems include regeneration gas condensers and
solvent/water decanters. The distinction among the control
options for publication gravure plants is the capture system
employed. The specification of ventilation, hooding, and
ducting for incremental improvements to existing systems is
site specific. The control options listed in Table 3-1
represent discrete levels of capture.
Table 3-2 lists the control options for packaging and
product gravure plants. In control options A and B, a control
device is used with different levels of control efficiency.
3-1
-------
TABLE 3-1.
CONTROL OPTIONS FOR PUBLICATION
ROTOGRAVURE PLANTS
Option Control device
Capture system
Solvent recovery-
system with carbon
adsorption and steam
regeneration
B
Draw 50 percent of
required pressroom
ventilation air through
concentrator to existing
solvent recovery system
Draw 100 percent of
required pressroom
ventilation air through
concentrator to existing
solvent recovery system
Construct permanent
total enclosure and draw
100 percent of required
pressroom ventilation
air through concentrator
to existing solvent
recovery system
TABLE 3-2.
CONTROL OPTIONS FOR PACKAGING AND PRODUCT
ROTOGRAVURE PLANTS
Option Control device
Capture system
B
C
Solvent recovery
system, or catalytic
incinerator or thermal
incinerator depending
on ink system in use
Use of ink containing
less than 1.5 percent
HAP
Treat dryer exhaust plus
50 percent of required
pressroom air with
control device
Permanent total
enclosure
None
3-2
-------
The control device can be selected based on the ink system in
use, or, if more than one type of device is potentially
suitable, on the basis of cost. All control devices presently
in use in this segment of the industry can achieve
efficiencies of more than 95 percent. Control option C
provides for the use of low-HAP ink with no control device, if
emissions do not exceed those of plants using solvent-based
inks with a high-HAP content using an efficient capture and
control system.
Most flexographic printing facilities, and all
flexographic printing facilities outside of the flexible
packaging industry, operate without control devices. Control
strategies are influenced by the composition of inks and other
materials applied on the press, as well as existing regulatory
requirements. Control options for flexographic printing
facilities are given in Table 3-3. In control options A and
B, a control device is used with different levels of capture
efficiency. The control device can be selected based on the
ink system in use, or if more than one type of device is
potentially suitable, on the basis of cost. All control
devices presently in use in this segment of the industry can
achieve efficiencies of more than 95 percent, at high
TABLE 3-3. CONTROL OPTIONS FOR FLEXOGRAPHIC
PRINTING PLANTS
Option Control device Capture system
A Solvent recovery Treat dryer exhaust plus
system, or catalytic 50 percent of required
incinerator or thermal pressroom air with
incinerator depending control device
on ink system in use
B Permanent total
enclosure
C Use of ink containing None
less than 1 percent
HAP
3-3
-------
concentrations of HAP in the solvent-laden air. Control
option C provides for the use of low-HAP ink with no control
device, if emissions do not exceed those of plants using
solvent-based inks with a high-HAP content using an efficient
capture and control system.
3.2 COSTS OF CONTROLS
Table 3-4 summarizes the total and annualized capital
costs, operating expenses, monitoring and recordkeeping costs,
and total annual cost for the regulation by industry segment.
The annualized capital cost is calculated using a capital
recovery factor of 0.1332 based on an equipment life of 10
years and a 7 percent discount rate. The total annual cost is
calculated as the sum of the annualized capital cost,
operating expense, and the monitoring and recordkeeping costs.
This figure ranges from a low of $1.5 million for the
flexographic industry segment to a high of $21.1 million for
the packaging and product gravure industry segment. Thus, the
total annual cost for the printing and publishing industry
(the sum across the three industry segments) is $40.3 million.
3-4
-------
SECTION 4
ECONOMIC IMPACT ANALYSIS
A variety of approaches may be used to assess the impacts
of the regulatory action; they reflect a variety of underlying
paradigms. Typically, an economic model is developed to
assess the facility- and market-level impacts of the
regulations, including price, quantity, employment, business
closure, and foreign competition impacts. Such models are
firmly rooted in neoclassical economic theory and require
market-level data on price and quantity for potentially
affected products and detailed production data at the
facility-level. In the case of the printing and publishing
industry, however, this information is not available at the
facility- or market -level. Furthermore, this regulation
affects a service (printing and publishing) as opposed to a
manufactured good or product. Service industries cause
problems related to identifying and differentiating the
affected commodities (markets), quantifying the level of the
service provided to other industries or final consumers, and
identifying the producers and consumers of the service.
Nevertheless, RTI has developed a market model of the printing
and publishing industry to assess the regulatory impacts of
the proposed NESHAP.
The model is a multidimensional Lotus spreadsheet
incorporating various data sources to provide an empirical
characterization of the U.S. printing and publishing industry
and product markets. The base year of analysis reflects the
economic conditions embodied in preliminary data from the
Department of Commerce's 1992 Census of Manufactures for SIC
codes related to the printing and publishing industry.
Observations on equilibrium prices and outputs are derived
from value of shipment data by defining otherwise unobservable
outputs of producer goods, printing inputs, and other factors
of production as those amounts that can be sold for $1 at the
observed baseline equilibrium. Given the baseline conditions,
4-1
-------
the model analyzes market adjustments for 22 final product
markets, three printing inputs, as well as capital and labor
services within the printing and publishing industry.
The exogenous shock to the economic model is the
imposition of the regulations and the corresponding control
costs. A competitive market structure is incorporated to
compute the equilibrium prices and quantities of all
commodities in the system. Demand for the "final" commodities
in the system, that is, commodities whose demand is exogenous,
is expressed in equation form. Demand elasticities are
assumed for each of these final products, while the demand for
printing and publishing inputs is derived from the production
decisions for final products through constant elasticity of
substitution (CES) production functions. The model does not
incorporate international trade because exports and imports of
printing and publishing are insignificant (see Section 2).
The model analyzes market adjustments by employing a process
of tatonnement whereby prices approach equilibrium through
successive correction modeled as a Walrasian auctioneer. The
major outputs of this model are market-level adjustments in
price and quantity for all affected products.
The remainder of this section provides: a conceptual
presentation of the production relationships involving the
printing and publishing industry, the details of an
operational market model to assess the regulation, and the
results of the market model.
4.1 CONCEPTUAL OVERVIEW
Printing is basically the reproduction of original type
or artwork for publications, packaging materials, and
products. The markets for printing are links in the chain of
market interactions that flow between end-use products (e.g.,
newspapers, magazines, packaged products, wallpaper),
intermediate products (e.g., printed flexible packaging and
folding cartons), printing processes (e.g., gravure and
4-2
-------
flexography), and primary inputs (e.g., inks, substrates,
artwork, manuscripts, printing plates). Figure 4-1
illustrates the multimarket interactions between each of these
markets. Conventional economic reasoning argues that the
chain begins with the demand for final commodities. These
demands create a set of derived demands for the intermediate
products, printing processes, and other commodities. Thus,
the demand for printing can be seen as a derived demand from
the consumers' desire for the final commodity. A consumer's
demand for an attractive product (e.g., shower curtains and
wallpaper) or informative and attractively packaged product
(e.g., cereal or facial tissues) translates into a derived
demand for packaging and printing. Because consumers value
the final commodities more than the costs to provide them,
producers find it in their self-interest to produce the
requisite inputs for the production chain.
The five major printing processes currently employed in
the U.S. are flexography, gravure, letterpress, offset
lithography, and screen. Each printing process offers
characteristics that make it more suitable for the markets it
serves. A discussion of the different types of printing and
how they provide the necessary quality and functional
characteristics is not presented here, but Table 4-1 displays
the typical printing processes employed for various
publication and packaging products. In publication and
commercial printing, offset printing makes up nearly 80
percent with gravure supplying most of the remainder and only
a small portion done by flexography. For package printing,
roughly 64 percent is done by flexography with the remainder
mostly by offset and gravure.
The demand for printing derives from its use as an input
into the production of publications, packaging, and printed
products. The production process for publications, packaging,
and products may be broken into stages so that at each stage
some inputs are used to make an intermediate input that is
then used with other inputs to produce the final product. In
4-3
-------
demand A
supply A
-»• equilibrium A
4 ^
T
' j
market A
for A
packaged products
-*• demandB
tupptyB
-^equilibrium B
1
T
1
market B
for
publications, packaging.
printed products
-*• demand C
supply C
-* eqiulfcrium C
*
i
4
i
market C
for
printing
—
-*• demand D
-*-equilitmi
1
supply D J "
market D
for
substrates, ink.
manuscripts, art
Figure 4-1. Multimarket relationships.
