Unrt*d Sutctt
EnvtronrrwriUl Prataetion
Apซney
Effiuant Guidettnttt Division
WH-552
Wwhington DC 20460
February 1983
i Manepvmom
Economic impact Analysis of
Proposed Effluent Guidelines
and Standards for the
Electrical and Electronic
Components Industry
Phase I!- Cathode Ray
and Luminescent Coatings
Subcategones
QUANTITY
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Economic Impact Analysis of the
Electrical and Electronics
Components Industry
Economic Analysis of Phase II Electronics
by:
Meta Systems Inc
10 Holworthy Street
Cambridge, MA 02140
EPA Contract No. 68-01-6162
(Work Task # 10)
to:
Office of Analysis and Evaluation
U.S. Environmental Protection Agency
401 M. Street, SW, (WH-586)
Washington, DC 20460
February 1983
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Table of Contents
Section Page
Section 1: Executive Summary
II. Industy Profile
III. Economic Impact Methodology
III. 2 Possible Plant Closures
III. 3 Production/ Employment and Foreign Trade
1 1 1. 4 New Sources
III. 5 Small Business Analysis
IV. Effluent Limitations Guidelines Options and Costs. . . .
IV. 1 Treatment Options
IV. 2 Treatment Costs for Existing Plants
IV. 3 Treatment Costs for New Sources
IV. 4 Selected Options
V. Results of the Analysis
V.I Baseline Estimates
V.4 Impact Estimates: Firm Level
V.4 Impact Estimates: Plant Level
V.5 Possible Plant Closures
V.6 Production and Employment Impacts.
V.8 New Sources '.
VI. Limits of the Analysis
VI. 1 Plants with Multiple Product Lines
VI. 2 Impact Measure Derivations
VI. 3 Discount Factors
VI. 4 Small Companies
I. Industry Definition
II. Industry Overview
III. 1.1 Electron Tubes All Types
III. 1.2 Color TV Picture Tubes
III. 1.3 Other Cathode Kay Tubes (CRT)
III. 2 Employment
III. 3 Prices
III. 4 Markets
III. 5 Foreign Trade
IV. Firms and Establishments in Scope of Study
References, Section 2
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Table of Contents
(continued)
Section Page
Section 3. Economic Impact Methodology 3-1
I. Industry-wide Baseline Projections 3-1
I.I Color TV Picture Tubes 3-1
1.2 Other CRTs 3-2
1.3 Luminescent Coatings 3-2
II. Impact Projections 3-3
I I.I Industry-wide Impact 3-3
II.2 Plant-Level and 'Firm-Level Impacts 3-3
11.2.1 Treatment Cost to Sales 3-4
II.2.2 Treatment Cost to Plant-Level Profit 3-4
II.2.3 Treatment Cost to Manufacturing Conversion Cost . 3-6
II.2.4 Treatment Costs to Firms's Profit 3-6
II.2.5 Capital Requirement to Plant Investment 3-7
II.3 Financial Ratios 3-7
II.3.1 Limitations 3-8
II. 3.2 Recommended Ratios 3-9
III. Closure Analysis 3-9
IV. Production and Employment Impacts 3-9
V. Foreign Trade Impacts 3-10
VI. New Sources 3-10
VII. Small Business Analysis 3"-ll
Section 4: Effluent Limitations Guidelines Options
and Compliance Costs 4-1
I. Introduction 4-1
II. Treatment Technology Options 4-2
II. 1 Cathode Ray Tubes 4-2
II.2 Luminescent Coatings 4-3
III. Current Treatment and Treatment Costs 4-3
III.l Current Treatment 4-3
III. 2 Treatment Costing 4-3
III.2.1 Treatment Costing for existing Sources 4-3
III.2.2 Treatment Costs for New Sources 4-4
Section 5: Results of Analysis 5-1
I. Baseline Analysis 5-1
I.I Industry-wide by Subcategory 5-1
1.2 Financial Ratio Analysis of Firms 5-2
1.3 Baseline Projections 5-5
II. Impact Analysis (Existing Producers) 5-5
II.I Industry-wide Impacts by Subcategory 5-5
II. 1.1 Color TV Picture Tubes 5-5
II.1.2 Other CRT 5-7
II.1.3 Luminescent Coatings 5-7
II.2 Impacts on Financial Ratios of Firms 5-7
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Section
Table of Contents
(continued)
II.3 Plant Level Impacts (Existing Plants).
II.3.1 TV Picture Tube Plants
II.3.2 Other CRT Plants
II. 3.3 Luminescent Coatings Plants . .
III. Possible Plant Closures
III.l Color TV Picture Tube Plants
III.2 Other CRT Plants
III.3 Luminescent Coatings Plants
IV. Production and Employment Impacts ....
V. Foreign Trade Impacts
VI. New Sources
VI.1 Treatment Costs for New CRT Plants . .
VI.1.1 Case A
VI.1.2 Case B
VI.2 New Luminescent Coatings Plants. . . .
VI.3 Comparison of New Luminescent Coatings
and New CRT Plants
VII. Small Business Analysis
Section 6: Limits of the Analysis
I. Plants With Multiple Product Lines.
II. Impact Measure Derivation
III. Discount Factors
IV. Small Companies
V. Import Policies
5-27
5-28
6-1
6-1
6-1
6-2
6-2
6-2
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List of Tables
Table Page
1-1 Treatment Option by Regulation and Type
of Discharger 1-6
1-2 Summary Table for Existing Sources 1-7
1-3 Treatment Costs by Option for New Sources
(NSPS and PSNS) 1-8
1-4 Selected Options for Proposed Rules 1-8
1-5 1982 Baseline Estimates 1-10
1-6 1982 Industry-wide Impacts 1-10
2-1 1981 Factory Sales of Electronic Systems and Components . . . 2-2
2-2 Annual U.S. Manufacturer Sales of Electron Tubes,
Selected Types, and Color Television Receivers 2-4
2-3 Annual Factory Sales of Color Television Picture Tubes by
Market (Thousands of Units and Dollars;
United States, 1971-1981 2-6
2-4 Average Annual Employment, Electron Tubes,
All Types (SIC 3671), 1971-1981 (In Thousands) 2-8
2-5 Average Factory Level of Electron Tubes,
Selected Types (3) 2-10
2-6 Original Equipment Manufacturers Purchases by End-Use
Market, Electron Tubes, Selected Types ($ million);
United States, 1979-1982 2-12
2-7 Annual Imports of Electron Tubes Selected Types
($ million) United States, 1977-1981 2-14
2-8 Annual Exports of Electron Tubes Selected Types
($ million) United States, 1977-1981 2-14
2-9 Balance of Trade of Electron Tubes
(1977-19817$ Million) 2-15
2-10 Firm and Plant Characteristics for Industry Segments 2-16
4-1 Treatment Option by Regulation and Type of Discharger .... 4-3
4-2 Current Treatment-in-Place by Option for Existing Sources . . 4-4
4-3A BAT Treatment Costs by Option 4-5
4-3B PSES Treatment Costs by Option 4-5
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List of Tables
(continued)
Table Page
4-4 Model Treatment Costs by Option for NSPS and PSNS 4-6
5-1 1982 Baseline Estimates by Industry Segment 5-1
5-2 Financial Ratio Trend Analysis 5-3
5-3 Comparative 1981 Dun and Bradstreet Industry
Ratios (SIC 3671-79) 5-4
5-4 1982 Impact Estimates Industry Segment:
Color TV Picture Tubes 5-6
5-5 1982 Impact Estimates Industry Segment:
Other CRT 5-8
5-6 1982 Impact Estimates Industry Subcategory:
Luminescent Coatings 5-9
5-7 Comparison of Firms' Assets With Treatment Costs 5-10
5-8A Impact Measures: TV Picture Tube Plants;
Option 2 5-11
5-8B Impact Measures: TV Picture Tube Plants;
Option 3 5-12
5-9A Impact Measures: Other CRT Plants;
Option 2 5-13
5-9B Impact Measures: Other CRT Plants;
Option 3 5-15
5-10 Impact Estimates: Luminescent Coatings 5-18
5-11 Additional Treatment Cost for New Sources
Case A (CRT Plants) 5-22
5-12 Impact of Treatment Cost on Cost Per Tube (1982$)
Case A (CRT Plants) 5-22
5-13 Treatment Cost for New Sources (1982$)
Case B (CRT Plants) 5-23
5-14 Impact of Treatment Cost on Cost Per Tube
Case B (CRT Plants) 5-24
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List of Tables
(continued)
Taole ' Page
5-15 Additional Treatment Cost for New Sources
(Luminescent Coatings Plants)...... 5-25
5-16 Impact of Treatment Cost on Cost to Sales
(Luminescent Coatings Plants) 5-26
5-17 Firm Ranking by Sales 5-30
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Section 1
Executive Summary
I. Introduction
This study is concerned with two industry subcategories that are part of
the electrical and electronic component industry. The two are cathode ray
tubes and luminescent coatings. Cathode ray tubes (CRT's) are used in a
variety of equipment such as television receivers, scientific instruments,
oscilloscopes, computers, industrial controls and military hardware.*
Luminescent coatings are used in the manufacture of all types of CRT's and
also in the manufacture of fluorescent lamps, mercury lamps, lasers, instru-
ment panels, postage stamps, laundry whiteners and speciality paints.
Several wastewater treatment alternatives were developed for the two
industry subcategories in response to federal legislation. The 1972 Federal
Water Pollution Control Act (and subsequent litigation) and the Clean Water
Act of 1977, require EPA to develop a program and adhere to a schedule in
promulgating effluent limitations guidelines, new source performance stan-
dards and pretreatment standards for 65 groups of "priority" pollutants for
21 major industries. This study presents for consideration, the projected
economic impacts of complying with proposed regulations as required by the
Clean Water Act.
II. Industry Profile
Color TV picture tubes and other CRT's are but two of a large number of
products associated with the electronics industry which include electronic
components, consumer, industrial and military electronics, communications
equipment and systems. Overall factory sales of electronic systems and
components were $114 billion in 1981 of which $24.4 billion (21.4%) was
electronic components that include solid state devices ($7.8 billion) passive
components such as resistors and capacitors ($2.9 billion) and electron
tubes. Sales of electron tubes of all types amounted to $2.0 billion of
which approximately $1.0 billion was in power and special purpose tubes
(which include CRT's other than color TV picture tubes).
In the Standard Industrial Classification (SIC) system, electron tubes of
all types are classified within SIC 3671. Luminescent coatings are not
classified as part of the electronics industry but fall primarily within SIC
2819, a large group of miscellaneous industrial inorganic chemicals, not
elsewhere classified.
Over the past decade, 1971-1981, the value of U.S. production of color TV
picture tubes increased at an average annual rate of 1.2 percent in real
terms. According to industry forecasts, the outlook is that annual sales of
color TV picture tubes will increase at a rate averaging 6.9 percent
* The cathode ray tube subcategory is subdivided into two industry seg-
mentscolor TV picture tubes and other CRT'sfor purposes of the impact
analysis.
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annually, in current dollars; in real terms, this should result in 1985 sales
of $1.05 to $1.09 billion (expressed in 1981 dollars, based on an average
annual rate of inflation of five to six percent).
For other CRT's, the value of production grew at an average annual rate
of eight percent between 1972 and 1981 in real terms. Industrial and mili-
tary type CRT sales amounted to $118 million in 1981, equivalent to 35
percent of all sales of electro-optical products; military and industrial
portions cannot be separately identified in the available information. In
1985, the value of sales is expected to be 15 to 19 percent greater than in
1981, expressed in constant 1981 dollars; this will result from an average
annual rate of real growth of 3.5 to 4.5 percent.
Employment in the electron tube industry overall (SIC 3671) increased
only slightly (0.05 percent annually) over the past decade; in 1981 total
employment was 43,500 and of these 60 percent were production workers. In
the current decade, 1980 to 1990, Bureau of Labor Statistics indicate rising
employment, at a rate of 1.7 to 2.5 per year.
Prices of color TV picture tubes in 1980 averaged $90 (all sizes) for
U.S.-made tubes compared to $56 for imports, most all of which come from
Japan; differences in average prices were due in part to the fact that U.S.-
raade picture tubes account for a greater share of the large screen sizes.
For other CRT's, industrial and military types averaged $197 per tube in
1980.
Foreign trade in color TV picture tubes is linked to foreign trade in
television receivers. Imported tubes have been increasing over the last
five years and in 1981 the number of tubes increased by 67 percent over
1980. The U.S. Tariff Act of 1980 invoked anti-dumping measures for
Japanese-made TV sets. Whether or not the anti-dumping measure for imported
sets will be relaxed, or continued, is currently under evaluation by the
U.S. government. This decision, as well as other potential import limiting
measures for electronic products, could affect the growth of U.S. production
of color TV picture tubes. The value of imports of other CRT's has also
been growing. In 1981 imports accounted for an estimated 24 percent of U.S.
sales of other CRT's. Balance of trade has been positive for color TV
picture tubes with CRT's and for electron tubes of all types. However, for
picture tubes, the balance has declined from $60 million in 1977 to $49
million 1980 and to $12 million in 1981; for other CRT's the balance has
increased from $11.6 million to $37.9 million in 1981.
Five firms are known to manufacture color TV picture tubes in the U.S.,
not including those who recondition used tubes; the firms are RCA, Zenith,
General Electric, North American Philips and Sony. An estimated 13 to 15
companies produce CRT's other than TV picture tubes, including two of the
largest (Tektronix and Hewlett Packard) who use much of their CRT production
captively. Five firms are known to manufacture luminescent coatings; RCA,
General Electric, Westinghouse, GTE-Philips and U.S. Radium Company.
1-2
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III. Economic Impact Methodology
The methodology consists of seven steps which address the following
points: (1) baseline estimates for the three industry segments/ (2) mea-
sures of treatment cost impacts at the industry, plant and firm level, (3)
potential plant closures, (4) production and employment effects, (5) foreign
trade implications, (6) new sources and (7) implications for small businesses.
III.1 Baseline Estimates and Measures of Impact
Impacts at the industry level, as well as at the firm and plant level,
result from treatment costs incurred by the plants. Estimates of value and
quantity of production and profitwithout additional treatment costsserve
as a baseline against which the impacts of treatment costs are estimated.
The baseline estimates are made for 1982 because treatment costs were
estimated in 1982 dollars. Different methods are used to estimate
industry-wide baseline values for each industry segment (color TV picture
tubes, other CRT's and luminescent coatings) because available data are
different with regard to (1) time periods for which data are reported and
(2) level of data aggregation for the different segments.
Industry-wide impacts for each subcategory are considered for two cases.
In one case, the analysis assumes manufacturers pass through the additional
costs for treatment; thus prices (and value of production) rise which can
affect demand and, in turn production and employment. In the second case,
the analysis assumes that additional costs are absorbed by manufacturers,
thus baseline prices are unchanged but profits decline.
Three of the financial ratios reported in Dun and Bradstreet are used to
judge the financial health of firms whose plants incur additional treatment
costs. The ratios which are examined for both the baseline and impact pro-
jections are: current assets to current liabilities, sales to net working
capital, and return on assets.
Five plant-level impact measures are used in the analysis. Four of
these are ratios of annual treatment costs relative to (1) plant sales, (2)
plant manufacturing cost, (3) plant-level profit, and (4) firm-level
profit. The fifth is a ratio of the capital investment portion of treatment
cost to yearly plant investment. Plant sales are obtained from the EIS
(Economic Information Systems) data file. Firm-level profit for publicly-
owned companies is obtained from Form 10-K reports and Moodys Industrial
Manual. The denominators of the other three ratios are estimated from a set
of derived factors, multiplied by 1982 plant sales. The factors are average
1977 values of manufacturing cost per dollar of sales, plant-level profit
per dollar of sales, and annual capital investment per dollar of sales;
sales and value of shipments are assumed to be synonymous. The factors are
calculated from the 1977 Census of Manufacturers at the four-digit SIC level
of aggregation that is most appropriate for each industry subcategory. For
1-3
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example, a 1982 estimate of the manufacturing cost for a color TV picture
tube plant is estimated as the 1982 plant sales multiplied by the manufac-
turing cost-to-sales ratio in 1977 computed for SI'C 3671electron tubes,
all types. This approach treats each plant as if it operated with the same
ratio of manufacturing cost-to-sales and plant profit to sales and capital
investment to sales as described by the average for the four-digit SIC
group. The approach was employed because, other than sales, no financial
information is available for individual plants.
III.2 Possible Plant Closures
Judgments are made about the possibility of plant closure based on the
magnitude of impact ratios, the financial conditions of the parent company
and other characteristics such as vertical integration within a firm.
III.3 Production, Employment and Foreign Trade
Judgements are made about price impacts if cost of treatment is passed
through, and take into account that cathode ray tubes and luminescent coat-
ings are only part of the price of end-products in which they are used.
Employment effects are derived from production changes based on the
value of production per worker. Judgements about foreign trade are also
based on the magnitude of potential price changes from the pass through of
treatment costs.
