EPA 440/1-77-009
JULY 1977
'1\
ECONOMIC ANALYSIS OF
PRETREATMENT STANDARDS
FOR THE TEXTILE INDUSTRY
II
quantity
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Analysis and Evaluation
Washington, D.C. 20460
u)
O
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ECONOMIC ANALYSIS OF
PRETREATMENT STANDARDS FOR THE
TEXTILE INDUSTRY
Report to
U. S. Environmental Protection Agency
Office of Analysis and Evaluation
Washington, D. C. 20460
Contract No. 68-01-4348
July 1977
Cnic..
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Table of Contents
Page
Preface xiii
Executive Summary S-l
I. INTRODUCTION 1-1
II. METHODOLOGY II-l
Development of the Analytic Framework
Industry Segmentation II-l
Development of Economic Impact Criteria II-l
Net Present Value Model II-3
Price Analysis II-5
Production Analysis II-6
Employment Analysis II-7
Community Analysis II-7
Balance of Trade Analysis II-7
Definition of Representative Plants' Parameters II-7
Preliminary Economic Assessment II-9
Data Gathering II-9
Secondary Data Sources II-9
Survey of Textile End Users 11-10
Survey of the Textile Industry 11-10
Survey of Publicly Owned Treatment Works 11-10
Analysis 11-11
Industry Segment Profiles 11-11
Financial Analysis of Representative Plant and Industry
Segments 11-13
Evaluation of Pretreatment Costs 11-14
Economic Impact Analysis 11-14
III. THE TEXTILE INDUSTRY III-l
The Textile-making Process III-l
Industry Structure III-l
Technical Change III-3
Factors Affecting Prices of Textile Products III-3
Demand III-3
Supply III-5
Foreign Trade III-7
Prices III-8
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Page
Financial Profile III-ll
Future Capital Requirements III-.L2
Financing New Investment III-.L2
Capital Expenditures for Plant and Equipment III-.L3
Asset Depreciation 111-13
Financial Indicators 111-13
Cost of Capital III-L5
Regional Aspects of the Textile Industry 111-18
Labor Costs 111-19
Energy Costs III-L9
Construction Costs 111-20
Municipal User Charges III-21
IV. WOOL SCOURING IV-1
Primary Products IV-1
Industry Description IV-1
Types of Firms IV-1
Plant Characterization IV-1
Trends in Wool Scouring IV-3
Demand, Supply, and Prices IV-5
Demand IV-5
Supply IV-5
Prices IV-6
Secondary Price Increases IV-6
Financial Profile IV-6
Income Statement Data IV-7
Balance Sheet Data IV-7
Invested Capital IV-9
Data Quality IV-9
Pretreatment Standards, Technologies, and Costs IV-11
Pretreatment Control Technologies IV-11
Discharge Status of the Industry IV-13
Pretreatment Control Costs IV-14
Municipal System User Charges IV-16
Anticipated Reaction to Pretreatment Standards IV-16
Economic Impact Analysis IV-16
Price Effects IV-17
Financial Effects IV-20
Production, Employment, and Other Effects IV-22
V. WOOL DYEING AND FINISHING V-l
Primary Products v~l
Industry Description v~l
Types of Firms v~2
Plant Characterization v~2
Trends in the Wool Finishing Segments V-5
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Page
Demand, Supply, and Prices V-5
Secondary Price Increases V-5
Financial Profile V-6
Income Statement Data V-7
Balance Sheet Data V-9
Invested Capital V-9
Data Quality V-ll
Pretreatment Standards, Technologies, and Costs V-ll
Pretreatment Control Technologies V-ll
Discharge Status of the Industry V-13
Municipal System User Charges V-16
Anticipated Reaction to Pretreatment Standards V-16
Economic Impact Analysis V-17
Price Effects V-18
Financial Effects V-18
Production, Employment, and Other Effects V-23
VI. WOVEN FABRIC DYEING AND FINISHING, EXCEPT WOOL VI-1
Primary Products VI-1
Industry Description VI-2
Types of Firms VI-2
Plant Characterization VI-3
Trends in Woven Fabric Finishing VI-8
Demand, Supply, and Prices VI-8
Demand VI-9
Supply VI-9
Prices VI-10
Secondary Price Increases VI-10
Financial Profile VI-10
Income Statement Data VI-11
Balance Sheet Data Vl-12
Invested Capital VI-14
Data Quality VI-14
Pretreatment Standards, Technologies, and Costs VI-16
Pretreatment Control Technologies VI-16
Discharge Status of the Industry VI-18
Pretreatment Control Costs VI-19
Municipal System User Charges VI-20
Anticipated Reaction to Pretreatment Standards VI-20
Economic Impact Analysis VI-22
Price Effects VI-22
Financial Effects VI-26
Production, Employment, and Other Effects VI-32
VII. KNIT FABRIC DYEING AND FINISHING, EXCEPT WOOL VII-1
Primary Products VII-1
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Page
Industry Description
Types of Firms
Plant Characterization
Degree of Specialization
, Trends in Knit Fabric Finishing
Demand, Supply, and Prices
Demand
Supply
Prices
Secondary Price Increases
Financial Profile
Income Statement Data
Balance Sheet Data
Invested Capital
Data Quality
Pretreatment Standards, Technologies, and Costs
Pretreatment Control Technologies
Discharge Status of the Industry
Pretreatment Control Costs
Municipal System User Charges
Anticipated Reaction to Pretreatment Standards
Economic Impact Analysis
Price Effects
Financial Effects
Production, Employment, and Other Effects
VII-2
VII-3
VII-3
VII-5
VII-9
VII-9
VII-9
VII-10
VII-10
VII-10
VII-10
VII-11
VII-12
VII-13
VII-13
VII-15
VII-15
VII-17
VII-18
VII-19
VII-20
VII-20
VII-21
VII-23
VII-28
VIII. CARPET MANUFACTURE, DYEING AND FINISHING
Primary Products
Industry Description
Types of Firms
Plant Characterization
Trends in the Carpet Mills Industry
Demand, Supply, and Prices
Demand
Supply
Prices
Secondary Price Increases
Financial Profile
Income Statement Data
Balance Sheet Data
Invested Capital
Data Quality
Pretreatment Standards, Technologies, and Costs
Pretreatment Control Technologies
Discharge Status of the Industry
Pretreatment Control Costs
Municipal System User Charges
Anticipated Reaction to Pretreatment Standards
VIII-1
VIII-1
VIII-1
VIII-2
VIII-2
VIII-5
VIII-8
VIII-8
VIII-9
VIII-9
VIII-10
VIII-10
VIII-11
VIII-11
VIII-11
VIII-11
VIII-15
VIII-15
VIII-16
VIII-17
VIII-19
VIII-19
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Page
Economic Impact Analysis
Price Effects
Financial Effects
Production, Employment, and Other Effects
IX. STOCK AND YARN DYEING AND FINISHING, EXCEPT WOOL
Primary Products
Industry Description
Types of Firms
Plant Characterization
Trends in Stock and Yarn Finishing
Demand, Supply, and Prices
Demand
Supply
Prices
Secondary Price Increases
Financial Profile
Income Statement Data
Balance Sheet Data
Invested Capital
Data Quality
Pretreatment Standards, Technologies, and Costs
Pretreatment Control Technologies
Discharge Status of the Industry
Pretreatment Control Costs
Municipal System User Charges
Anticipated Reaction to Pretreatment Standards
Economic Impact Analysis
Price Effects
Financial Effects
Production, Employment, and Other Effects
X. LIMITS OF THE ANALYSIS
General Accuracy
Range of Error
Critical Assumptions
Remaining Questions
APPENDIX
A. Incremental Capital Cost and Impact Analysis
VI11-19
VIII-20
VIII-23
VIII-25
IX-]
IX-1
IX-2
IX-2
IX-2
IX-7
IX-9
IX-8
IX-8
IX-8
IX-8
IX-8
IX-9
IX-10
IX-10
IX-10
IX-10
IX-13
IX-15
IX-15
IX-16
IX-16
IX-18
IX-19
IX-21
IX-23
X-l
X-l
X-l
X-2
XT 2
A-l
Figure
II-l. Research Methodology
II-2
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Page
Tables
II-l. Representative Plant Production Capabilities II-8
II-2. Respondents to Textile Industry Survey by Production
Capacity Category 11-11
III-l. The Textile Industry, 1972 III-2
III-2. Major Textile Companies in Today's Textile Industry III-4
III-3. Piece Goods Machines in Place, U. S. III-4
III-4. Textile Industry Operating Rates III-6
III-5. Ratio of U. S. Imports for Consumption to Apparent
Domestic Market for Textile and Apparel Products,
1964-1975 III-7
III-6. Consumer Price Index of Apparel and Textiles II.T-9
III-7. Personal Consumption Expenditures (1969-1976) III-9
III-8. Wholesale Price Index of Textiles and All Industrials III-9
III-9. Capital Expenditures for New Plant and Equipment fot
Textiles and All Manufacturing 111-14
111-10. Profits on Sales: Textiles and All Industrial 111-15
III-ll. Respondents' Net Before-Tax Profit on Sales, 1975 111-16
111-12. Respondents' Interest Rate on Long-Term Debt, 1975 111-17
111-13. Average Industrial Gas Rate by Region, 1976 111-20
111-14. Energy Sales, Revenues, and Cost per KWH for Commercial
and Industrial Users by Region, 1975 111-20
111-15. Average Plant Building Costs, Effective October 1976
to March 1977, with Wall Height 20 Feet, Useful Space
10,000 Square Feet, Average Quality 111-22
111-16. Summary of Waste Treatment Charges for New England
Division 111-24
111-17. Summary of Waste Treatment Charges for the Middle
Atlantic Division 111-25
111-18. Summary of Waste Treatment Charges for the South
Atlantic Division 111-26
111-19. Summary of Waste Treatment Charges for the East South
Central Division 111-28
111-20 Summary of Waste Treatment Charges for the West South
Central Division 111-29
111-21. Summary of Waste Treatment Charges for the Pacific
Division 111-29
IV-1. Wool Scouring and Combing Plants: Number, Employment
Size, and Discharge Status by Region, 1972 IV-2
-VI-
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Tables Page
IV-2. Wool Scouring and Combing Plants by Production Capacity
Category, 1972 IV-4
IV-3. Age of Equipment in the Wool Scouring Industry IV-4
IV-4. Trends from Census Data for Wool Scouring Industry IV-5
IV-5. Pro Forma Income Statement and Financial Data for the Wool
Scouring Industry IV-8
IV-6. Pro Forma Balance Sheet for the Wool Scouring Industry IV-9
IV-7. Invested Capital for the Wool Scouring Industry IV-10
IV-8. Pretreatment Control Costs: Wool Scouring IV-15
IV-9. Wool Scouring: Required Price Increases Necessary to
Offset Pretreatment Control Costs IV-18
IV-10. Wool Scouring: Pretreatment Standard Impacts on Profit-
ability IV-21
IV-11. Wool Scouring: Pretreatment Standard Impacts on Cash
Flows IV-23
IV-12. Wool Scouring: Pretreatment Standard Impacts on Net
Present Values IV-24
V-l. Wool Dyeing and Finishing Plants: Number, Employment
Size, and Discharge Status by Region, 1972 V-3
V-2. Wool Dyeing and Finishing Plants by Production Capacity
Category, 1972 v-4
V-3. Age of Equipment in the Wool Finishing Industry V-5
V-4. Trends from Census Data for the Wool Finishing Industry V-6
V-5. Pro Forma Income Statement and Financial Data: Wool Dyeing
and Finishing Industry V-8
V-6. Pro Forma Balance Sheet for the Wool Dyeing and Finishing
Industry v-9
V-7. Invested Capital for the Wool Dyeing and Finishing Industry V-10
V-8. Pretreatment Control Costs: Wool Dyeing and Finishing V-15
V-9. Wool Dyeing and Finishing: Required Price Increases Neces-
sary to Offset Pretreatment Control Costs V-I9
V-10. Wool Dyeing and Finishing: Pretreatment Standard Impacts
on Profitability V-21
V-ll. Wool Dyeing and Finishing: Pretreatment Standard Impacts
on Cash Flows V-22
V-12. Pretreatment Standard Impacts on Net Present Values V-24
V-13. Wool Dyeing and Finishing Impacted Mills, 1977 V-26
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Tables (Continued) Page
VI-1. Woven Fabric Dyeing and Finishing Plants: Number and Em-
ployment Size by Region, 1972 VI-4
VI-2. Woven Fabric Dyeing and Finishing Plants Municipal Dis-
chargers: Estimated Number and Employment Size by Region,
1972 VI_6
VI-3. Woven Fabric Dyeing and Finishing by Production Capacity
Category, 1972 VI-7
VI-4. Age of Equipment in the Woven Fabric Finishing Industry VI-7
VI-5. Trends from Census Data for Woven Fabric Finishing Industry VI-8
VI-6. Woven Fabric Finishing Plants Value of Industry Shipments VI-9
VI-7. Pro Forma Income Statement and Financial Data: Woven Fabric
Dyeing and Finishing (A) VI-11
VI-8. Pro Forma Income Statement and Financial Data: Woven Fabric
Dyeing and Finishing (B) VI-12
VI-9. Pro Forma Balance Sheet for the Woven Fabric Finishing In-
dustry (A) VI-13
VI-10. Pro Forma Balance Sheet for the Woven Fabric Finishing In-
dustry (B) VI-13
VI-11. Invested Capital for the Woven Fabric Finishing Industry (A) VI-15
VI-12. Invested Capital for the Woven Fabric Finishing Industry (B) VI-15
VI-13. Pretreatment Control Costs: Woven Fabric Finishing VI-21
VI-14. Woven Fabric Finishing: Required Price Increases Necessary
to Offset Pretreatment Control Costs (Type A Mills) VI-24
VI-15. Woven Fabric Finishing: Required Price Increases Necessary
to Offset Pretreatment Control Costs (Type B Mills) VI-25
VI-16. Woven Fabric Finishing: Pretreatment Standard Impacts on
Profitability (Type A Mills) Vl-28
VI-17. Woven Fabric Finishing: Pretreatment Standard Impacts on
Profitability (Type B Mills) VI-29
VI-18. Woven Fabric Finishing: Pretreatment Standard Impacts on
Cash Flows (Type A Mills) VI-30
VI-19. Woven Fabric Finishing: Pretreatment Standard Impacts on
Cash Flows (Type B Mills) VI-31
VI-20. Woven Fabric Finishing: Pretreatment Standard Impacts on
Net Present Values (Type A Mills) VI-33
VI-21. Woven Fabric Finishing: Pretreatment Standard Impacts on
Net Present Values (Type B Mills) VI-34
VII-1. Structure of the Knit Fabric Finishing Segment VII-4
VII-2. Concentration Ratios and Value of Shipments, Knit Fabric
Finishing Industry VII-5
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Tables (Continued)
VII-3. Knit Fabric Dyeing and Finishing Plants: Number and Employ-
ment Size by Region, 1972
VII-4. Knit Fabric Dyeing and Finishing Plants Municipal Dischargers:
Estimated Number and Employment Size by Region, 1972
VII-5. Knit Fabric Dyeing and Finishing Plants Municipal Dischargers
by Production Capacity Category, 1972
VII-6. Age of Equipment in the Knit Fabric Finishing Industry
VII-7. Trends from Census Data for Knit Fabric Finishing Industry
VII-8. Pro Forma Income Statement and Financial Data: Knit Fabric
Dyeing and Finishing
VII-9. Pro Forma Balance Sheet: Knit Fabric Finishing Industry
VII-10. Invested Capital for the Knit Fabric Finishing Industry
VII-11. Pretreatment Control Costs: Knit Fabric Finishing
VII-12. Knit Fabric Finishing: Required Price Increases Necessary
to Offset Pretreatment Control Costs
VII-13. Knit Fabric Finishing: Pretreatment Standard Impacts on
Profitability
VII-14. Knit Fabric Finishing: Pretreatment Standard Impacts on
Cash Flows
VII-15. Knit Fabric Finishing: Pretreatment Standard Impacts on
Net Present Values
VIII-1. Structure in the Carpet Mill Industry
VIII-2. Carpet Mills: Number and Employment Size by Region, 1972
VIII-3. Carpet Mills Municipal Dischargers: Estimated Number and
Employment Size by Region, 1972
VIII-4. Carpet Mills, Dyeing and Finishing Plants by Production
Capacity Category, 1972
VIII-5. Age of Equipment in the Carpet Mill Industry
VIII-6. Trends from Census Data for Carpet Mills
1961
VIII-7. Value of Shipments of Rugs, Carpet, and Carpeting:
to 1975
VIII-8. Domestic Broadloom Carpet Average Mill Value per Square
Yard
VIII-9. Pro Forma Income Statement and Financial Data: Carpet
Mills
VIII-10. Pro Forma Balance Sheet: Carpet Mills
VIII-11. Invested Capital for Carpet Mills
VIII-12. Pretreatment Control Costs: Carpet Mills
VIII-13. Carpet Industry: Required Price Increases Necessary to
Offset Pretreatment Control Costs
Page
VII-6
VII-7
VII-8
VII-8
VII-9
VII-11
VII-12
VII-14
VII-19
VII-22
VII-24
VII-26
VII-27
VIII-3
VIII-4
VIII-6
VIII-7
VIII-7
VIII-8
VIII-9
VIII-10
VIII-12
VIII-13
VIII-14
VIII-18
VIII-22
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Tables (Continued)
Page
VIII-14. Carpet Industry: Pretreatment Standard Impacts on Profit-
ability
VIII-15. Carpet Industry: Pretreatment Standard Impacts on Cash
Flows
VIII-16. Carpet Industry: Pretreatment Standard Impacts on Net
Present Values
IX-1. Structure of the Stock and Yarn Dyeing Industry
IX-2. Stock and Yarn Dyeing and Finishing Plants: Number and