4-4
-------
TABLE 4-1. PRINTING PROCESSES COMMONLY EMPLOYED FOR
PUBLICATIONS AND PACKAGING
Product Printing processes
Publications
Advertising F, G, 0, L
Books F, 0, L
Catalogs and directories G, 0, L
Financial and legal documents F, 0, L
Magazines and periodicals G, 0, L
Newspapers F, 0, L
Packaging
Labels, tags, and wrappers F, G, 0, L
Corrugated F, 0, L
Folding cartons F, G, 0
Flexible packaging F, G
Paper bags F, G
Plastic bottles F, S
Beverage cans 0, L
Crowns and closures F, 0
Note: Printing process codes are flexography (F), gravure (G),
letterpress (L), offset (0), and screen (S).
the first stage, final producers purchase printing services in
the market along with other inputs to produce their particular
output. The underlying production function for each output
(Q) may be given by:
Q = F(K, L, E, Y)
where Q is the production of publications, packaging, or
product, K is the capital stock, L is the labor input, E is
the energy input, and Y is printing services. For this
analysis, the production technology is assumed to be separable
4-5
-------
so that producers require a fixed amount of the printing
services per unit of output and that it is not substitutable
with the other inputs--capital, labor, and energy.
Therefore, in the second stage, printing services (Y) may
be viewed as an intermediate input composed of various
printing processes that producers may substitute across to
meet their input requirements, i.e.,
Y = f (Xj)
where the Xj's represent the available printing processes such
as flexography, gravure, and offset that may be employed.
Using the relative costs of each process, producers will
minimize the costs per unit of printing services resulting in
demands for each process by final product.
In the third stage, the production function for each
printing process may be described by:
X = F(VA,M)
where X is the production of a particular printing input, VA
is the value added consisting of capital and labor services,
and M is intermediate inputs consisting of inks, solvents, and
substrates. Producers have fixed requirements of intermediate
inputs and value added per unit of printing output. Thus, in
the final stage of production, producers are able to
substitute between labor and capital to minimize costs per
unit of value added.
As a result of regulation, the relative cost of the
available printing processes will change. This in turn will
force final producers to alter their production decisions and
to substitute away from regulated processes (more costly)
toward unregulated processes (less costly) to the extent
existing production technologies allow. Thus, the regulations
on the printing and publishing industry may be incorporated
into the system like a per-unit tax on the use of the printing
inputs, Xj, with statutory incidence on the buyers.
Figure 4-2 shows the market for a particular printing
4-6
-------
Figure 4-2 shows the market for a particular printing
input, X. The price (P.J and quantity (Q.,) of X are determined
competitively by supply (S...) and demand (Dx) . A key is to
recognize that in the presence of a tax the price paid by
demanders (F
gross'
and the price paid by suppliers (P_e.) will
differ by the per-unit amount. After the regulation is
imposed, the associated per-unit cost (C) will shift the
demand curve as perceived by the suppliers (Dxi downward to
D... . The new equilibrium occurs where supply equates demand as
perceived by the suppliers. Thus, the regulation will lower
the quantity from Q0 to Q,,, while suppliers receive the net
price of F,^._ and demanders pay the gross price of Pcr~ss.
Therefore, holding all else constant, those producers that
employ flexography and gravure in their production process
will face a new higher price of printing inputs after
imposition of the regulation.
P/t
gross
PO
•net
C » per unit
regulatory
cost
Oft
Figure 4-2. Imposition of regulatory costs
on market for printing input, X.
4-7
-------
4.2 OPERATIONAL MARKET MODEL
To estimate the economic impacts of the regulation, we
developed a competitive market model based on the discussion
above. The purpose of the model is to provide a structure for
analyzing the market adjustments associated with regulations
to control air pollution from the printing and publishing
industry. To implement this model, we identified the
commodities to be included in the analysis, specified the
supply and demand side of the market, incorporated supply and
demand specifications into a market model framework, and
estimated market adjustments due to imposing regulatory
compliance costs.
4.2.1 Model Dimensions
Clearly this analysis must account for all marketable
commodities involved in the printing and publishing industry,
in particular those affected by the regulation. The first
marketable product is the printing input. Although there are
five major printing processes, only two are directly affected
by the regulation—flexography and gravure. The other
processes (offset, letterpress, and screen) are not covered by
the regulation. Therefore, this analysis includes three
printing inputs: flexography, gravure, and a composite
printing input that includes offset, letterpress, and screen.
The second marketable product is the final product that
employs printing inputs. Table 4-2 presents the 22 final
products included in the market model. International trade is
not included in this model, so all of these products are
consumed and produced domestically.
4.2.2 Production
On the production side of the model, each of the 22 final
products is produced from a combination of printing services
and a composite input consisting of all other inputs including
labor, capital, and energy. Industry input decisions are
assumed to be made on the basis of cost minimization, and
these decisions are affected by the EPA air regulations on the
4-8
-------
TABLE 4-2. FINAL PRODUCTS INCLUDED
IN THE MARKET MODEL
PuJbli cations
Advertising
Books
Catalogs and directories
Financial and legal documents
Magazines and periodicals
Newspapers
Packaging
Labels, tags, and wrappers
Corrugated
Folding cartons
Sanitary packaging
Flexible packaging
Paper bags and mulitwall sacks
Plastic bottles
Plastic bags
Metal cans
Other packaging, n.e.c.
Product
Sanitary paper products
Envelopes
Floor coverings
Wall coverings
Gift wraps
Greeting cards
n.e.c. = Not elsewhere classified.
4-9
-------
printing industry through the alteration of relative prices
for printing inputs. Printing services consist of three
printing inputs—gravure, flexography, and a composite process.
Gravure and flexography are the only processes affected by the
proposed air regulations.
The structure of production is displayed in Figure 4-3.
Given a single producer of each final product, each determines
its use of factors in a sequence of stages, through a nested
CES production function.* First, producers have fixed
requirements of printing services and all other inputs per
unit of output. Second, they can substitute between printing
processes through a CES function to minimize costs per unit of
printing services. To facilitate the analysis, the CES
function is limited to two printing processes for each final
product. The value of the elasticity of substitution between
the two printing processes is chosen to be consistent with
industry literature about substitution possibilities, but
sensitivity analysis is conducted with respect to this
parameter specification.
In the third production stage, each printing process has
fixed requirements of intermediate inputs (substrates and
printing inks) and value added (labor and capital). In the
fourth stage, within each printing process, we allowed for
substitution between labor and capital through a CES value-
added function. The elasticity of substitution between labor
and capital for each printing process is determined
exogenously from literature estimates.b
"The CES, or constant elasticity of substitution, production function
is one of the most frequently employed functional forms in modern economic
analysis. As implied by its name, the elasticity of substitution between
factors of production is expressed as some constant value. The Cobb-
Douglas function is a special case of the CES production function with an
elasticity of substitution equal to 1.
bA possible extension of the model would be to separate printing inks
for each process as another CES function of water-based and solventborne
inks. The possible substitution between printing inks could then be
included to assess the impacts of pollution prevention options.
4-10
-------
AOI
Y;
Each producer good Q. uses fixed proportions
of printing services (Y.) and all other mputs(AOI)
Printing services for each producer good is a CES
function of printing processes (X() where i may be
flexography, gravure, or a composite process.
VA
x1 x2
M
K
Each printing process (X,) uses fixed proportions
of value added (VA) and intermediate inputs (M).
Intermediate inputs (M) are composed of substrates and
printing mKs used in fixed proportions tor each process.
Value added (VA) for each process is a CES function
of labor (L) and capital (K).
Figure 4-3. Diagram summary of production model.
Thus, the production function for each final product can
be written as:
= min
(4-1)
where Y., is a CES function for final product j with two
printing inputs (Xa and X2) as inputs, a., is the fixed input
requirement for printing services (Y-,) per unit of output, and
(1-a.j) is the fixed input requirement for the composite input
(AOIj) per unit of output. Next, each final product uses the
CES function to decide how much of printing service (Yj)
should be performed through printing process Xaj and how much
should be performed by X2:
- fi
" °
p'
(4-2)
4-11
-------
where 6} is a weighting parameter and pl =
with ffj being the
elasticity of substitution between printing processes in the
production of final product j.
Production of each printing input (X;) takes place
according to the following production function:
X, =
VA(Ki,Li),
(4-3)
where VA is a CES value added function for printing input i
with labor (L,) and capital (K.{) as inputs, ft is the fixed
input requirement for value added (VAj) per unit of output, and
(1-/3,) is the fixed input requirement for intermediate inputs
(M,) per unit of output. In the fourth stage of production,
each printing process uses the CES value-added function to
allocate value added across labor (L,) and capital (K,) :
VAS = 7,1 + (1-7.)
where 7, is a weighting parameter and p, =
e-1
(4-4)
with e, being the
elasticity of substitution between labor and capital in the
production of printing input i. Each factor of production is
assumed homogeneous and mobile across printing processes. The
stock of capital is assumed fixed and labor is inelastically
supplied.
4.2.3 Consumption
The demand for each producer good
by the following equation:
Q,D =
(Q°) may be specified
(4-5)
where PJ is
is the price of final product j
4-12
is the demand
-------
elasticity for final product j , and A, is a multiplicative
demand parameter that calibrates the demand equation for each
final product j given data on price and the demand elasticity
to replicate the baseline equilibrium level of demand.