III.4 New Sources
Impacts on new sources are calculated based on incremental cost for a
higher level of required treatment for new plants compared to existing
plants for direct and indirect sources. Three sizes of model plants are
postulated for estimating treatment costs and production estimates are
approximated based on existing plants. Judgements are made about the
additional cost for new sources posing an economic disadvantage to entry
into the three industry segments.
III.5 Small Business Analysis
Under the Regulatory Flexibility Act of 1980, the EPA must consider the
effects of proposed regulations on small businesses. The distribution of
treatment costs incurred by different size firms is estimated to identify
the potential impacts on those firms considered to be small businesses.
1-4
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IV. Effluent Limintations Guidelines Options and Costs
Under the Clean Water Act of 1977, the EPA program is to set a number of
different kinds of effluent limitations and standards designated as follows:
o Best Practicable Control Technology Currently Available
(BPT);
o Best Available Technology Economically Achievable (BAT);
o Best Conventional Pollution Control Technology (BCT);
o New Source Performance Standards (NSPS);
o Pretreatment Standards for Existing Sources (PSES) and for
New Sources (PSNS).
EPA estimated a total of 27 plants are covered by the proposed
regulation. Treatment technologies appropriate for CRT's and luminescent
coatings are developed in the Proposed Development Document.
IV.I Treatment Options
For cathode ray tube plants/ three treatment technologies considered are:
Option 1; No required treatment, specific conditions are met
that allow exclusion of regulatory requirements.
Option 2; Solvent management to control total toxic organics,
chromium reduction with the use of sulfuric acid and sodium
bisulfite, chemical precipitation and classification of all
metalsbearing process wastes, sludge de-watering and pH
adjustment.
Option 3: Option 2 plus multimedia filtration.
For luminescent coatings plants, there are two options:
Option 1; No required treatment.
Option 2: Chemical precipitation and clarification of all
metals-bearing process wastes using lime, a coagulant and a
polyelectrolyte, sludge de-watering and pH adjustment.
The treatment options are applied to each regulation and the specific
designations are shown in Table 1-1.
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Table 1-1. Treatment Option by Regulation
and TyPe of Discharger
Option
1
2
3** 1
I Existing I
I Direct* 1
BPT/BAT-1
BPT/BAT-2
BPT/BAT-3
Existing I
Indirect 1
PSES-1
PSES-2
PSES-3 .
New Source 1
Direct I
NSPS-1
NSPS-2
NSPS-3
New Source
Indirect
PSNS-1
PSNS-2
PSNS-3
* BPT, BCT, and BAT all apply to existing direct dischargers.
** Applies only to the CRT subcategory.
IV.2 Treatment Costs for Existing Plants
In estimating treatment costs, Option 1 would require no additional
treatment of wastewater effluents. For existing sources, model plant
treatment technology is developed and costed; the estimates are applied to
existing plants by making adjustments to account for actual flow size and
treatment currently in place.
Table 1-2 summarizes the cost information for the plants included in the
study. Of the total plants, only three are direct dischargers. Sixteen are
indirect dischargers. Five small CRT plants use contract hauling and are
considered zero dischargers. The treatment costs for the two major industry
subcategories are summarized by direct and indirect dischargers and by
option. Option 3 does not apply to the coatings subcategory.
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Table 1-2. Summary Table for Existing Sources
Number of Plants by Industry Subcategory
Luminescent Coatings
Plants
Direct I Indirect
CRT
Plants
Direct
Indirect
Total Number of Plants* 2
Incurring Costs at:
Option 1 0
Option 2 ' 2
Option 3 N.A.
Treatments Costs ($000)**
Option 1
Capital Costs 0
Total Annual Cost 0
Option 2
Capital cost 5.00
Total Annual Cost 27.40
Option 3
0
2
N.A.
0
0
98.40
84.90
0
1
1
2.50
13.70
14
0
14
14
0
0
9,945.60
2,743.80
Capital Cost
Annual Cost
N.A.
N.A.
N.A.
N.A.
2.50
13.70
5,648.50
. 3,042.25
Notes:
N.A. = Not applicable.
* For Luminescent Coatings, there is one zero discharging facility.
For
CRT plants, five facilities with small flows currently haul their wastewater
flow and are considered zero dischargers for this analysis. There are two CRT
plants for which information on current treatment is not available; one of
these plants will be relocated in the near future.
** Dollars are 1982 $.
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IV.3 Treatment Costs for New Sources
Treatment costs for new sources are summarized in Table 1-3 for three
model plant sizes. The costs shown are incremental with respect to raw
waste load treatment technology. The model plant costs for direct
discharges (NSPS) and indirect dischargers (PSNS) are the same.
IV.4 Selected Options
The EPA has selected the options (summarized in Table 1-4) for the
proposed regulations. For existing CRT plants, that selection is Option 2.
For new CRT sources/ Option 3 is selected. For new coatings plants, Option 2
is selected.
Table 1-3. Treatment Costs by Option
for New Sources (NSPS and PSNS)
Subcategory
Luminescent
Coatings
CRT's
Model Plant
Flow Size
(gpd)
10,000
100,000
250,000
10,000
100,000
500,000
1
I Total Annual Costs ($000)
I Option 2
68.2
328.5
589.6
75.5
392.1
836.7
1
1 Option 3
70.3
336.4
628.0
77.6
410.0
905.2
1
Table 1-4. Selected Options for Proposed Rules
Luminescent Coatings I CRT
Plants I Plants
Existing Sources
BPT/BCT/BAT BPT/BAT-1 BPT/BAT-1
PSES PSES-1 PSES-2
New Sources
NSPS NSPS-2 NSPS-3
PSNS PSNS-2 , PSNS-3
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V. Results of the Analysis
V.I Baseline Estimates
At the industry level, the 1982 baseline estimates are shown in Table
1-5 for the three industry segments.
At the firm level, the financial health of ten publicly-owned companies
whose plants may incur treatment costs were judged by the three financial
ratios. (Seven other firms are not publicly-owned and therefore the
necessary data are not available.) Several firms have relatively low
solvency rating (current assets to current liabilities) but no marked
weakness in the other two ratios (net sales to net working capital and
return in total assets) . Return on assets has been low for several years
for all but one of the firms, but none of the firms are judged to be in
serious financial difficulty.
V.2 Impact Estimates; Industry-wide
At the industry level, two cases are considered; i.e., treatment costs
are assumed to be fully absorbed by manufacturers or costs are assumed
passed through resulting in higher prices. The results are summarized in
Table 1-6 which shows that for the higher treatment level, Option 3, if
costs are fully absorbed, estimated baseline profit decreases no more than
1.42 percent (which occurs in the industry segment other CRT). If costs are
passed through, price rises are expected to be no more than 0.65 of a
percent.
V.3 Impact Estimates; Firm Level
At the firm level, treatment cost impacts on the financial health of
publicly owned companies are imperceptible. For example, RCA has three
plants that incur cost under Option 3, however, the total annual cost of
$973 thousand has no significant effect on the financial ratios, given that
total assets of the firm are $7.8 billion.
V.4 Impact Estimates: Plant Level
Color TV Picture Tubes. Seven existing plants would incur costs under
selected Option 2, and would incur costs under Option 3. Except for one
plant (Zenith, Melrose Park, Illinois, which is closing according to a
recent announcement), all the impacts based on annual costs are small, less
than two percent; these impacts are annual treatment cost to: a) sales, b)
manufacturing cost, c) plant level plant profit, and d) firm's net income.
The capital investment portion of treatment cost is less than 21 percent of
annual plant investment for Option 3, excluding the Zenith plant.
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Table 1-5. 1982 Baseline Estimates
Production Quantity
(million units)
Value of Production
(Millions $)
Unit value
($ per CRT)
Industry Profit
(million $)
Color TV
Picture Tubes
11.5
1048.60
91.18
364.90
1 Other |
1 CRT's I
0.52
137.44
264.30
j 63.00 .
Luminescent
Coatings
NA
345.0
NA
132.13
NA = Hot available; dollars are 1982 $.
Table 1-6. 1982 Industry-Wide Impacts
I 1982 Impacts (Percent*)
Industry
Segment
Color TV Picture Tubes
Value of Production
Industry Profit
Other CRT
Value of Production
Industry Profit
Luminescent Coatinqs
Value of Production
Industry Profit
1982
Baseline
(Millions $)
1,048.60
364.90
137.44
63.00
345.00
132.13
I Option 2
1 I Costs
1 Costs I Passed
1 Absorbed I Through
0 +.18%
-.52% 0
0 +.54
-1.37% 0
0 +.02%
. -.08% | 0
1 Option 3
1 I Costs
1 Costs 1 Passed
1 Absorbed (Through
0 +.21%
-.60% 0
0 +.65%
-1.42% 0
N.A. N.A.
. N.A. . N.A.
* Percent change from Baseline Estimate.
1-10
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Other CRTs. Eight of the 15 plants incur treatment costs under selected
Option 2 and also under Option 3 (for two plants no treatment costs were
estimated). Except for two relatively small plants, all impacts are small.
These two, plus another CRT plant are owned by one firm, Thomas Elec-
tronics. Their most impacted plant, (in Los Angeles) shows an annual treat-
ment cost-to-sales ratio of about just under four percent for either Option
2 or 3; the ratio of treatment cost to manufacturing cost is 6.00 percent,
and for treatment cost to plant profit it is 8.18 percent for Option 3. The
capital cost for treatment is 1.29 to 1.37 times as great as the annual
plant investment for Option 2 and Option 3, respectively.
Luminescent Coatings. Four of the five existing plants would incur a
cost under Option 2. All of the impact measures are small, less than two
percent. Under the selected Option 1, no treatment costs are incurred.
V.5 Possible Plant Closures
Color TV Picture Tube Plants. There are no plant closures anticipated
as a result of treatment costs. It should be noted that plant-level impacts
are expressed with reference to plant sales. However, a plant may have
multiple product lines, and if so, treatment costs should be allocated only
to those lines which incur the costs. Thus, the impacts could be more
severe than have been calculated/ however, sales data on a product line
basis are not available for TV picture tube plants (or for plants in the
other two industry subcategories).
Other CRT Plants. Two plants owned by Thomas Electronics (in Los
Angeles and Clyde, NY) show the highest values of impacts. The Los Angeles
plant (with sales of $1.7 million) and the Clyde, NY plant ($2.4 million
sales) are small relative to a third plant in Wayne, NJ (with $9.2 million
sales). Financial data for this privately-owned company are not available.
However, estimates of company sales ($400 million) and employment (400
workers) suggest adequate capital availability to finance the necessary
capital investments ($79.0 thousand for Option 2 and $84.2 thousand for
Option 3 for each of the three plants) . Therefore no plant closures are
anticipated.
Luminescent Coatings. None of the plants are considered as closure
candidates because no regulation is being written for existing plants.
V.6 Production and Employment Impacts
If treatment costs are fully absorbed, prices of plant outputs are
unchanged and therefore no changes in demand or production are projected.
If costs are passed through, they are unlikely to affect demand because: 1)
treatment costs relative to value of production is less than one percent,
except for the Thomas Electronics plants, and 2) price changes for compo-
nents such as CRTs or coatings are greater than price changes that would be
1-11
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induced in end-products in which the components are used. Though not
anticipated, if one of the small Thomas Electronics plants closed, the
geographical distribution of production might change slightly, but there is
no basis to suggest the industry-wide production would decline. Employment
levels are not projected to be affected by the treatment costs.
V.7 Foreign Trade
The costs for any of the treatment options are not likely to result in
impacts on foreign trade due to price changes of products or to the sourcing
locations by manufacturing firms. As noted before/ price effects of treat-
ment costs, if passed through, are small. The decision to relocate U.S.
plants in foreign countries (or for foreign firms to produce in the U.S.)
are based on more fundamental economic and political considerations than can
be associated with the relatively small treatment costs.
V. 8 New Sources
More stringent wastewater treatment requirements for new sources com-
pared to existing plants could result in additional costs sufficient to act
as a barrier to new firms entering the industry or to existing manufacturing
firms who might build new plants. Whether or not current capacity can
handle increased demands is not considered here because no information is
available on current plant capacity and utilization for any of the three
industry segments.
For the CRT subcategory, the additional treatment cost for new plants is
the incremental cost between Option 3 and Option 2 because all existing
indirect dischargers will comply with PSES-2. (Only one of the 22 plants in
the CRT subcategory is a direct discharger and currently complies with
BAT-3.) For new luminescent coatings plants, the additional treatment cost
is the total cost for Option 2 because no regulation is proposed for the
existing plants.
New CRT Plants. Two cases are analyzed in comparing new CRT plants with
existing plants. Two cases are considered because regulations are proposed
for existing indirect CRT dischargers but not for direct dischargers. Case
A analyzes the incremental treatment costs between Option 3 and Option 2
(both color TV picture tubes and other CRT's). Treatment costs estimated
per CRT range from $0.02 to S.63 which is less than one percent of the
baseline unit value on new plants entering the industry.
Under Case B total costs are estimated and the treatment costs are
larger (up to $3.10 per CRT for a small plant with low production). Even
so, higher treatment costs per tube for new plants under Case B will not be
as severe as one might expect due to the high value of the product ($253.30
for CRT versus $91.18 for color TV picture tubes). Case B analyzes the
total cost for Option 3 compared to the raw waste load. Treatment costs
1-12
-------
estimated per CRT are less than two percent of the baseline value. For
either Case A or Case B the impacts are small and not likely to pose a major
disadvantage for new plants entering the industry.
New Luminescent Coatings Plants. Prices for plant output of new sources
could be 0.7 to 10.5 percent higher than for existing plants. These
estimates are based on a tenuous relationship of production value to waste-
water flow in existing plants; the range in value per unit of flow varies by
a factor of 1.5 between the high and the low. Based on larger plant sizes
(i.e., 100,000 gpd or greater) and on average value per unit of flow, treat-
ment costs are 1.5 percent or less of production value.
The tentative conclusions are: 1) the additional cost burden will not
discourage new plants being built by large firms whose product lines are
very likely to be vertically integrated with coating production; and 2)
treatment costs for small plants, not vertically integrated with CRT or
fluorescent lamp manufacturing may possibly dissuade a new entry into the
industry.
V.9 Small Business Analysis
Of eighteen firms included in the study, the six smallest in terms of
sales incur no incremental costs under Option 2 or Option 3. For five of
these, corporate sales are not available and the plants are treated as if
they are the firm; their sales range from $13.5 million for Thomas
Electronics to $1.5 million for on plant owned by B-Scan Inc. (For Special
Purpose Tech and Tex-Video Man. sales are not available).
The eleven largest firms incur all of the treatment costs for both
Option 2 and Option 3. For these firms, sales range from $27 million for
General Electric to $400 million for Thomas Electronics.
The twelfth largest firm is Clinton Electronics based on sales of one
plant at $41.2 million. Corporate sales are not known. However, employment
of 700 for Clinton Electronics suggests that the firm is not a small
business.
VI. Limits of the Analysis
The results of the analysis depend on several major assumptions and on
the accuracy of the data used in the calculations. These are discussed next.
VI.1 Plants With Multiple Product Lines
There is a lack of information on product lines for each existing plant,
particularly sales data on product lines affected by treatment cost. There-
1-13
-------
fore, treatment cost ratios are based on plant sales. If additional waste-
water treatment is needed for only cathode ray tubes or luminescent coatings
and the plant has other product lines, then the impacts are underestimated.
VI.2 Impact Measure Derivatives
Impact measures, other than treatment cost to sales ratio, are derived
on aggregated data of the four-digit SIC level and the data are not up-to-
date. Individual plants are analyzed as if they operated with the average
values (of sales to manufacturing cost, sales to plant profit, sales to
annual plant investment) for the four-digit SIC group for the three industry
subcategories. In addition, the averages are calculated from 1977 Census of
Manufacturers data.
VI.3 Discount Factors
Annual costs are based on 13 percent discount rate and a five-year life
for the capital investment portion of treatment costs. Two alternative
discount rates, 10 and 16 percent, were also analyzed. For color TV picture
tubes and other CRTs, annual treatment costs are changed by five percent or
less from those used in the study. The impact ratios are altered by no more
than 0.028 percentage points for color TV tubes and by no more than 0.15
percentage points for other CRTs. None of the conclusions stated earlier
would change if the alternative discount rates had been used.
VI.4 Small Companies
Small plants are likely to be privately owned. Privately owned firms
are not required to provide financial data for public use, therefore finan-
cial ratios cannot be calculated to help in judging the financial condition
of small companies and the potential severity of impacts.
This limitation not withstanding an analysis was conducted to determine
whether small firms bear disproportionate impacts. Six firms from the study
sample of eighteen employ fewer than 250 persons and can be considered small
and none of these firms incur treatment costs. The twelve largest firms
incur all of Option 2 treatment costs ($2,869,800). The same is true for
Option 3; where the twelve largest firms incur all the treatment costs of
$3,055,900.
VI.5 Import Policies
If U.S. levels of production decline, existing plants may be more
adversely impacted than the estimates show because costs will be spread over
a lower base. Imports of TV picture tubes have increased annually in recent
years; but the future trend is uncertain. The tubes are used in TV sets and
anti-dumping regulations imposed on Japanese sets by the U.S. may or may not
1-14
-------
continue. New regulations that apply to the picture tubes as well as the TV
sets could also affect U.S. production, although pressure for such regu-
lation has not been observed.