Employment Size by Region, 1972
IX-3. Stock and Yarn Dyeing and Finishing Plants Municipal Dis-
chargers: Estimated Number and Employment Size by Region,
1972
IX-4. Stock and Yarn Dyeing and Finishing Plants by Production
Capacity Category, 1972
IX-5. Age of Equipment in the Stock and Yarn Dyeing and Finish-
ing Industry
IX-6. Trends from Census Data for Stock and Yarn Dyeing and
Finishing Industry
IX-7. Pro Forma Income Statement and Financial Data for the
Stock and Yarn Dyeing and Finishing Industry
IX-8. Pro Forma Balance Sheet for the Stock and Yarn Dyeing and
Finishing Industry
IX-9. Invested Capital for the Stock and Yarn Dyeing and Finish-
ing Industry
IX-10. Pretreatment Control Costs: Stock and Yarn Dyeing and
Finishing
IX-11. Stock and Yarn Dyeing and Finishing: Required Price In-
creases Necessary to Offset Pretreatment Control Costs
IX-12. Stock and Yarn Dyeing and Finishing: Pretreatment Stan-
dard Impacts on Profitability
IX-13. Stock and Yarn Dyeing and Finishing: Pretreatment Stan-
dard Impacts on Cash Flows
IX-14. Stock and Yarn Dyeing and Finishing: Pretreatment Stan-
dard Impacts on Net Present Values
Appendix Tables
A-l. Incremental Impact Analysis:
Medium Mill
A-2. Incremental Impact Analysis:
Large Mill
A-3. Incremental Impact Analysis:
Medium Mill
Wool Scouring, Existing
Wool Scouring, Existing
Wool Scouring, New Source
VIII-24
VIII-26
VIII-27
IX-2
IX-4
IX-5
IX-6
IX-6
IX-7
IX-9
IX-11
IX-12
IX-17
IX-20
IX-22
IX-24
IX-25
A-2
A-3
A-4
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Appendix Tables (Continued) Page
A-4. Incremental Impact Analysis: Wool Dyeing and Finishing,
Existing Small Mill A-5
A-5. Incremental Impact Analysis: Wool Dyeing and Finishing,
Existing Medium Mill A~6
A-6. Incremental Impact Analysis: Wool Dyeing and Finishing,
Existing Large Mill A-7
A-7. Incremental Impact Analysis: Wool Dyeing and Finishing,
New Source Medium Mill A-8
A-8. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, Existing Small Mill A-9
A-9. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, Existing Medium Mill A-10
A-10. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, Existing Large Mill A-ll
A-ll. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, New Source Medium Mill A-12
A-12. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, Existing Small Mill A-13
A-13. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, Existing Medium Mill A-14
A-14. Incremental Impact Analysis: Woven Fabric Dyeing and
Finishing, New Source Medium Mill A-15
A-15. Incremental Impact Analysis: Knit Fabric Dyeing and
Finishing, Existing Small Mill A-16
A-16. Incremental Impact Analysis: Knit Fabric Dyeing and
Finishing, Existing Medium Mill A-17
A-17. Incremental Impact Analysis: Knit Fabric Dyeing and
Finishing, Existing Large Mill A-18
A-18. Incremental Impact Analysis: Knit Fabric Dyeing and
Finishing, New Source Medium Mill A-19
A-19. Incremental Impact Analysis: Carpet Manufacture, Exist-
ing Small Mill A-20
A-20. Incremental Impact Analysis: Carpet Manufacture, Exist-
ing Medium Mill A-21
A-21. Incremental Impact Analysis: Carpet Manufacture, Exist-
ing Large Mill A-22
A-22. Incremental Impact Analysis: Carpet Manufacture, New
Source Medium Mill A-23
A-23. Incremental Impact Analysis: Stock and Yarn Dyeing and
Finishing, Existing Small Mill A-24
A-24. Incremental Impact Analysis: Stock and Yarn Dyeing and
Finishing, Existing Medium Mill A-25
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Appendix Tables (Continued) Page
A-25. Incremental Impact Analysis: Stock and Yarn Dyeing and
Finishing, Existing Large Mill A-26
A-26. Incremental Impact Analysis: Stock and Yarn Dyeing and
Finishing, New Source Medium Mill A-27
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Preface
The attached document is a contractor's study prepared for the Office
of Analysis and Evaluation of the Environmental Protection Agency (EPA).
The purpose of the study is to analyze the economic impact which could
result from the application of alternative pretreatment standards to be
established under sections 307(b) of the Federal Water Pollution Control
Act, as amended.
The study supplements the technical study ("EPA Development Document")
supporting the issuance of final regulations under sections 307 (b). The
Development Document surveys existing and potential waste treatment control
methods and technology within particular industrial source categories and
supports interim final promulgation of pretreatment standards based upon an
analysis of the feasibility of these standards in accordance with the require-
ments of sections 307 (b) of the Act. Presented in the Development Document
are the investment and operating costs associated with various alternative
control and treatment technologies. The attached document supplements this
analysis by estimating the broader economic effects which might result from
the required application of various control methods and technologies. This
study investigates the effect of alternative approaches in terms of product
price increases, effects upon employment and the continued viability of af-
fected plants, effects upon foreign trade, and other competitive effects.
The study has been prepared wtih the supervision and review of the Office
of Analysis and Evaluation of the EPA. This report was submitted in fulfill-
ment of Contract No. 68-01-4348 by the Georgia Institute of Technology, School
of Textile Engineering, and Technology and Development Laboratory, Economic
Development Division. This report reflects work completed as of July 1977.
The study represents the conclusions of the contractor. It has been
reviewed by the Office of Analysis and Evaluation and approved for publica-
tion. Approval does not signify that the contents necessarily reflect the
views of the EPA. The study has been considered, together with the Develop-
ment Document, information received in the form of public comments, and other
materials in the establishment of final pretreatment standards.
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Executive Summary
This study represents an assessment of the probable economic impact on
the textile industry of the costs of proposed pretreatment requirements under
the Federal Water Pollution Control Act Amendments of 1972. Specific focus
was placed on the analysis of probable price effects, financial effects, em-
ployment effects, community effects, and balance of trade effects which are
expected following implementation of pretreatment control guidelines in each
of the following segments of the textile industry:
o Wool Scouring
o Wool Dyeing and Finishing
o Woven Fabric Dyeing and Finishing, Except Wool
o Knit Fabric Dyeing and Finishing, Except Wool
o Carpet Manufacture, Dyeing and Finishing
o Stock and Yarn Dyeing and Finishing, Except Wool
The analysis which provides the framework for this study was based on
several alternative pretreatment strategies and the costs associated with them
for each segment. The effluent guidelines for the industry segments of this
study were proposed in a separate development document.±f
This study was prepared under the supervision and review of the Office of
Analysis and Evaluation of the U. S. Environmental Protection Agency (EPA) by
the Georgia Institute of Technology.
Textile Industry
The overall textile industry situation was examined because of the number
of factors that are common to all of the studied segments of the industry.
The demand for textile mill products is a function of disposable parsonal
income, population trend, and fashion and taste. Textile demand is still feel-
ing the effects of the sluggishness exhibited by the economy in 1975 and early
1976. However, given the accelerated pace of retail trade in late 1976 and the
low level of textile inputs into the system, the stage is set for improved
textile demand in 1977.
Supply of textile products is from both domestic and foreign mills. The
capacity utilization of domestic mills dropped to a low of 67% in 1975 but ha^
improved since then. Textile imports have played a significant role in certain
sectors of the industry. This is especially true for imports of wool textile
and apparel products, which have supplied an average of 20% of the domestic
market for a number of years. The renewal of the Multi-Fiber Arrangement (MFA)
— an agreement covering the imports of wool and man-made fibers — is critical
_!/ U. S. Environmental Protection Agency, Draft Development Document,
Pretreatment Standards for Textile Mills, prepared by Sverdrup & Parcel and
Associates, Inc., November 1976.
S-l
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to the future financial viability of certain textile industry segments. Nego-
tiations for the renewal and possible modification of the MFA are currently
underway.
The pattern of profitability in the textile industry historically has been
at a low level relative to other industries. After-tax earnings on sales of
textile companies have averaged 2.4 cents per dollar of sales in the last five
years, compared with 4.7 cents for manufacturing in general.
Expenditures for new plant and equipment between 1970 and 1974 in the tex-
tile industry averaged just above one billion dollars a year. However, textile
new plant and equipment expenditures as a percentage of all manufactures expendi-
tures declined from a high of 5.62% in 1972 to 3.29% in 1974. In part, this
lower level of investment in new plant and equipment and in modernizing existing
facilities is due to a scarcity of outside equity capital and long-term credit
which is inhibited by the low level of profits.
Since the textile plants must rely on internally generated funds for capi-
tal expenditures, the available capital is limited. The major competing uses
for this available capital in the future are the improvement of production
technology and compliance with government regulations.
Impact of Pretreatment Standards
For the industry segments studied, potential impacts of the proposed pre-
treatment regulations ranged from severe impact with probable closure of plants
for certain pretreatment alternatives in the wool dyeing and finishing industry
segment to virtually no impact for the remaining textile industry segments.
The total capital costs, annualized costs, and economic impacts for the
various segments to meet the pretreatment standards are summarized for each
segment of the textile industry in the tables that follow the narrative portion
of this summary and constitute the core of this executive summary.
Limits of the Analysis
The impact analysis in this study was based upon data and information from
surveys of the textile industry, from published secondary data sources, and
from estimates prepared by the Georgia Institute of Technology. An assessment
of the reliability and the general accuracy of the data, the possible ranges of
errors in key data, and the critical assumptions are described in the report.
In particular, the most significant assumption of this study is that representa-
tive plants characterize the industry sectors. Another limit to the analysis
involves the degree of applicability of the proposed guidelines within each
industry segment.
Critical to an interpretation of the results of this analysis is the fact
that this study is concerned only with the impact of proposed pretreatment con-
trols and, by definition, does not consider the full impact of the aggregate of
existing and potential regulations. It is recognized that other regulatory pro-
grams — either in effect or emerging — will influence the operations and
profitability of the plants covered by this study.
S-2
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TEXTILE INDUSTRY SUMMARY
Segment: Wool Scouring
SIC Code: 22993
1 /
No. of plants indirect discharging poter
No. of plants with treatment in place
Percent of plants indirect discharging
S S, E
5 4
33 25
. ... 25
4
. ... 15
. ... 50
. ... 15
. ... 50
4/
Pretreatment Alternatives—
S, E, N S, E, C
4 0
25 0
S, E, C, B
0
0
Cost of Pollution Abatement
Capital costs for segment
Total capital cost
Total capital expenditures
as percent of total capi-
tal in place5-/
Annualized costs for segment
Total incremental increase
including capital charges
Total incremental increase
excluding capital charges
Total incremental increase
including capital charges
as percent of sales^y
Expected Price Increase
Expected percent increase due to
pollution control
Plant Closures
Total closures anticipated
Percent reduction of segment
capacity due to closures
Employment
Total number of employees
affected
Percent of total employees
in segment
Community Effects
Impact on Industry Growth
Balance of Trade Effects
$327,600
.5- .8
$136,600
$ 83,000
0.1-0.2
.15
0
0
0
0
None
None
None
$789,800
1.0-1.8
$278,800
$167,300
0.2-0.4
.27
0
0
0
0
None
None
None
$1,178,000
1.5-2.7
$424,000
$246,800
0.3-0.6
.43
0
0
0
0
None
None
None
$2,853,000
2.9-4.8
$1,554,600
$1,124,400
0.9-1.5
1.11
0
0
0
0
None
None
None
$4,800,000
5.2-7.8
$2,163,600
$1,461,600
1.3-2.1
1.65
0
0
0
0
None
None
None
I/ Wet processors only.
2/ Percentage and number of plants may not compute precisely in aggregate because of methodology used in com-
puting parts.
3/ Individual plants or plants of corporations with $100 million or more in annual sales were assumed not to
~ be financially impacted and were removed from consideration.
4/5= screening; E = equalization; N = neutralization; C = chemical coagulation; B = biological treatment.
5/ Since aggregate industry data were not available, the figures shown are for representative plants.
S-3
-------
TEXTILE INDUSTRY SUMMARY
Segment: Wool Dyeing and Finishing
SIC Code: 2231
Percent of total plants in industry 28
No. of plants indirect discharging 133
No. of plants indirect discharging potentially impacted^/ 125
Total plants in segment 63
Pretreatment Alternatives—
S S, E S, E, N S, N, B
No. of plants with treatment in place 43 33 33 0
Percent of plants indirect discharging 33 25 25 0
Cost of Pollution Abatement
Capital costs for segment
Total capital cost $3,036,400 $7,404,000 $11,874,000 $19,428,000
Total capital expenditures
as percent of total cap-
tal in placei/ 1.7-7.9 3.2-17.5 6.0-26.9 8.1-31.9
Annualized costs of segment
Total incremental increase
including capital charges $1,254,000 $2,603,900 $ 4,576,000 $ 6,920,800
Total incremental increase
excluding capital charges $ 756,100 $1,557,200 $ 2,718,300 $ 4,188,400
Total incremental increase
including capital charges
as percent of sales!/ .1- .3 .1- .6 .3-1.0 .4-1.1
Expected Price Increase
Expected percent increase due to
pollution control .11 .19 ,41 _ 54
Plant Closures
Total closures anticipated— 0 0 78 13
Percent reduction of segment
capacity due to closures 0 0 52 21
Employment
Total number of employees
affected!/ 0 0 5,672 3,926
Percent of total employees
in segment 0 0 46 32
Community Effects None None Sign-i fi n*n<- Significant
in Northeast in Northeast
Impact on Industry Growth None None Non,a Nnnp
Balance of Trade Effects None None Not Not
Significant Significant
S, C
0
0
$21,415,000
9.3-36.7
$11,773,900
$ 8,396,300
.7- 1.9
.82
104
68
7,475
61
in Northeast
None
Not
Significant
I/ Wet processors only.
2/ Individual plants or plants of corporations with $100 million or more in annual sales were assumed not
to be financially impacted and were removed from consideration.
3/ S - screening; E = equalization; N = neutralization; C = chemical coagulation; B = biological treatment.
4/ Since aggregate industry data were not available, the figures shown are for representative plants.
V Maximum impact; actual impact probably will be less.