Minimizing costs per unit of printing service (Yj) yields
the conditional demand for an individual printing input (Xj) by
final product j written as
(4-6)
where P] and p2 are the price of the respective printing input
i with other parameters defined as before.
The total market demand for an individual printing input
(X,) is the sum across all producing industries j, i.e.,
X,° =£ X, . (4-7)
In a similar fashion, we solve for the conditional demand
for the factors of production capital and labor by each
printing process as given by
K. - = = (4-8a)
r'-[7y-- + (1-7.) r1-'-
and
L. =
w'
(4-8b)
4-13
-------
Summing across printing processes i determines total
market demand for capital and labor by the printing industry
D = 1 Kj (4-9a)
and
LD = E L, . (4-9b)
4.2.4 Model Parameterization
Model parameters are chosen to construct a baseline
equilibrium data set that is replicated by the model as an
equilibrium solution. The model is parameterized with
preliminary data from the 1992 U.S. Census of Manufactures as
shown in Table 4-3. The basic data contained in this table
are used to generate the parameters for the behavioral
equations of the model. This involves first decomposing the
observations on value of shipments into separate observations
on equilibrium prices and outputs. For this purpose, we
define otherwise unobservable outputs of producer goods,
printing inputs, and other production factors as those amounts
that can be sold for $1 at the observed equilibrium.
Therefore, the baseline equilibrium data can be separated into
price and output observations with all baseline equilibrium
market prices equal to unity and all baseline equilibrium
outputs are those given by the value of shipment data.
Data presented in Table 4-3 also determine the amount of
printing services and all other inputs for each final product
and the corresponding input requirement parameters. The
amount of printing services (Y) is approximated by the value
of materials, ingredients, containers, and supplies. Thus,
our construction of printing services includes the ink,
substrate, and other materials. The amount of all other
inputs (AOI) is computed as the value of shipments minus the
value of materials, ingredients, containers, and supplies.
4-14
-------
TABLE 4-3. 1992 CENSUS OF MANUFACTURES DATA BY SJC FOR FINAL PRODUCTS
Final product/SIC code
Pub] ications
Advert ising
2754-5
2752-5
2759-5
2759-C34
2759-8/19-23
Books
2731
** 2732
i
01 Catalogs and Directories
2754-3
2752-3
2759-3
Financial and legal
documents
2761
2759-C32
2752-4
2759-4
SIC descript ion
Advertising prtg, gravure
Advertising prtg, litho
Advertising prtg, letterpress
Advertising prtg, flexo
Advr-i t ising prtg, screen
Book publishing
Book printing
Cat. and dir. prtg, gravure
Cat. and dir. prtg, litho
Cat. and dir. prtg, letterpress
Manifold business forms
Fin. and legal prtg, flexo
Fin. and legal prtg, litho
Fin. and legal prtg, letterpress
M,H f i 1,1 1 i,
Vnluo ('(><•( of ini.jr«'!iiPiil •:, V.iliif M!
aciiJivl inn! i j i dl>; conl ,i i IKM -: , ••!) ) pin, -nl
1510'') ( .- in6) PI ,-. (51 o") (510')
8, 1 1 H H .,, .t vi i ',, (70 -, 1-1 , c r: '<(.n
44-1 '' -1R6 . j -I'll . ', 'Ml.'
7, 53'< .1 S, 6f>4 .9 -1, 6rW . 1 If, .'00
!'. 3 11 / . 1 j n . 8
1 / . -1 1 .7 . 0 101 ,' " . 3 /
2?4 n 154.6 n f .H i/H (,
13, (.M . / 8, 204 .6 ' i, ,'7 1 . > ?\ ,H',f, (
11.776./ 5,349.7 l,f>67.<> 1 / , 1 ?.f, 1
l,fi/r).0 2,ft'.4.9 1,603.6 4,7?'J 0
5.0.M ', 4 , 33". 6 3.7'M .H '1, 3M . 1
3 , 9OH . ', t , LjO(, .1 ! , 1 Or, .O / , 1 I 1 t,
lo 1 7.0 6.0 l/.O
1 , 0V' . .! /96 .4 6'j4 . 7 1 , Hr.', 6
4 f / 30 .? 26 . 1 M 9
(cont i
-------
TABLE 4-3. 1992 CENSUS OF MANUFACTURES DATA BY SIC FOR FINAL PRODUCTS (CONTINUED)
Final product/SIC code
Magazines and
periodicals
2721
2754-1
2759-C29
2752-1
2759-1
Newspapers
2711
** 2759-C36
l
t-1 2752-6/11
CTl
2759-6/13
Vn 1 1 1 - •
add--.)
SIC description ($10")
18, / (i,. i
Periodicals 15,7'. I M
Mag. and periodical prtg, gravure 26^.3
Mag. and periodical prtg, gravure V.H
Mag. and periodical prtg, litho 2,641.4
Mag. and periodical prtg, letterpress 36.7
27,74 1 . r.
Newspapers 27,26n.h
Newspapers, flexo 7 . R
Newspapers, litho -IS'..0
Newspapers, letterpress 16 3
Coit of
mnl or ia ] s
f? io6)
fl , S ! '> . 3
", .'] (.7
2S/.3
22.7
1 , 985.8
25.4
7, 212. 1
6,936.5
1.9
342.7
11.3
Ma r e r i a 1 s ,
ingredients, V.ilur? of
CO tit ,1 i flora, ::!> 1 pmonl ::
etc. ($10*) (SH)6)
4 , i/. 7
19 . fl
1 , 632.5
21.9
6 , 1 7 r> . 7
5,882.5
1 .7
281 . 8
9.8
,'/,.'/! .4
.' 1 , "."> .S
'•.M . 1
•iS.S
-I, 627 . 2
62 . 1
!'.,034 .0
31,20).!
4 . /
718. 6
27.6
Packaging
Labels, tags and
wrappers
2754-2
2759-7
2752-2
2759-2
2759-8
2672-3
-1, 3 4 0 . r>
3,917.7
Labels & wrappers (gravure)
Flpxo printed labels
Labels & wrappers (litho)
Labels & wrappers (letterpress)
Screen printing labels
Pressure sensitive products (labels)
H, fi()4
2,
24'/ .fl
81<> 0
918.1
166 S
217.8
i ; .'. •-,
270
563
690.
114 .
164
2 , •> 3 6 .
. 8
. 3
.8
, 9
.7.
251
487
567
99,
142
2, 369
. 4
. 3
.9
,4
.0
. r,
M8
1, 379
1, 609
281
402
-I, M I.
. 6
. 3
.7
. 4
0
-------
TABLE 4-3. 1992 CENSUS OF MANUFACTURES DATA BY SIC FOR FINAL PRODUCTS (CONTINUED)
Final product/SIC code
Corrugated
2653
Folding Cartons
2657
2652
Sanitary packaging
2656
Flexible packaging
2671
3089-4
Paper bags & multiwall
sacks
2673 excl. 2673-2
2674
Plastic bottles
3085
Plastic bags
2673-2
Metal cans
3411
Mat el i ft } r;,
V,}ln,' C~rv:t ul ) nqi fil > nut •: , ViliU' "1
a*K K •' i in, » 1 « • i i a 1 s • "out ,1 1 ih • i : , :ti J | >iut •;!' •
SIC description ($1<>''I (Jio1') <>t.-. ($lot>) (Cin1')
Coriugated and solid fiber boxes 6,6<>'> ( I! , 1< (1 4, 96 /.I 4,1 Or..l '',<>Mi '*
Paper coating & laminating for pkg l.'.o/ ', 2,711.0 7,106.3 3,/lR S
Plastics packaging 3,1B'..S 2,7r,6.'» 2,V)8.8 S,'-4/ 4
1,77,' n 2,600.0 7,413.1 4,377.0
Bags, plastic, laminated and coated 771.! 76S.1 686.1 l,r.3i.4
Bags: uncoated paper and multiwall 1,00.>.7 1,834.9 1,727.0 7,837.6
Plastic bottles 2.0RH 1 2.2HO 1 2,071.0 4,3-.fl.4
Specialty bags and liners, plastic 2,0"', •• ?., 070.0 1 , Rr>7 . J 4,1','..''
Metal cans 9, 14". 4 ?, 227.0 7,107.2 12,1?'.. 4
-------
TABLE 4-3. 1992 CENSUS OF MANUFACTURES DATA BY SIC FOR FINAL PRODUCTS (CONTINUED)
Final product/SIC code
SIC description
M'lt FT i fi \ '.;,
V.iluo Co<5( of inqrorli^nt •;, V.tliio of
acMcil tTMt
904.6
200.?
3,"M f)
'), 470. 4
v>',.', 437.4 40''.*> HI P. 9
783.R 1,138.3 1,061.9 1,922.1
, °r. r'.r) 1,903.7 1,4''r).r) 4, 8 S '1.6
B.OVn.fl 7,396.7 7,117.6 IS, 467. 5
1,3V,. 2 1,482.5 1,268.0 2,837.7
616.5 547.3 1 , c,r 1 . 1
216.1
185.9 416.3
2R3.3 243.7 606.3
Greeting cards
2771
Greeting card publishing
34S? ',
743.0 473.2 1,11',.*;
See sources on following page.