1-15
-------
Section 2
Industry Profile
I. Industry Definition
This study is concerned with three segments of manufacturing that are
part of, or related to, the electronic tube industry. The three segments
include the manufacture of (1) color television picture tubesa particular
type of cathode ray tube, (2) other cathode ray tubes and (3) luminescent
coatings.
Color TV tubes produce images by controlling a stream of electrons which
strike a surface coated with phosphors resulting in luminescence. Other
cathode ray tubes (i.e. other than color TV tubes) use these same principles
for display and the storage of data in many different types of equipment such
as scientific and engineering instruments, oscilloscopes, industrial con-
trols, computers, word processors and military equipment such as radar, fire
control and navigation systems. Luminescent coatings are used in the manu-
facture of cathode ray tubes (CRT) and also in fluorescent lamps.
There are many types of electronic tubes other than CRT's such as radio
and television receiving tubes, power tubes and a wide variety of special
purpose tubes. However, the effluent discharges resulting from their manu-
facture are from metal finishing processes and will not be controlled under
this regulation.
II. Industry Overview
Color TV picture tubes and other CRT's are but two of a large number of
products associated with the electronics industry. Before analyzing the
particular segments that are the focus of this study, an overview of the
electronics industry is presented.
A rough breakdown of factory sales of electronic equipment, systems and
components is shown in Table 2-1.' Factory level sales of electronic
components in 1981 accounted for $24.4 billion, or 21.4 percent of the $114
billion electronics industry total. Electron tubes are but one group of
electronic components; tube sales totalled about $2.0 billion of which $1.1
billion is attributed to TV picture tubes, most of which were color tubes.
(In 1981 about 11.1 million color TV tubes were sold, valued at $998.7 mil-
lion.) Thus, color TV picture tubes account for approximately 50 percent of
all electron tube sales, 4.5 percent of all electronic components and
slightly less than one percent of total U.S. industry-wide factory sales of
electronic equipment, systems and components.
Sales of power, transmitting and special purpose tubes amounted to $845
million in 1981. Electro-optical devices show sales of $337 million and
included other CRT's (other than TV picture tubes).
Five firms manufacture color television picture tubes (RCA, Zenith, GE,
N.A. Philips and Sony). We estimate that 14 to 16 firms make other CRT's
including two large producers, (Hewlett Packard and Tektronix) and eleven or
-------
Table 2-1
1981 Factory Sales of Electronic
Systems and Components
U.S. Industry Wide Factory Sales
Billions
of
Dollars
114.0
Percent
of
Total
100.0
Consumer Electronics (e.g. stereo
equipment, TV sets) 11.4
Industrial Electronic Products,
including computers & related products
Communications Equipment & Systems
Electronic Components
Electron Tubes
TV Picture Tubes* (color and
monochrome)
Radio and TV Receiving Tubes 0.1
Power & Transmitter & Special
Purpose Tubes 0.8
Solid State Products (e.g. transistors,
diodes and rectifiers, integrated
circuits, other semi-conductors 7.8
Passive Components (e.g. capacitors,
resistors) 2.9
Other Components 11.6
10.0
43.5
34.7
24.4
2.0
1.1
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30.4
21.4
1.8
0.9
0.1
0.7
6.8
2.5
10.2
Source: Derived from 1982 Edition Electronic Market Data Book,
Electronic Industries Assoc. (EIA)
*Includes Imports of $71 million which EIA includes in U.S. Industry-wide
Factory Sales
2-2
-------
twelve smaller producers. (Bureau of the Census information indicates that
fourteen firms make industrial and military-type CRT's-/). Five firms
produce luminescent coatings/ based on information collected by the EPA.
Employment in 1980 for electronic components (i.e., establishments clas-
sified in SIC 367) totaled 498,600 of which 336,600 were production workers.
The electronic tube sector, all types (SIC 3671), accounts for eight percent
of all employment in the components sector. In contrast, the semiconductor
sector (SIC 3674) accounts for about 30 percent of all employment in the
electronics component sector.
III. Growth History and Outlook
III.l Production and Factory Sales
III.1.1 Electron Tubes All Types. The growth history of electron tube
sales (all types) has been sluggish since 1971. Analysis of this history
differs depending on the data source. Data from the Electronic Industries
Association (EIA) in Table 2-2A, shows that sales of electron tubes have
increased at an annual current dollar rate averaging six percent since 1971
except for a downturn during the 1975 recession. In 1981, sales were $2.014
billion; over the 1972-81 period the data show that real growth (i.e., in
constant dollars) averaged only 0.6 percent annually. According to the U.S.
Department of Commerce data shown in Table 2-2B, value of product shipments
of electron tubes grew at average annual rate of 3.6 percent from 1972 to
1981 (in current dollars)' but in real terms, the value of shipments
decreased at an average rate of 1.1 percent per year during that nine year
period.*
A major reason for the sluggishness suggested by both industry and
government trends is the poor performance of the radio and television
receiving tubes segment of the industry. This segment is being affected by a
continuing shift to solid state technology. Increased import penetration
into the US market is another important factor in the decline of receiving
tubes. As a result, shipments of US-made receiving tubes (expressed in
current dollars) have decreased 10 percent annually since 1972.
* Product price index applied to data in Table 2-2 to estimate constant
dollar growth rates.
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The outlook, according to U.S. Department of Commerce projections, is
that sales of electron tubes (total, all types) are expected to move in a
downward trend at an inflation-adjusted rate of 0.4 percent per year through
1936.'' Industry forecasts show an annual (current dollar) growth rate
of 5.7 percent in sales from 1981 to 1985.-^ If a six to seven annual
percentage rate of inflation is assumed, then the two projections are about
the same. Using a sales value of $2.014 billion in 1981 and a 0.4 percent
annual decline, the projected 1985 sales value is about $2.0 billion,
expressed in constant 1981 dollars.
III.1.2 Color TV Picture Tubes. Color TV picture tube sales showed an
eight percent annual (current dollar) growth during the 1971-81 period except
for the 1975 drop, as presented in Table 2-2A. Expressed in constant
dollars, this industry segment's sales increased by 1.2 percent per year.
Manufacturers' sales of color television receivers grew by 11 percent per
year (in current dollars) from 1975 to 1981 while picture tube sales grew by
14 percent annually in the same period (see Table 2-2C). The color TV
picture tube sales trend appears to generally follow that for receivers but
with a higher rate of growth in value. The factors behind this trend can be
seen in Table 2-3. Initial equipment sales grew rapidly in the late seven-
ties (15 percent per year, in current dollars) but declined in 1981. Renewal
sales and exports show a narked decline since the mid-seventies while imports
have increased.
According to industry forecasts, the long-term outlook for color TV
picture tubes is that annual sales are expected to grow at a rate of 6.9
percent (current dollars) from 1981 to 1985.-' Allowing for an average
annual rate of inflation of five to six percent, 1985 sales will be five to
nine percent greater than 1981 sales, in constant dollars. There is a
growing demand for color television receivers for the consumer market due, in
part, to the many new uses for the TV screen that are being developed. The
color TV is the basic visual display device for several new television tech-
nologies such as video games, video cassette recorders, and home computers.
There do not appear to be any technological innovations that would have
an adverse impact on the TV picture tube market in the near future. Flat
display tubes using semiconductor and/or liquid crystal technology have been
demonstrated. However, substitution of such tubes for the cathode ray type
tube will probably not be evident until the 1990's.'
III.1.3 Other Cathode Ray Tubes (CRT). Sales of electro-optical
devices, which include cathode ray tubes for non-television uses, grew
rapidly at an average annual rate of 13 percent per year from 1972 to 1981,
as shown in Table 2-2A. Even when expressed in constant dollar terms, growth
was substantial; an average rate of eight percent per year.
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sented about 35 percent ($118 million) of electro-optical .factory sales in
1981.-/ Using this $118 million estimate in conjunction with unit value
of the factory level from the 1980 Annual Survey of Manufacturers, a 1981
average price is estimated at $210 to $225 per CRT, implying a production
level of 550,000 to 600,000 units. (The 1980 Survey indicates 367,000 units
with a value of $72.1 million.) It can safely be assumed that growth of CRT
sales equalled or exceeded the trend of the larger, electro-optical segment
of the industry.
The outlook for industrial and military CRT's is excellent; the industry
forecasts the sales value to increase at an annual rate of about nine percent
(in current dollars) from 1981 to 1985. Allowing for an average annual rate of
inflation of five to six percent, 1985 sales will be 15 to 19 percent greater
than 1981 sales, in constant dollars. This is the segment of the electro-
optical devices sector expected to achieve the highest growth rate.'
The current Administration's committment to increased expenditures for the
Department of Defense, combined with a growing proportion of electronics
equipment in military hardware, supports these growth projections.
Increasing demand by business for the capabilities offered by data display
devices (which allow easy access to information) will be another source of
long-term growth in CRT sales. Expanded consumer use of personal computers
and terminals is also expected to raise demand for CRT's. Color is an addi-
tional feature of CRT screens that will be in demand for such uses as com-
puter terminals and airline cockpit displays. Technologies like these will
promote speedy growth of industrial-military CRT sales in the future.
Display innovations, such as those using lasers, are not expected to hurt CRT
sales and -could expand them by stimulating the development of new, previously
unattainable, applications.'
III.2 Employment
Employment in the electron tube industry (SIC 3671) has increased
slightly over the past ten years, at an average rate of 0.05 percent per year
according to U.S. Department of Commerce and U.S. Department of Labor data.
Table 2-4 shows total employment to be 43,500 in 1981 of which 26,700 were
production workers. The same data sources indicate an historical decline in
the number of production workers of 1.8 percent annually. The U.S. Indus-
trial Outlook for 1982 reports an annual decrease in total employment in the
electron tube industry two percent between 1972 and 1981 and a decline of 2.3
percent per year in production workers over the same period.'
Figures for the radio and television receiving tubes sector (SIC 36711)
are not available, however, as mentioned earlier, this is a declining
industry segment due to technological innovation and product substitution as
well as import penetration.
Based on historical trends, the outlook for employment in other parts of
the electron tube industry such as color TV and other cathode ray tubes may
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be better than is apparent from the overall industry data. Bureau of Labor
Statistics forecasts show increases in employment ranging from 1.7 to 2.5
percent per year between 1980 and 1990 for the electronics industry as a
whole.y
III.3 Prices
Based on the value of manufacturer's shipments, 1980 prices of color
television tubes averaged $76 per unit for domestic tubes (this average
reflects a range of $62 for 17 inch tubes to $92 for tubes 20 inches and over
as shown in Table 2-5A), and ฃ56 per unit for imported tubes. Considering
all sizes of tubes, data from the EIA indicate that price of tubes made in
the U.S. in 1981 was $90, up 18 percent in one year while import prices
declined. These data also reveal that increases in U.S. color TV picture
tube prices averaged about three percent annually from 1972 to 1981 (in cur-
rent dollars).
The average price of industrial and military-type cathode ray tubes was
$197 in 1980. (With available production data it is not possible to estimate
price differences between CRT prices purchased for industrial use and those
for military purposes.) As shown in the table, prices of color television
picture tubes have increased (in current dollars) between two percent and
eight percent per year, depending on tube size, over the 1977 to 1980
period. Industrial-military CRT prices rose 33 percent annually during the
same period.
Import prices increased four percent per year from 1971 to 1981 (in
current dollars) but have remained lower than U.S. prices, as shown in Table
2-5B. In 1981, for example, the average price of a color TV picture tube
import was $54, or 60 percent of the U.S.-made average picture tube price.
In constant dollars, import prices fell at an average annual rate of 2.3
percent while domestic prices fell at an average annual rate of 1.8 percent
between 1972 and 1982. (This is due, in part, to a different mix of tube
sizes among imports compared to U.S-made tubes.) An important factor in the
outlook for the TV picture tube market will be the impact of Japanese imports
(see Foreign Trade).
The average color television receiver price (in current dollars and
including both imports and U.S. made products) in 1981 was $377, in 1980 was
$369 and in 1979 was $360, based on factory sales.=* This suggests that,
at the factory level, color TV picture tube prices recently have been twenty
to twenty-five percent of receiver prices. However, another source indicates
that the ratio of TV picture tube price to TV set price at the retail level
was about 40 percent several years ago.-^/ Costs of TV set components
other than the picture tubeare expected to decline due to the use of inte-
grated circuits and other innovations, therefore, the ratio of the picture
tube to receiver price will probably start to increase.
2-9
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III.4 Markets
Market data are available for the electron tube industry in terms of the
value of purchases made by original equipment manufacturers (OEM), broken
down into four categories:
o Commercial - business and government (civilian), trans-
portation (other than consumer) and similar uses;
o Consumer - entertainment equipment, automotive electronics,
appliances and home applications;
o Industrial - manufacturing, instrumentation, medical,
process control, machinery and utilities; and
o Military and space.zr
The market category into which a component is classified is determined by
the end user of the equipment that incorporates the component. Table 2-6
presents market data for electron tubesall types, color television tubes,
and other cathode ray tubes. The basis for the data shown differ from U.S.
manufacturers sales data in several important ways: imports and distri-
butors' margins are included, while exports, replacement components and cap-
tive production are excluded.-' Consider captive production, for
example. The major portionpossibly allthe output of two of the producers
of industrial and military cathode ray tubes (Hewlett Packard and Tektronix)
is for their own use, and therefore not included. Nevertheless, the relative
importance of different markets can be roughly outlined.
For electron tubes, total all types, the main market is industrial (35
percent), although consumer (29 percent) and military and space (24 percent)
are very important. The fastest growing area since 1979 is the commercial
market which has grown at an average rate of 14 percent per year. Consumer
uses declined at an average rate of four percent per year between 1979 and
1982.
By far the major market for color TV picture tubes is consumer uses (92
percent). However, this market share has declined at an average rate of four
percent since 1979 while the other three markets (accounting for eight
percent of TV picture tube OEM purchases) have grown rapidly.
For other cathode ray tubes, all four markets are growing at an average
rate of 16 percent, industrial uses have grown more rapidly than the others,
at 23 percent annually. The largest CRT market is commerical with over one-
half the total value of purchases in 1982. The military and space CRT mar-
kets are also important and growing rapidly.
2-11
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2-12
-------
111.5 Foreign Trade
The history of foreign trade in color TV tubes is linked to foreign trade
in color TV sets. The U.S. Tariff Act of 1980 invoked an anti-dumping order
on the import of Japanese color TV sets. This order was continued in 1981
and complicates the outlook for color TV's in this country. Partly as a
result of the antidumping order, Japanese firms have opened manufacturing
plants in the U.S.
U.S. manufacturers of TV tubes desire stricter import rules and allege
that they are adversely affected by "dumping" practices of the Japanese tube
manufacturers.-/ The outcome of current litigation concerning TV
receiver sets and the past U.S. policy aimed at prohibiting dumping of
foreign TV sets on the US market is uncertain and may affect TV picture tube
imports. Talks between the U.S. and Japanese governments may encourage
self-imposed limitations on television picture tube exports by Japanese
manufacturers, but long-term policies are unclear.
Annual imports of electron tubesall typeshave been steadily
increasing since 1977 at an average rate of 18 percent (see Table 2-7).
Imports of electron tubes and related products totaled $300 million in 1981,
up 17 percent in current dollars over the 1980 value of $256.9 million.
Imports were equal to 15 percent of U.S. sales in 1981.
Imports of color TV picture tubes have been increasing by 36 percent per
year from 1977 to 1981 (see Table 2-7). The 1981 value of picture tube
imports, $53 million, was 59 percent higher than the 1980 value of $33
million in current dollars. Sixty-seven percent more color TV picture tubes
(i.e. units) were imported in 1981 (984.2 thousand) than in 1980 (590.3
thousand).' Imports accounted for nine percent of the quantity and five
percent of the value of annual U.S. factory level sales of color picture
tubes in 1981. Almost all (97 percent) color picture tube imports come from
Japan.
The value of imports of other cathode ray tubes increased 30 percent from
$21 million in 1980 to $28 million in 1981 (see Table 2-7). The average
annual increase over the period 1977-1981 has been 55 percent expressed in
current dollars. Imports were about 24 percent of U.S. sales of "Other
CRT's" in 1981.
Exports of electron tubes have also been rising since 1977, at an average
rate of 12 percent annually (see Table 2-8). This rate is lower than that of
imports. Exports of electron tubes and related products totaled $377.3
million in 1981, four percent above the 1980 value of $361.1 million. The
recent balance of trade for electron tubes is positive, as shown in Table
2-9. Exports equaled nineteen percent of US factory sales in 1981.
For electron tubesall typesthe balance of trade increased 5.8 percent
between 1977 and 1980 and then declined 26 percent in current dollars,
between 1980 and 1981 (from $104.2 million to $77.3 million). The overall
average annual growth rate from 1977 to 1981 was 1.4 percent.