S-4
-------
TEXTILE INDUSTRY SUMMARY
Segment: Woven Fabric Dyeing and Finishing, Except Wool
No. of plants in segment— 522
Percent of total plants in industry 7.3
SIC Codes: 22117, 22218, 2261, 2262
57
potentially impacted— 279
53
S
ace 89
ging 30
Pretreatment Alternatives—
S, E S, E, N S, B
24 12 0
840
S, E,
3
1
C
$1,599,600 $30,045,000 $46,002,000 $61,170,000 $118,299,000
No. of plants with treatment in place
Percent of plants indirect discharging
Cost of Pollution Abatement
Capital costs for segment
Total capital cost
Total capital expenditures
as percent of total capi-
tal in place!/
Annualized costs for segment
Total incremental increase
including capital charges
Total incremental increase
excluding capital charges
Total incremental increase
including capital charges
as percent of sales!/
Expected Price Increase
Expected percent of increase
due to pollution control
Plant Closures
Total closures anticipated
Percent reduction of segment
capacity due to closures
Employment
Total number of employees
affected
Percent of total employees
in segment
Community Effects
Impact on Industry Growth
Balance of Trade Effects
I/ Wet processors only.
2/ Individual plants or plants of corporations with $100 million or more in annual sales were assumed not to
be financially impacted and were removed from consideration.
V S = screening; E = equalization; N = neutralization; C = chemical coagulation; B = biological treatment.
4/ Since aggregate industry data were not available, the figures shown are for representative plants.
1.1-3.0
$4,153,600
$2,249,300
.1- .3
.18
0
0
1.6-6.8
$10,220,600
$ 5,951,100
.1- .5
.26
0
0
2.4-10.0
$16,923,000
$ 9,867,000
.2- .8
.45
0
0
4.0-11.5
$24,667,200
$16,008,200
.2- .9
.91
0
0
10.0-19.6
$ 60,462,000
$ 42,416,000
.5- 2.5
2.03
0
0
0
0
None
None
None
0
0
None
None
None
0
0
None
None
None
0
0
None
None
None
0
0
None
None
None
S-5
-------
TEXTILE INDUSTRY SUMMARY
Segment; Knit Fabric Dyeing and Finishing
SIC Codes: 2251, 2252, 2253. 2254. 2257, 2258
No. of plants in segment— . .
Percent of total plants in industry. . . .
No. of plants indirect discharging
Percent of total plants in segment
No. of plants indirect discharging potentially impacted— ^
Percent of total plants in segment
S
No. of plants with treatment in place 376
Percent of plants indirect discharging 31
Cost of Pollution Abatement
Capital costs for segment
1 214
. . . 1,148
Pretreatment Alternatives—
S, E S, E, D S, E, C
61 12 0
5 1 0
Total capital cost
Total capital expenditures
as percent of total capi-
tal in place4/
Annualized costs for segment
Total incremental increase
including capital charges
Total incremental increase
excluding capital charges
Total incremental increase
including capital charges
as percent of salesi/
Expected Price Increase
Expected percent of increase
due to pollution control
Plant Closures
Total closures anticipated
Percent reduction of segment
capacity due to closures
' Employment
Total number of employees
affected
Percent of total employees
in segment
Community Effects
Impact on Industry Growth
Balance of Trade Effects
$30,277,800
1.5-3.0
$12,126,800
$ 7,150,800
.1- .2
.09
0
0
0
0
None
None
None
$87,533,400
2.3-6.5
$30,576,500
$18,192,100
$291,226,000
13.9-17.5
$ 83,333,000
$ 42,413,600
.13
0
0
0
0
None
None
None
.64
0
0
0
0
None
None
None
$255,842,000
9.2-17.1
$136,694,500
$ 98,055,300
.6- 1.1
.75
0
0
0
0
None
None
None
I/ Wet processors only.
2/ Individual plants or plants of corporations with $100 million or more in annual sales were assumed not
to be financially impacted and were removed from consideration.
3/ S = screening; E = equalization; N = neutralization; C = chemical coagulation; B = biological treatment.
4/ Since aggregate industry data were not available, the figures shown are for representative plants.
S-6
-------
TEXTILE INDUSTRY SUMMARY
Segment; Carpet Mills
No. of plants in segment— 222
Percent of total plants in industry 3.1
No. of plants indirect discharging 173
Percent of total plants in segment 78
No. of plants indirect discharging potentially impacted— .... 145
Percent of total plants in segment 65
SIC Codes: 2271, 2272, 2279
Pretreatment Alternatives—
3/
No. of plants with treatment in place
Percent of plants indirect discharging
Cost of Pollution Abatement
Capital costs for segment
Total capital cost
Total capital expenditures
as percent ot total capi-
tal in place4./
Annualized costs for segment
Total incremental increase
including capital charges
Total incremental increase
excluding capital charges
Total incremental increase
including capital charges
as percent of sales4/
Expected Price Increase
Expected percent increase due to
pollution control
Plant Closures
Total closures anticipated
Percent reduction of segment
capacity due to closures
Employment
Total number of employees
affected
Percent of total employees in
segment
Community Effects
Impact on Industry Growth
Balance of Trade Effects
131
76
$1,498,600
1.2-2.5
$ 603,600
$ 357,900
.03-.13
.04
0
0
0
0
None
None
None
S, E
9
5
$12,514,400
2.2-5.5
$ 4,383,200
$ 2,609,000
.05-.024
.07
0
0
0
0
None
None
None
S, E, C
0
0
$36,213,000
7.5-14.3
$19,603,500
$14,137,100
26-.96
.31
0
0
0
0
None
None
None
I/ Wet processors only.
2/ Individual plants or plants of corporations with $100 million or more in annual sales were assumed not
to be financially impacted and were removed from consideration.
3/ S = screening; E = equalization; N = neutralization; C = chemical coagulation; B = biological treatment.
4/ Since aggregate industry data were not available, the figures shown are for representative plants.
S-7
-------
TEXTILE INDUSTRY SUMMARY
Segment! Stock and Yarn Dyeing and Finishing, Except Wool
No. of plants in segment— 265
Percent of total plants in industry 3.7
No. of plants indirect discharging 204
Percent of total plants in segment 77
No. of plants indirect discharging potentially impacted— .... 197
Percent of total plants in segment 74
SIC Codes: 2269, 2281
Pretreatment Alternatives—
No. of plants with treatment in place
Percent of plants indirect discharging
Cost of Pollution Abatement
Capital costs for segment
Total capital cost
Total capital expenditures
as percent of total capi-
tal in place!/
Annualized costs for segment
Total incremental increase
including capital charges
Total incremental increase
excluding capital charges
Total incremental increase
including capital charges
as percent of sales!/
Expected Price Increase •_
Expected percent increase due to
pollution control
Plant Closures
Total closures anticipated
Percent reduction of segment
capacity due to closures
Employment
Total number of employees
affected
Percent of total employees
in segment
Community Effects
Impact on Industry Growth
Balance of Trade Effects
47
23
$5,463,500
.8-4.9
$2,233,400
$1,337,700
.1- .2
.10
0
0
0
0
None
None
None
S, E
16
8
$14,388,000
1.9-10.8
$ 5,048,000
$ 2,880,000
.1- .3
.17
0
0
0
0
None
None
None
S, E, N
11
5
$24,314,000
3.6-16.6
$ 9,263,600
$ 5,460,000
.3- .6
.37
0
0
0
0
None
None
None
S, E, N, B
0
0
$58,497,000
8.6-34.4
$18,398,100
$10,278,300
.6- .9
.92
0
0
0
0
None
None
None
I/ Wet processors only.
2/ Individual plants or plants of corporations with $100 million or more in annual sales were assumed not
to be financially impacted and were removed from consideration.
3/ S = screening; E = equalization; N = neutralization; C = chemical coagulation; B = biological treatment.
4/ Since aggregate industry data were not available, the figures shown are for representative plants.
S-8
-------
I. INTRODUCTION
This study for the Environmental Protection Agency was designed to analyze
the economic impact on the textile industry of the costs of pretreatment re-
quirements under the Federal Water Pollution Control Act amendments of 1972.
Specifically, the following types of economic impacts were analyzed and,
to the extent that they were found to be significant, are described in this
report: price effects, financial effects, production effects, employment and
community effects, and balance of trade effects. These impacts were analyzed
only for those textile mills which discharge wastewaters to publicly owned
treatment works (municipal treatment systems).
This report contains, in order, a description of the methodology used in
the study, an overview of the textile industry, impact analyses by industry
segments, and an explanation of the limits of the analyses. The section on
methodology also contains the sources of data used in the study. The overall
textile industry situation is examined because of the number of factors that
are common to all of the studied segments of the industry.
For each of the textile industry segments (wool scouring, wool finishing,
woven fabric finishing, knit fabric finishing, carpet manufacturing, and stock
and yarn dyeing and finishing), the industry's structure and financial and
pricing characteristics are examined. From these data, representative plants
are developed which serve as a baseline (before pretreatment controls) from
which impacts can be measured. Finally, the model plants are impacted, utiliz-
ing pretreatment control costs provided by the Environmental Protection Agency,
and the overall industry impacts are determined.
1-1
-------
II. METHODOLOGY
The research approach utilized to quantify the economic impacts of pro-
posed pretreatment standards under the Federal Water Pollution Control Act
amendments of 1972 on new and existing sources of the textile industry is
shown schematically in Figure II-l. In general, the research approach was
divided into four segments: development of the analytic framework, data gather-
ing, analysis, and preparation of the final report.
Development of the Analytic Framework
The development of the analytic framework for the study involved the seg-
mentation of the textile industry, development of the economic impact criteria,
specification of the physical/financial parameters for the representative plants,
and the preliminary economic assessment.
Industry Segmentation
The textile industry was examined in depth to determine the exact industry
segmentation to be employed. The purpose of this phase of the study was to
segment the plants in the textile industry into relatively homogenous classes
with respect to factors (such as estimated plant production, number of products
and types, and the composition of waste flow) which would be relevant in assess-
ing the impact of pretreatment standards.
The textile industry was divided into the seven segments proposed by the
Environmental Protection Agency and which have formed the basis for previous
studies:
(1) Wool Scouring
(2) Wool Dyeing and Finishing
(3) Dry Processing (eliminated during the study)
(4) Woven Fabric Dyeing and Finishing
(5) Knit Fabric Dyeing and Finishing
(6) Carpet Mills
(7) Stock and Yarn Dyeing and Finishing
Development of Economic Impact Criteria
The economic impact of pretreatment regulations on the textile industry
is measured in terms of the effects on prices, profitability, production, em-
ployment, communities, and the balance of trade. These effects are quantified
by determining the difference between the performance of these parameters in a
scenario of the textile industry with pretreatment standards and their per-
formance in a scenario of the textile industry without such standards.
It also should be emphasized that the economic impact analysis was con-
cerned with the short-run effects of pretreatment regulations on the textile
industry. The analysis employed in this study was based on estimates of pres-
ent production costs and pretreatment control costs. In the long run, such
costs will be lower because of technological change and, perhaps more
II-l
-------
Figure II-l
RESEARCH METHODOLOGY
SEARCH SECONDARY
DATA SOURCES
,
^
hs
CONSTRUCT INDUSTRY
SEGMENT PROFILES
H
H
FINANCIAL ANALYSIS OF
REPRESENTATIVE PLANT
AND INDUS'IRY SEGMENTS
DEVELOP ECONOMIC
DEFINE REPRESENTATIVE
PLANTS' PHYSICAL/
FINANCIAL PARAMETERS
EVALUATE
PRF.TREATHENT COSTS
DEVELOPMENT OF ANALYTIC FRAMEWORK
FINAL REPORT
-------
importantly, input factor substitution induced by the imposition of pollution
controls.
Pretreatment costs increase production costs and may contribute to capac-
ity reductions. The resulting shift in the industry's supply curve, when
coupled with a sloping industry demand curve, determines both the price and
production impacts of pretreatment regulations on the industry.
To arrive at these price and production impacts, the initial step was to
construct representative plants based on the physical and financial character-
istics of the industry segments. The purpose of the representative plant analy-
sis was to identify the most viable situation for the plant owner to follow,
assuming that he was confronted with a decision to add pretreatment controls
or sell his plant for salvage. There were several criteria for making deci-
sions on whether or not to close plants, based on common economic assumptions:
o Where variable costs exceeded revenue, there was immediate closure.
o Where revenue was greater than variable costs but less than total cost,
there was continued operation until fixed capital had to be replaced.
The timing of such closures is difficult to predict.
o Where revenue exceeds total cost, there was closure if the net present
value of the cash flow at the industry's cost of capital is less than
zero.
Net Present Value Model. Plant closure is a problem that involves the
same analytical concepts as those employed in the capital budgeting decision.
The following discussion is derived primarily from The Capital Budgeting Deci-
sion by Harold Bierman, Jr., and Seymour Smidt (4th ed.). The basic mathemati-
cal relationship for the net present value is as follows:
n
NPV = E Afc (l+k)"1
t=o
Where: NPV = net present value
A = cash flow of period t
k = some value of money of the firm
(after tax cost of capital)
n = life of the investment
Cash Flows — The following discussion specifies the conventions that were
used in the construction of the cash flows for existing sources and new sources.
The cash flows used in the analysis were composed of the following elements:
(1) Initial investment taken in year tQ was considered to be equal to sal-
vage value for existing sources. Salvage value was defined as the
liquidation value of the fixed investment plus net working capital.
For new sources initial investment was considered to be outlays for
fixed investment, working capital, and venture initiation costs.
(2) After-tax cash flow taken for years t^ and tn. The after-tax cash
flow was computed for both existing and new sources as after-tax in-
come plus depreciation. Annual depreciation for new sources was cal-
culated for the fixed investment based on the estimated life of
II-3
-------
buildings and equipment. The after-tax cash flow can be computed
using the following equation:
After-Tax Cash Flow = (1 - t) x (R - E - D) + D
Where t = tax rate
R = revenues
E = cash operating expenses other than interest
D = annual depreciation charges
The above after-tax cash flow computation did not include cash dis-
bursed for interest payments. Interest charges were omitted from the
computation because in the net present value method the discount rate
is the interest analogous to the interest expense, and inclusion of
the cash disbursed for interest would result in double counting. The
effect of interest payments on income taxes also was excluded from the
computation. This was brought into the analysis when computing the
effective rate of interest of debt sources of capital, which was used
in the determination of the after-tax cost of capital.
The rates of 20% on the first $25,000 income, 22% on the second
$25,000, and 48% on amounts over $50,000 were used throughout the
analysis. Accelerated depreciation methods, investment credits, and
carry-forward and carry-back provisions were not used because of their
complexity and special limitations.
(3) Annual replacement investment for plants equal to annual current depre-
ciation taken for years t, to t for both existing and new sources.
(4) Salvage value of investment taken in year t . Salvage value was de-
fined as the liquidation value of the fixed investment plus net work-
ing capital for both existing and new sources.
The above cash flows represent those required to establish the baseline
scenario, that is, the plant without pretreatment controls. The following cash
outlays were added to arrive at the scenario with pretreatment controls:
(5) Investment for pretreatment controls was added to outlays for initial
investment in year tQ. For existing sources, incremental pollution
control investment was used, while for new sources the total pollution
control investment was applicable.
(6) Annual pretreatment operating expenses taken for years t, to t were
added to cash operating expenses. For existing sources incremental
pretreatment expenses were used, while for new sources the total pol-
lution control expenses were applicable.
(7) Annual replacement investment for pretreatment control equal to annual
current depreciation taken for years t, to t was added to annual re-
placement investment for the plant for both existing and new sources.
(8) Terminal value of pretreatment control facilities was taken to be zero
in the year t , except where land value was significant.
Cost of Capital — The plant closure criteria depend on the time value of
money to the firm, that is, the discount rate. For the purposes of this analy-
sis, the after-tax cost of capital for the textile industry was calculated.
II-4
-------
There is considerable discussion on the appropriate method to use in the cal-
culation of the cost of capital;!/ the following is from Bierman and Smidt,
The Capital Budgeting Decision 1st ed.). The average after-tax cost of capital
was determined by computing the cost of the individual capital components and
multiplying them by the appropriate set of weights which reflect the present
capital structure of the industry.
o After-tax cost of debt is defined as the interest rate that must be
paid on debt capital adjusted for taxes.