-------
TABLE 4-3. 1992 CENSUS OF MANUFACTURES DATA BY SIC FOR FINAL PRODUCTS (CONTINUED)
Sources: U.S. Department of Commerce. 1992.
Census of Manufactures: Prelimary Report Industry Series: Commerri,tl Piint ing and Manifold Mus-inoq';
Forms. Washington, DC, U.S. Goverment Printing Office. October 19'H
Census of Manufactures: Prelimary Report Industry Series: Paperhoii-i ( <>nt .11 IHT;-, ,ind Boxes. W i::h ni'jlon,
DC, U.S. Goverment Printing Office. October 1994.
Census of Manufactures: Prelimary Report Industry Series: Glass Pi K|i •, PCI i n,i i.-.i I •:, nook", .mnn;; Manufactures Publishing.
Washington, DC, U.S. Goverment Printing Office. November 1994.
Census of Manufactures: Prelimary Report Industry Series: Miscel 1 m. •oir: Pl.-jstic Product :, n f?. c.
Washington, DC, U.S. Goverment Printing Office. November 1994.
Census of Manufactures: Prelimary Report Industry Series: Greetin ••. October 1994.
-------
The input requirement parameter (otj) of printing services per
unit of final product was computed by dividing the amount of
printing services by the value of shipments for each final
product. The input requirement parameter ($,) of value added
per unit of printing input was computed by dividing the value
added by the value of shipments for each printing input using
1992 Census of Manufactures data from SIC codes 2752, 2754,
and 2759.c The weighting parameters that determine the
allocation of printing services among the printing processes
for each final product were derived using information from the
Gravure Association of America (GAA)d and Eldred.3
Given the baseline market price and output observations,
as shown in Table 4-4, and the functional forms of the
behavioral equations the parameter values are solved to
complete the consistent baseline equilibrium data set. In the
case of CES production functions, an extraneous estimate of
the elasticity of substitution must be provided for the
printing inputs to each producing industry and for the capital
and labor inputs to each printing process. To our knowledge
no study has ever estimated the elasticity of substitution
between printing processes. Therefore, separate model
simulations were performed with assumed values of 0.5 and 1.5
across all final products to provide a sensitivity analysis of
the market adjustments. This analysis incorporates Frenger's
estimate of 0.3 for the elasticity of substitution between
capital and labor in the printing industry.4 Furthermore, in
the absence of estimates for the demand elasticity, the
analysis assumes a value of -1 for each of the 22 final
products.
cData for SIC code 2754 {Commercial Printing, Gravure) were used for
the gravure printing input, while SIC codes 2759B and 2759C (Commercial
Printing, Flexographic) were used for the flexography printing input. The
composite printing input required aggregating data for SIC codes 2752
(Commercial Printing, Lithographic), 2759-1 through 2759-6 (Commercial
Printing, Letterpress), and 2759-8 (Commercial Printing, Screen).1
dSpecifically, data on the value of shipments by each printing
process for final products and/or market share were obtained from GAA.2
4-20
-------
TABLE 4-4. BASELINE MARKET PRICE AND OUTPUT OBSERVATIONS FOR FINAL
PRODUCTS AND PRINTING INPUTS
I
KJ
Printing
Publications, total
Advertising
Books
Catalogs and
directories
Fin. & legal
documents
Magazines &
periodicals
Newspapers
Packaging, total
Labels, tags, &
wrappers
Corrugated
Folding cartons
Sanitary packaging
Flexible packaging
Market
price
$1
$1
$1
$1
$1
$1
$1
$1
$1
$1
$1
Total
output
(106)
113
14
21
9
27
35
81
8
19
8
2
9
,310.7
,873.0
,856
4914.9
,361
,271
,034
,919.2
,904
,681
,480
,491
,661
Flexography
1,375
0
0
0
758
0
617
30,290
3,604
11,309
3,382
1,069
4,149
.9
.0
.0
.0
.4
.0
.6
.4
.3
.4
.0
.4
.4
input (10'')
Hravure
4, 286
590
65
466
0
3,164
0
3,529
313
0
917
267
355
.9
.8
.4
. 1
.0
.6
.0
.3
.4
.0
.2
.4
.7
Other
19,191.
4,779.
3,205.
1 , 383 .
3,033 .
1,230.
5,558.
3,840.
0.
876.
0.
0.
0.
Total
2
8
8
4
4
7
1
7
0
7
0
0
0
24,
5,
3,
1,
3,
4,
6,
37,
-s t
12,
4,
1,
4,
854.0
370.6
27] .2
84^.4
791 .&
395.3
175.7
660.5
917.7
186.1
299.2
336.8
505. 1
(cont inneci)
-------
TABLE 4-4.
BASELINE MARKET PRICE AND OUTPUT OBSERVATIONS FOR FINAL
PRODUCTS AND PRINTING INPUTS (CONTINUED)
to
Printing input (10'')
Paper bags
Plastic bottles
Plastic bags
Metal cans
Other packaging,
n.e.c.
Products, total
Sanitary paper
products
Envelopes
Floor coverings
Wall coverings
Gift wraps
Greeting cards
Printing input, totals
Market
price
$1
$1
$1
$1
$1
$1
$1
$1
$1
$1
$1
Total
output
(106)
4,
4,
4,
12,
7,
25,
15,
2,
1,
4,
377
368
166.
175.
614.
044.
467.
837.
521.
416.
606.
195.
9
4
6
5
5
7
1
3
3
6
Flexography Gravure
2,219
1,119
1,326
301
1,809
6,887
6,783
0
0
104
0
0
61,985
.6
.5
.6
.0
.1
.2
.1
.0
.0
.1
.0
.0
193
951
530
0
0
2,344
334
1,014
459
81
170
283
21, 104
.5
. 5
.6
.0
.0
.9
.5
.4
.7
.8
.6
.9
Other
0.
0.
0.
1,806.
1,157.
603.
0.
253.
87.
0
73.
189.
5,432
0
0
0
2
9
5
0
6
6
1
3
Total
2, An. 1
2, 071 .0
1,857.3
2,107.2
2,967.0
9,835.6
7, 117.6
1,268.0
547.3
185.9
243.7
473.2
88,521
-------
4.2.5 Incorporating Regulatory Control Costs
The starting point for assessing the market impact of the
regulations is to incorporate the regulatory control costs
into the production decisions for final products. The final
products included in this analysis were chosen because of
their employment of either gravure or flexographic printing.
All final products employing gravure are affected by the
regulation with the associated costs determined by
classification (i.e., publication gravure or packaging product
gravure). Alternatively, not all final products using
flexography are affected by the regulation. The final product
category of labels, tags, and wrappers is unaffected since it
uses narrow web flexography, which is not covered by the
regulations. Furthermore, the engineering analysis to develop
compliance costs found that newspapers and corrugated
producers were currently in compliance and thus incur no
additional control costs.
The per-unit cost of the regulation is calculated for
publication gravure, packaging and product gravure, and
flexography based on the total annual compliance cost
estimated for each segment by the engineers (see Table 3-4 in
Section 3). The total annual compliance cost includes the
annualized capital cost, the operating expenses, as well as
the monitoring and recordkeeping costs. To ensure consistency
among the estimates of total compliance costs for the printing
and publishing industry by the market model and the
engineering analysis, the per-unit cost of the regulation was
derived by dividing the total annual compliance cost for a
particular segment by the corresponding affected baseline
output from the market model for that segment. For
publication gravure, the per-unit cost of the regulation is
estimated at 0.49C, while the per-unit cost of the regulation
for packaging and product gravure is estimated at 0.46C. For
flexography, the per-unit cost of the regulation is estimated
at 0.02C.
4-23
-------
The estimated per-unit compliance cost (c) for each
industry segment is incorporated into the model structure
through the conditional demand equations for printing inputs
(Eq. [4-6] ) . For affected final products, we substituted a
gross price, p,* = (Pj + c) , for the net price (p;) of printing
input i , i.e.,
(p, + c^'a^p, + c.p1"' + (i - ep (p
+
For example, the gross price of gravure for use in
publications without accounting for market adjustments would
be $1.005 (e.g., the baseline market price of $1 plus the per-
unit compliance cost) . The market adjustments described below
will act to reduce the gross price faced by consumers of
affected products, like publication gravure, through a
reduction in the net price received by producers of gravure.
4.2.6 Market Equilibria
Appendix A includes a complete list of exogenous and
endogenous variables, as well as model equations. The new
post -compliance equilibrium is the result of a series of
iterations between producer and consumer responses and market
adjustments until a stable market price arises where total
market supply equals total market demand for each producer
good, printing process, and factor of production, with no
excess profits. That is,
QjS = 0°, for all final products (j) ,
X,s = X,D, for all printing inputs (i) ,
and
Ks = KD and Ls = LD.