2-13
-------
Table 2-7. Annual Imports of Electron Tubes
Selected Types ($ million)
United States, 1977-1S81
1977 I 1978 I 1979 I 1980 I 1981
TV Picture Tubes, Color
TV Picture Tubes, B/W
Cathode Ray Tubes, NES*
Parts of CRT's, Including Glass
Electron Tubes, All Types
$15.5
4.7
4.8
38.8
156.0 .
$16.6
8.3
7.3
50.3
183.4
$22.0
10.0
13.2
75.5
232.0
$33.3
10.5
21.3
76.8
256.9
$52.9
15.3
27.6
86.7
300.0
*NES = Not elsewhere specified.
Source: Reference 6.
Table 2-8. Annual Exports of Electron Tubes
Selected Types ($ million)
United States, 1977-1981
1977 I 1978
1979 I 1980 I 1981
TV Picture Tubes, Color
TV Picture Tubes, B/W
Cathode Ray Storage Tubes
Cathode Ray Tubes, NES
Parts, etc., NES*
Including CRT Glass
Electron Tubes, All Types
$75.7
1.2
5.0
11.4
63.7
239.1 .
$67.4
1.8
5.8
25.8
65.8
256.2 .
$80.9
1.7
6.6
40.2
101.2
327.8
$82.0
1.2
8.1
44.3
100.1
361.1
$65.8
1.3
9.4
56.1
108.3
377.3
*NES = Not elsewhere specified.
Source: Reference 6.
Exports of color TV picture tubes have equaled seven percent of the value
of U.S. factory sales in 1981 and have had a mixed history (see Table 2-8).
From 1977 to 1981 there was an average annual decline in exports of three
percent with a 20 percent decline between 1980 and 1981 (from $82 million to
$66 million in current dollars). Imports of color TV tubes, on the other
hand, increased between 1977 and 1981, and this has resulted in a five
percent decline in the balance of trade over the past five years (see Table
2-9). The decline in color TV picture tube balance of trade between 1980 and
1981 was 73 percent.
Exports of other cathode ray tubes increased 25 percent in current
dollars from $52.4 million in 1980 to $65.5 million in 1981 (see Table 2-8).
Since 1977, exports have been increasing at an average annual rate of 41
percent. The value of other CRT exports came to 56 percent of US sales in
2-14
-------
1981, a significant factor in this segment's market. The balance of trade of
other CRT's is positive and increasingly favorable as shown in Table 2-9.
IV. Firms and Establishments in Scope of Study
There are five known firms in the US which make color television picture
tubes. The five producers supply about 15 firmsincluding their ownwhich
manufacture color TV sets.
Thirteen firms manufacture other CRT's with a significant part of their
production used captively in the production of engineering and scientific
instruments. Five firms produce luminescent coatings. The major companies
are listed in Table 2-10 along with the sample of plants included in this
study; there are seven color TV picture tube plants, 1.5 other CRT plants and
five luminescent coatings plants.
The firms that manufacture the color television tubes are all large,
publicly owned companies which also manufacture color television receivers
and therefore, in this respect are vertically integrated "downstream11. Three
firms (possibly four) make the basic glass enclosure, the raw material item
that color television tubes are made from; the three are: Owens-Illinois,
Corning Glass, and Lancaster Glass.-' Thus, none of the color TV tube
manufacturers are vertically integrated "upstream" with respect to the basic
glass enclosure. Two firms each have two color TV tube production plants.
Table 2-9. Balance of Trade of Electron Tubes
(1977-1981/$ Million)
BALANCE OF TRADE
1
Year 1
1977
1978
1979
1980
1981
1
Color 1
TV Tubes I
60.2
50.8
58.9
48.7
12.9 .
1
Other
CRT's*
11.6
24.3
33.6
31.1
37.9
I Electron Tubes,
I All Types
83.1
72.8
95.8
104.2
. 77.3
1
*Includes both Cathode Ray Storage Tubes and Cathode Ray Tubes, NES,
from Tables 2-7 and 2-8.
Source: Reference 1.
2-15
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Four of the firms produce an estimated 90 percent or more of total color
TV picture tubes in the U.S. The top two firms are RCA and Zenith but their
share of total production is not public information.
The industry segment producing other CRT's includes 15 firms; this is a
dynamic business and not all small manufacturers may be known to us at this
time. The industry segment EPA has identified includes 13 firms of which
two, Tektronix and Hewlett Packard, are large producers of CRT's; most,
perhaps all, of their CRT production is for captive use in the electronic
instruments they manufacture.
Four firms in the CRT plant sample are medium-sized producers based on
plant-level sales data while six are very small. Only one firm in the
sample, Thomas Electronics," has multiple (three) plants. Four of the major
CRT producers are publicly owned firms (Tektronix, Westinghouse, Hewlett-
Packard and Litton); the ownership status of Clinton Electronics is not
known. Only one of the other nine firms is publicly owned; the rest are
private.
The other CRT industry segment may be more competitive than the color TV
picture tube segment, due to the larger number of producers making other
CRT's. However, the products of each producer may be so specialized that
competition is not a major factor in CRT prices. This suspicion is supported
by the fact that CRT sales for military purposes account for a sizeable share
of current sales and that share is increasing.
The CRT industry segment appears to be as concentrated as the color TV
picture tube segment; among the firms whose plants are included in the scope
of study, the top four account for almost 95 percent of the total sales of
the CRT plants included in the study. It should be noted that the available
sales data are plant-wide sales and therefore may include sales of products
other than CRTs made at the plants. As mentioned above, at least two of the
firms are vertically integrated downstream, producing CRT's for use in scien-
tific-engineering instruments and other products they manufacture.
The luminescent coatings industry segment is characterized by a few
large, publicly owned firms. Each firm has a single plant for producing the
coatings and most are vertically integrated from the production of the phos-
phors to their use in the manufacture of color television tubes other CRT's
or fluorescent lamps. RCA produces phosphors only for TV, Westinghouse only
lamp phosphors, while the rest produce both. About 90 percent of total
annual sales in the sample are attributed to three plants.
Of all plants in the three industry segments under study, 12 are located
in the Mid Altantic region of the U.S, five in the Mid-West, seven in the
Western region and one each in the south and eastern regions.
Employment in each of the four color TV tube manufacturing plants for
which data are available is between 1000 and 2600 in tube production and up
to 3000 in total plant employment. There is a wide range in employment
2-17
-------
levels in the other CRT plants in the sample. Of the nine plants for which
data are available one (Tektronix) has 1000 CRT production employees and
12,000 total plant employees, one (Hewlett Packard) has 400 production
workers in CRT and 2,300 total plant, three plants have between 30 and 120
production workers and four very small plants have less than 20. Employment
figures are not readily available for the luminescent coatings manufacturers.
Product diversification data at the plants are not available. Using very
gross indicators (total employment versus product-specific employment and
total flow versus product-specific flow), it appears that three color TV
picture tube plants may make other products, two CRT plants are known to be
diversified while five more may be, and two luminescent coatings plants pro-
bably make other products. A 1982 catalogue of product listings show that,
within the other CRT segment, General Atronics makes only non-TV tubes while
the following plants make the following additional products:-/
Clinton Electronics Group: Black and white TV tubes
Litton Industries: Microwave and other special purpose
tubes
Thomas Electronics, Wayne, NJ: Electrostatic printing and black and
white TV tubes
Thomas Electronics of California: Electrostatic printing and black and
white TV tubes
No other plants in the three industry segments samples are listed in the
catalogue.
2-18
-------
Section 2
REFERENCES
1. Electronic Industries Assoc. (EIA), 1982 Edition Electronic Market
Data Book, Washington, D.C. 1982.
2. Current Industrial Reports, U.S. Bureau of the Census, 1980.
3. U.S. Department of Commerce, 1982 U.S. Industrial Outlook for 200
Industries with Projections for 1986, January 1982.
4. Electronics, January 13, 1982, (p.126 as reported in'Predicasts,
Forecast Abstracts, p. B-242).
5. Evison, Peter, Electronics: The Market to 1982, The Financial Times
Limited, London, 1978, p.84.
6. U.S. Department of Commerce, Current Industrial Reports, Selected
Electronic and Associated Products, Including Telephone and Telegraph
Apparatus, MA-36N (80)-1, October 1981.
7. Personal communication with International Trade Commission personnel.
8. Electronic Business, January 1981.
9. Electronics Buyers Guide 1982, McGraw-Hill, Inc., May 1982.
10. U.S. Department of Commerce, 1977 Census of Manufacturers.
2-19
-------
Section 3
Economic Impact Methodology
The economic impact methodology is performed in seven steps. First, the
methods used to estimate a baseline projection for each of the three industry
subcategories (color TV picture tubes, other CRT's and luminescent coatings)
are discussed. Second, several measures are developed to analyze the impacts
of treatment costs at the industry-level and the plant and firm level. Third,
the approach used to analyze potential closures of existing plants resulting
from treatment costs is described. In the fourth and fifth steps, the
methods for estimating possible effects on production/employment and foreign
trade are presented. Methods to estimate treatment cost impacts on new
sources are discussed in the sixth step and the section concludes in the last
step by describing how the analysis of impacts on small businesses is
conducted.
I. Industry-wide Baseline
Estimates of production value and quantitieswithout additional treat-
ment costsserve as a baseline against which the impacts from regulatory
action are estimated. Baseline projections for 1982 are developed for each
of the three industry subcategories of color TV picture tubes, other CRT's
and luminescent coatings.
The baseline is defined for 1982 because treatment costs have been
estimated in 1982 dollars. Real growth is anticipated over the next three to
five years for color TV picture tubes and other CRT's, therefore using cur-
rent 1982 costs and production information should yield a somewhat higher,
hence conservative, estimate of adverse impacts for existing plants than if
1985 conditions were projected.
The variables estimated in the baseline for TV picture tubes and other
CRT's are: production value, quantity, unit prices and industry profit. For
the luminescent coatings subcategory, production quantities are unknown and
only total value of production and industry profit are projected.
Different methods are used to estimate baseline values for the three
subcategories because available data are not consistent with regard to; (1)
time periods for which data are reported by various sources, and (2) level of
data aggregation in the different subcategories. The various methods for
baseline estimation are discussed next.
I.I Color TV Picture Tubes
The 1982 baseline values are estimated from 1980 and 1981 factory sales
and quantities published by EIA (Electronic Industries Association, 1982
Edition, Electronic Market Data Book) and from the Department of Commerce
estimate of 1981-82 growth in value of production (1982 Industrial Outlook).
-------
In 1980, U.S. factory sales of color TV tubes was $911.5 million and in 1981
it was $998.7 million; a five percent increase in total value is projected
between 1981 and 1982. However/ the quantity of tubes manufactured in the
U.S. was 11.93 million and 11.09 million in 1980 and 1981, respectively, as
imported tubes increased by almost 400 thousand in that period. The 1982
baseline for U.S. production is estimated at 11.5 million tubes which is the
average of the preceding two years. As noted elsewhere in the report, this
stagnant condition is not expected to continue out to 1985.
The 1982 baseline estimate for the industry subcategory was checked
against plant sales listed in the EIS (Economic Information System) data
files. The aggregate plant sales account for 77 percent of the production
value for the industry subcategory.* The profit for the subcategory is esti-
mated by applying a ratio of profit to value of production. The ratio is
derived from aggregate statistics for the appropriate four-digit SIC group.
(The derivation is discussed later under plant-level impacts.) The use of a
profit to sales ratio in the methodology is common to the other two industry
subcategories.
1.2 Other CRT's
For this subcategory, 1982 baseline production value and quantities are
estimated from 1979 and 1980 data published by the Department of Commerce/
Current Industrial Reports 1980, MA-36N (80-1). The observed rates of
increase in value and production identified under SIC 36713 are projected to
obtain the 1982 estimates. (This method was used because no later data are
available to distinguish the CRT's from other components.) The 1979-80
growth in production quantity was 19.5 percent and in unit value it was 16.0
percent in current dollars. The industry-wide projection of production value
for this subcategory in 1982 is much less than the aggregate plant sales
listed in the EIS file for the CRT plants identified in the Proposed Develop-
ment Document; at least one very large plant, owned by Tektronixpossibly
two others of Hewlett Packard and Raytheonhave major product lines other
than CRT's which cannot be separated out of the plant sales data.
1.3 Luminescent Coatings
In this industry subcategory, the Department of Commerce data were not
used because coatings are undistinguishable within SIC 2819, a large
* Another method, used for the other CRT subcategory, was considered for
color TV picture tubes. The 1979 and 1980 data reported by the Department of
Commerce, Current Industrial Reports was used to calculate an annual growth
rate in unit value and quantity. The method yielded a 1982 total value of
production 1.75 times greater than aggregate sales of all seven plants
(identified in the Proposed Development Document) whose sales are listed in
the Economic Information Systems (EIS) data files on a plant-by-plant basis.
Therefore, the more recent 1980-1982 production data published by the EIA was
used.
3-2
-------
miscellaneous group of inorganic chemicals not elsewhere classified. There-
fore, industry-wide baseline values are estimated from plant data. Sales data
for four of the five existing plants identified in the Proposed Development
Document are listed in the EIS data file. For the fifth plant, employment
information was provided by- EPA and an average sales value per employee was
applied to obtain annual sales for the fifth plant. The average sales value
per employee was based on the EIS sales and employment data for three plants
which ranged from $70,000 to $80,000 per employee. (A fourth plant showed
$155,000 per employee but was not used for purposes of calculating an average
value because the plants SIC classification indicates that metal working
rather than coatings is the dominant manufacturing activity.)
To estimate the baseline for the total industry subcategory, the
employment estimates for all five plants were aggregated and then multiplied
by the average value per worker to calculate the value of total production.
II. Impact Projections
II.I Industry-wide Impact
The ability of the industry to pass on treatment costs in the form of
higher prices depends on the strength of demand, the ability of foreign-based
manufacturers to take away U.S. market share, and the distribution of treat-
ment costs among producers. If incremental unit cost increases are distri-
buted evenly across all producers, then the costs are likely to be fully
passed through because demand is strong. Costs may be' unevenly distributed,
in which case the price increase resulting from the pass through of treatment
costs is assumed to be a production weighted average of unit treatment costs
incurred by all the manufacturers.
Note that this assumption implies that average unit costs for the
industry as a whole are passed through. Depending on the variability of
unit costs across plants, some individual firms may experience reduced
profits and other increased profits. (The latter would include plant with
zero incremental costs.)
Two impact projections are made. For one impact projectionthe cost
pass through casethe treatment cost is distributed over the estimated
production to obtain unit cost (and total production value) increases. In
addition, another case is examined; treatment costs are absorbed by the
producers resulting in profit reductions.
II.2 Plant-Level and Firm-Level Impacts
Five impact measures are derived to estimate the plant-level impacts
of additional treatment costs. Also in the second part of this discus-
sion, several of the standard financial ratios reported by Dun and Brad-
street that are used to estimate the financial health of firms are
3-3
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developed to help in evaluating firms that incur treatment costs in their
plants.
The five plant-level impact measures selected are:
1. ratio of treatment cost to plant sales;
2. ratio of treatment cost to plant-level profit;
3. ratio of treatment cost to plant manufacturing conversion
costs;
4. ratio of treatment cost to profits of the firm; and
5. ratio of capital investment portion of treatment cost to
annual plant investment.
These measures are used to judge the severity of additional treatment
costs. More than one measure of impact is desirable because accurate infor-
mation at the plant level is very limited, and confidence is not high in any
one measure. Available plant-level data do not include profits, production
costs and other financial data that are desirable for the evaluation of
impacts. In addition, there was no 308 survey covering the manufacturing
subcategories addressed in this study. Therefore the impact measures were
derived using publicly available data in conjunction with a number of gross
assumptions necessary for the plant-level analysis. The remainder of this
discussion outlines the assumptions and data used to develop the impact
measures.
II.2.1 Treatment Cost to Sales. This measure provides a gross screening
criterion for identifying plants that may be severely impacted (ratios of
treatment costs to sales, greater than, say, two or four percent of plant
sales have been used in other EPA impact analyses for this purpose). Esti-
mates of plant-level sales were obtained from the EIS (Economic Information
Systems) data base. The EIS sales figures are projected values for 1982
based on input-output tables from the Department of Labor. Treatment cost to
sales ratios were obtained simply by dividing annual!zed treatment cost for a
given plant by the projected plant sales.
II.2.2 Treatment Cost to Plant-Level Profit. This measure can provide
another relevant way to judge the ability of a plant to absorb additional
treatment cost. If treatment cost is a significant portion of plant profits,
and the additional costs cannot be recovered with higher prices for the
plant's products, then the plant may be a candidate for closure. Ideally,
the calculations should consider a profit stream over several years. How-
ever, because of data limitations, only one year is considered and plant
level-profit is approximated by an industry-wide ratio, explained next.
3-4
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Because plant-level profit is not known, we have developed a ratio of
profit to sales at the four-digit SIC group level based on data in the Census
of Manufacturers.* The profit is calculated as the residual of value added
by manufacturing, less wages and depreciation. The profit ratio is obtained
by dividing the residual, by value of shipments (value of shipments is
considered synonomous to plant-level sales). The value of the residual in
the numerator ideally should be reduced further to account for other costs
such as royalty payments, licensing fees, plant utilities and maintenance
costs exclusive of plant labor. However, these costs cannot be identified in
the source data, therefore the residual is referred to as "unadjusted profit".