After-tax cost of debt = interest rate x (1.0 - tax rate)
o Cost of equity capital can be estimated using two approaches. In the
simple case, where the current dividend rate is expected to be confirmed
into the indefinite future and when no stock dividends are expected:
C = D/P
Where C = cost of equity capital
D = (constant) expected future dividend
P = current stock market price per share
If it can be shown that the current dividend is expected to grow at a
steady rate, then the cost of equity capital can be roughly approximated
from the following expression:
C = D/P + g
Where C = cost of equity capital
D = current dividend rate
P = current market price per share
g = expected annual percentage rate increase in future
dividends
Price Analysis. As discussed before, the price and production effects of
pretreatment regulations are interrelated. The analysis is further compli-
cated because of the large number of product markets in the textile industry.
The prices of the products that form the subject of this study are likely to
be impacted differently by such factors as imports, exports, competitive sub-
stitutes, supply and demand elasticities, production utilization, and the
degree of dominance exerted by large firms. A quantitative analysis of the
price impacts based upon the above factors is not within the scope of this
study. For the primary products within the textile segments under study, data
on the above factors were examined where possible and judgment was exercised
to determine the supply response to a price change and alternative price changes
to be employed.
To assist in the analysis of the price effects, the estimated price in-
crease was calculated for the representative plant which would leave it as
I/ Wilbur G. Lewellen, "A Conceptual Reappraisal of Cost of Capital,"
Financial Management, Winter 1974, pp. 63-70.
II-5
-------
well off after the investment in pretreatment control facilities as before.
This required price increase can be computed using the NPV model.
P = (PVP) (100)
(1-T) (PVR)
where: P = required percentage increase in price
PVP = present value of pretreatment control costs
PVR = present value of gross revenue starting in year pre-
treatment control is imposed
T = tax rate appropriate following imposition of pollu-
tion control
The next step was to evaluate the required price increases against expec-
tations regarding the ability to raise prices. The required price increase at
the plant level was evaluated in terms of the competitive structure of the in-
dustry. This supply and demand analysis at the industry level provided insights
into likely supply response to different prices. With initial estimates of ex-
pected price increases completed, the initial estimates of production curtail-
ments for the industry segments were made. Analysis of the expected price
increases at the industry level involves translating the pretreatment cost esti-
mates to changes in market demand and supply for production. Market responses
may take several forms, depending on how many mills choose to close and the ex-
tent of the pass-through of pollution costs to the consumers. The supply, in
turn, depends on the mills' decisions, which will be based on the strength of
the market demand, competitors' actions, and on the market's ability to sustain
price increases. There are a number of demand and supply factors which need to
be.considered in determining the portion of pretreatment costs to be passed
through. Demand factors which need to be considered are substitute and competi-
tive products, expected demand growth, foreign demand, price elasticity of
demand, cross elasticity of demand, and the major demand components. Supply
factors which need to be considered in the analysis of expected price increases
are capacity utilization, foreign competition, supply elasticity, competitive
structure of the industry, number of producers, and market share distribution.
Unfortunately, all such factors cannot be expressed quantitatively and, by neces-
sity, the projected price increases involved a considerable amount of judgment.
In general, the price increases that were utilized in the analysis were assumed
to be approximately equal to the impact of pretreatment costs which would be
experienced by the most efficient mills in a segment (i.e., the large represen-
tative plant). The expected price increases were revised upward if the decrease
in production was significant in relationship to industry capacity. That is,
prices were dependent on whether the reduction in production indicated by plant
closures could be absorbed by the remaining capacity or whether such curtail-
ments would increase prices.
An attempt was made also to quantify the secondary price impacts of water
pretreatment controls on the textile industry, that is, to determine how con-
sumers of textile products would react to increases in textile mill products.
Further discussion of procedures used for this analysis is included in the dis-
cussion on data gathering.
Production Analysis. The estimated production curtailment was made utiliz-
ing the net present value model discussed previously and the likely price changes.
II-6
-------
Plant closures would be identified where NPV < 0 for the representative plant.
It is recognized that for the industry segments under study, one would expect
to find some plants with profits lower and some higher than shown for the rep-
resentative plant. In a statistical sense, this phenomenon can be described
via profitability distribution functions. Unfortunately, such financial data
were not available. Therefore, in projecting closures, the estimated distri-
bution by plant size.within a size category was considered. By utilizing the
net present values calculated under pretreatment assumptions, the plant size
distribution within a segment, and the assumption that plants with a negative
net present value will be forced to close, the percentage of firms closing in
each industry segment can be estimated. If production impacts were of suffi-
cient magnitude, the expected prices would be reevaluated and the production
analysis repeated.
Employment Analysis. Based on the production curtailments and plant
closures estimated to be due to pretreatment controls, the impact on industry
employment was quantified. The number of direct employment positions lost was
estimated using the representative plant data and the estimated plant closures.
In general, the textile industry's labor is relatively unskilled and immobile,
so that in the short run the local labor markets will have difficulty in absorb-
ing the replaced workers.
Community Analysis. Although specific impacts on substate communities of
plant closures and the resulting unemployment were not considered, a general
discussion provided insights into regional impacts.
Balance of Trade Analysis. The analysis considered whether or not the
estimated price changes would hinder competitive positions with regard to ex-
ports or increase foreign imports. Where important, estimates on the amount
of trade that potentially could be impacted were presented.
Definition of Representative Plants' Parameters
As previously discussed, the economic impact analysis centered around
"representative plants." Therefore, the construction of these representative
plants, which were based on the physical and financial characteristics of the
industry segments, is critical.
Representative plants were developed for each of the industry segments
for three size plants, since it is reasonable to assume that economies of scale
would affect the economic impact of pretreatment standards on such operations.1/
Therefore, the representative mill sizes specified in the Development Document-
were used and are shown in Table II-l. Additionally, the impact on new construc-
tion of a medium-size plant within each industry segment was determined.
The construction of pro forma income and balance sheets for representative
plants, as well as the use of a cash flow discount model, specified certain
data requirements. Also, in order to be able to translate the impact of
I/ U. S. Environmental Protection Agency, Draft Development Document, Pre-
treatment Standards for Textile Mills, prepared by Sverdrup & Parcel Associates,
Inc., November 1976.
II-7
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Table II-l
REPRESENTATIVE PLANT PRODUCTION CAPABILITIES
Production Capacity (1,000 Ibs./day)
Industry Segemnt Small Medium Large
Wool Scouring 72.3 144.5
Wool Dyeing and Finishing 4.5 14.8 29.6
Woven Fabric Dyeing and Finishing
(Except wool) 40.8 163.0 408.5
Knit Fabric Dyeing and Finishing
(Except wool) 7.5 50.2 100.4
Carpet Mills 22.3 74.4 148.8
Stock and Yarn Dyeing and Finishing
(Except wool) 16.7 55.6 111.1
pretreatment standards from the plant level to the entire industry segment, cer-
tain other parameters were collected for the representative plants. The param-
eters of interest were:
o Plant parameters
- process description
- production volume in pounds
- age of plant
- number of employees
- capacity utilization
- geographical location
o Effluent discharge parameters
- process wastewater volume
- current pretreatment practices
- sewer charges
- land availability for pretreatment facilities
- present wastewater effluent expenses
- proposed pretreatment investments and operating costs
o Financial parameters
- sales
- operating expenses
- depreciation
- interest costs
- net profit before taxes
- current assets
- current liabilities
- book value fixed'assets
- long-term debt
- owners' equity
- plant salvage value
- replacement cost fixed assets
II-8
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Preliminary Economic Assessment
The preliminary economic assessment was conducted based on secondary data.
It consisted of an evaluation of the present and future economic outlook for
the textile industry.
Data Gathering
After development of the analytic framework for the study, the next phase
of the methodology was to determine the data collection techniques to be em-
ployed. Data from both primary and secondary sources were used.
Secondary Data Sources
The data sources listed below provide extensive information on the textile
industry as a whole. However, for the individual textile industry segments
very little published information was available. The major secondary sources
of data that were used are listed:
1. U. S. Environmental Protection Agency, Economic Analysis of Proposed
Effluent Guidelines for the Textile Industry, prepared by Arthur D.
Little, Inc., March 1974.
2. National Commission on Water Quality, Textile Industry Technology and
Costs of Wastewater Control, prepared by Lockwood Greene, June 1975.
3. National Commission on Water Quality, The Economic Impact of the Fed-
eral Water Pollution Control Act Amendments of 1972 on the Textile
Industry, prepared by National Bureau of Economic Research, Inc., re-
vised February 1976.
4. National Industrial Pollution Control Council, The Textile Industry
and Pollution Control, February 1973.
5. U. S. Department of Commerce, Bureau of the Census, 1972 Census of
Manufactures.
6. Robert A. Leone, Editor, Environmental Controls: The Impact on Indus-
try, Lexington, Massachusetts: Lexington Books, 1976.
7. Standard & Poor's Industry Surveys, "Textiles," Current Analysis, 1976.
8. Leo Troy, Almanac of Business and Industrial Financing Ratios, Engle-
wood Cliffs, N. J.: Prentice-Hall, Inc., 1972.
9. S. J. Hudak and P. T. Bohnslav, The Textile Industry, Office of Indus-
trial Economics, Office of the Assistant Secretary for Tax Policy,
Department of the Treasury, February 1976.
10. "Textile Activity Indicators," Textile World (monthly).
II-9
-------
11. F. W. Sogel and G. L. Rutledge, Capital Expenditures by Business for
Air, Water, and Solid Waste Pollution Abatement, 1975 and Planned 1976,
U. S. Department of Commerce, Bureau of Economic Analysis, July 1976.
12. U. S. Department of Commerce, Bureau of the Census, Current Industrial
Reports.
13. Davison's Blue Book, Ridgewood, N. J.: Davison's Publishing Co., 1975.
Survey of Textile End Users
In order to assist in the determination of the effect a price increase by
textile manufacturers would have on the purchasing decisions of textile users
and subsequently on the ultimate consumer, a one-page mail-out questionnaire
was designed to solicit data regarding attitudes and responses to future price
increases. Because small-volume buyers tend to lack influence in changing
price structures and thereby have limited freedom of action, only firms
with assets of more than $1 million were contacted for information.
The survey mailing list was compiled from all segments of the U. S. textile
industry and included, in part, carpet mills, apparel producers, and upholstered
furniture manufacturers.
Of the 603 survey questionnaires mailed out, 120 usable responses were
received in the time frame available, a return of 19.9%. The companies partici-
pating represented a balanced cross section of both the textile mill products
industries (SIC 22), 58 returns, and the manufacturers of apparel and finished
products made from fabric (SIC 23 plus SIC 2512), 62 returns. The combined
activity of the companies involved the purchasing and producing of $523 million
worth of textile fiber and yarn and $503 million worth of fabric.
Survey of the Textile Industry
The data required to evaluate the economic impact on the textile industry
were identified in the development of the analytic framework. However, certain
essential data were not available in published sources. To obtain the necessary
data, a mail questionnaire was developed in conjunction with EPA, American Tex-
tile Manufacturers Institute (ATMI), Carpet and Rug Institute, Northern Textile
Association, and the American Yarn Spinners Association. The questionnaire
was mailed by the trade associations to their members and by the economic
contractor to nonmembers believed to be wet processors.
Of the 1,441 firms surveyed, 672 responses were received for a return of
47%. However, responses included 129 firms that were out of business and 179
firms where the primary operations could not be classified as textiles. A
breakdown of the 364 usable responses by industry segment is shown in Table
II-2.
Survey of Publicly Owned Treatment Works
A survey was made of publicly owned waste treatment plants in areas where
textile plants are located to determine the charges made for waste treatment.
11-10
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Table II-2
RESPONDENTS TO TEXTILE INDUSTRY SURVEY
BY PRODUCTION CAPACITY CATEGORY
Plant Size by
Production Capacity Categories
Industry Segment Small Medium Large Total
Wool Scouring 42 6
Wool Dyeing and Finishing 10 6 2 18
Woven Fabric Dyeing and Finishing
(Except wool) 84 20 7
Knit Fabric Dyeing and Finishing
(Except wool)
Carpet Mills
Stock and Yarn Dyeing and Finishing
(Except wool)
Total Usable Responses
82
6
55
237
20
3
25
78
10
15
13
49
Out of Business
Not Textile
Operation
112
24
93
364
129
179
A questionnaire was submitted to the individual responsible for the treatment
plant. Municipalities in which textile operations are located were identified
through Davison's Blue Book, and the questionnaire was submitted to a selected
number of these locations. Approximately 250 questionnaires were mailed, and
76 responses to the questionnaire were received.
Analysis
With the data gathering techniques specified, the next phase of the study
was the analysis, which involved construction of industry segment profiles,
evaluation of pretreatment cost data, financial analysis, and finally the eco-
nomic impact analysis.
Industry Segment Profiles
Industry profiles were constructed for each textile industry segment based
mainly on secondary data sources. These characterizations of the industry seg-
ments were difficult because the industry segment categories used did not cor-
respond in most cases to the segmentation (i.e., SIC categories) of the textile
industry available from published sources. Therefore, wherever possible, when
actual data were not available, estimates were made for the items of interest:
o number of firms
o number of employees
11-11
-------
o value added by manufacture
o value of shipments
o new capital expenditures
o geographical concentration
Tables for each industry segment have been developed to show the potential
number of plants to be impacted by census region, by size of employment, and by
size of production. The methodology for developing the tables for each industry
segment are basically the same; however, some differences do occur. The dif-
ferences are largely due to the industry segments differing from four-digit SIC
codes.
The basis for each table is the 1972 Census of Manufactures published and
unpublished data. Estimates for each industry segment of the number of estab-
lishments and the number of employees by employment size group and by census
region were taken from the census when available; when these exact data were
not contained in the census, estimates were made by the economic contractor
based on known census employment data and, in some cases, value of shipments.
In general, where the industry segment was the same as a four-digit SIC industry,
or the same as several four-digit SIC industries combined, the data were readily
available. However, for five-digit SIC product codes, the census information
is brief.
Having developed basic information for each industry segment, it was desir-
able to extract from the segments those plants and their employments which were
financially sound enough to withstand the financial burden of additional effluent
controls. After consideration, it was determined that large firms or corpora-
tions having sales of $100 million or more per year and their branch plants or
subsidiaries in the industry in most cases would not be significantly affected
financially by additional controls. Having made this determination, arrange-
ments were made with Dun & Bradstreet, Inc., to extract such data from their
files. The cumulated Dun & Bradstreet data were extracted from the previously
developed census data for all industry segments relating to four-digit SIC codes.
The result of this extraction provided the universe of establishments with a
potential for being impacted.
It was then determined to extract from this universe of potentially im-
pacted establishments the percent of those that did not use water in their
processing. For each industry segment, this determination was made indepen-
dently. SIC definitions, census explanatory text, census data on gray goods,
discussion with textile associations, census water use study data, and other
pertinent information were all considered and weighed for validity, reliability,
and consistency before the percent of "dry" processors was extracted.
Within the same operation of extracting the "dry" processors, the percent
of nonmunicipal system dischargers was also extracted. The percents of these
dischargers were determined by considering the 1973 EPA (A. D. Little) study,
the 1974 National Commission on Water Quality study, the 1975 EPA (Sverdrup &
Parcel) study, and the 1976 economic contractor's survey. Considering each
estimated percent, the median was chosen as the best available data.
11-12
-------
Havinq finished the estimates of potentially impacted establishments and
employees by census region and by employment size group, these data were con-
verted to small, medium, and large size ranges based on production volume. In
general, the sizes for each range for each industry segment were those used in
the 1974 National Commission on Water Quality study.
In considering the results of this operation, note should be made of sev-
eral items. Columns may not always add, even in census data, because of round-
ing. In removing establishments and employees for various reasons, extraction
was made at the employment size level and, after extraction, the various levels
were summed to equal a total for the region and summed again to equal a total
for the U. S. Where there was only one establishment to be extracted from, if
the percent to be extracted was less than 50% then the establishment was not re-
moved, nor were any employees removed; if the percent to be extracted was more
than 50%, then the establishment and 100% of the employees were removed. Be-
cause of the methods employed, over as well as under estimations occurred in
some instances. However, considering available data, the results are the best
estimates of establishments with a potential for being impacted by the proposed
pretreatment effluent control standards.
The financial profiles for the industry segments depended to a large ex-
tent on the questionnaire data and, hence, were undertaken in conjunction with
the representative plant financial analysis.