4-24
-------
This market clearing process is simulated given the per-unit
compliance costs, producer and consumer behavioral equations,
and market adjustment mechanisms to arrive at the with-
regulation equilibrium.
The process for determining equilibrium prices (and
outputs) is modeled as a Walrasian auctioneer. The auctioneer
calls out a price for each product and evaluates the reactions
by all participants (producers and consumers), comparing
quantities supplied and demanded to determine the next price
that will guide the market closer to equilibrium (i.e., market
supply equal to market demand). Simply stated, the price
revision rule employs a simple Walrasian rule that raises the
price of a product in excess demand, lowers the price of a
product in excess supply, and leaves unchanged the price of a
product with own demand equal to own supply. Decision rules
were established to ensure that the process will converge to
an equilibrium and to specify the conditions for equilibrium.
The result of this approach is a vector of with-regulation
product prices that equilibrates supply and demand for all
markets.
4.3 MARKET IMPACTS
Market-level impacts of the regulation include the market
adjustments in price and quantity for all final products and
printing inputs. However, the structure of the market model
precludes using these market adjustments to estimate the
changes in the aggregate economic welfare following
traditional applied welfare economics principles. Therefore,
the economic welfare impacts are discussed below along with an
approximation of the social cost of the regulation.
4.3.1 Price and Quantity Impacts
Market adjustments are a result of moving from the
baseline to with-regulation equilibrium. Given the regulatory
control costs, the interaction of producer responses and price
revision mechanism, modeled as a Walrasian auctioneer, along
4-25
-------
with the simultaneous coordination of the final product and
input markets, results in a new with-regulation equilibrium
consisting of new prices and quantities for all product
markets (22 final products and three printing inputs).
Table 4-5 provides the market adjustments associated
with the regulation for separate model simulations employing
different assumed values for the elasticity of substitution
between printing processes of 0.5 and 1.5 across all final
products. Percentage change in market prices and quantities
is significantly below 1 percent across all final products and
printing inputs. The percentage increase in the market price
of gravure is predicted to be 0.4 percent in response to the
regulation, while the market price of flexography is predicted
to decline by a negligible amount of 0.06 percent. The model
results predict substitution away from gravure to flexography
and other printing inputs but at a very low level as indicated
by the output adjustments. Although the percentage change in
market price of printing inputs does not vary by specification
of elasticity of substitution, the percentage change in output
with a value of 1.5 for each printing input is almost double
those observed with a value of 0.5. This outcome is expected
as a result of the higher sensitivity of input substitution
given higher values of the elasticity of substitution.
Table 4-6 provides the projected reallocation of capital
and labor services within the printing industry in response to
the regulation. As expected, given the market adjustments
detailed above, the model predicts a very small reallocation
of capital and labor services away from gravure to flexography
and other printing inputs. Also, the output adjustments are
higher under the simulation with the assumed value of 1.5 for
the elasticity of substitution between printing inputs.
4.3.2 Economic Welfare Impacts
The value of a regulatory policy is traditionally
measured by the change in economic welfare that it generates.
Welfare impacts resulting from the regulatory controls on the
printing and publishing industry will extend to the many
4-26
-------
TA5LE 4-5. PRICE AND QUANTITY ADJUSTMENTS DUE TO
REGULATION: PRINTING INPUTS AND FINAL PRODUCTS
?ro=.=t
Gra-.-_re
C-tr.e:-
final Frsduzzs
Publications, Total
Advertising
Books
Catalogs and directories
Final and legal
documents
Magazines and
periodicals
Newspapers
Packaging, Total
Labels, tags, and
wrappers
Corrugated
Folding cartons
Sanitary packaging
Flexible packaging
Paper bags
Plastic bottles
Plastic bags
Metal cans
Other printing,
necessities
C ,
Percentage
Price
-C . 05
_ ~ " ~
0.03
-0.02
-0.05
0.05
-O.C7
0.27
-0 06
-0.01
-0.03
-0.07
0.05
0.04
-0.01
-0.01
0.15
0.08
-0.06
-0.03
5
change in
2-ar.tir/
C . 0 4
-0.29
C .04
-0.03
0.01
0.05
-0.06
0.06
-0.27
0.04
0.01
0.03
0.07
-0.05
-0.04
0.01
0.01
-0.16
-0.08
0.06
0.04
S, , 1_^ *• , t- . , — , r^-~ 6
I .
Percentage
?r;ce
A n c.
- U . U D
0.41
_ A f~t ^
0.04
-0.00
-0.04
0.06
-0.06
0.27
-0.05
-0.01
-0.02
-0.06
0.06
0.05
-0.00
-0.00
0.16
0.09
-0.05
-0.03
5
change in
Quantity
r\ fi 7
U . U I
-0.53
C . Ct
-0.04
0.07
0.04
-0.06
0.06
-0.27
0.05
0.01
0.02
0.06
-0.06
-0.05
0.00
0.00
-0.16
-0.09
0.05
0.04
(continued)
4-27
-------
TABLE 4-5. PRICE AND QUANTITY ADJUSTMENTS DUE TO
REGULATION: PRINTING INPUTS AND FINAL PRODUCTS (CONTINUED)
Proa-ct
Products, Total
Sanitary paper products
Envelopes
Floor covenr.cs
Wall coverings
S.ft wraps
Greet. r.:: rir=s
0.
Percentage
Price
0.07
-0.05
0.30
C.32
0.15
C.26
0 . 2 G
, i
cr.ance ir.
Quantity
-0.07
0.05
-0.3C
-o.;:
-0.1E
-C .15
- r . r :
£ «. „<,.- . . ... ft
1.
Percentage
Price
0.07
-C.04
0.31
0.33
0.16
0.26
c.:?
c
cr.ange :r.
Quant. :\
-C.06
C . C -.
-0.31
-;.;;
- c . : E
-c . ;^
-: ::
The elasticity of substitution between printing processes in final production
is assumed to be the same across all final products.
Other printing input is a composite input that includes lithography,
letterpress, and screen printing processes.
TABLE 4-6. REALLOCATION OF CAPITAL AND LABOR IN
PRODUCTION OF PRINTING INPUTS DUE TO REGULATION
Printing input
Flexography
Gravure
Otherb
0.
Percentage
Capital
0.04
-0.29
0.04
Elasticity of
.5
change in
Labor
0.04
-0.26
0.05
substitution*
1 .
Percentage
Capital
0.06
-0.53
0.08
S
cnange in
Labor
0.07
-0.52
0.09
The elasticity of substitution between capital and labor services in
printing processes is assumed to be the same across all final products.
Other printing input is a composite input that includes lithography,
letterpress, and screen printing processes.
4-28
-------
consumers and producers of printing and publishing services.
In a market environment, consumers and producers of a good or
service derive welfare from a market transaction. The
difference between the maximum price consumers are willing to
pay for a good and the price they actually pay is referred to
as consumer surplus. Consumer surplus is measured as the area
under the demand curve and above the price of the product.
Similarly, the difference between the minimum price producers
are willing to accept for a good and the price they actually
receive is referred to as producer surplus. Producer surplus
is measured as the area above the supply curve to the price of
the product. These areas may be thought of as consumers' net
benefits of consumption and producers' net benefits of
production, respectively.
The structure of the market model for the printing and
publishing industry precludes estimating the economic welfare
impacts in the traditional fashion. An alternative is to
approximate the social cost of the regulation using the total
annual compliance cost as estimated by the engineers. The
total capital cost is annualized over its expected life (10
years) at a 7 percent discount rate. The annual operating
expenses and administrative costs (i.e., monitoring and
recordkeeping) are added to the annualized capital cost to
arrive at the total annual social cost approximation. For the
NESHAP on the printing and publishing industry, the total
annual social cost approximation is $40.0 million with
publication gravure accounting for $17.4 million, packaging
and product gravure accounting for $21.1 million, and
flexography accounting for $1.5 million. The difference
between this estimate of social cost and that derived through
economic welfare analysis is the deadweight loss to society of
the inefficient reallocation of resources. Typically, the
deadweight loss is very small relative to the total annual
compliance cost so that the approximation of total annual
social cost described above is of the correct magnitude.
4-29
-------
-------
4.4 REFERENCES
1. U.S. Department of Commerce. 1992 Census of
Manufactures: Preliminary Report Industry Series:
Commercial Printing and Manifold Business Forms.
Washington, DC, U.S. Goverment Printing Office. October
1994.
2. Gravure Association of America. Profile Survey of the
U.S. Gravure Industry. 1989.
3. Eldred, Nelson R. Package Printing. Plainview, NY:
Jelmar Publishing Co., Inc. 1993.
4. Andersson, A.E., and R. Brannlund. "The Demand for
Forest Sector Products." In the Global Forest Sector.
Markku Kallio, Dennis P. Dykstra, and Clark S. Binkley,
eds. John Wiley & Sons, New York. 1987. p. 267.