A ratio of unadjusted profit to sales was obtained at the four digit SIC
code level using the 1977 census data* and then applied to 1982 plant level
sales to approximate 1982 plant level unadjusted profit. As mentioned
earlier/ the ratio is also used at the industry subcategory level to estimate
industry profits. In equation form, the relationships are as follows:
UP = fup x Sp
where
UP = unadjusted profit, plant-level
Sp = plant-level sales in 1982
fup = unadjusted profit to sales ratio computed at the 4-digit
SIC code level for 1977
*
= [(value added) - (wages) - (depreciation)3
[value of shipments]
For color TV picture tubes, SIC 3671 was used to calculate the unadjusted
profit ratio. For the subcategory Other CRT, the average of four different
unadjusted profit ratios was used; these are SIC 3671Electronic Tubes, all
types, SIC 3811Engineering, Scientific Instruments, SIC 3825 Instruments to
Measure Electricity, and SIC 3829 Measuring and Control Devices, not else-
where classified. The four SIC groups were used because cathode ray tubes
are not only sold as distinct items made by manufacturers classified in SIC
36713, but are also incorporated into instrument packages sold by manu-
facturers classifed in the other three SIC groups. For luminescent coatings,
industrial inorganic chemicals not elsewhere classified (SIC 2819) is used to
derive the ratio. The unadjusted profit ratios derived from 1977 data are as
follows:
Color TV picture tubes fup = 0.348 (SIC 3671)
* 1977 Census of Manufacturers, U.S. Department of Commerce, Bureau of
the Census.
3-5
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Other CRT fup = 0.458 (average of four
SIC groups)
Luminescent Coatings fup = 0.383 (SIC 2819)
II.2.3 Treatment Cost to Manufacturing Conversion Cost. This measure
considers treatment cost as if it were" an additional production cost, neces-
sary in the conversion of raw materials into products that are shipped by the
plant. The conversion costs are those included in value added by manufac-
turing (excluding resales which involve no manufacturing activity) as defined
by the Department of Commerce,* plus cost of energy and contract work.
As explained above for the unadjusted profit ratio, a manufacturing
conversion cost to sales ratio was calculated at the four digit SIC level for
1977. The ratio was then applied to specific plant sales in 1982. In equa-
tion form, this is:
MCC = fmc x Sp
where
MCC = manufacturing conversion cost at the plant level
fmc = manufacturing conversion cost ratio computed at the
4-digit SIC code level for 1977
= [(value added by manufacturing) - (value of resales)
+ (fuels) + (purchased electrical energy + (contract work)]
[(value of shipments) - (value of resales)]
For each of the three subcategories, the same SIC groups identified earlier
were used to obtain the averages. The values are as follows:
Color TV picture tubes fmc = 0.597
Other CRT fmc = 0.647
Luminescent coatings fmc = 0.632
II.2.4 Treatment Costs to Finns' Profit. Manufacturing plants (or
establishments) are often treated organizationally as independent profit and
loss centers by the parent firm. That is, the plant manager is responsible
for developing a sales plan, a budget and then carrying out all activities
(such as operating the facility, purchasing raw materials, maintaining a work
force, marketing the product, etc.) so that a profit results at year end.
* 1977 Census of Manufacturers, Appendix A.
3-6
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However, if capital investment is required for plant modification or new
equipment, the necessary funds may be appropriated from a higher organiza-
tional level than the plant. Assuming the outlays are relatively modest, it
is reasonable for the firm to consider financing the new investment from its
earnings rather than by borrowed capital. Therefore it is useful to consider
how additional plant treatment costs compare to the net income of the parent
firm. To make this comparison, the annual treatment cost is divided by the
reported net income* for the firm. This calculation is possible only for
those firms that are publicly-owned and are required to report.
11.2.5 Capital Requirement to Plant Investment. The capital investment
portion of treatment cost (TCC) is compared to an annual investment estimate
at the plant level. The annual plant investment for each of the three
industry subcategories is for one year as reported in the 1977 Census of
Manufacturers at the four-digit SIC level. The same SIC groups discussed
earlier for each of the three industry subcategories are used here. The plant
investment for each subcategory is related to value of shipments to derive a
ratio as follows:
CAP
where
CAP = Capital investment, plant-level (one year)
fcap = ratio of plant investment to plant-level sales computed at the
four-digit SIC code level for 1977.
= [new capital expenditures]
(value of shipments)
The derived values of the ratio for the industry subcategories are:
Color TV picture tubes fcap = 0.0327
Other CRT fcap = 0.0361
Luminescent coatings ^cap = 0.0541
II.3 Financial Ratios
Production of the electronic components relevant to this study are often
a small part of a firm's total output. Therefore, it is difficult to assess
* Form 10-K, Securities and Exchange Commission, Washington, D.C. and
Moodys Industrial Manual.
3-7
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the impact of treatment costs on the firm except for the crude measure of
treatment cost to net income discussed above. However, it is possible to
jau^e the relative health of a firm (without considering treatment costs) by
using financial ratios. Three ratios have been selected for this analysis:
1. Current assets to current liabilities ("current ratio") ;
2. Sales to net working capital; and
3. Return on assets.
Before describing the ratios, it is important to note their limitations.
II.3.1 Limitations. Generally, the use of ratio analysis is a series of
necessary, but not sufficient, tests. As the analyst finds satisfactory
ratios, he moves on to the next test. When an unsatisfactory ratio is found,
the factors involved are flagged for further investigation. The way that
further investigation proceeds depends a great deal on the access to accounts
and records usually considered to be proprietary by the firm. Even exper-
ienced analysts sometimes have difficulty getting to the root cause of an
unsatisfactory trend revealed by a financial ratio.
The trends identified using the financial ratios represent the relation-
ships of two financial items but the information provided is rather super-
ficial since it does not shed light on the relative behavior of the two
items. As an example, assume a rise in a firm's "current ratio" (current
assets divided by current liabilitiesa basic indication of a company's
ability to meet payment obligations from current assets). It is not suf-
ficient to know the ratio increased; it is more important to know why. The
cause could be:
1. A rise in current assets and a decline in current liabilities;
2. A rise in both current assets and current liabilities but
with current assets moving at a faster relative rate; and
3. A decline in both but with a more rapid decline of current
liabilities.
In ratio analysis work, another important and most difficult problem is
to establish norms of satisfactory or unsatisfactory relationships. The
quality of a company's management, its policies, operations, competitive
position, and future plans must also be carefully considered. Many of these
factors are more closely held than financial statements. In addition, the
impact of economic, technological and environmental factors, acquisitions and
divestitures as well as many other factors must be considered. For example,
temporary distortions in financial ratio trends can be very significant when
North American Philips acquired General Telephone and Electronics1 television
set business in 1981.
3-8
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II.3.2 Recommended Ratios. The financial relationships of each of
the publicly held firms associated with manufacturing activities in the
three subcategories are calculated to obtain a relatively broad view of
the financial health of the firm. Particular attention is directed
towards a firm's ability to incur additional debt without a major change
in its financial structure. The following ratios are used in the analysis:
Current Assets to Current Liabilities. Current assets are the sum of
cash, notes and accounts receivable (less reserves for bad debt), advances
on merchandise, merchandise inventories, and listed federal, state and
municipal securities not in excess of market value. Current liabilities
is the total of all liabilities falling due within one year. This is
perhaps the most common test of short-term solvency. Normally a ratio of
2 to 1 or better is considered good.
Sales to Net Working Capital. The net sales figure is divided by net
working capital. This provides a guide as to the extent the company is
turning over its working capital and the margin of operating funds. This
ratio is a good measure of both efficiency and profitability.
Return on Assets. Profit after taxes is divided by total assets.
This ratio is a key indicator of the profitability of a firm. It matches
operating profits with the assets available to earn a return. Firms that
have been effectively managed will have a relatively high return while the
returns of less well-run businesses will be relatively low.
These three ratios are indicators of solvency, ability to meet short
and long term debt, how well a company uses and controls its assets,
profitability, and lastly, how successfully a business is earning a return
for its owners.
III. Closure Analysis
It is possible that a plant, or product line within a plant, may close
due to the burden of additional treatment cost. Lacking information about
product line diversification at each plant as well as production value for
each product line, a high confidence closure analysis is not feasible.
Instead, judgments are made about closure possibilities by examining the
values of the impact measures, the financial ratios of the parent company
and other characteristics known about some of the firms.
IV. Production and Employment Impacts
Reductions in total industry output could result if cost increases due
to treatment are passed on in the form of higher prices and the demand is
sensitive to the price change. However, the three industry subcategories
are associated with the manufacture of componentsnot end-productsused
by downstream manufacturers. Therefore, the potential price increases
3-9
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calculated for plant outputs of interest in this study are likely to be
lower in terms of price changes of end-products in which the components
are used. Without specific data on the elasticity of demand for the three
industry subcategories, judgments are made about the production implica-
tions based on the magnitude of the potential price increases. If treat-
ment costs are absorbed by the manufacturers then profits are reduced and
there is no change in price, and hence no change in production.
Employment impacts are derived from production changes based on value
of production per worker. (For example, value per worker for luminescent
coatings plants average $75,000 per year as noted earlier.)
V. Foreign Trade Impacts
Foreign trade impacts are judged based on the magnitude of treatment
costs, assuming they are passed through. The evaluation is made at the
industry level rather than for individual plants. Judgments about foreign
trade are difficult because factors other than treatment costs are impor-
tant, but currently are subject to major uncertainty. These factors have
resulted in, (1) U.S. firms opting to close plants here, and transferring
their production overseas to other plants owned by the U.S. parent firm
and (2) foreign-owned firms opting to open plants in the United States.
The impact of treatment costs on foreign trade is judged in light of the
magnitude of treatment cost impacts at the industry subcategory level.
VI. New jiources
Requirements for treatment by new sources can discourage, and possibly
preclude, new entries in the industries of interest. To estimate the
possible cost disadvantage for new sources, costs associated with higher
treatment levels are postulated for new sources and compared with treatment
for existing plants. The incremental cost for the higher level of treatment
is attributed to the treatment requirements promulgated for new sources.
For color TV picture tubes and other CRT's, two cases relative to raw
waste load are developed for new plants. Case A analyzes the impact of
the incremental treatment costs between Option 2 and Option 3 because
existing indirect dischargers will be required to attain a level of
treatment equivalent to PSES-2. Case B analyzes the impact of the total
treatment cost for Option 3 because no regulation is being proposed for
existing direct dischargers and a new new direct discharger may incur the
total cost between no treatment and a level of treatment equivalent to
BAT-3.
Three sizes of model plants are used for the new source analysis. The
plant sizesspecified in terms of wastewater floware based on the range
of plants identified in the Proposed Development Document. The wastewater
flows are related to model plant production using a range of production/
3-10
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wastewater flow relationships observed for existing plants. The annual
treatment cost is then compared to value of production of each model
plant. The capital investment portion of the model plant treatment cost
is also considered in judging the potential impacts of treatments for new
source s.
VII Small Business Analysis
The Regulatory Flexibility Act of 1980 requires that the effects of
proposed regulations on small businesses be considered. The analysis
considers the distribution of treatment costs among firms using company
sales and employment to describe the size of the firm. The proportion of
total treatment costs borne by small and large firms is calculated.
3-11
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Section 4
Effluent Limitations Guidelines Options
and Compliance Costs
I. Introduction
The Federal Water Pollution Control Act Amendments of 1972 established a
comprehensive program to "restore and maintain the chemical, physical, and
biological integrity of the Nation's waters" (Section 101 (a)). To implement
the Act, EPA was to issue effluent limitations guidelines, pretreatment stan-
dards, and new source performance standards for industrial dischargers. The
Act included a timetable for issuing these standards. However, EPA was
unable to meet many of the deadlines and, as a result, in 1976, it was sued
by several environmental groups. In settling this lawsuit, EPA and the
plaintiffs executed a court approved "Settlement Agreement." This Agreement
required EPA to develop a program and adhere to a schedule in promulgating
effluent limitations guidelines, new source performance standards, and pre-
treatment standards for 65 "priority" or toxic pollutants and classes of
pollutants for 21 major industries (see Natural Resources Defense Council,
Inc., v. Train, 8 ERC 2120 (D.D.C. 1976), modified, 12 ERC 1833 (D.D.C. 1979).
Many of the basic elements of this Settlement Agreement program were
incorporated into the Clean Water Act of 1977. Under the Act, the EPA pro-
gram is to set a number of different kinds of effluent limitations and stan-
dards. The following is a brief summary:
Best Practicable Control Technology Currently Available (BPT)
BPT applies to existing direct dischargers. The limitations are
generally based on the average of the best existing performance at plants
of various sizes, ages and unit processes.
Best Available Technology Economically Achievable (BAT)
BAT also applies to existing direct dischargers. These limitations, in
general, represent the best existing performance in the industrial sub-
category or category.
Best Conventional Pollutant Control Technology (BCT)
BCT replaced BAT for the control of conventional pollutants (BODj, TSS,
oil and grease and pH). The Clean Water Act requires that BCT limita-
tions be assessed in light of a two part "cost-reasonableness" test.
New Source Performance Standards (NSPS)
NSPS apply to new facilities which discharge directly into the Nation's
waterways and are based on the best available demonstrated technology.
-------
Pretreatment Standards for Existing Sources (PSES) and for New Sources
(PSNS)
PSES and PSNS control the discharge of pollutants which pass through,
interfere with, or are otherwise incompatible with the operation of a
publicly owned treatment works (POTW). These limitations are to be
technology-based, with PSES analogous to BAT and PSNS to NSPS.
The role of this report is to analyze the economic impact of water
pollution controls on the electronics industry, specifically, color tele-
vision picture tubes, other cathode ray tubes, and luminescent coatings. As
required by the Clean Water Act, this study presents for consideration the
projected economic impacts of complying with proposed regulations.
II. Treatment Technology Options
A total of 27 plants are covered by the proposed regulation. Treatment
technologies appropriate to the two subcategories are developed in the Pro-
posed Development Document in Section 7. The treatment technologies
considered are summarized below:
II.1 Cathode Ray Tubes*
Option 1; No required treatment. The Clean Water Act and the Settlement
Agreement allow exclusion of regulatory requirements under specific condi-
tions. Thus, this is a zero cost option because current treatment of waste-
water is sufficient.
Option 2; Solvent management to control total toxic organics, chromium
reduction with the use of sulfuric acid and sodium bisulfite, chemical pre-
cipitation and clarification of all metals-bearing process wastes, sludge
de-watering and pH adjustment.
Option 3; Option 2 plus multimedia filtration
II.2 Luminescent Coatings
Option 1; No required treatment
* In this section color TV picture tubes have been combined with all
other cathode ray tubes.
4-2
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Option 2; Chemical precipitation and clarification of all metals-
bearing process wastes using lime, a coagulant aid and a polyelectrolyte,
sludge de-watering and pH adjustment.
These treatment options are applied to each regulation. The specific
designations of options by regulation appear in Table 4-1.
Table 4-1. Treatment Option by Regulation
and Type of Discharger
1
Option 1
1
2
1
Existing I
Direct I/ I
BPT/BAT-1
BPT/BAT-2
BPT/BAT-3
1
Existing
Indirect
PSES-1
PSES-2
PSES-3
1
I New I
I Direct 1
NSPS-1
NSPS-2
NSPS-3
1
New
1 Indirect
PSNS-1
PSNS-2
PSNS-3
BCT, and BAT all apply to existing direct dischargers. However,
BCT limitations are not being set more stringent than BPT for this industry.
Hereafter, the treatment options will be referred to as BAT-1, BAT-2, etc., for
simplicity.
I/,
Option 3 applies only to the cathode ray tubes subcategory.
4-3
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III. Current Treatment and Treatment Costs
III.l. Current Treatment
EPA contacted or visited as many of the existing facilities as possible to
determine current treatment practices. Table 4-2 summarizes the treatment in
place determinations.
III.2 Treatment Costing
This part covers the estimation of treatment costs for new and existing
sources. In all cases, Option 1 is excluded from treatment costing because
it would require no treatment of wastewater effluents.
III.2.1. Treatment Costing for Existing Sources. Model plant costs are
developed in Section 9 of the Proposed Development Document. The detailed
discussion of assumptions and of cost sources appear in that section. From
those model plant costs (which are calculated for a variety of flow sizes),
specific plant costs are determined based in EPA's knowledge of the flow size
and existing treatment at each facility. EPA realizes that actual costs at
each facility may differ depending upon raw waste pollutant concentrations,
geographical considerations, etc. Monitoring of wastewater is required for
direct and indirect dischargers. For each plant, $2,500 for capital
investment and $13,000 per year for operation and maintanence is included in
the treatment cost. For plants that currently are zero discharges, there are
no monitoring costs. '
Table 4-2. Current Treatment-in-Place by Option
for Existing Sources
Luminescent Coatings
Direct
Indirect
Zero
Number of
Plants
5
2
2
1
Option 1
BAT-1 or
PSES-1
2
2
NA
Option 2
BAT- 2 or
PSES-2
2
1
NA
Option 3
BAT-3 or
PSES-3
NA
NA
NA
Cathode Ray Tubes (CRT) 22
Direct
Indirect
Zero
1
16*
5
1
16*
NA
1
3
NA
1
1
NA
Note: Some plants have partial treatment in-place for Option 2.