Financial Analysis of Representative Plant and Industry Segments
The primary and secondary data collected were used to prepare the neces-
sary representative plant financial statements and cash flows. It was not pos-
sible to construct a comprehensive financial profile for each industry segment.
However, questionnaire data and results from the representative plant financial
analyses were used to obtain insight into key financial parameters.
The financial profiles of representative plants were based on data obtained
from the industry survey and published data such as the Kurt Salmon Associates'
Fourth Annual Performance Profile of Textile Companies, which is an analysir, of
the fiscal 1974 financial performance of 89 publicly-owned firms in the textile
industry.
The general procedure which was used to analyze the financial data is out-
lined below. In developing the representative plant financial statements each
plant size category (i.e., small, medium, large) within each indusrry segment
was analyzed separately. For the income statement, the distributions of direct
cost per pound and sales revenue per pound were analyzed to arrive at median
values of these parameters. Annual sales revenue and direct costs were then
derived for the representative plant. Financial statistics, such as after-tax
profit as a percent of sales, were calculated from the financial data base and
applied to obtain values for the representative plant. The components of direct
and indirect costs were derived from the pattern displayed by the questionnaire
data.
Except for costs of labor, depreciation, and long-term debt, the revenues
and costs for the new source representative plant were the same as for the
existing medium plant. For those industry segments where the data were
11-13
-------
available, the labor cost structure for new existing plants was compared with
older existing plants to arrive at a percentage reduction in labor cost. If
no data were available, the new source representative plant was assumed to be
about 20% more labor efficient. Depreciation for new source was assumed to be
5% of the total fixed assets, while interest expenses were assumed to be 10%
of long-term debt shown on the new source balance sheet.
The balance sheets for the existing representative plants were derived by
calculating the following financial ratios: sales to total assets, sales to
working capital, and sales to fixed assets. These ratios were checked where
possible against published data. The above procedure provided estimates of
current assets, fixed assets, total assets, current liabilities, and total
liabilities. The components of fixed assets such as land were derived by exam-
ining the pattern of the survey data and then applying the pattern to the repre-
sentative plant data. Likewise, the composite division between long-term debt
and owner's equity/net worth from the questionnaire data was used.
The balance sheet for the new source medium plant was assumed to be the
same as an existing medium plant except for fixed assets, long-term debt, and
owner's equity. The current replacement cost of fixed assets was used rather
than book value of fixed assets. The new source owner's equity was assumed to
be 35% of total assets and long-term debt; therefore, the balance was unac-
counted for in total liabilities.
The invested capital for each representative plant was derived directly
from the income statement and balance sheet except for salvage value of fixed
assets. The question on the survey form asked the respondents to indicate
estimated salvage value (liquidation market value for nonconforming uses). The
term "nonconforming uses" was ignored by the respondents with the exception of
a few responses which were removed from the following analysis. With data on
current market salvage value for fixed assets, expert opinion was obtained
which indicated that between a 50% to 70% drop in current market value could be
excepted if a large number of mills ceased operation. Using 40% of reported
market salvage value, ratios were calculated and utilized which related revised
market salvage value to book value of fixed costs for each industry segment.
Evaluation of Pretreatment Costs
The pretreatment investments and operating costs were supplied by Sverdrup
& Parcel Associates, Inc., for each industry segment and included six levels
of pretreatment for three production size categories. A brief review was made
of the data base used to derive pretreatment costs as well as the methodology
employed.
Economic Impact Analysis
The objective of the economic impact analysis was to specify the impacts
of pretreatment costs on the textile industry. The economic impact criteria
were discussed previously. This effort was primarily concerned with using the
data collected to perform the impact analysis.
As part of the economic impact analysis, sensitivity analysis was used to
help judge the importance of the results of the economic impact analysis to
errors in key parameters.
11-14
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III. THE TEXTILE INDUSTRY
Textile manufacturing, one of this country's oldest industries, was the
first step of the industrial revolution in the United States in the early nine-
teenth century. The textile industry is a significant factor in the United
States economy, providing employment for nearly one million people and ship-
ments of textile mill products of $32.8 billion in 1975. This section provides
an overview of the industry by examining the textile-making process; the indus-
try structure; demand, supply, and pricing; financial profile; and regional
aspects of the industry.
The Textile-making Process
The textile-making process can be divided into four stages: (1) yarn pro-
duction; (2) fabric production, weaving, knitting, and tufting; (3) finishing;
and (4) fabricating. The stages of the textile manufacturing process may in-
volve either dry or wet processing. Virtually all of the waste water is
generated in the finishing stage, with small amounts discharged by scouring
operations in the yarn production stage.
Yarn production involves the preparation of both natural and synthetic
fibers. The natural fibers (cotton and wool) are cleaned, carded, and/or
combed, and then spun into yarn. Synthetic fibers are produced either as
staple and spun in a similar process to that for natural fibers or as filament
yarn.
The second stage is fabric production through weaving, knitting, or tuft-
ing. The yarn is knitted into fabrics such as jersey or into final products
such as hosiery, underwear, and outerwear. Most of the yarn goes into weaving
mills which produce the broad-woven fabrics from which the familiar textile
products are made. Textile yarns can also be tufted into floor coverings such
as carpets or rugs.
The third stage of the textile process is finishing. Very little of the
products produced to this stage are made with pre-colored yarns; therefore, the
majority of products have a dull gray, unfinished appearance. Before these
products can be marketed they require considerable processing: bleaching,
printing, dyeing, pre-shrinking, and shaping.
The final stage in the textile manufacturing process is when the finished
cloth is fabricated into a number of products. Some products, such as bags,
sheets, and pillowcases, are produced by the textile mills.
Industry Structure
In 1972, the Census of Manufactures included data on 30 subclasses in the
textile industry. That report shows that there were 7,125 establishments in
the textile industry. More than 60% of these (4,505} were plants employing 20
or more persons. A total of 5,611 firms were represented at that time, and the
sector employed 948,900 persons. The number of employees has exceeded one rril-
lion in years since then and has dropped back to about that level at present.
The value of all shipments in 1972 was $27,857.6 million. (See Table III-l.)
III-l
-------
Table III-l
THE TEXTILE INDUSTRY, 1972
SIC
Code
SIC Code Title
Establishment
Number Percent
Employment
Number Percent
(1,000)
Value of Shipments
Million $ Percent
H
H
H
M
!• Weaving Mills Total 1,274
2211 Weaving mills, cotton 303
2221 Weaving mills, man-made fiber and silk 406
2231 Weaving and finishing mills, wool 197
2241 Narrow fabric mills 366
II. Knitting Mills Total 2,695
2251 Women's hosiery, except socks 314
2252 Hosiery, N.E.C 414
2253 Knit outerwear mills 915
2254 Knit underwear mills 87
2257 Circular knit fabric mills 697
2258 Warp knit fabric mills 199
2259 Knitting mills, N.E.C 69
III. Textile Finishing, Except Wool Total 641
2261 Finishing plants, cotton 190
2262 Finishing plants, man-made fiber and silk 255
2269 Finishing plants, N.E.C 196
IV. Floor Covering Mills Total 520
2271 Woven carpets and rugs 65
2272 Tufted carpets and rugs 368
2279 Carpets and rugs, N.E.C 87
V. Yarn and Thread Mills Total 811
2281 Yarn mills, except wool 424
2282 Throwing and winding mills 212
2283 Wool yarn mills 101
2284 Thread mills 74
VI. Miscellaneous Textile Goods Total 1,186
2291 Felt goods, except woven felts and hats 42
2292 Lace goods 103
2293 Paddings and upholstery filling 132
2294 Processed textile waste 104
2295 Coated fabrics, not rubberized 201
2 296 Tire cord and fabric 18
2297 Nonwoven fabrics 73
2298 Cordage and Twine 152
2299 Textile goods, N.E.C 361
17.8
9.0
7.3
11.4
16.6
Industry Total
7,125
100.0
315.2
123.1
145.6
19.4
27.1
274.2
49.9
32.6
74.4
25.9
65.5
22.1
3.8
79.4
25.7
35.2
18.5
59.5
6.6
49.6
3.3
148.0
89.6
38.1
8.6
11.7
72.6
4.5
2.7
4.4
3.6
18.6
10.0
9.0
8.7
11.1
948.9
33.2
28.9
8.3
6.3
15.6
7.6
100.0
7,445.3
2,787.1
3,668.8
448.3
541.1
7,611.4
1,001.3
599.8
1,700.6
536.7
2,714.8
987.0
71.2
2,597.0
621.6
1,338.5
636.9
3,167.8
212.8
2,788.6
166.4
4,216.1
2,205.1
1,431.0
232.3
347.7
2,820.0
133.2
45.8
134.9
132.0
863.5
685.1
350.2
182.7
292.6
27,857.6
26.7
27.3
9.3
11.4
15.1
10.0
100.0
Source: 1972 Census of Manufactures, Bureau of the Census, U. S. Department of Commerce
-------
According to the 1974 Survey of Manufactures the value of industry ship-
ments for SIC 22 in 1974 was #32,892.2 million. Total sales of 18 larger
intergrated firms shown in Table III-2 (not including Deering Millikin Corp-
oration) amounted to $10,572.6 million on about one third of SIC 22's total
value of shipments for the year. While at the turn of the century the small
family owned firm was characteristic of the industry, many modern mills are
operated by 18 to 20 large firms. However, even now over one-half of the in-
dustries output is from firms with less than $50 million sales per year.I/
Technical Change. The level of technology in the textile industry tends
to vary widely.There are still thousands of small firms in the industry, many
of them operating at only one location. Old weaving mills may still operate
with their original installation of equipment. Others have introduced the
latest missile, rapier, and/or water jet looms.
Many of the major technological changes have resulted from the impact of
man-made fibers. Texturing techniques, for example, have been developed to
create the better qualities of natural fibers in man-made fibers.
The growth in the knitting industry has been phenomenal. Multiple-feed
circular knitting machines are one example of the industry's investment in new
technology. The number of four-feed knitting machines in place has increased
from 5,270 in 1963 to 63,855 in 1972. Double knit machines represent a major
technological breakthrough, with the number in place increasing from 1,200 in
1962 to 23,800 in 1974.U Both open-end spinning and shuttleless looms have
been major breakthroughs in textile technology.
Major changes in dyeing and finishing of textiles have occurred in recent
years also. As can be seen in Table III-3, there has been a major shift to
package pressure dyeing machines, pressure dyeing becks, pressure jet dyeing
machines, and thermosol-pad steam ranges. These shifts imply both growth in
dyeing capacity and obsolescence of earlier dyeing techniques. The major shift
is to high-temperature pressure dyeing. There have been major advances in the
new types of printing machines available for both yarn goods and carpets. Ac-
tive work also is being done in the creating of industrially feasible low-
temperature, carrier-free dyeing processes for polyester-containing textiles.
In summary, the textile industry is still relatively fragmented and labor
intensive, but strong trends toward increased integration and greater capital
intensity are evident.
Factors Affecting Prices of Textile Products
The prices of textile products are determined by the demand for and the
supply of these products in the marketplace. Foreign trade affects both the
supply and the demand. Characteristics of demand, supply, foreign trade, and
prices in the textile industry are discussed below.
Demand. The demand for textile mill products is a function of disposable
personal income (hence level of economic activities), population trend, and
— Derived by American Textile Manufactures Institute, Inc. from U. S.
Bureau of the Census, Enterprise Statistics and U. S. Department of the Treasury's
Corporate Income Tax Return Statistics.
2/
— The Textile Industry, Office of Industrial Economics, Department of
the Treasury, 1976, pp. 45-56.
III-3
-------
Table III-2
MAJOR TEXTILE COMPANIES IN TODAY'S TEXTILE INDUSTRY
Company
1. Burlington Industries, Inc.
2. Stevens (J. P.) & Co.
3. United Merchants & Manufacturers, Inc.
4. Indian Head
5. Springs Mills
6. West Point-Pepperell
7. M. Lowenstein & Sons
8. Mohasco
9. Dan River
10. Cone Mills
11. Cannon Mills
12. Collins & Aikman
13. Fieldcrest Mills
14. Hanes
15. Riegel Textile
16. Texfi Industries
17. E. T. Barwick Industries
18. Avondale Mills
Total
I/
Total Sales —
1974
(milliom;)
$ 2,330.0
1,264.1
962.6
615.4
600.4
580.8
562.8
551.0
439.7
434.0
395.2
352.9
300.4
288.8
260.0
218.1
211.5
204.9
$10,572.6
Table III-3
PIECE GOODS MACHINES IN PLACE , U. S.-
(units)
2/
Year
1960
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
Jet
Dyeing
Machines
6
7
12
33
67
117
201
374
599
758
858
Pressure
Dyeing
Machines
34
56
65
98
160
230
400
650
750
810
810
Atmospheric
Dyeing
Machines
5,000
4,980
4,902
4,880
4,790
4,750
4,602
4,510
4,350
4,150
4,048
Jig
Dyeing
Machines
3,800
3,680
3,510
3,480
3,460
4,208
2,804
2,440
2,208
2,110
1,957
Padder
Dyeing
Machines
650
648
646
644
642
640
638
636
634
632
630
Continuous
Dyeing
Rangers
3/
200(30)-'
3/
295(132)"
I/ Total sales are those of the particular companies and not necessarily
totally textile sales. Figures are those presented by Fortune Magazine, May
and June 1975.
2/ Noncarpet machines
_3/ (Thermosol-pad steam ranges)
Source: Department of Treasury, The Identification and Assessment of Techno-
logical Obsolescence of Capital Equipment in the Textile Industry.
II I-4
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fashion and taste. Most textile mill products sold in the U. S. are ultimately
used in apparel, furniture, automobiles, and industrial goods. Standard and
Poor's estimates indicate that 37% of all yardage produced goes to apparel uses,
30% to the home furnishing market, 11% to home sewing, 18% to industrial uses,
and 4% to export. Although retail unit sales of apparel tend to be more stable
than the sales of furniture, automobiles, and industrial goods, overall textile
sales do reflect general economic conditions. Thus changes in the market condi-
tions for these goods affect the textile producers serving these markets.
Taste and design affect textile sales. Sales of successful products often
follow similar patterns over time, which is known as the "product life cycle."
There is an initial startup period when sales are slow, production facilities
are being geared up, and marketing efforts emphasize product performance char-
acteristics. Following a successful startup phase, there is a period of rapid
growth, during which marketing efforts boost demand, competitors emerge, and
firms try to maintain and expand their market shares. After this growth, sale
increases slow down as maximum demand is approached. This phase, called "prod-
uct maturity," is characterized by keen price competition among a large number
of firms and the resulting need for effective cost control. Firms which take
successful leads in product innovations have advantage over firms that follow
the leads. Following firms that are "imitators" usually enter the product life
cycle late.
Latest retail trade statistics produced by the Census Bureau (through
December 1976) dramatize the improved confidence of the American consumer.
Over the October to December (1976) two-month period, total retail sales rose
21%, general merchandise store sales spurted 70%, department store sales accel-
erated 76%, and apparel and accessory store sales increased at a 62% rate.
However, these large spending gains cannot be maintained. Rather, they are
probably making up for the evident sluggishness earlier in 1976.
Textile demand is still feeling the effects of that sluggishness as well
as the added depressant of increased imports of apparel. As one measure of
textile operations, the poundage of throughput in textile mills totaled just
over a billion in October 1976, well below October 1975 and not very much higher
than the traditionally low summer months.
Another measure of textile demand is the mill unfilled order position. At
the end of October 1976, yardage backlog was off 20% from a year ago for broad-
woven goods, and incoming orders were down by more than that. Unusually high
levels of inventories in retail stores are the reasons for this dismal perform-
ance of textile sales. However, given the accelerated pace of retail trade in
the latest months and given the low level of textile input to the system, it
would appear that excess soft goods inventories are being reduced. This sets
the stage for improved textile demand in 1977.
Supply. According to government figures, there are more than 5,000 compa-
nies with over 7,000 plants in the U. S. textile industry. Since most of these
companies are small (4,300 with less than 100 employees), it is apparent that
the industry is fragmented and very highly competitive. Although the largest
company in the industry is big by any standard, it accounts for about only 7%
of total sales.