4-30
-------
SECTION 5
FIRM-LEVEL ANALYSIS
A regulatory action to reduce air emissions from the
printing and publishing industry will potentially affect
owners of the regulated plants. Firms or individuals that own
the facilities are legal business entities that have the
capacity to conduct business transactions and make business
decisions that affect the facility. The legal and financial
responsibility for compliance with a regulatory action
ultimately rests with the owners of the printing and
publishing plant who must bear the financial consequences of
their decisions. Thus, an analysis of the firm-level impacts
of EPA regulations involves identifying and characterizing
affected entities; assessing their response options by
modeling or characterizing the decision-making process and
projecting how different parties will respond to a regulation;
and analyzing the consequences of those decisions. Analyzing
firm-level impacts is important for two reasons:
• Even though a plant is projected to be profitable with
the regulation in place, financial constraints
affecting the firm owning the facility may mean that
the plant changes ownership.
• The Regulatory Flexibility Act (RFA), the EPA
guidelines for conducting Regulatory Flexibility
Analyses, and the Small Business Regulatory
Enforcement Fairness Act (SBREFA) of 1996 requires
that the impact of regulations on all small entities,
including small companies, be assessed.
Environmental regulations such as the NESHAP for the
printing and publishing industry affect all businesses, large
and small, but small businesses may have special problems in
complying with such regulations. The RFA of 1980 requires
that special consideration be given to small entities affected
by Federal regulation. Under the 1992 revised EPA guidelines
for implementing the RFA, an initial regulatory flexibility
analysis (IRFA) and a final regulatory flexibility analysis
5-1
-------
(FRFA) will be performed for every rule subject to the Act
that will have any economic impact, however small, on any
small entities that are subject to the rule, however few.
Therefore, this firm level analysis specifically addresses the
RFA requirements by measuring the impacts on small entities
associated with the regulations on the printing and publishing
industry. This should also provide enough analyses of small
entities to satisfy the analytical requirements of the SBREFA.
The general steps involved in analyzing company-level
impacts include identifying and analyzing the possible option
facing owners of affected facilities and analyzing the impacts
of the regulation including impacts on small companies and
comparing them to impacts on other companies.
5.1 ANALYZE OWNERS' RESPONSE OPTIONS
Generally, it is assumed that, when choosing a compliance
option, owners will act in a way that maximizes the net
present value (NPV) of the firm. As shown in Figure 5-1,
owners of affected plants are assumed to choose among the
following options:
• install pollution control equipment,
• discontinue regulated processes within the facility,
and
• comply via process and/or input substitution
(pollution prevention).
Firms compare their with-regulation total revenues with
their with-regulation total costs, including annualized
liquidation value. If profits are positive (TR>TC), the plant
should continue operating; if not, it should shut down. This
option is referred to as voluntary exit because equity holders
as opposed to debt holders make the exit decision. Exit may
take the form of liquidation of the assets, a distressed sale
of the facility to another firm, or conversion of the facility
to other uses.
5-2
-------
Identify
Cost-Minimizing
Compliance Option
Implement
Cost-Minimizing
Compliance Option
TR = Total wkh-regulation
revenues
TC = Total wMwegulation costs
DM = Martwt Value of Debt
DL = Liquidation Value
of Debt
Implement Cost-
Minimizing
Compliance Option
and Continue
Operations
an firm"
cover its debt
obligations?
Figure 5-1.
Characterization of owner responses
to regulatory actions.
If the firm chooses to implement the cost-minimizing
control option, to continue to operate the facility, and to
continue to meet its debt obligations, operations will
continue. However, if the firm cannot meet its interest
payments or is in violation of its debt covenants, the debt
holders take control of the exit decision. If the market
value of debt under continued operations is greater than the
liquidation value of debt, then debt holders will allow the
facility to continue to operate. The owners will implement
the cost-minimizing compliance option and continue to operate
the plant. If, however, the market value of debt under
continued operations is less than its liquidation value,
5-3
-------
operations. Exit will likely take the form of liquidation of
assets or distressed sales of the facility. Any of the above
decisions may change the financial status of the firm.
This analysis evaluates the change in financial status by
first computing the with-regulation financial ratios of
potentially affected firms and comparing them to the
corresponding baseline ratios. These financial ratios may
include indicators of liquidity, asset management, debt
management, and profitability. Although there are a variety
of possible financial ratios providing individual indicators
of a firm's health, they may not all give the same signals.
Therefore, for this analysis, the focus is on changes in key
measures of profitability (return on sales, the return on
assets, and the return on equity). Furthermore, a composite
of financial ratios (i.e., the Z-score1) is employed to
measure financial viability and determine the likelihood that
regulatory compliance will result in financial failure
(bankruptcy) of the owning firm.
The severity of the rule's impacts on small entities may
be measured once the small entities are identified. Small
entities include small businesses, small organizations, and
small governmental jurisdictions and may be defined using the
criteria prescribed in the RFA or other criteria identified by
EPA. Small businesses are typically defined using SBA general
size standard definitions for SIC codes. Firms owning plants
that have gravure or flexographic printing capabilities are
covered by various SIC codes. The main relevant industries
potentially include the commercial printing and book printing
industries under SIC 27, the packaging industries under SICs
26, 30, 32, and 34, as well industries under SICs 26 and 30
that produce products with gravure or flexographic printing.
The SBA size standards for all of these industries are based
on the number of employees so that businesses in most of these
industries are considered small if they have fewer than 500
employees; otherwise they are considered large.
5-4
-------
Potentially affected firms include entities that own
plants employing gravure or flexographic printing processes.
For the base year of 1993, the EPA survey indicates that 6
companies owned the 27 publication rotogravure plants and 64
companies owned the 107 packaging/product rotogravure plants.
Furthermore, the EPA survey of flexographic printers
identified 500 companies. Companies in this analysis include
those owned directly by the shareholders/owners and those
owned by a "parent" company for which complete financial
information was readily available. Therefore, 45 firms
involved in the printing and publishing industry are included
in this analysis.
5.2 IMPACTS OF THE REGULATION
This analysis characterizes the financial status of 45
firms potentially affected by the regulation. The baseline
financial profile is based on financial information from Dun
and Bradstreet for 11 private firms and from Dow Jones
Business Information Services for 34 public firms. The firms
in this analysis include 4 of the 6 in publication gravure, 20
of the 64 in packaging and product gravure, and only 21 of the
500 to 1,000 firms involved in flexographic printing.
To compute the with-regulation financial ratios, pro-
forma income statements and balance sheets reflecting the
with-regulation condition of affected firms are developed
based on projected with-regulation costs (including compliance
costs) and revenues (including the with-regulation price and
quantity changes projected using a market model). However, in
this case, the results from the market model do not allow for
calculation of facility revenue changes, thereby precluding
the inclusion of market adjustments in projecting company-
level revenue changes. As a consequence, for this analysis,
it is assumed that revenues are constant and that the
regulatory costs are fully absorbed--a worst case scenario.
Table 5-1 shows the adjustments made to the baseline financial
5-5
-------
TABLE 5-1.
CALCULATIONS REQUIRED TO SET UP WITH-REGULATION
FINANCIAL STATEMENTS
Financial statement
category
Calculations
Income statement
Annual revenues
Cost of sales
Gross profit
Expenses due to
regulation
Other expenses and
taxes
Net income
No change from baseline
No change from baseline
Annual revenues—cost of sales
Administration: Monitoring and
recordkeeping costs of regulation
operating: operating and maintenance
expenses of regulation
(Gross profit—estimated expense due to
regulation) • baseline ratio of other
expenses and taxes to gross profit
Gross profit—estimated expense due to
regulation—other expenses and taxes
Balance Sheet
Cash
Accounts receivable
Other current
assets
Total current
assets
Fixed assets
Other noncurrent
assets
Total assets
Accounts payable
Other current
liabilities
Total current
liabilities
Noncurrent
labilities
Total labilities
Net worth
No change from baseline
No change from baseline
No change from baseline
Baseline total current assets—[ (1 -
debt ratio) times total capital cost]
Baseline fixed assets + total capital
cost
No change from baseline
Total current assets + fixed assets +
other noncurrent assets
No change from baseline
No change from baseline
Accounts payable + other current
liabilities
(debt
Baseline noncurrent liabilities +
ratio times total capital cost)
Total current liabilities + noncurrent
liabilities
Total assets—total liabilities
b - o
-------
statements to develop the with-regulation financial statements
that form the basis of this analysis.
Several adjustments are made to the financial statements
of each firm to account for the regulation-induced changes at
all facilities owned by the firm. Because the market
adjustments predicted by the market model are not linked to
facilities, the firm-level analysis does not account for both
directly and indirectly affected firms. Thus, only those
firms that own an affected facility and incur compliance costs
are evaluated in this analysis. Directly affected firms
typically incur three types of costs because of the
regulation: capital, operating, and administrative. The
capital cost is an initial lump sum associated with purchasing
and installing pollution control equipment. Operating costs
are the annually recurring costs including costs associated
with operation and maintenance of control equipment, while
administrative costs are annually recurring costs that include
emission monitoring, reporting, and recordkeeping costs.