* Includes two plants for which information on current treatment is not
available; one of these plants will be relocated in the near future.
4-4
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Tables 4-3A and 4-3B summarize the estimated treatment costs for existing
sources; annual costs shown are calculated as the sum of the investment cost
annualized over five years at a discount rate of 13 percent, plus the yearly
operation and maintenance cost.
Table 4-3A
BAT Treatment Costs by Option
($000)
Sub- I Number [Number of Plants I Capital Investment [Total Annual Costs
category I of [Incurring Costs I I
Plants [Option 2|Option 3| Option 21 Option 3 I Option 2 I Option 3
Luminescent
Coatings
CRT's
TOTAL
1
2
1
3
1
2 N.A. 5.00 N.A.
1 1 2.50 2.50
3 1 7.50 2.50
1 1 1
27.4
13.70
41.1
1
N.A.
13.70
13.70
1
Table 4-3B
PSES Treatment Costs by Option
($000)
Sub- 1
category 1
1
Luminescent
Coatings
CRT's
TOTAL
BAT & PSES
TOTAL
Numbe r
of
Plants
2
14
16
19
[Number of
1 Incurring
[Option 21
2
14
16
19
Plants |
Costs I
Option 31
N.A.
14
14
15
Capital
Option
98.
4945.
5044.
5051.
40
60
00
50
Investment
2 [Option
N.
5648.
5648.
5651.
3
A.
50
50
00
1 Total
1
Annual Costs
1 Option
84.
2743.
2828.
2869.
9
8
70
80
2 [Option
N.
3042.
3042.
3055.
3
A.
25
25
95
4-5
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III.2.2 Treatment Costs for New Sources Because it is difficult to
project the type of facility that may be built in the future, three models
sizes of plants were coated for each of the two major subcategories. All
treatment costs are estimated with respect to raw waste load. The model
plant treatment costs are shown in Table 4-4; the estimates include the same
per plant monitoring costs discussed earlier.
Table 4-4. Model Treatment Costs by Option for NSPS and PSNS*
($000)
I Model Plant I Capital Investment I Total Annual Costs
Subcategory I Flow Size (gpd) I Option 2 I Option 3 I Option 2 I Option 3
Luminescent
Coatings
CRT's
1
10,000
100,000
250,000
10,000
100,000
500,000
91.1
628.9
1,163.2
107.9
693.0
1,569.5
1
96.1
672.2
1,255.6
113.1
736.3
1,734.5
1 1
68.2
328.5
589.6
75.5 .
392.1
836.7
1 1
70.3
336.4
628.0
77.6
410.0
905.2
* NSPS and PSNS model plant compliance costs are identical.
4-6
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Section 5
Results of Analysis
I. Baseline Analysis
I.I Industry-Wide by Subcategory
Table 5-1 shows the 1982 base-line estimates for three industry segments:
color TV picture tubes, other CRT's and luminescent coatings. For TV picture
tubes and other CRT's, baseline values are shown for production quantity,
value of production, unit price and industry profit. For the luminescent
coatings, production quantities and unit prices are not known and only total
value of production and industry profit are estimated.
Table 5-1
1982 Baseline Estimates by Industry Segment
(1982 $)
1 Color TV
1 Picture
1 Tubes
Production
Quantity (million units)
Value of Production (million $)
Unit value ($ per tube)
Industry Profit (million $)-/
11.
1048.
91.
364.
1
5
60
18
9
1 1
1 Other I Luminescent
1 CRT i Coatings
0.52 NA
137.44 345.00
264.30 NA
63.00 132.13
1 1
Notes:
NA = not available.
Industry profit based on ratio of unadjusted profit to value of ship-
ments at the 4-digit SIC level; the ratios are:
0.348 for color TV picture tubes
0.458 for other CRT
0.383 for luminescent coatings
Sources:
For Color TV picture tubes, production quantity and value are based on
1980 and 1981 data from 1982 Edition of Electronic Market Data Book,
Electronic Industries Association, and U.S Industrial Outlook 1982, U.S.
Dept. of Commerce, January 1982.
For Other CRT, production quantities and value of production are derived
from U.S. Dept. of Commerce, Bureau of the Census, Current Industrial
Reports, 1980.
For luminescent coatings, value of production is based on (a) sales and
employment for three plants in the EIS data file and (b) employment in one
plant supplied by EPA.
-------
For color TV picture tubes, 11.5 million picture tubes is the estimated
1982 production with a value of $1.05 billion based on a unit value of $91.18
per tube. Unadjusted profit is estimated at $364.90 million (based on the
unadjusted profit to sale ratio of 0.348 derived in Section 3).
For other CRT's, 1982 production is estimated at 0.52 million units with a
value of $138.5 million based on unit value of $264.30 per tube. The unad-
justed profit for this industry subcategory is estimated at $63.4 million
(based on an unadjusted profit to sales ratio of 0.458 derived in Section 3).
For luminescent coatings, total value of production in 1982 is estimated
at $345 million. The unadjusted profit for this subcategory is estimated at
$132.1 million (based on unadjusted profit to sales ratio of 0.383 derived in
Section 3).
1.2 Financial Ratio Analysis of Firms
The ratios developed in Section 3 were calculated and are shown in Table
5-2 for ten firms; five firms are in color TV picture tube manufacturing, four
in other CRT, three in luminescent coatings. Thus, of all the companies under
study, financial statements were available for 10 of 21 firms. The financial
statements of most of the smaller firmsprivately owned for the most part
are not available.
The financial ratios in Table 5-2 are compared to industry data developed
by Dun and Bradstreet and shown in Table 5-3. Of the ten firms shown in Table
5-2, six showed current ratios (assets to liabilities) of less than 2 which is
a rule-of-thumb for identifying possible risk. They are RCA, GE, Sony,
Raytheon, Litton, and Westinghouse. Of these, only Litton Industries has
higher than average value of return on assets. However, all are somewhat
above average in the net sales to working capital ratio which is perhaps the
best measure of efficiency and profitability.
Based on the analysis of one year (1981) alone, not one of these firms
appear financially weak, although Sony and Tektronix are at, or somewhat
below, the median in all three ratios. To investigate further, each firm has
also been evaluated using data covering several years (two to five depending
on the data available), shown in Table 5-2. When the ratios are averaged
over several years and compared to Dun and Bradstreet industry medians and
high and low quartiles shown in Table 5-3, it is not surprising to note that
most TV picture tube and other CRT manufacturers have experienced a number of
lean years financially. Several reasons can be identified to explain this
decline. First, and most importantly, each of these firms is large and
diversified, producing many products, some of which have been severely
affected by nationwide economic conditions. Second, they tend to be in
industries under heavy pressure from international competition. Also, the
performance of the dollar in relation to other currencies has made their task
more difficult as have high interest and inflation rates.
5-2
-------
Table 5-2
Financial Ratio Trend Analysis
Firm's Subcate- 1
gory and Firm I
Color TV Tubes
General Electric**
NA Philips**
(Formerly GTE)
RCA**
Sony
Zenith
Other CRT
Hewlett Packard
Litton
Raytheon
Tektronix
Westinghouse**
Ratio
Code*
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
I Average
1 Ratio
1.3
11.0
8%
2.67
3.29
5.5%
1.5
8.17
4.4%
1.24
6.65
6%
2.45
4.09
3%
2.23
3.65
11.33%
1.51
5.2
8.5%
1.33
9.09
9%
2.75
2.87
10%
1.19
33.85
4%
1
1 1981 I
1.24
13.16
8%
2.48
3.63
6
1.78
10.59
1%
1.72
5.79
6%
2.13
4.42
2%
2.42
2.42
11%
1.53
5.19
8%
1.33
9.6
10%
2.67
2.96
8%
1.03
84.01
5%
(Ratio
1980
1.30
10.89
8%
2.86
2.95
5
1.49
7.11
4%
1.27
6.51
10%
2.76
3.76
4%
2.16
2.16
12%
1.49
5.21
9%
1.32
10.09
10%
1.79
2.80
10%
1.26
9.99
6%
Values)
I 1979 1 1978
1.37
8.94
8%
1.45 1.69
7.47 5.86
5% 6%
1.18
7.64
2%
2.12
2.12
11%
1.31 1.35
9.53 8.31
9% 8%
2.8
2.85
12%
1.29
7.56
1%
1 1977
1.70
6.02
6%
1.35
7.89
7%
Source: 1981, 10-K Reports.
*Firra's average for each of the three ratios is based on values over the 2
to 5 years as displayed in the table. Ratio code is as follows:
1 = Current Ratio (Current Assets to Current Liabilities).
2 = Net Sales to Net Working Capital.
3 = Return on Total Assets in Percent.
**These firms also produce luminescent coatings.
5-3
-------
Table 5-3
Comparative 1981 Dun and Bradstreet Industry Ratios (SIC 3671-79)
Electronic Components and Accessories (108 Firms)**
Upper Quartile
Median
Lower Quartile
1 Current Assets
1 Current
1 Liabilities
3.8
2.5
1 1'7
1 Net Sales
1 Net Working
1 Capital
9.0
4.9
1 3'2
I Net Profit
1
1 Total Assets
18.2
10.6
1
Source: Key Financial Ratios in 125 Lines of Business, Dun and Bradstreet
Inc. 1981.
**The Dun and Bradstreet industry (SIC) ratios are arranged in ordei of
"quality" with the best at the top and the weakest at the bottom. The figure
in the middle becomes the median for that ratio in that line of business. The
upper and lower figures typify the experience of firms in the top and bottom
halves of the sample. Though not relevant to the data shown in this table, it
is important to note that upper quartile figures are not always the highest,
nor are lowest quartile figures always the lowest numerically. The upper
quartile listings represent judgmental ranking, thus the upper quartile
represents the best condition in any given ratio and is not necessarily the
highest numerical value.
Analysis of each of the three ratios based on the firms multi-year aver-
age, results in the following observation.
Current Ratio; Only two firms (Tektronix and N.A. Philips) exceeded the
median. Since the rule of thumb for healthy solvency is 2, it is obvious that
money is tight for this industry sector, however solvency is not necessarily
the main issue because other ratios indicate relative strength in other areas.
Net Sales to Net Working Capital; This ratio indicates that four
corporations are below the median (Zenith, Tektronix, Hewlett Packard and
N.A. Philips). According to the current ratio analysis, N.A. Philips and
Tektronix are among the most solvent firms in the sample. Furthermore, Hew-
lett Packard has one of the highest reputations among the nation's corpora-
tions. In these three cases, it is unlikely that inefficient management of
assets is the cause of the relatively low ratios.
Return on Total Assets; Returns have been low for several years for
almost all firms in included in the investigation. Only Hewlett Packard
reached the 1981 Dun and Bradstreet median with their corporate three-year
average.
5-4
-------
Several firms come to our attention as each financial ratio is analyzed
separately. When these firms' performance is evaluated with respect to all
three ratios, the following observations can be made. Several firms have a
relatively low solvency rating but show no marked weakness in the ratios that
highlight management efficiency and profitability. Hewlett Packard, N.A.
Philips, Tektronix and Zenith have relatively low net sales to working
capital ratios but the first three of these are at the top of the industry in
other ratios. Return on assets has been low for several years for all firms
except Hewlett Packard which indicates that these are difficult economic
times but none of the publicly held corporations in this study are judged to
be in serious financial difficulty.
1.3 Baseline Projections
As discussed in Section 2, annual growth in color TV picture tubes between
1981-85 is anticipated to be 6.9 percent (in current dollar value) by industry
observers. Allowing for a six percent annual rate of inflation over that
period, the real increase (1.07 percent annually) would result in 1985 value
of production that is 4.3 percent greater than in 1981. However, it seems
that 1982 will show little if any growth over 1981 due to the current business
slump. To meet a 1985 production value that is 4.3 percent over 1981 in three
years instead of four will require an annual real rate of growth averaging
1.43 percent annually in 1983, 1984, and 1985. This accelerated pace (com-
pared to 1.07 percent annually) does not seem unrealistic (assuming the
economic downturn does not persist into 1983) in light of the expanding demand
for color tubes in many different new applications as discussed earlier.
Thus, the 1985 U.S. production value is projected to be $1.1 billion, in con-
stant 1982 dollars. (This projection assumes no major changes in U.S. market
penetration by imported tubes or large reduction in import share of the U.S.
market due to protectionist measures adopted by the U.S. government.)
Military and industrial uses of other CRTs will create additional demand
over the next several years. A nine percent annual growth over the 1981-85
period is anticipated by industry experts. Allowing for a six percent annual
rate of inflation suggests that 1985 production value will be 11 percent (in
real terms) over the 1982 baseline value. Therefore, the 1985 value of pro-
duction is projected to be $154 million, in constant 1982 dollars.
II. Impact Analysis (Existing Producers)
II.I Industry-wide Impacts by Subcategory
II.1.1 Color TV Picture Tubes. Table 5-4 shows the impact of Options 2
and 3 on the TV picture tube industry subcategory. In Option 2, total annual
cost is $1.907 million, and if treatment costs are fully absorbed by manufac-
turers, baseline profit is reduced by this amount which is 0.52 percent of the
baseline profit for the industry subcategory; if costs are passed on in the
5-5
-------
Table 5-4
1982 Impact Estimates (1982 $)
Industry Segment: Color TV Picture Tubes
Value of
Production;
million $
Value per tube; $
Industry Profit;
million $
1982
Baseline!/
1,048.60
91.18
364.90
1982 Impact Projections^/
Option 2
Costs
Are
Absorbed
1,048.60
(0%)
91.18
(0%)
362.99
(-.52%)
Costs
Are
Passed
Through
1,050.51
(+.18%)
91.35
(+.18%)
364.90
(0%)
Option 3
Costs
Are
Absorbed
1,048.60
(0%)
91.18
(0%)
362.73
(-.60%)
Costs
Are
Passed
Through
1,050.77
(+.21%)
91.37
(+.21%)
364.90
(0%)
1
~ Baseline production is 11.50 million units.
'Percent changes from baseline are noted in parentheses.
Option 2 Annual Treatment cost = $1.9069 million
Option 3 Annual Treatment Cost = $2.1731 million
5-6
-------
form of higher prices, the price is expected-to rise by about $0.17 per tube
which is 0.18 percent of the baseline unit price.
For Option 3 the total annual cost is $2.173 million and if treatment
costs are fully absorbed, baseline profit is reduced by 0.60 percent. If
Option 3 treatment costs are passed through, then the price increases by $0.19
per tube which is 0.21 percent of the baseline unit price.
II.1.2 Other CRT. Table 5-5 shows the impact of Option 2 and 3 on the
other CRT industry subcategory. For Options 2, total annual cost is $864.3
thousand and if treatment costs are fully absorbed by manufacturers, baseline
profit is reduced by an amount equal to the treatment cost; this is 1.37 per-
cent of the baseline profit for the industry subcategory. If the treatment
cost ($864.3 thousand) is passed on by manufacturers, the price is expected to
rise $1.66 per tube which is 0.63 percent of the baseline price.
For Option 3, total annual cost is $896.6 thousand and if fully absorbed
by manufacturers, baseline profit is reduced by this amount which is 1.42
percent of the baseline profit for the industry subcategory. If the treatment
cost is passed through, price is expected to rise by $1.72 per tube which is
0.65 percent of baseline price.
II.1.3 Luminescent Coatings. Table 5-6 shows the impact of Option 2 on
the luminescent coatings industry. For Option 2, total annual cost is $111.2
thousand and if treatment cost is fully absorbed, baseline profit is reduced
by this amount which is 0.08 percent of the estimated baseline profit. If all
treatment costs are passed through, price is expected to rise by 0.03 percent.
II.2 Impacts on Financial Ratios of Firms
The publicly owned companies are large and the impacts measured by the
financial ratios are small. Table 5-7 compares total assets with the treat-
ment cost for Option 3; for example, the annualized treatment costs of three
RCA plants combined ($987,100) has no measurable affect on the financial
ratios given that RCA's total assets are $7.8 billion. Thus, the firm-level
financial ratios are insensitive to the relatively very small changes in value
of assets associated with additional treatment equipment or facilities.
As discussed later in the plant-level impact analysis, one firm (Thomas
Electronics) has three plants with relatively higher impacts than other
plants. However, the firm is privately owned and therefore not required to
publish financial data that would allow analysis of the financial ratios.