III-5
-------
The heaviest geographic concentration in recent decades has been in the
Southeast. Textile plants in the Carolinas, Georgia, and Alabama account for
the bulk of spinning, weaving, and knitting operations.
Sales of textile products run over $35 billion a year. Spending for new
plants and equipment averaged about $700 million annually during the 1970s, and
these expenditures are expected to rise in the future due to the expected
growth in the economy. Capacity in the textile industry is difficult to esti-
mate, partly because of the broadly diversified and flexible nature of produc-
tive facilities. Mill operating rates, as estimated by the McGraw-Hill Economic
Department, reached a peak of over 97% in 1966, but revisions of this series
have been made subsequently. (See Table III-4). Utilization by 1970 fell to
a reported 81.8% but turned upward to 89.9% in 1973. Sharp curtailments during
the 1974-75 recession to below 60% rebounded to 75.5%. For purposes of this
study, a "normal" year operating rate of 85% will be used. This capacity utili-
zation rate corresponds to that experienced in 1972.
Table III-4
TEXTILE INDUSTRY OPERATING RATES
(in percent)
All
Year Textiles Manufacturing
1966 97.6 90.3
1967 91.2 84.7
1968 91.0 84.5
1969 87.5 83.5
1970 83.0 78.5
1971 - 82.5 77.0
1972 84.5 81.0
1973 90.0 87.0
1974 79.0 82.5
1975 67.0 70.8
Source: McGraw-Hill Economic Department.
Although operating rates have been low, the supplies of certain woven goods
are likely to be tight. Aggressive expansion of capacities is unlikely until
more capital is available, the incentive for investment is greater, and the
longer-term market outlook becomes more clearly defined.
The textile industry depends heavily on the supplies of fibers, machinery,
chemicals, energy, labor, and water. Cotton is in short supply at the present
time. The supplies of man-made fibers are adequate. The supply of labor is
ample in general but tight in some areas, with wages continuing to rise. On
the other hand, further efficiencies are expected from new machinery, and better
utilization of labor has resulted in the reduction of overhead. The supplies
of natural gas are in critical condition in many parts of the nation. Some
plant closings have been reported due to gas shortages. Textile mills require
large amounts of fresh water for cleaning and finishing operations. The used
water contains relatively large amounts of dyes, finishing chemicals, and
III-6
-------
cleansers. In 1974, few plants recoverd these chemicals for reuse. Water
treatment facilities at the textile mills range from nonexistent at some small
mills to extensive systems at many integrated mills.
Foreign Trade. Foreign trade, especially imports, affects the prices of
domestic textile goods. Large volumes of textile imports have played a signif-
icant role in dampening textile prices and in depressing certain sections of
the industry. Since the 1973 worldwide agreement on a multi-fiber arrangement,
the outlook of the U. S. textile industry has been improved.
After many years of being a net exporter of textiles, the U. S. has imported
more textiles than it has exported since 1958. The balance of U. S. textile
trade in favor of the imports increased from $36 million in 1958 to $2,418 mil-
lion in 1972, then decreased to $1,753 million in 1975, and increased to $2.8
billion in 1976.A/ Several relevant factors have contributed to the current
U. S. problems in the textile trade. The world textile industry has expanded
significantly since World War II, especially in the Far East. Many countries
that were previously textile importers become first self-sufficient producers
and then net exporters. Low wage rates in these countries enable them to sell
in high-wage countries such as the U. S. The fact that the U. S. cotton price
exceeded the world price was an important contributing factor to the large tex-
tile imports in the past. It is not a significant factor now because the U. S.
abandoned a two-price system in cotton in 1964.
U. S. textile mills also are affected by the import of apparel products.
Shown in Table III-5 are the textile and apparel imports as a percentage of
U. S. consumption. The most striking disclosure of these data is sustained
high level of imports of wool textile and apparel products.
Table III-5
RATIO OF U. S. IMPORTS FOR CONSUMPTION TO APPARENT DOMESTIC MARKET
FOR TEXTILE AND APPAREL PRODUCTS, 1964-1975
(in percent)
Textile and Apparel Product Ratio
Year
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Source: U. S. Department of Commerce, Cotton, Wool and Man-Made
Fiber Textiles and Apparel, U. S. Production, Imports and
Import Production Ratios.
— Derived by American Textile Manufactures Institute, Inc. from the
U. S. Department of Commerce figures.
Source: Textile Hi-Lights, American Textile Manufactures Institute.
III-7
Cotton
6.9
7.7
10.3
9.5
10.7
11.7
11.2
11.7
14.6
14.5
14.7
15.7
Wool
18.4
20.8
21.5
21.6
25.4
25.4
28.0
28.0
25.1
26.3
22.6
19.6
Man -Made
1.9
2.7
3.6
3.9
4.6
5.3
8.2
10.5
9.4
7.3
6.3
6.4
-------
In the early 1960's, the U. S. government negotiated a long-term arrange-
ment with several nations which helped establish reasonable growth rates for
cotton textile goods. However, there were no controls on imports of wool or
man-made fiber textiles while the latter gained in popularity. As a result,
textile imports, which amounted to 1.5 billion square yards in 1962, jumped to
over six billion yards in 1972.
Agreements covering wool and man-made fiber textiles were negotiated suc-
cessfully in 1971 and 1973 with 50 nations, including big exporters like Japan,
Taiwan, Hong Kong, and Korea. Properly administered, this new agreement can
materially stabilize textile trade among nations while allowing for orderly
growth. With this Multi-Fiber Arrangement (MFA) in force, the U. S. textile
industry, for the first time in recent history, could plan for its future devel-
opment with some confidence. The international agreement will expire in Decem-
ber 1977 unless it is renewed.
Renewal of the MFA is not certain, however. Although the United States is
pressing for renewal without change, some of the other importing countries —
particularly those of the European community — insist that some modifications
should be made. The textile and man-made fiber interests in Western Europe
would like to modify the MFA by reducing the 6% annual rise provision — now
required in importing countries' quotas — to zero during a period of zero
economic growth.I/
Prices. Textile producers have little control over product prices because
of numerous competitors. At one time, the price mechanism was as close to a
model of pure competition as existed in the major manufacturing industries in
this country. However, the events of the last three decades have moved the
industry somewhat away from the pure competition model. Textile prices are
determined by marginal producers who are willing to accept a price level
which would enable them to survive in the marketplace.
The prices consumers pay for textile goods, along with other commodities,
have been affected by inflation. But retail prices for textiles have increased
much less than most other necessities of life in the Consumer Price Index com-
piled by the U. S. Department of Labor. (See Table III-6.) This is due in
large part to the competition among the large number of textile companies and
to some extent to imports of foreign textile and apparel goods.
Since the post-World War II period, American consumers have been spending
increasing amounts on clothing and shoes, according to the Department of Com-
merce. (See Table III-7.) From $18.2 billion in 1946, the amount jumped to
$69.9 billion in 1975 and reached an annual rate of $73.5 billion in the first
quarter of 1976. But while the total amount has increased, the percentage of
total disposable personal income spent on clothing and shoes has declined almost
steadily each year in the past decade. It dropped from 7.2% in 1966 to 6.5% in
1975. This trend is expected to continue as income increases.
I/ U. S. Department of Agriculture, Foreign Agricultural Service, "Foroiqn
Agriculture," Vol. XV, No. 10, March 7, 1977, pp. 2-4.
III-8
-------
Table III-6
CONSUMER PRICE INDEX OF APPAREL AND TEXTILES
(1967 = 100)
Year
1972
1973
1974
1975
1976 (annual rate)
Apparel Less
Footwear
122.3
126.5
135.7
140.6
142.3
Textile Home
Furnishings
113.6
116.2
131.5
141.4
144.7
All Consumer
Items
125.3
133.1
147.7
161.2
167.7
Table III-7
PERSONAL CONSUMPTION EXPENDITURES
(1969-1976)
Year
1969
1970
1971
1972
1973
1974
1975
1976 (est.)
Clothing
& Shoes
(in billions)
.1
.6
,5
$45.
46.
50.
55.1
61.4
65.2
69.9
73.5
Food
(in billions)
$126.1
136.3
140.6
150.4
168.0
189.4
209.1
219.3
Housing
(in billions)
$ 86.8
94.0
102.7
112.3
123.1
136.0
148.8
157.8
Clothing & Shoes
as Percentage of
Total Disposable
Personal Income
7.2
6.8
6.8
6.9
6.8
6.6
6.5
6.4
Source: U. S. Department of Commerce, Survey of Current Business.
Except for one year, textile prices have been rising less rapidly than
most industrial products in recent years. In 1973, a combination of price in-
crease in man-made fibers, due to shortages, and soaring raw cotton prices
forced the textile price index above the general price index. (See Table III-8.)
Table III-8
WHOLESALE PRICE INDEX OF TEXTILES AND ALL INDUSTRIALS
(1967 = 100)
Year
1972
1973
1974
1975
1976 (May)
Textiles
111.6
128.7
147.8
142.3
156<8
All Industrials
117.9
125.9
153.8
171.5
180.4
Source: U. S. Department of Labor.
III-9
-------
Price and Income Elasticities. The previous discussion has identified in
a qualitative manner those determinants of pricing in the textile industry.
The following discussion has been adopted from the National Bureau of Economic
Research, Inc., report entitled, "The Economic Impact of the Federal Water Pol-
lution Control Act Amendments of 1972 on the Textile Industry." Other econo-
metric research which has been done in the area of textiles is included in the
references.
Since textile products are included in a wide variety of goods, it is dif-
ficult to estimate aggregate-level product demand elasticities. Also, the
analysis was conducted for the aggregate demand function for fibers instead of
textile products. As the authors indicate, over a long period of time, allow-
ing for changes in inventory, final consumption of fiber should be equal to
that consumed in mills.
Domestic fiber consumption has shown an increasingly upward trend since
World War II. The principal factors affecting this trend include fiber prices,
changes in tastes and preferences, changes in personal disposable income,
changes in product mix due to technological innovation, and population growth.
Not all of these parameters can be quantified, however. Income, price, and
population may be accurately measured; changes in tastes and the emergence of
new products, while equally important, may not. The elasticity estimation for
aggregate fiber consumption was base on the following regression equation:
Ln (TDC = -6.891 -0.101 • Ln (FPL) + 1.25 • Ln (PDI)
(91.418) (0.268) (4.836)
+ 0.392 • Ln(N) -0.208 • Ln (T)
(0.326) (2.267)
R2 = 0.96 RHO = -0.078 DW = 1.98
Years - 1953 to 1969
Where
TDC = total domestic fiber consumption (in pounds/capita; fibers other
than cotton have been converted into cotton-equivalent quantities)
FPL = fiber price level (weighted price index consisting of cotton, wool,
cellulosic, and noncellulosic fiber prices)
PDI = personal disposable income per capita
N = population (in millions)
T = time trend
The equation reveals that the fiber demand is fairly inelastic as indicated
by the small coefficient of Log (FPL). The price elasticity of demand for fiber
with respect to fiber price is -0.10, implying that a 10% increase in fiber
prices translates into a 1% decline in fiber consumption.
It is hardly surprising that textile fiber consumption is relatively in-
elastic. Textile fibers are used primarily as inputs whose cost represents a
small proportion of the cost of the finished product. In addition, textile
end-products are generally considered to be "necessities" rather than "luxuries.1
While fiber consumption is fairly inelastic with respect to changes in fiber
prices, it is relatively responsive to changes in personal disposable income.
111-10
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As indicated in the equation, a 10% increase in income will lead to a 12.5%
increase in fiber consumption. Obviously, population growth also contributes
to the increase in fiber consumption.
Secondary Price Increases. For insight into how various types of textile
users would react to possible increases in supplier prices, survey question-
naires were mailed to domestic firms known to purchase large volumes of textile
fiber, yarn, or fabric. The survey mailing list was compiled from all segments
of the U. S. textile industry and included, in part, weavers, knitters, carpet
mills, apparel producers, and upholstered furniture manufacturers.
Of the 603 survey questionnaires mailed out, 120 usable responses were
received in the time frame available, a return of 20%. The participating com-
panies represented a balanced cross section of both the textile mill products
industries (SIC 22), 58 returns, and the manufacturers of apparel and finished
products made from fabric (SIC 23 plus SIC 2512), 62 returns. The combined
activity of the companies involved the purchasing and producing of $523 million
worth of textile fiber and yarn and $503 million worth of fabric.
Should the price of these items be increased to a given point (average
price percentage and degree of volume change would vary by industry), the mills
and manufacturers surveyed intend to seek new domestic suppliers for as much
as $565 million worth, or 55% of their textile needs. If prices were to increase
further, many companies stated that they would give serious consideration to a
high volume switch to foreign textiles.
Of the more than one billion dollars worth of fiber, yarn, and cloth pur-
chased by the respondent American companies annually, $55 million worth, or
approximately 5%, is imported. If prices rise, however, percentage volumes of
imports will escalate, and firms presently buying domestic textile products
will investigate foreign sources. Under sufficient price duress, it is reported
that textile imports conceivably could expand almost 600% to more than $350
million.
Questionnaire responses indicate that, for the most part, price increases
of less than 2% will be absorbed; price increases of 2-3% will be passed on to
customers; and increases of more than 3% will be partially absorbed and partially
passed on.
The above findings from the textile products users might have differed if
the respondents could have known and considered the reaction of competitors to
price changes. Although the statistics and opinions reported in the survey are
based on only a small fraction of the total textile industry, they are repre-
sentative and their relevancy to the study warrants consideration.
Financial Profile
As would be expected in an industry as diverse as the textile industry,
there can be found both companies that are very strong financially and companies
that are in marginal financial condition. The modern trend is clearly but slowly
toward larger, integrated, multi-plant producers. However, even today many small
privately owned mills remain, and it is this sector that tends to have the least
financial strength. Most of the large-scale producers are publicly owned firms
whose capital stock is actively traded in the financial markets and are, as a
III-ll
-------
group, much stronger financially. It should be noted that the textile industry
is characterized by variability in financial structure; hence, aggregate figures
should be interpreted with caution. Frequency distributions of financial mea-
sures, such as net after-tax profits, return on equity, and operating margins
for publicly held firms, display substantial variability. The actual variabil-
ity within the industry is likely to be even greater when family-owned or closely
held firms are included.
Future Capital Requirements. A Department of the Treasury study, The Tex-
tile Industry, published in 1976, provides insight into the numerous needs that
are competing for the available capital of the industry. The major demands on
capital are:
(1) To improve production technology
(a) increased quality of product
(b) less labor-intensive machines and processes
(c) increased quantity of product
(d) reduced energy demands
(2) To meet government regulations
Financing New Investment. Before examining the industry's financial per-
formance, it is useful to consider the factors which affect the ability of a
firm to finance new investment for pollution abatement. In general terms, this
discussion of these critical financial and economic factors provides a framework
in which the presentation of the industry's financial measures takes on addi-
tional significance.
New capital must come from one or more of the following sources: (1) funds
borrowed from outside sources, (2) equity capital through the sale of common or
preferred stock, and/or (3) internally generated funds — retained earnings and
the stream of funds attributed to depreciation of fixed assets.
For each of the three major sources of new investment, the most critical
set of factors is the financial condition of the individual firm. For debt
financing, the firm's credit rating, earnings record over a period of years,
stability of earnings, existing debt-equity ratio, and the lenders' confidence
in management will be major considerations. New equity funds through the sale
of securities will depend upon the firm's future earnings as anticipated by
investors, which, in turn, will reflect past earnings records. The firm's re-
cord, compared with others in its own industry and firms in similar industries,
will be a major determinant of the ease with which new equity capital can be
acquired. In the comparisons, the investor will probably look at the trend of
earnings for the past five or so years.
Internally generated funds depend upon the margin of profitability and
the cash flow from operations. Also, in publicly held corporations, stock-
holders must be willing to forego dividends in order to make earnings available
for reinvestment.
The condition of the firm's industry and general economic conditions are
also major considerations in attracting new capital. The industry will be
111-12
-------
compared with other similar industries in terms of net profits on sales and on
net worth, supply-demand relationships, trends in production and consumption,
the state of technology, impact of government regulation, foreign trade, and
other significant variables. Declining or depressed industries are not good
prospects for attracting new capital. At the same time, the overall condition
of the domestic and international economy can influence capital markets. A
firm is more likely to attract new capital during a boom period than during a
recession. On the other hand, the cost of new capital will usually be higher
during an expansionary period. Furthermore, the money markets play a deter-
mining role in new financing.