Table 5-2 provides an indication of the burden of the
regulatory costs on firms. This table shows the mean and
maximum levels of total capital costs and total annual
compliance cost (annualized capital plus the annual operating
and administrative cost) as a percentage of baseline total
costs by size and type of firm.
In the annual income statement, the baseline operating
expenses are increased by the aggregate change in operating
and maintenance costs across printing facilities owned by the
firm, while the administrative, selling, and general expenses
of the firm also increase by the aggregate change in
monitoring and recordkeeping costs across its facilities.
In the balance sheet, changes occur only to those firms
that incur capital control costs and are determined by the
manner in which firms acquire the pollution control equipment.
These firms face three choices in funding the acquisition of
capital equipment required to comply with the regulation:
5-7
-------
TABLE 5-2. MEASURES OF COMPLIANCE COSTS AS A PERCENTAGE OF
BASELINE TOTAL COSTS BY SIZE AND TYPE OF FIRM
Item
Total number of firms
Number of firms with costs
Small firms Large firms
Public Private Total Public Private Total All firms
279 32 4 36 45
123 538 11
Total annual compliance costs
en
CD
Mean (percent)
Maximum ( pe r cent )
Total capital cost
Mean (percent)
Maximum ( pe r cent )
0.24 0.99 0.83 0.08 0.33 0.10 0.12
0.49 4.12 1.37 0.82 4.12
0.48 1.96 1.63 0.21 1.34 0.33 0.29
0.97 8.09 2.72 3.59 8.09
-------
• debt financing,
• equity financing, or
• a mixture of debt and equity financing.
Debt financing involves obtaining additional funds from
lenders who are not owners of the firm; they include buyers of
bonds, banks, or other lending institutions. Equity
financing involves obtaining additional funds from owners of
the firm: proprietors, partners, or shareholders. Each
source differs its exposure to risk, its taxation, and its
costs. In general, debt financing is more risky for the firm
than equity financing because of the legal obligation of
repayment, while borrowing debt can allow a firm to reduce its
weighted average cost of capital because of the deductibility
of interest on debt for state and federal income tax purposes.
The outcome is that a tradeoff exists associated with debt
financing for each firm that depends on its tax rates, its
asset structures, and its inherent riskiness.
Leverage indicates the degree to which a firm's assets
have been supplied by, and hence are owned by, creditors
versus owners. Leverage should be in an acceptable range,
indicating that the firm is using enough debt financing to
take advantage of the low cost of debt but not so much that
current or potential creditors are uneasy about the ability of
the firm to repay its debt. The debt ratio (d) is a common
measure of leverage that divides all debt, long- and short-
term, by total assets. Capital structure does not appear to
have a significant impact on firm value over a wide range of
debt ratio values. Consequently, it is assumed that the
current capital structure, as measured by the debt ratio,
reflects the optimal capital structure for each firm. Thus,
each firm's debt ratio for 1993 determines the amount of
capital expenditures on pollution control technology that will
be debt financed.
Thus, in the assets side of the balance sheet of affected
firms, current assets decline by (1 - d) times the total
5-9
-------
capital cost (EK) , while the value of property, plant, and
equipment (fixed assets) increases by the total capital cost
(i.e., the value of the pollution control equipment). Thus,
the overall increase in a firm's total assets is equal to that
fraction of the total capital cost that is not paid out of
current assets (i.e., d • EK) .
The liabilities side of the balance sheet is affected
because firms enter new legal obligations to repay that
fraction of the total capital cost that is assumed to be debt
financed (i.e., d • EK) . Long-term debt, and thus total
liabilities, of the firm is increased by this dollar amount.
Owner's equity, or net worth at these firms, is unchanged
because of the offsetting increases in both total assets and
total liabilities. However, working capital at each affected
firm, defined as current assets minus current liabilities,
unambiguously falls because of the decline in current assets.
Comparison of the baseline and with-regulation financial
statements of firms in the U.S printing and publishing
industry provides indicators of the potential disparity of
economic impacts across small and large firms. These
indicators include the key measures of profitability (return
on sales, return on assets, and return on equity) and changes
in the likelihood of financial failure or bankruptcy (as
measured by Altman's Z-score).
5.2.1 Profitability Analysis
Financial ratios may be categorized as one of five
fundamental types:
• liquidity or solvency,
• asset management,
• debt management,
• profitability, or
• market value.2
Profitability is the most comprehensive measure of the firm's
performance because it measures the combined effects of
liquidity, asset management, and debt management. Analyzing
profitability is useful because it helps evaluate both the
5-10
-------
incentive and ability of firms in the printing and publishing
industry to incur the capital and operating costs required for
compliance. More profitable firms have more incentive than
less profitable firms to comply because the annual returns to
doing business are greater. In the extreme, a single-facility
firm earning zero profit has no incentive to comply with a
regulation imposing positive costs unless the entire burden of
the regulation can be passed along to consumers. This same
firm may also be less able to comply because its poor
financial position makes it difficult to obtain funds through
either debt or equity financing.
As shown in Table 5-3, three ratios are commonly used to
measure profitability, including return on assets, return on
equity, and return on sales. For all these measures, higher
values are unambiguously preferred over lower values.
Negative values result if the firm experiences a loss.
Table 5-4 provides the summary statistics for each
measure of profitability. The summary statistics include the
mean, minimum, and maximum values for each measure at baseline
and with-regulation across small, large, and all firms in the
industry. A comparison of the values at baseline and after
imposing of the regulation provides much detail on the
distributional changes in these profitability measures across
firms.
TABLE 5-3. KEY MEASURES OF PROFITABILITY
Measure of
profitability Formula for calculation
Return on sales Net income
Sales
Return on assets Net income
Total assets
Return on equity Net income
Owner's equity
5-11
-------
TABLE 5-4. SUMMARY STATISTICS FOR KEY MEASURES OF
PROFITABILITY IN BASELINE AND WITH-REGULATION BY
FIRM SIZE CATEGORY
Measure of
prof itability/summa
ry statistics
Return on sales
Mean
Minimum
Maximum
Return on assets
Mean
Minimum
Maximum
Return on equity
Mean
Minimum
Maximum
Baseline
Small
firms
4.82
1.16
8.68
9.88
3.16
14.68
20.23
13.3
33.03
Large All
firms firms
1.28 0.97
-14.69
10.11
1.75 1.65
-14.83
14.73
-1.81 1.27
-182.76
74.91
With regulation
Smal Large
1 firms
firm
s
4.43 1.24
1.13 -14.78
8.68 10.11
8.71 1.72
3.08 -14.70
14.68 14.73
17.92 -1.93
10.3 -183.80
33.03 73.50
All
firms
0.92
1.53
1.00
As Table 5-4 illustrates, the mean return on sales
declines by 5 percent for all firms after imposing the
regulation. The observed decline for large firms is 3
percent, while the mean return on sales for small firms
declined by 8 percent. Further, the mean return on assets
slightly declines for all firms with the regulation from 1.65
percent to 1.53 percent. A decline in the mean return on
assets is also found for small (12 percent) and large (2
percent) firms alike. As measured across all firms, the
with-regulation mean return on equity declines from 1.27
percent to 1 percent. As a group, the financial impacts
associated with the regulation are negligible and show no
overall disproportionate impact across small and large firms.
5-12
-------
5.2.2 Bankruptcy Analysis
The distinction between plants and firms is an important
one in discussing their economic viability. A market analysis
focuses on the economic viability of printing and publishing
plants — close the plant if marginal revenue (price) is below
marginal cost. Alternatively, the firm-level analysis
addresses the viability of companies as legal entities. Their
viability is conditional on their ability to meet their legal
liabilities at the firm level.
Altman draws a distinction between economic failure and
bankruptcy. His definition of economic failure is consistent
with a facility closure decision typical of market analyses.
Economic failure results from the inability of invested
capital (i.e., the facility) to continually cover its variable
costs through revenue. Bankruptcy can be defined financially
or legally, but both definitions are closely related.
Financially, a business is bankrupt when the fair market value
of its total assets is below its total liabilities. Legally,
a business can be determined to be bankrupt when it fails to
earn profits sufficient to meet enforceable debts. In such
cases, firms may declare bankruptcy with a new owner taking
over operation of the physical assets (i.e., plant, equipment,
and land).
The objective of the firm-level bankruptcy analysis is to
determine the likely effect of the regulatory options on the
financial and legal viability of firms within the printing and
publishing industry, with special emphasis on possible
disparities between small and large firms.
A composite ratio of financial condition, called the
Z-score, is computed to characterize baseline and with-
regulation financial condition of potentially affected firms.
The Z-score is a multidiscriminant function used to assess
bankruptcy potential and was developed specifically for
manufacturing firms.3 This approach has the advantage of
combining information from several financial variables, which
examined individually may yield contradictory messages of the
5-13
-------
firm's financial health. This approach has the advantage of
simultaneously addressing liquidity, asset management, debt
management, profitability, and market value.