5-7
-------
Table 5-5
1982 Impact Estimates (1982 $)
Industry Segment: Other CRT
Value of
Production;
million $
Value per
tube; $
Industry Profit;
million $
1982
Baseline!/
137.44
264.30
63.00
1982 Impact Projections^/
Option 2
Costs
Are
Absorbed
137.44
(0%)
264.30
(0%)
62.14
(-1.37%)
Costs
Are
Passed
Through
138.30
(+.63%)
265.96
(+.63%)
63.00
(0%)
Option 3
Costs
Are
Absorbed
137.44
(0%)
264.30
(0%)
62.10
(-1.42%) I
Costs
Are
Passed
Throuqh
138.34
(+.65%)
266.02
(+.65%)
63.00
(0%)
!/
Baseline production is 520,000 units.
i
Percent changes from baseline are noted in parentheses.
Option 2 Annual Treatment Cost = $850,600
Option 3 Annual Treatment Cost = $882,850
5-8
-------
Table 5-6
1982 Impact Estimates (1982 $)
Industry Subcategory: Luminescent Coatings
Value of
production;
million $
Industry Profit;
million $
1982
Baseline!/
345.00
132.13
1
1982 Impact Projections^/
Option 2
Costs
Are
Absorbed
345.00
(0%)
132.02
(-.08%)
Costs
Are
Passed
Through
345.11
(+.03%)
132.13
(0%)
Option 3
Costs
Are
Absorbed
NA
NA
Costs
Are
Passed
Through
NA
NA
Option 3 not applicable (NA) to this subcategory.
Baseline value of production estimated from plant level data on employ-
ment and sales.
2/
Percent changes from baseline are noted in parentheses.
Option 2 Annual Treatment Cost = $111,230
5-9
-------
Table 5-7
Comparison of Firms' Assets
with Treatment Costs
($000)
1
1
I
I
Total
Assets
1 Treatment Cost
1 (Option 3)
I Capital 1
1 Investment 1 Annual
Color TV Tubes
General Electric*
N.A. Philips*
RCA*
Sony
Zenith
20,942,000
1,854,100
7,856,700
5,287,400
743,200
152.2
317.4
1,861.0
94.9
1,663.5
88.8
197.0
973.4
52.1
877.2
Other CRT's
Hewlett Packard
Litton
Raytheon
Tektronix
Westing house*
2,758,000
3,687,600
3,363,800
953,735
. 8,316,200 .
84.2
0.0
826.5
2.5
84.2 ,
66.0
0.0
404.7
13.7
, 66.0
*These firms also produce luminescent coatings.
II.3 Plant Level Impacts (Existing Plants)
The impact measures developed in Section 3 for individual plants are
shown in Tables 5-8, 5-9 and 5-10 for the three industry subcategories of
color TV picture tubes, other CRT's and luminescent coatings, respectively.
The tables also display the plant sales and annual treatment costs for Option
2 and Option 3, by plant.
II. 3.1 TV Picture Tube Plants. Seven existing plants incur treatment
costs under Option 2 and Option 3. Tables 5-8A and 5-8B reveal that all the
impact measures based on annual costs are relatively small, less than two
percent (except for one plant, Zenith, Melrose, IL.,).
For treatment cost to plant sales TC/Sp,the ratio is less than 0.57
percent for Option 3 and the ratio of treatment cost to manufacturing conver-
sion cost TC/MCC, is less than 0.95 percent. The ratio of treatment cost to
5-10
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unadjusted profit at the plant level is less than 1.55 percent for Option 2
and less than 1.65 percent for Option 3 for any of the plants.
The cost of treatment to the firm's net income ranges up to 5.22 percent
for Option 2 and up to 5.62 percent for Option 3. These values are associated
with one plant (the Zenith plant in Melrose Park, Illinois) and if it is
excluded, the ratio is less than 1.60 for Option 2 or 3. It should be noted
that this Zenith plant is closing and its production will move to Taiwan
according to a recent announcement in Electronic News.
The capital investment portion of treatment cost TCC/CAP, is less than
21.00 percent of annual plant investment if the Zenith plant is excluded; if
Zenith is included, the ratio is as high as 32.91 percent for Option 3,
II.3.2 Other CRT Plants. Eight existing plants incur treatment costs
under Option 2 and incur additional costs for Option 3 as shown in Tables 5-9A
and 5-9B; for two other plants (Litton and Dumont) treatment costs have not
been estimated.
The ratio of treatment cost to plant sales TC/Sp, ranges up to 3.75 percent
for Option 2 and up to 3.88 percent for Option 3. For treatment cost relative
to manufacturing conversion cost TC/MCC, the ratio is as high as 5.79 percent
for Option 2 and 6.00 percent for Option 3. For treatment cost to unadjusted
plant level profit TC/UP the ratio is as high as 8.18 percent for Option 2 and
8.47 percent for Option 3.
For all three of the impact ratios discussed above, the high values are
associated with one plant owned by Thomas Electronics of California. The plants
showing the second and third highest impact in terms of these three impact
measures are owned by same parent company; the second highest set of impact
ratios is for the Clyde, New York plant and the third highest are for the Wayne,
New Jersey plant.
To consider the total treatment cost burden to the Thomas Electronics
Company, aggregate costs were compared to aggregate sales for the three plants.
Also, aggregate costs for the three plants were compared to total company
sales. The ratio of aggregate treatment costs to aggregate plant sales is 1.437
percent for Option 2 and 1.488 percent for Option 3. At the firm level, total
sales are estimated to be "over $400 million" (according to Standard and Poors
Directory of Corporations). Using $400 million as total company sales, the
aggregate treatment costs of the three plants is less than 0.05 percent of firm
sales. Because Thomas Electronics is privately owned and not required to
publish financial data, estimates of treatment costs to net income cannot be
carried out.
The ratio of plant treatment cost to the firm's net income is less than
0.14 percent for any of the publicly owned plants for either Option 2 or 3.
However, it should be noted that net income data are fragmentary for this
industry subcategory. The ratio of capital investment for treatment to annual
plant investment is less than 25 percent for any of the plants, except those
5-16
-------
owned by Thomas Electronics; for the most severely impacted plant of Thomas
Electronics of California, the ratio is 129 percent for Option 2 and 137 per-
cent for Option 3.
Returning to the first mentioned impact measure of treatment costs to
sales, this ratio has been used in other EPA impact studies to identify plants
that potentially might experience severe impacts. If a value of this ratio
equal to, or greater than, one percent is used as a screening criterion, two
plants are severely impacted under Option 2 or Option 3; both are owned by
Thomas Electronics. If a value equal to, or greater than, two percent is
used, the same two plants are noted as potentially severely impacted. With
three percent as a screening criterion, only one plant (Thomas Electronics of
California) is severely impacted. With a criterion of four percent, no plants
are severely impacted under either Option 2 or Option 3.
II.3.3 Luminescent Coatings Plants. Four of the five existing plants
would incur treatment costs under Option 2 as shown in Table 5-10. The U.S.
Radium, Morriston, N.J. plant has no discharge and therefore has no treatment
costs. (Option 3 does not apply to this subcategory.)
All the impacts based on annual treatment costs are relatively small.
None of the impact measures based on annual costs exceed 0.18 percent. The
highest ratio of the capital investment impact measure is less than 1.70
percent.
III. Possible Plant Closures
III.l Color TV Picture Tube Plants
The first mentioned impact measure indicates treatment costs to plant
sales will be less than 0.6 percent for color TV picture tube plants. A plant
may have multiple product lines with dedicated treatment facilities for one or
more particular product line. If so, the treatment costs should be allo-
cated to the selected product line (or lines) which incur the additional
treatment costs. In such cases, the ratio of treatment cost to product line
sales could be higher than the values estimated in the above impact analysis;
if higher than the ratios calculated for the plant, a product line shutdown
may be implied. However, sales data on a product line basis are not available.
Two other impact measurestreatment cost to manufacturing conversion cost
and to unadjusted plant profitsupport the above conclusion that impacts are
slight because the ratios are less than two percent (Option 2 or Option 3) for
any of the plants.
The next impact measure of treatment cost to firm net income is as high as
5.63 percent for one plant (Zenith, Melrose IL). However this plant is
closing as noted earlier, for reasons other than treatment cost impacts.
5-17
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5-18
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Some of the larger firms engaged in TV picture tube manufacturing show
relatively low net incomes., for example, Zenith with $15 million in 1981.
.However, Zenith and the other firms manufacture complete color TV sets and
therefore it does not seem reasonable to consider a possible TV tube plant or
product line shutdown without considering the plant's relationship as a sup-
plier to one of the firms' major product lines. A modest cost increase in the
picture tube can probably be passed through to the downstream TV set manufac-
turer in the same firm. Also, firms such as RCA are large and highly diver-
sified (for example, broadcasting, major appliances, and defense hardware) and
capital investment for treatment at the plant level is not exorbitant compared
to annual investments routinely contemplated by large, diversified firms.
(The Zenith plant has the highest ratio but capital investment for Option 3 is
less than 35 percent of the annual investments at the plant level)-
Based on the observations discussed above, no closures are anticipated
among the color TV picture tube manufacturing plants for any treatment option.
III.2 Other CRT Plants
The three plants owned by Thomas Electronics show the highest impacts as
pointed out earlier. In particular, treatment costs for the Los Angeles plant
are less than four percent of sales under either Option 2 or 3 and the capital
investment component of treatment cost is 129 to 137 percent of the average
annual plant investment for the two options. This plant is small with annual
sales of $1.7 million relative to company sales. The Clyde NY plant is also
small (sales of $2.4 million). It is conceivable that Thomas Electronics
might consider closing one or both the California and New York plants and
consolidate all CRT manufacturing at the Wayne, NJ plant if (1) the Wayne, NJ
plantwith CRT sales greater than the aggreagate sales of the other two
Thomas CRT plantshas slack capacity and (2) the company's major market
opportunities are compatible with expanding their operations on the East
Coast. However, the size of the company (over $400 million in annual sales
and 400 employees) suggest an adequate financial base to afford the expendi-
tures for wastewater treatment. Therefore, no closures of any CRT plants are
expected.
III.3 Luminescent Coatings Plants
None of the coatings plants are closure candidates. As noted earlier, all
of the treatment measures are relatively small.
IV. Production and Employment Impacts
If treatment costs are absorbed by manufacturers, prices of plant output
are, of course, unchanged. Therefore, there are no production or employment
changes due to treatment costs.
5-19
-------
If treatment costs are passed through by manufacturers/ the price increase
of end-products (television sets, instruments containing CRT's and luminescent
coated lamps) is small and unlikely to affect 'demand {and hence production)
for two reasons. First, treatment costs relative to value of production at
the specific plants in any of the three industry subcategories is less than
one percent with the exception of the Thomas Electronic plants discussed
earlier. Secondly, the percent increase in prices for the end-products is
less than the treatment cost impact noted at any of the TV picture tube
plants, the other CRT plants or the coatings plants. This is explained by the
fact that the output of these plants represent only a fraction of the value of
the end-product. For example, assume the price of a component accounts for
one-third the value of the end-product; a scientific instrument sells for $600
and the CRT represents $200 of that selling price. A five percent increase in
the price of the CRT increases the instrument price to $610; thus, the price
of the end-product increases only 1.67 percent (i.e., the component price
increase of 0.05 multiplied by its proportionate share of the end-product
value of 0.333).
The two small CRT plants owned by Thomas Electronics are not expected to
close, but assuming that they did, this does not imply an overall loss of
production. If Thomas closed one or both plants, that decision might well be
based on increasing production at their largest plant in Wayne, NJ. Or, other
firms would increase their production if Thomas Electronics did not opt to
maintain their share of total industry CRT output. Thus, while the geograph-
ical distribution of production might shift if Thomas Electronics closed one
(or two) of its plants, on an industry-wide basis, no reductions in total
output are anticipated as a result of any of the options.
Employment levels in each of the three industry subcategories are not
likely to change due to the costs of treatment Option 2 or 3. This conclusion
derives from the conclusion about production impacts because a constant ratio
of plant employment to production is assumed.
V. Foreign Trade Impacts
The costs for any of the treatment options are not likely to result in
impacts on foreign trade or decisions by U.S. firms to relocate plants outside
the U.S. The treatment cost effects on prices (if passed through) are small
on an industry-wide basis for any one of the three industry segments. This
conclusion applies, even though the treatment cost-to-sales ratios are rela-
tively high for the Thomas Electronic plants discussed earlier. Because these
plants are small, any price increases that might be implemented by that
company is not likely to affect U.S. industry's position in imports or exports
of CRT's.
The decision of some U.S. firms to relocate their production in foreign
countries and the decision of some foreign owned firms to open manufacturing
plants in the U.S. are based on much more fundamental reasons than can be
associated with the relatively small effects of treatment costs. These rea-
5-20
-------
sons include labor cost differentials and overall cost of operations, corpor-
ate strategy for increasing market share and existence (or threat) of import
quotas and/or other measures undertaken at the national level.
VI. New Sources
The additional costs that a new source might incur if higher treatment
requirements are imposed, compared to existing sources, could pose a barrier
to new firms entering the industry or to existing firms who may otherwise
build new plants. Whether or not there will be sufficient demand to attract
new plant investment is not addressed. That issue depends in large degree on
current industry capacity and the intensity with which it is utilized. No
information is available on plant capacity and current utilization. There-
fore, the analysis concentrates on the first issue concerning potential
barriers to entry into the three industry subcategories.
VI.1 Treatment Costs for New CRT Plants
Color TV picture tubes and other CRT's are analyzed as one subcategory and
the treatment costs relative to raw waste load are shown in Section 4. Two
cases for new CRT plants are considered. Case A analyzes the impact of the
incremental treatment cost between Option 2 and Option 3 because existing
indirect dischargers will be required to attain a level of treatment
equivalent to PSES-2.
Case B analyzes the impact of the total treatment cost for Option 3
because no regulation is being proposed for existing direct dischargers.
Therefore, a new direct discharger may incur-the total cost between no
treatment (i.e./ raw waste load) and a level of treatment equivalent to
BAT-3. For both cases, three plant sizes have been selected covering the
range from small (with 10,000 gpd wastewater flow) to large (500,000 gpd).
VI.1.1 Case A
For this case, the incremental cost between Option 3 and Option 2 for the
three plant sizes is shown in Table 5-11; the capital costs range from $7,700
to $167,500 and the annual costs, from $15,800 to $82,200. The relationship
between quantity of tubes produced and wastewater flow for existing color TV
picture tube plants ranges from 10 to 30 tubes per thousand gpd with an
average of 20; these values are applied to both TV picture tube and other CRT
new model plants.
The annual production of CRT tubes for the three model plants is shown in
Table 5-12 for the low, average and high values of 10, 20, and 30 tubes per
thousand gallons per day. The annual treatment cost (shown in Table 5-11) is
then applied to the annual tube production figures in Table 5-12 to obtain the
cost per CRT. The costs shown in Table 5-12 range from $0.02 to $0.63
5-21
-------
Table 5-11. Case A
Additional Treatment Cost for New Sources (1982 $)
(CRT Plants)
Plant Size (gpd)
10,000
100,000
500,000
Capital
Investment
($000) 7.7 45.8
Annual Cost ' 15.8 31.6
($000)
1
167.5
82.2
1
Table 5-12. Case A
Impact of Treatment Cost on Cost per Tube (1982 $)
(New CRT Plants)
CRTs Annual Plant Annual Cost
Plant Produced Production Treatment per
Size per 1000 of CRTs Cost Tube
(gpd) gpd (000) ($000) ($)__
10,000
100,000
500,000
10
20
30
10
20
30
10
20
30
25
50
75
250
500
750
1,250
2,500
3,750
15.8
15.8
15.8
31.6
31.6
31.6
82.2
82.2
82.2
0.63
0.32
0.21
0.13
0.06
0.04
0.07
0.03
0.02
Note: Annual production is based on 250 days per year of
plant operation.
5-22
-------
per tube. If these incremental costs are passed through to buyers, the price
increases range from 0.02 percent to 0.69 percent for color TV picture tubes,
and from 0.01 percent to 0.24 percent for other CRTs; these percentages are
based on tne unit values shown earlier in Table 5-4 for color TV picture
tubes and in Table 5-5 for other CRTs.
The price increases attributed to Option 3 treatment costs for new
sources are very small and not likely to be a competitive disadvantage even
if all the cost is passed through. Also a new plant would take advantage of
iT.ore up-to-date, efficient production processes than used in existing plants;
thus overall costs of manufacturingincluding the additional cost for Option
3--are likely to result in a lower cost per CRT than can be met in existing
plants.
The capital investment costs for Option 3 are modest (assuming that even
a small plant will require capital expenditures of at least one million
dollars) and the price increases that might stem from Option 3 are very
small. Thus, in our judgment there are no significant barriers to new
sources entering the CRT industry that are attributable to treatment costs.
VI.1.2 Case B. The total cost for CRT plants to achieve new source
standards equivalent to Option 3 are shown in Table 5-13 and range from
$113.1 thousand to $1,734.5 thousand for capital investment and the annual
costs range from $77.6 to $950.2 thousand. Table 5-14 shows the impacts of
treatment costs. The cost per CRT range from $3.10 for a small plant (10,000
gpd) with a low output (i.e., CRT's produced per 1,000 gpd) to $0.24 for a
large plant (500,000 gpd) with high output (i.e., 30 CRT's produced per 1,000
gpd) .