These general guidelines can be applied to the textile industry by looking
at general economic data and industry performance over the recent past.
Capital Expenditures for Plant and Equipment. Expeditures for plant and
equipment as reported by the Annual Survey of Manufactures are shown in Table
III-9. Between 1960 and 1974, capital expenditures in textiles exhibited a
9.6% average annual growth rate compared with a 9.4% average for all manufac-
turing operations. The most significant statistic in the table is that which
shows textile capital expenditures as a percentage of all manufacturing capital
expenditures. The recent decline from a high of 5.62% in 1972 to 3.29% in 1974
would seem to suggest that the textile industry has postponed expenditures to
a certain extent for new plant and equipment to future years.
Asset Depreciation. The Treasury Department has conducted a study of
assets in the textile industry in order to revise the Class Life Asset Depre-
ciation System. The Treasury Department has recommended new asset depreciation
and repair allowance guidelines which will result in a savings to the industry
as a whole of $6.5 million from 1976 through 1980. The near-term estimate of
savings may be put in perspective by comparison with the planned expenditures
for new plant and equipment in 1976 of $787 million, including $32 million for
water pollution abatement alone.
Financial Indicators. The pattern of profitability in the textile indus-
try historically has been at a low level relative to other industries. (See
Table 111-10.) After taxes, earnings on sales of textile companies have
averaged 2.4 cents per dollar of sales in the last five years, compared with
4.7 cents for manufacturing in general. This persistent pattern of low profit-
ability performance has been present even in times of very favorable economic
conditions. The net result of the pattern of low profitability is a reinforce-
ment of the propensity of the industry to substitute labor for fixed assets,
since their cost of investment capital is relatively higher than other manu-
facturing and the potential return in profits is at least perceived to be lower
because of the overall pattern of low profits in the industry.
Data from the survey on profitability are presented in Table III-ll.
These data cover calendar year 1975 or fiscal year 1975-76, depending upon the
firms' accounting period. As is evident, the 1974-75 recession had a substan-
tial impact on the industry's profits, with only 57% of the respondents report-
ing a profit. The presentation of profits by firm size indicates that the small
operations were the least profitable.
Although profitability has been low, the industry appears to be in a posi-
tion to increase earnings significantly in the near future. A number of
111-13
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Table III-9
CAPITAL EXPENDITURES FOR NEW PLANT AND EQUIPMENT FOR TEXTILES AND ALL MANUFACTURING
Textile Mill Products Capital Expenditures
Year
1960
1965
1970
1971
1972
1973
1974
All Manufacturing
Capital Expenditures
(millions of dollars)
10,097.8
16,606.6
22,164.3
20,940.7
20,077.7
26,972.9
35,546.1
Total
(millions
of dollars)
326.1
618.1
811.1
872.8
1,275.5
1,120.9
1,169.9
Dollars
per
Employee
362
691
877
962
1,146
1,143
1,254
As Percent
Value of
Shipments
2.36
3.37
3.58
3.63
4.02
3.60
3.55
As Percent of
All Manufacturing
Capital Expenditures
3.22
3.72
3.65
4.16
5.62
4.15
3.29
Sources: Annual Survey of Manufactures and Census of Manufactures, 1972.
-------
Table 111-10
PROFITS ON SALES: TEXTILES AND ALL INDUSTRIAL
(in percent)
Year Textiles All Industrial
1971 2.4 4.2
1972 2.6 4.3
1973 2.9 5.0
1974 2.5 5.5
1975 1.5 4.6
1976 (1st. qtr.) 3.0 5.2
Source: Federal Trade Commission.
factors contribute to this expected rise in earnings. During the 1974-75 re-
cession, plants and product lines were eliminated, overhead was materially
cut, and finances were strengthened, with improved controls over inventories
and receivables. These actions have resulted in improved capacity utilization
rates and reasonable levels of inventories.
Inventories and receivables have been reduced from the mid-1974 peak,
which has permitted a reduction in current liabilities. Industry working capi-
tal of $6.4 billion is slightly below the peak of $6.5 billion in mid-1974,
but represents an improvement from about $5 billion in 1970.
Materials and labor are the major costs in the textile industry and will
affect future levels of profitability. Cost of materials represented 58% of
the value of shipments in 1972, according to the Census of Manufactures.
Fibers represent a major portion of material costs, and the long-term trend
toward the use of man-made fibers, which generally experience less price vola-
tility than natural fibers, should moderate cost variations. Labor is the
second largest cost in the textile manufacturing process, accounting for 21%
of the total value of shipments in 1972. Hourly earnings have been in a long
uptrend and reached $3.57 in early 1976, as compared with $2.45 in 1970 and
$1.61 in 1960. These rates compare with hourly earnings of all manufacturing
companies of $5.07, $3.36, and $2.26, respectively.
Cost of Capital. Return on invested capital is a fundamental notion in
U. S. business. It provides a measure of both actual and expected performance
of a firm. In the latter case, it is also called the cost of capital. The
cost of capital is defined as the weighted average of the cost of each type of
capital employed by the firm — in general terms, equities and interest-bearing
liabilities. There is no methodology that yields the precise cost of capital,
but it can be approximated within reasonable bounds.
Cost of Long-Term Debt. The cost of long-term debt capital is the current
effective interest rate for long-term securities of the specific firm; in this
instance, the industry. It must be recognized that the indicated interest rate
of an outstanding debt security may not be the effective rate of interest be-
cause the security may be selling at a premium or a discount.
111-15
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Table III-ll
RESPONDENTS' NET BEFORE-TAX PROFIT ON SALES, 1975
Size of Firm
Net Before-Tax
Profit on Sales
(Percent)
-50% to -10%
-9 to - 5%
- 4% to - 1%
0
1% to 3%
4% to 6%
7% to 9%
10% to 55%
Total
Mode , Profit
Mean , Profit
% of firms
reporting
a profit
All Firms
No. Of
Firms
19
20
24
33
38
33
26
28
221
0
2.0
56.5
% of
Total
8.60
9.05
10.86
14.93
17.19
14.93
11.76
12.67
99.99
Small
No. of
Firms
14
12
17
26
29
24
15
17
154
0
1.4
55.2
% of
Total
9.09
7.79
11.04
16.88
18.83
15.58
9.74
11.04
99.99
Medium
No. of
Firms
3
7
5
6
7
4
6
5
43
0
2.1
51.2
% of
Total
6.98
16.28
11.63
13.95
16.28
9.30
13.95
11.63
100.00
Large
No. of
Firms
2
1
2
1
2
5
5
6
24
6,8
5.2
75.0
% of
Total
8.33
4.17
8.33
4.17
8.33
20.83
20.83
25.00
99.99
Census Region
Northeast
No. of
Firms
7
7
6
10
10
7
9
10
66
0
2.2
54.5
% of
Total
10.61
10.61
9.09
15.15
15.15
10.61
13.64
15.15
100.01
South
No. of
Firms
7
13
17
18
23
19
11
17
125
0
2.1
56.0
% of
Total
5.60
10.40
13.60
14.40
18.40
15.20
8.80
13.60
100.00
-------
The respondents' interest rate on long-term debt is shown in Table 111-12.
Since there does not seem to be any difference in the interest cost by size of
firm, the mode value of 9% will be used, and the resultant cost of capital will
be used for all firms. The after-tax cost of debt can be calculated in the
following manner:
ATC = I (1 - TR)
Where ATC = after-tax cost of debt
I = interest rate on long-term debt
TR = tax rate
Applying this formula to the textile manufacturing industry, the cost of
debt is calculated as follows:
ATC = .09 (1 - .48)
ATC = .0432
Table 111-12
RESPONDENTS' INTEREST RATE ON LONG-TERM DEBT, 1975
Size of Firm
All Firms
Interest
Rate
3
4
5
6
7
8
9
10
12
15
18
Mode
Median
No. of
Firms
1
2
7
11
12
16
25
10
4
1
1
90
9
8
% of
Total
1.1
2.2
7.8
12.2
13.3
17.8
27.8
11.1
4.4
1.1
1.1
99.9
Small
No. of
Firms
1
1
3
5
10
13
15
8
3
1
60
9
8
% of
Total
1.7
1.7
5.0
8.3
16.7
21.7
25.0
13.3
5.0
1.7
100.1
Medium
No. of
Firms
1
3
3
2
1
7
2
1
21
9
8.5
% of
Total
4.8
14.3
14.3
9.5
4.8
33.3
9.5
4.8
4.8
100.1
Large
No. of
Firms
1
3
2
3
1
10
6,9
8
% of
Total
10.0
30.0
20.0
30.0
10.0
100.0
Cost of Equity Capital. The cost of common stock capital is equal to the
return required by common stockholders. This return can be measured by com-
paring expected future dividends to the present market value of the common
stock. The rate of discount that equates future dividends for perpetuity to
the cost of the stock is the cost of capital for common stock capital.
Standard & Poor's Textiles Basic Analyses published in May 1976 provides
the data needed to calculate the cost of equity capital. Composite industry
data for textile products indicate average dividends paid of $3.04 in 1974.
111-17
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Calendar year average price ranges of common stock was a low of $30.14 and a
high of $48.98, for an average value of $39.56. The average annual growth
rate of dividends between 1965-66 and 1973-74 was 2.15%.
The cost of equity capital can be found by the following formula:
Where C = cost of equity capital
D = expected future dividend
P = current market price of common stock
g = expected annual percentage rate increase in future dividends
Applying this formula to the textile manufacturing industry, the cost of
equity capital is calculated as follows:
C = .0768 + .0215 = .0983
For a composite after-tax cost of capital for the textile industry, each
of the two costs of capital were weighted to reflect the present capital struc-
ture of the industry. For all respondents, the proportion of total capital
financed by long-term debt was 21%, with the remaining 79% financed by equity.
These proportions are probably slightly biased toward the small and medium-size
firms. The composite cost of capital can be calculated using the following
formula :
CCC = (ATC)P + (C)Q
Where CCC = composite cost of capital
ATC = after-tax cost of debt
C = cost of equity
P = percentage of industry financed by debt
Q = percentage of industry financed by equity
Applying this formula to the conditions prevailing in the textile manu-
facturing industry, the cost of capital for the industry is calculated as
follows:
CCC = (.432) (.21) + (.0983) (.79)
CCC = .0090 + .0776
CCC = .0866 or 8.7%
Regional Aspects of the Textile Industry
The representative plant financial statements which provide the basis for
the impact analysis were obtained from plants throughout the nation and, there-
fore, do not reflect any regional cost differences in textile production except
for the cases where an industry segment (i.e., carpet mills) was located pre-
dominantly in a single region. In the following discussion, costs for labor,
111-18
-------
energy, construction, and municipal user charges are examined to provide in-
sights into regional cost differences.
There are important regional cost differences in textile production. The
first U. S. textile mills were in the North, mainly in New England. At the
turn of the century the Northeast still had the bulk of textile capacity, but
since then the South has largely displaced it. Both grew until after World
War I, but the South advanced further. Since 1923 New England has experienced
an almost continuous decline. Today, the South has nine-tenths of the spinning
capacity. New England's textile employment has not fallen this fast because it
changed to two- and three-shift operations between World Wars I and II and ^
because it lost spinning capacity faster than weaving and finishing capacity.—
Labor Costs. The heavy labor costs in textile production account for much
of the attraction that the South holds for textile mills. Even today wages
paid by southern textile mills are lower on the average than any other region.
Moreover, southern public opinion generally has been hostile to unions, so the
southern mills tend to be less organized by unions than the northern mills.
Southern state legislatures often treat mills moving from the North with great
tenderness, imposing little or no social legislation.!/
The advantage of lower southern wage rates over other regions can be illus-
trated by total wages in dollars paid by textile mills to production workers
divided by total production hours in the different regions as reported in the
2972 Census of Manufactures. The average textile wage for production workers
in the South in 1972 was $2.68 per hour, compared with $3.06 per hour in the
Northeast, $3.32 per hour in the North Central region, and $3.02 in the West.
Energy Costs. The South as a whole has some distinct advantages over other
regions in fuel costs. This is especially true in a comparison between the
South Atlantic states and the Northeast (or New England). The South has not
only a warmer climate with shorter winter but also lower unit fuel costs than
northern regions. The average industrial gas rate was $1.07 per thousand cubic
feet (M.C.F.) in the South Atlantic in 1976, compared with $2.92/M.C.F. in the
Northeast, $2.05/M.C.F. in the Middle Atlantic, and $1.36/M.C.F. in the East
North Central. The details of average industrial gas rates by region in 1976
are given in Table 111-13.
Electrical energy is important to the textile industry. The differences
in electrical energy cost by region were derived by dividing total energy sale
revenues by total energy sales in million kilowatt hours (KWH) to commercial
and industrial users in 1975. In the South Atlantic states, where most tex-
tile mills are located, electricity costs about 3.09 cents per KWH compared
with 4.8 cents per KWH in New England, 3.65C per KWH in the Middle Atlantic
states, 3.26 cents per KWH in the West North Central, 5.33 cents per KWH in the
the East South Central, and 3.18 cents per KWH in the Pacific. Only three areas,
East North Central, West South Central, and Mountain, had lower rates than the
South Atlantic. However, these regions are not major textile areas. Details
of electrical energy costs are given in Table 111-14.
I/ Leonard W. Weiss, Economics and American Industry, John Wiley & Sons,
Inc.,~New York, N. Y., 1967, pp. 134-135.
111-19
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Table 111-13
AVERAGE INDUSTRIAL GAS RATE BY REGION, 1976
Region
Northeast
Middle Atlantic
East North Central
South Atlantic
West North Central
West South Central
Pacific
I/ One thousand cubic feet
I/
Cost per M.C.F.—
$2.92
2.05
1.36
1.07
0.96
1.46
1.88
Source: American Gas Association, Arlington,
Virginia.
Table 111-14
ENERGY SALES, REVENUES, AND COST PER KWH FOR
COMMERCIAL AND INDUSTRIAL USERS BY REGION, 1975
Northeast
New England
Middle Atlantic
North Central
East North Central
West North Central
South
South Atlantic
East South Central
West South Central
West
Mountain
Pacific
Energy Sales
in Million KWH
174,210
36,037
138,173
252,533
203,908
48,625
298,433
145,936
37,294
115,203
127,078
39,742
87,336
Revenues
in $1,000
6,519,125
1,470,654
5,048,471
6,792,800
5,207,331
1,585,469
8,880,621
4,515,603
1,986,743
2,378,275
3,839,486
1,061,041
2,778,445
Source: Statistical Year Book of the Electric Utility
1975, Edison Electric Institute, New York, N.
Dollar/KWH
0.0374
0.0481
0.0365
0.0269
0.0255
0.0326
0.0298
0.0309
0.0533
0.0206
0.0321
0.0267
0.0318
Industry for
Y., 1976.
Construction Costs. The cost of building and construction in a location
is another important yardstick in measuring the regional cost difference.
Average plant building costs, based on a wall height of 20 feet and a useful
space of 10,000 square feet, were derived from the cost indices provided by
the F. W. Dodge Company for tilt-up concrete building and for brick-concrete
building in major textile locations in the United States. The details of
111-20
-------
these building cost estimates are given in dollars per square foot in Table
111-15. It is apparent that major textile locations in North Carolina, South
Carolina, and Georgia have advantages in building costs over other states.
The average cost per square foot for tilt-up concrete building in the three-
state area ranges from $5.99 to $7.35, compared with the Northeast locations
of from $7.45 to $9.49. For brick-concrete building, the three states in the
South Atlantic give a cost range of $16.11 to $19.76 per square foot, compared
with the Northeast locations of from $20.02 to $25.51 per square foot.
New capital expenditures for textiles in the United States as reported in
the 1972 Census of Manufactures amounted to $1,127.4 million in 1972, of which
75.63% was spent in the South, 19.91% in the Northeast, 1.87% in the North
Central region, and 2.59% in the West. The heavy concentration of textile's
new capital expenditures in the South is obvious. The South also compares
favorably with other regions in new textile capital expenditure per employee.