The function is given in the following equation:
Z = 1.2X, + 1.4X2 + 3.3X3 + 0.6X4 + 0.999X5 (5-1)
where
Z = overall index
X, = working capital/total assets
X2 = retained earnings/total assets
X3 = earnings before interest and taxes/total assets
X4 = market value of equity/book value of total debt
X5 = sales/total assets.
The market value component (X4) uses stock price data.
Consequently, the Z-score is only applicable to firms with
publicly traded stock. This analysis will employ a modified
function developed for private firms referred to as the
Z'-score, given in the following equation:
Z' = 0.717X, + 0.847X2 + 3.107X3 + 0.42X4 + 0.998X5 (5-2)
where Z' is the overall index, Xl through X3 and X5 are as
defined for Z above, while the book value of equity is
substituted for the market value in X4.
Taken individually, each of the ratios given above is
higher for firms in good financial condition and lower for
firms in poor financial condition. Consequently, the greater
a firm's bankruptcy potential, the lower its overall index
score. Once data for a given company have been input, the
model yields a Z-score, or Z'-score, which is used to predict
future company bankruptcy based on previously estimated
categories. A Z-score below 1.81 indicates that bankruptcy is
likely, and a score above 2.99 indicates that bankruptcy is
unlikely. Z-scores between 1.81 and 2.99 are indeterminate.
Similarly, a Z'-score below 1.23 indicates that bankruptcy is
likely, and a score above 2.90 indicates that bankruptcy is
5-14
-------
unlikely. Z'-scores between 1.23 and 2.90 are indeterminate.
Table 5-5 shows the baseline distribution of publicly
traded firms by Z-score prediction and the distribution of
firms that do not issue publicly traded stock by Z'-score
prediction. Predicted failure rates across firm size reveal
that 44 percent (4 of 9} of the small firms and 36 percent (13
of 36) of the large firms are likely to fail in the baseline.
TABLE 5-5. BASELINE BANKRUPTCY PREDICTION
Bankruptcy prediction
Publicly traded
companies'
Likely
Indeterminate
Unlikely
Subtotal
Other companies15
Likely
Indeterminate
Unlikely
Subtotal
All companies
Likely
Indeterminate
Unlikely
Total
Firm
Less than
500
0
0
2
2
4
2
1
7
4
2
3
9
size by employment
Greater than 500
10
12
10
32
3
1
0
4
13
13
10
36
Total
10
12
12
34
7
3
1
11
17
15
13
45
* Bankruptcy prediction is based on the Z-score for companies with publicly
traded stock. If a company's Z-score is less than 1.81, the model
predicts that bankruptcy is likely. If a company's Z-score is greater
than 2.99, the model predicts that bankruptcy is unlikely. Z-scores
between 1.81 and 2.99 fall in the indeterminate range, and the model
makes no prediction for these companies.
b Bankruptcy prediction is based on the Z'-score for companies that do not
issue publicly traded stock. If a company's Z'-score is less than 1.23,
the model predicts that bankruptcy is likely. If a company's Z'-score is
greater than 2.90, the model predicts that bankruptcy is unlikely. Z'-
scores between 1.23 and 2.90 fall in the indeterminate range, and the
model makes no prediction for thesp. jgmpanies.
-------
The predicted failure rates do not compare favorably with
average reported failure rates for the U.S. The 1990 failure
rate averaged 0.92 percent for U.S. manufacturing firms, 0.49
percent for U.S. service firms, and 0.76 percent for all U.S.
firms .*
A possible explanation for the high failure predictions
for firms in the printing and publishing industry, as measured
by the Altman Z-score, is an unintended bias in the sample of
45 firms used in this analysis. A large number of these firms
are involved in the forest products industry, which is capital
intensive. For example, in 1991, the paper and allied
products industry (represented by SIC code 26) had the highest
percentage of new capital expenditures to value of shipments
(6.9 perent) across all U.S. manufacturing industries.5 A
decade of capital expenditures to retool existing plants and
invest in new ones also brings along a large level of current
debt for these firms that would correspond to a poor Z-score.
Table 5-6 provides the with-regulation bankruptcy
prediction by firm size. With regulation, the likelihood of
financial failure is unaffected for both small and large
firms. No firm moves from the unlikely to indeterminate range
or from the indeterminate to the likely to become bankrupt
range. Therefore, there is no evidence of any dispropor-
tionate impacts on small entities because of the proposed
NESHAP on the printing and publishing industry.
5-16
-------
The predicted failure rates do not compare favorably with
average reported failure rates for the U.S. The 1990 failure
rate averaged 0.92 percent for U.S. manufacturing firms, 0.49
percent for U.S. service firms, and 0.76 percent for all U.S.
firms.4
A possible explanation for the high failure predictions
for firms in the printing and publishing industry, as measured
by the Altman Z-score, is an unintended bias in the sample of
45 firms used in this analysis. A large number of these firms
are involved in the forest products industry, which is capital
intensive. For example, in 1991, the paper and allied
products industry (represented by SIC code 26) had the highest
percentage of new capital expenditures to value of shipments
(6.9 perent) across all U.S. manufacturing industries.5 A
decade of capital expenditures to retool existing plants and
invest in new ones also brings along a large level of current
debt for these firms that would correspond to a poor Z-score.
Table 5-6 provides the with-regulation bankruptcy
prediction by firm size. With regulation, the likelihood of
financial failure is unaffected for both small and large
firms. No firm moves from the unlikely to indeterminate range
or from the indeterminate to the likely to become bankrupt
range. Therefore, there is no evidence of any dispropor-
tionate impacts on small entities because of the NESHAP on the
printing and publishing industry.
5-16
-------
TABLE 5-6. WITH-REGULATION BASELINE BANKRUPTCY PREDICTION
Firm size by employment
Bankruptcy prediction
Less than
500
Percentage
change
Greater
than 500
Percentage
change
Total
Percentage
change
Publicly traded
companies"
Likely
Indeterminate
Unlikely
Subtotal
Other companies11
Likely
Indeterminate
Unlikely
Subtotal
All companies
0
0
2
2
4
2
1
7
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
10
12
10
32
3
1
0
4
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
10
12
12
34
7
3
1
11
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Likely
Indeterminate
Unlikely
Total
4
2
3
9
0.0%
0.0%
0.0%
0.0%
13
13
10
36
0.0%
0.0%
0.0%
0.0%
17
15
13
45
0.0%
0.0%
0.0%
0.0%
Bankruptcy prediction is based on the Z-score for companies with publicly traded stock. If a
company's Z-score is less than 1.81, the model predicts that bankruptcy is likely. If a
company's Z-score is greater than 2.99, the model predicts that bankruptcy is unlikely.
Z-scores between 1.81 and 2.99 fall in the indeterminate range, and the model makes no
prediction for these companies.
Bankruptcy prediction is based on the Z'-score for companies that do not issue publicly traded
stock. If a company's Z'-score is less than 1.23, the model predicts that bankruptcy is
likely. If a company's Z'-score is greater than 2.90, the model predicts that bankruptcy is
unlikely. Z'-scores between 1.23 and 2.90 fall in the indeterminate range, and the model
makes no prediction for these companies.
-------
5.3 REFERENCES
l. Altman, Edward. Corporate Financial Distress. New York,
John Wiley and Sons, 1983.
2. Brigham, Eugene F., and Louis C. Gapenski. Financial
Management: Theory and Practice. 6th Ed. Orlando, FL,
The Dryden Press, 1991.
3. Ref. 1.
4. Dun's Analytical Services. Industry Norms and Key
Business Ratios. Dun and Bradstreet Credit Services.
1991.
5. U.S. Department of Commerce. 1991 Annual Survey of
Manufactures: Statistics for Industry Groups and
Industries M91(AS)-1. U.S. Government Printing Office,
Washington, DC. December 1992.
5-18
-------
APPENDIX A
MARKET MODEL OF THE PRINTING AND PUBLISHING INDUSTRY: SUMMARY
This appendix provides a complete list of the exogenous and
endogenous variables, as well as the model equations.
A.I EXOGENOUS VARIABLES
-------
A.2 ENDOGENOUS VARIABLES (continued)
AOIj All other inputs in the production of the jth final
product.
Yj Printing services in the production of the jth final
product.
Xij Use of the ith printing process in the CES function
for each final product (j).
xf Market production of the ith printing process.
MA Intermediate inputs in the production of the ith
printing process.
VAi Value added in the production of the ith printing
process.
Kif Li Captial and labor use, in service units, of the ith
printing process.
0.9, X? Market demands for final products j = 1 to 22 and
printing processes i = 1 to 3.
A.3 MODEL EQUATIONS
Production Function for Final Products:
= min
CES Function for Printing Services:
where
Pi '
(O-l)
j
A-2
-------
A.3 MODEL EQUATIONS (continued)
Production Function for Printing Processes
x,. =
CES Function for Value Added:
where
Market Demand of Final Products:
Market Demand of Printing Inputs:
where
;.; = - - 2 — LJ - , , without regulation
O
Pl
and
j
, with regulation
------- |