Table 5-13. Case B*
Treatment Cost for New Sources (1982$)
(CRT Plants)
Plant Size (gpd)
10,000 100,000 500,000
Capital
Investment
($000) 131.1 736.30 1,734.5
Annual Cost 77.6 410.0 905.2
($000)
5-23
-------
Table 5-14. Case 8
Impact of Treatment Cost on Cost per Tube (1982 $)
(New CRT Plants)
Plant
Size
(gpd)
10,000
100,000
500,000
CRT's
Produced
per 1,000
gpd
10
20
- 30
10
20
30
10
20
30
Annual
Plant
Production
of CRT's
($000)
25
50
75
250
500
750
1,250
2,500
3,750
Annual
Treatment
Cost
($000)
77.6
77.6
77.6
410.0
410.0
410.0
905.2
905.2
905.2
Cost
per tube
($)
3.10
1.55
1.03
1.64
0.82
0.55
0.72
0.36
0.24
* Treatment cost is total for Option 3 (i.e., not the increment
between Option 3 and Option 2).
Using existing plants as a guide, the small plants are likely to be
associated exclusively with CRT's other than TV picture tubes and the value
of production for these tubes in the baseline estimate is $264.30. The $3.10
cost per tube is about 1.2 percent of. the unit value which is the maximum
impact on this industry segment of other CRT's. Using an average output (20
CRT's per 1,000 gpd) the small plants would experience an impact of $1.55 per
tube which is 0.6 percent of the unit value.
Plant size of color TV picture tube plants are likely to be over 100,000
gpd based on existing plants (none of which are smaller than 200,000 gpd).
The value of these tubes is $91.18 in the baseline estimate. Based on the
100,000 gpd plant size, the treatment cost per tube ranges from $1.65 to
$0.55 per tube or from 1.8 percent to 0.16 percent of the unit value.
For either of the above industry segmentscolor TV tubes and other
CRT'sthe ratio of cost to sales value is less than two percent. The value
of production per tube includes plant profits and therefore, the ratio of
treatment cost to production cost would be higher than two percent.
Even so, the higher treatment cost per tube for CRT's other than color TV
tubes are associated with higher value product (i.e., $264.30 versus $91.18)
for color TV picture tubes. Therefore, the impact (cost-to-value) is not as
severe as may be inferred from the $3.10 cost per tube when the CRT's are
analyzed as two industry segments rather than as a single segment.
5-24
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VI.2 New Luminescent Coatings Plants
Three plant sizes were selected covering the range from small (10,000 gpd)
to large (250,000 gpd). We assume that new plants will be required to achieve
NSPS and PSNS wastewater treatment levels equivalent to BAT-2 and PSES-2 and
that existing plants will not be required to attain any higher level of treat-
ment over current, in place, treatment. Therefore the additional treatment
cost burden for new sources relative to existing plants is the total treatment
cost of Option 2. The costs are shown in Table 5-15 for the three plant
sizes; capital investment ranges from $91,100 to $1,163,200, and annual costs
from $68,200 to $589,600. In contrast to the new source CRT analysis (where
there is some information available on plant production quantities and waste-
water flow), there is no information on plant production quantities for
luminescent coatings plants to obtain a relationship between flow and output
quantities. Based on two of the five existing plants where total plant output
appears to be for only one product lineluminescent coatingsplant sales
range from $260 to $1,440 in sales per thousand gallons of wastewater flow;
the average of the two is $850.
Table 5-15
Additional Treatment Cost for New Sources (1982 3)
(Luminescent Coatings Plants)
Plant Size (gpd)
10,000 100,000 500,000
Capital
Investment
($000) 91.10 628.90 1,163.20
Annual Cost 68.2 328.5 589.6
($000)
5-25
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"sing this crude relationship of wastewater flow to sales, treatment cost
as a percent of plant sales is calculated and displayed in Table 5-16. For
the small model plants (10,000 gpd) the treatment cost is as high as 10.5
percent of plant sales and ranges down to 1.9 percent depending on the value
selected for the sales-flow relationship. One existing small plant (U.S.
Radium in Morristown, NJ) suggests that a new small plant in the 10,000 gpd
range would experience an impact of treatment cost to sales of 1.5 to 2.0
percent. (The existing plant with sales of $3.6 million according to the EIS
data file, and 10,000 gpd establishes the high end of the sales to flow
relationship of $1,440 sales per 1,000 gallons.) This magnitude of treatment
cost, irr.pact is small enough so that manufacturing improvements incorporated
in a new plant design might well remove the apparent cost disadvantage
calculated above (however the degree to which the existing U.S. Radium plant
utilizes up-to-date process technology and plant design is not known).
Considering all the plant sizes, Table 5-16 shows a cost to sales ratio
ranging from 10.5 percent to 0.7 percent; therefore if the additional treat-
ment costs were passed through, prices for output of new plants might be
higher by 0.7 to 10.5 percent than output from existing plants.
Table 5-16
Impact of Treatment Cost on Cost to Sales (1982 3)
(New Luminescent Coatings Plants)
Plant
Size
(gpd)
10,000
100,000
500,000
Sales
per 1000
gal of flow
($)
260
850
1,440
260
850
1,440
260
850
1,440
Annual
Plant
Sales
($000)
650
2,125
3,600
6,500
21,250
36,000
16,250
53,125
90,000
Annual
Treatment
Cost
($000)
68.2
68.2
68.2
328.5
328.5
328.5
589.6
589.6
589.6
Annual
Treatment
Cost
to Sales
(%)
10.5
3.2
1.9
5.1
1.5
0.9
3.6
1.1
0.7
Note: Annual sales is based on 250 days per year of plant
operation.
5-26
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The simplified analysis described above does not consider the
relationsnip of coatings plant to downstream users of the product. At least
four of the existing five plants are owned by large firms (RCA, GE,
West ing house, GTE) that utilize the coatings in their CRT and lamp
production; the amount of the new coatings production used captively is
unknown. It seems reasonable that if new plants were built by one of these
firms, or another large corporation, the plants would be large (e.g., 100,000
gpd) and vertically integrated with other plants owned by the firm. Thus
treatment costs would be in the range of 0.5 to 2.0 percent of the value of
coatings output.
The tentative conclusion is that large integrated firms seeking new
sources of luminescent coatings will not face a cost burden from treatment
costs sufficient to dissuade them from building new plants. For new, small
coatings plants that are not vertically integrated with CRT or lamp manufac-
turing, treatment costs may possibly pose a barrier to entering the industry.
VI.3 Comparison of New Luminescent Coatings and New CRT Plants
With regard to capital investment, the additional treatment cost for a new
coatings plant may be as high as 15 times as costly as a new CRT plant of
comparable flow if treatment costs for the CRT are based on Case A. (For
example, at 10,000 gpd the coatings plant investment is $91.10 thousand and
for the CRT plant it is $7.7 thousand, or a ratio of 12 to 1; for the 100,000
gpd plant the ration is 14 to 1.)
If new coatings plants are compared to new CRT plants based on Case B, the
difference in capital costs for treatment are relatively small. In this case,
a CRT plant shows a capital cost that is about 20 percent higher than a
coatings plants of comparable size.
With regard to capital investment, the additional treatment cost for a new
coatings plant may be as high as 15 times as costly as a new CRT plant of
comparable flow. (For example, at 10,000 gpd the coatings plant investment is
$91.10 thousand and for the CRT plant it is $7.7 thousand, or a ratio of 12 to
1; for the 100,000 gpd plant the ratio is 14 to 1.) If we also make a compar-
ison of value of plant output, the small 10,000 gpd coatings plant has annual
sales of $3.6 million (based on the U.S. Radium plant) while a new CRT plant
of the same size has sales of perhaps $10 to $20 million. Thus the capital
cost is substantially higher relative to its sales potential for the new,
small coatings plant than for the new CRT plant. It should be noted that the
additional cost of luminescent coatings plant is the total treatment cost to
achieve BAT-2 or PSES-2 because no regulation is being prepared for existing
plants. For the new CRT plants, the additional treatment cost is the incre-
ment between Option 2 and Option 3 because existing plants will attain BAT-2
or PSES-2.
5-27
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VII. Sir..ill Business Analysis
Under the Regulatory Flexibility Act of 1980, the EPA and other regulatory
agencies are required to consider the effects of proposed regulations on small
companies. This section reviews the potential small business impacts of the
Proposed Regulations for the color TV picture tubes, other CRT's and lumine-
scent coatings industries.
The Act relies on the Small Business Administration (SBA) for guidance in
defining a small firm. The Small Business Act, section three, defines a small
business as:
"...a small business concern shall be deemed to be one which
is independently owned and operated and which is not dominant
in its field or operation. In addition to the foregoing
criteria, the Administration (of the SBA), in making a
detailed definition may use these criteria, among others:
Number of employees and dollar volume of business."
In addition, the SBA published specific employee based guidelines for various
business activities including manufacturing. The SBA defined a small firm as
one with not more than 750 employees. Companies classified in SICs 2831 and
2833 with not more than 250 employees are considered small; this is the
criterion used in this analysis. It should be noted that even 250 employees
may be large, given that the Regulatory Flexibility Act is concerned with
firms with limited resources and is aimed at avoiding regulatory barriers to
entry into an industry.
This analysis is conducted to determine whether small firms bear dispro-
portionate impacts under the proposed effluent guidelines. The firms in the
study are described in terms of their sales and employment. The distribution
of treatment costs incurred by plants belonging to the firms is analyzed.
Six firms from the study sample of eighteen (one-third of the total) may
be candidates for the small business category based on employment of 250 or
less shown in Table 5-17. (This determination cannot be made with certainty
because firm-level sales and employment figures are lacking for five of the
smallest companies.)
The twelve largest firms incur 100 percent of the Option 2 treatment costs
of $2,869,200. The same is true for Option 3; the twelve largest firms incur
all of the $3,055,800 treatment costs. All of these firms have more than 250
employees.
Thomas Electronics (ranked eleventh, based on sales in Table 5-17) is too
large to qualify as a small business but is of concern because it is impacted
by treatment costs to a greater degree than other firms in this study. The
three Thomas Electronics plants incur 6.62 to 6.47 percent of total treatment
cost under Options 2 and 3, respectively.
5-28
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Clinton Electronics (ranked twelfth in sales) incurs costs of $129.7
thousand for Option 2 and $134.7 thousand for Option 3 representing 4.50 and
4.41 percent of the total costs for those options. The total firm sales and
employment are not reported for this privately owned firm.
U.S. Radium (ranked fourteenth in sales) is a small publicly held firm
with sales of $12 million and employment of 190 in 1981. As Table 5-17 shows,
U.S. Radium does not incur costs. Except for Dumont, all other small firms
incur no treatment costs; treatment costs for Dumont are not available.
5-29
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Table 5-17
Firm Ranking by 1981 Sales
1981 Sales
Rank I Firm
1 1
1 Millions $ I
1 Employment
1 Annual Treatment Cost*'
1 ($000)
Option 2
1 General Electric 27,240.0
2 Westinghouse 9,367.5
3 RCA ' 8,004.8
4 Raytheon 5,636.2
5 Litton 4,942.8
6 Sony 3,864.1
7 Hewlett Packard 3,578.0
8 N.A. Philips 3,030.0
9 Zenith 1,275.2
10 Tektronix 1,061.8
11 Thomas Electronics 400.0
12 *Clinton Electronics 41.2
13 *Dumont Electronics 13.5
14 U.S. Radium 12.0
15 *Video Display Corp. 2.1
16 *B-Scan Inc. 1.5
17 Special Purpose Tech. NA
18 Tex-Video Man. NA
-404,000
147,841
119,000
79,500
76,500
38,550
64,000
49,400
28,000
24,028
400
700
230
190
36
25
NA
NA
Option 3
68.2
134.9
864.1
388.7
NA
13.7
63.7
188.3
813.7
13.7
191.1
129.7
NA
07
0
0
0
0
(2)
(2)
(3)
(1)
(1)
(1)
(1)
(4)
(1)
(1)
(3)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
88.8
95.9
973.4
404.7
NA
52.1
66.0
181.6
877.2
13.7
197.8
134.7
NA
0
0
0
0
0
2869.8 (27) 3055.9
*Plant Sales and Employment are used as if they are firm-level data.
**Number of plants included in the study are shown in parentheses. Fewer plan1
counted under Option 3 than Option 2 because Option 3 does not apply to lumninesci
coatings plants.
5-30
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Section 6
Limits of the Analysis
The results of the impact analysis depend on several major assumptions
underlying the methodology and on the accuracy of data used to carry out the
impact calculations. The assumptions and data limitations are discussed in
this section with two main purposes in mind. First/ the reader should be
aware of the major uncertainties in using the results of the economic impact
analysis. Secondly, the discussion of major uncertainties may elicit the
discovery of more appropriate data or methodology which then might be incor-
porated in judgements and decisions that eventually must be made in the pro-
cess of promulgating new regulations.
I. Plants With Multiple Product Lines
There is a lack of information on product lines for individual plants/
particularly the sales value of product lines affected by additional waste-
water treatment. This data deficiency has resulted in the allocation of
treatment cost to total plant sales and therefore may underestimate impacts
on the specific product lines of color TV tubes, other CRTs, and luminescent
coatings which are the subjects of this study. For example, the Tektronix
Company makes various kinds of scientific instruments and many of these
incorporate cathode ray tubes which the firm produces for captive consump-
tion. If additional wastewater treatment is needed just for the CRT produc-
tion line, the impact of treatment costs estimated are low because the costs
are measured against total plant sales of the Beaverton, Oregon plant as
reported in the EIS data file. This problem of potential underestimation of
impacts seems particularly important for the CRT plants with relatively large
sales (such as Tektronix, Raytheon, and Hewlett Packard) because we suspect
that the CRT is only one of the product lines. Also, three color TV picture
tube plants and two luminescent coatings plants may each have several major
product lines; this judgement is based on the wastewater flow associated with
the products addressed in this study compared to the flow reported for the
entire plant.
II. Impact Measure Derivation
To develop plant level impact measures in addition to the treatment cost/
sales ratio, we have estimated manufacturing conversion costs, unadjusted
profit and annual plant investment. The derivations rest on aggregate rather
than plant-specific information and use data that are not up-to-date. The
aggregate data are at the 4-digit SIC level. Therefore, the method impli-
citly assumes each plant operates with the average ratio of sales (a) to
conversion costs, (b) to profit, and (c) to annual investment as the 4-digit
SIC group. In addition, the data used are from the 1977 Census of Manu-
facturers which may not typify the current relationships for each of the
three industry subcategories.
-------
III. Discount Factors
The capital recovery factor used to annualize the investment portion of
the treatment cost is based on a 13 percent discount rate and a five-year
equipment life. The appropriateness of any particular discount rate is
debatable. Therefore, we have examined the sensitivity of plant-level
impacts to two alternative rates; 10 percent and 16 percent. Annual costs
using these rates were calculated for tube manufacturers under Option 3.
(There are five existing color TV picture tube plants and five other CRT
plants that incur capital investment expenditures under this option.)
For color TV picture tubes the 10 percent discount rate reduces the
annual treatment cost by five percent or less, and the 16 percent rate in-
creases the annual costs by five percent or less. The highest impact ratio
of treatment cost sales was computed to be 0.558 percent. With the alter-
native discount rates this value becomes 0.530 percent (for the 10 percent
rate) and 0.586 percent (for the 16 percent rate). Or, in absolute terms the
treatment cost to sales ratio is only altered by 0.028 percentage points.
For other CRT plants, the 10 percent rate reduces annual treatment costs
by four percent or less, and at the 16 percent rate, the annual costs
increase by five percent or less. The highest ratio of treatment cost to
sales using a 13 percent discount rate was computed to be 3.073 percent.
With the alternative discount rates, the ratio becomes 2.950 percent and
3.227 percent for 10 and 16 percent, respectively. In absolute terms the
ratio changes by no more than 0.15 percentage points.
ป
The changes in the treatment cost to sales ratio for the alternative
discount rates are small. None of the conclusions would change if the alter-
native discount rates had been used in annualizing the investment portion of
treatment cost.
IV. Small Companies
Small firms (with only one plant in some cases) are less likely to be
able to pass through their additional treatment costs than large firms.
Large firms operate color TV picture tube plants, other CRT plants, and
coatings plants as part of their vertically integrated business. Small
plants are likely to be privately owned and not required to provide 10-K
information. Therefore, financial ratios cannot be examined to help deter-
mine whether or not the financial condition of small firms makes them more
vulnerable to adverse impacts of treatment costs.
V. Import Policies
If the production level of U.S. cathode ray tubes declines, the existing
plants may be more adversely affected than anticipated because treatment
costs will be spread over a smaller production base. If U.S. production
6-2
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grows over the next few years as anticipated, estimated impacts should be less
severe. There are however, uncertainties. The anti-dumping regulations
imposed by the U.S. on Japanese-made TV receivers may or may not continue.
Also, other protectionist policies could be adopted that apply to the foreign-
made TV picture tubes that are imported and used in TV sets manufactured in
the U.S.
6-3
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