In 1972, new capital expenditure per employee was $1,243 in the South, com-
pared with $1,007 in the Northeast, $762 in the North Central region, and
$1,792 in the West. This indicates that more expensive or more efficient
machinery has been employed in the South and the West.
Municipal User Charges. A survey was made of publicly owned waste treat-
ment plants in areas where textile plants are located to determine the charges
made for waste treatment. The data were analyzed to determine the bases on
which user charges are made and differences in user charges for various plant
sizes and regions of the country.
Bases of Charges. Examination of the questionnaires returned by the treat-
ment works indicated several predominant bases for charges as follows:
1. No charges made, since ad valorem taxes paid by the user support the
publicly owned treatment works and other municipal services.
2. Charges based on water consumption.
3. Charges based on water consumption and surcharges for BOD and suspended
solids based on BOD and SS level and volume. Other waste parameters
for which charges might be made are COD, pH, and grease.
4. Surcharges for BOD, SS, COD, pH, and/or grease without other charges.
The questionnaire did not ascertain if charges currently made included
operation and maintenance costs and industrial cost recovery as required by
PL 92-500, Federal Water Pollution Control Act and Amendments of 1972. Several
respondents did not supply rates and gave as their reason that rates were cur-
rently being revised to "conform to EPA requirements."
Plant Size, Industry Segment. The waste treatment plants surveyed make
no distinction among industries served with regard to charges based on the
industry's activities. This finding can be inferred from examination of the
bases for charges reported by the treatment works. Charges are made on the
basis of quantity of waste and degree of pollution as measured by BOD, suspended
solids, and other parameters, regardless of the source of pollution. It follows
that certain segments of the textile industry will discharge wastes of different
strengths and, in that regard, there well may be differences in the charges made
to different segments of the industry.
111-21
-------
Table 111-15
AVERAGE PLANT BUILDING COSTS, EFFECTIVE
OCTOBER 1976 TO MARCH 1977, WITH WALL HEIGHT 20 FEET,
USEFUL SPACE 10,000 SQUARE FEET, AVERAGE QUALITY
Local Build-
ing Cost
Multiplier
1.654
1.572
1.551
1.410
1.374
1.751
1.650
1.573
1.498
1.640
1.600
1.611
1.211
1.200
1.194
1.194
1.106
1.157
1.157
1.272
1.356
1.272
1.267
1.360
1.424
1.300
1.535
Cost per Square Foot
Tilt-up
Concrete
$5.42
8.96
8.52
8.41
7.64
7.45
9.49
8.94
8.53
8.12
8.89
8.67
8.73
6.56
6.50
6.47
6.47
5.99
6.27
6.27
6.89
7.35
6.89
6.87
7.37
7.72
7.05
8.32
Brick-
Concrete
$14.57
24.10
22.90
22.60
20.54
20.02
25.51
24.04
22.92
21.83
23.92
23.31
23.47
17.64
17.48
17.40
17.40
16.11
16.85
16.85
18.53
19.76
18.53
18.46
19.82
20.75
18.94
22.36
Location
UNITED STATES
Fall River, Massachusetts
New Bedford, Massachusetts
Springfield, Massachusetts
Springvale, Maine
Portland, Maine
Providence, Rhode Island
Manchester, Connecticut
Hartford, Connecticut
Manchester, New Hampshire
Allentown, Pennsylvania
York, Pennsylvania
Williamsport, Pennsylvania
Danville, Virginia
Waynesboro, Virginia
Gastonia, North Carolina
Greensboro, North Carolina
High Point, North Carolina
Greenville, South Carolina
Spartanburg, South Carolina
Macon, Georgia
Gainesville, Georgia
Griffin, Georgia
Knoxville, Tennessee
Nashville, Tennessee
Anniston, Alabama
New Braunfels, Texas
Fresno, California
Source: Dodge Building Cost Calculation and Valuation Guide, F. W. Dodge Com-
pany, Division of McGraw-Hill, Inc., September 1976.
111-22
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Regional Analysis. Summaries of waste treatment characteristics for each
state from which responses were obtained are shown by Bureau of Census region
in Tables 111-16 through 111-21.
In New England, the questionnaire responses indicate a widespread prac-
tice in which waste treatment services are provided mills without charge, as
shown in Table 111-16. Additional evidence that this practice exists was ob-
tained in interviews with city officials in Fall River, Massachusetts, and with
representatives of the Northern Textile Association. Mills obviously "pay" for
the services through their ad valorem taxes just as they support other munici-
pal services. Further investigations'are being made to determine the estimated
costs of treating wastes in such plants on a volume basis or by other param-
eters such as BOD or suspended solids. Five of 19 waste treatment plants in
New England reported charges made to customers based on volume of waste treated.
Only two of the 19 plants make charges for parameters in addition to volume.
Charges based on volume range from $0.248 to $0.54 per 1,000 gallons of ef-
fluent. Charges for BOD and suspended solids ranged from $0.0154 to $0.0413
per pound.
Replies were received only from New York and Pennsylvania in the Middle
Atlantic division. Waste treatment plants in Pennsylvania generally have estab-
lished rate structures based on volume of effluent, BOD, and suspended solids
as shown in Table 111-17. Two plants out of 12 indicated that charges are not
made, and four of the 12 indicated that industry is not served. This latter
result implies that industries in their locations discharge directly. Two of
the waste treatment plants have elaborate rate structures in which charges are
made for suspended solids, BOD, chlorine, and dissolved solids in direct pro-
portion to their strengths above given maximum levels. Other plants making
charges for BOD and suspended solids do so on the basis of wastes exceeding
given maximum levels and do not charge additionally for stronger levels. A
large number of the plants charge for flow with a graduated rate structure,
with rates decreasing as flow volume increases. Rates at the lowest levels
ranged from $0.435 to $1.83 per 1,000 gallons of effluent. Charges for BOD and
suspended solids ranged from $0.02223 to $0.60 per pound.
The South Atlantic division of the United States contains the largest num-
ber of textile manufacturing plants. A summary of replies from waste treatment
plants in this area is contained in Table 111-18. In most cases, charges for
waste treatment are made on the basis of volume and other parameters, including
BOD and suspended solids. For this region, three of 35 treatment plants indi-
cated that no charge was made for waste treatment. One of the plants indicated
that industry is not served, while several indicated that rates are currently
being established. Again, most treatment plants have a graduated rate struc-
ture for volume of effluent, with rates decreasing as volume increases. Two of
the plants have graduated rate structures for BOD, suspended solids, and pH.
The Western Carolina Regional Sewer Authority, which serves a large number of
plants in Greenville County, South Carolina, was found to have very comprehen-
sive rate structures and bases for user charges. Rates at the lowest levels
of volume ranged from $0.20 to $2.50 per 1,000 gallons of effluent. Charges
for BOD and suspended solids ranged from $0.000029 to $0.08 per pound.
Replies were received from two states in the East South Central division
— Alabama and Tennessee. (See Table 111-19). One of eight treatment plants
indicated that no charges are made for waste treatment services. Four of the
111-23
-------
Table 111-16
SUMMARY OF WASTE TREATMENT CHARGES
FOR NEW ENGLAND DIVISION
Massachusetts: 7 replies
4 - No sewer charges made
1 - Two industrial clients pay 54.509% of town
costs (not specified)
1 - Presently establishing rates
1 - $0.30/1000 gal; $226/year, min.
Maine:
1 reply
1 - Charges based on water charge
Rhode Island: 1 reply
1 - $0.319/1000 gal.
0.0326/lb; BOD
0.0413/lb; SS
Connecticut: 8 replies
4 - No sewer charges made
3 - No textile wastes
1 - Presently establishing rates
New Hampshire: 2 replies
1 - $10 per quarter, minimum
0.54/1000 gal.
1 - $25 per quarter, minimum
0.248/1000 gal.
0.0154/lb; BOD
0.0331/lb; SS
111-24
-------
Table 111-17
SUMMARY OF WASTE TREATMENT CHARGES
FOR THE MIDDLE ATLANTIC DIVISION
New York: 1 reply
1 - $0.64/1000 gal; 0-5000 gal (6 mos.)
to 0.19/1000 gal; > 1,000,000 gal.
1.67 times above charges for BOD > 750 ppm
Pennsylvania: 12 replies
2 - $1.83/1000 gal; 0-5000 gal (3 mos.)
to 0.33/1000 gal; > 2,500,000 gal.
0.02139/lb; BOD > 300 ppm
to 0.10/lb; BOD > 200 ppm
0.02223/lb; SS > 360 ppm
to 0.60/lb; SS > 200 ppm
2 - $0.435/1000 gal; $837/year min.
to 0.78/1000 gal; 42.40/year min.
1 - $0.44/1000 gal; 0-200,000 gal (3 mos.)
to 0.21/1000 gal; > 2,000,000 gal.
SC = 8.33 Q {(SS-SSOlK/i + (BOD-300)K? + (CL-15)K3)
1,000,000
where SC is service charge
Q is quantity of waste, gal.
K-L = 0.08/lb. SS
K2 = 0.05/lb. BOD
KS = 0.09/lb. CL
1 - $0.72/1000 gal.
SQ = .00834 Q! {(BOD-300)Ki + (SS-350)K2 + (DS-500)K3)
where SQ is service charge per quarter
Ql is waste flow in million gal.
K]_ = $38.75, BOD
K2 = $25.96, SS
K3 = $ 4.11, DS
2 - No sewer charges made
4 - Industry not served
111-25
-------
Table 111-18
SUMMARY OF WASTE TREATMENT CHARGES
FOR THE SOUTH ATLANTIC DIVISION
Maryland:
1 reply
1 - $0.90/1000 gal.
Virginia:
2 replies
1 - $2.50/1000 gal.
1 - $0.20479/1000 gal.
0.08/lb.; BOD > 300 ppm
0.06/lb.; SS > 300 ppm
5 x charge for slug discharge
North Carolina: 15 replies
4 -
1 -
$0.41/1000 gal. to 0.945/1000 gal.,
for minimum effluent discharge, to
$0.19/1000 gal. to 0.43/1000 gal.,
for maximum effluent discharge,
No other charges made
$0.59/1000 gal., 0-3,750 gal. to
• 0.23/1000 gal., > 30,000 gal.
0.033/lb.; BOD > 200 ppm
0.030/lb.; SS > 200 ppm
2 -
$0.03/lb. to 0.0587/lb.; BOD
0.03/lb. to 0.0689/Ib.; SS
> 300 ppm
(250 to 300 ppm)
2 - No charges made
5
1
Rates not supplied
Rates being established
South Carolina: 10 replies
2 - $0.304/1000 gal. to 0.48/1000 gal.,
for minimum effluent discharge, to
$0.160/1000 gal., for maximum
effluent discharge
1 - $0.0419/lb., BOD
0.0419/lb., SS
(Continued)
111-26
-------
South Carolina: (Continued)
2 - $0.20/1000 gal. to 0.53/1000 gal.
for minimum effluent discharge, to
0.17/1000 gal. to 0.53/1000 gal.,
for maximum effluent discharge
$0.000027/lb. to 0.064/lh.; BOH (0-350 ppm)
0.000029/ib. to 0.065-0.068/lb.; BOD > 350 ppm
0.0005/lb. to 0.0023/lb.; SS (271-350)
0.0005/lb. to 0.0072/lb.; pH<6, > 8.5
1 - No sewer charges made
1 - Rate being established
1 - 90% of O & M cost
1 - Rate not submitted
1 - Industry not served
Georgia:
7 replies
1 - $0.24/1000 gal.
3 - $0.20/1000 gal. to 0.33/1000 gal.,
for minimum effluent discharges, to
$0.37/1000 gal. for maximum effluent discharge
$0.02/lb. to 0.06/lb.f BOD (250-300 ppm)
S0.02/lb. to 0.07/lb., SS (250-350 ppm)
3 - Rates not submitted
111-27
-------
SUMMARY OF WASTE TREATMENT CHARGES
FOR THE EAST SOUTH CENTRAL DIVISION
Tennessee: 5 replies
2 -
$0.82/1000 gal. to 1.24/1000 gal.;
for minimum effluent discharge, to
$0.36/1000 gal. to 0.43/1000 gal.,
for maximum effluent discharge
0.0156/lb. to 0.0225/lb.; BOD (240-300 ppm)
0.0129/lb. to 0.0215/lb.; SS (300-325 ppm)
0.0129/lb. to 0.0200/lb.; Grease (50 cc 100 ppm)
$1.13/1000 gal., 0-1500 gal., to
0.24/1000 gal., > 500,000 gal./mo.
Service outside city 1.5 x above
2 - Rates not supplied
1 -
Alabama:
3 replies
2 - $0.21/1000 gal. to 0.51/gal.,
for minimum effluent discharge, to
$0.21/1000 gal. to 0.18/1000 gal.,
for maximum effluent discharge
$0.025/lb. to 0.04/lb.; BOD (200-210 ppm)
$0.025/lb. to 0.05/lb.; SS (210-700 ppm)
$0.06/lb. Grease > 100 ppm)
1 - No sewer charges made
111-23
-------
eight plants make charges for effluent volume, BOD, suspended solids, and
grease, with only one of the eight charging for volume only. Rates at the
lowest levels of volume ranged from $0.21 per 1,000 gallons to $1.24 per 1,000
gallons of effluent. Charges for BOD at lowest levels of strength for which
charges are imposed were from $0.0156 to $0.04 per pound. Rates for suspended
solids at lowest strength levels were from $0.0129 to $0.05 per pound and, for
grease at lowest concentrations on which charges are made, rates were from
$0.0129 to $0.06 per pound.
Texas was the only state in the West South Central division that was sur-
veyed, and only one reply was received. This waste treatment plant, as shown
in Table 111-20, charges $0.20 per 1,000 gallons of effluent, $0.21 per pound
for BOD of unspecified strength, and $0.00309 per pound for suspended solids.
Table 111-20
SUMMARY OF WASTE TREATMENT CHARGES
FOR THE WEST SOUTH CENTRAL DIVISION
Texas: 1 reply
1 - $0.20/1000 gal.
0.21/lb., BOD
0.00309.lb., SS
California was surveyed in the Pacific division, and one reply was received
as shown in Table 111-21. Charges for effluent made by this plant are $0.11 per
1,000 gallons, with charges of $0.025 per pound made for BOD having strength
greater than 120 ppm and $0.022 per pound for suspended solids in concentra-
tions greater than 80 ppm.
Table 111-21
SUMMARY OF WASTE TREATMENT CHARGES
FOR THE PACIFIC DIVISION
California: 1 reply
1 - $0.11/1000 gal.
0.025/lb.; BOD > 120 ppm
0.022/lb.; SS > 80 ppm
Service outside city 1.5 x rates
111-29
-------
IV. WOOL SCOURING
This industry segment cleans wool of animal oils prior to its being pro-
cessed into yarns and fabrics. There are separate wool scouring mills as well
as wool scouring operations within spinning and weaving plants.
Primary Products
Identification of the primary products of the wool scouring segment cov-
ered in this study is derived from data reported in the 1972 Census of Manufac-
tures, the 1972 Standard Industrial Classification Manual, and pertinent Bureau
of the Census Current Industrial Reports. Relative importance in 1975 of each
product is shown as a percentage of production volume for the individual segment.
Percent of Industry
Production on a
Poundage Basis
Apparel class raw wool
Carpet class raw wool
100.0
Industry Description
The wool scouring industry segment is comprised of those mills in SIC
22993 (Products of Scouring and Combing Mills). Census information for this
sector is limited, due to the change in 1972 of the four-digit industry SIC
2297 to a product class, SIC 22993. The product class refers to the products
of scouring and combing of raw wool prior to its use in top yarn. The process
is necessary as long as wool is used, since raw wool contains 25% to 75% non-
wool materials.
A recent EPA report on the sector (A. D. Little, 1975) points out that
Australian and New Zealand wool is ordinarily scoured at the source, but that
this procedure is not yet significant in the U. S. The reduction of wool scour-
ing and combing to a product class implies that its continued existence as a
separate industry is not likely. The operations necessary to the woolen indus-
try in this country are likely to be integrated into firms which also make yarn
and cloth.
Types of Firms. Firms engaged in wool scouring tend to be, in the main,
closely held private corporations or proprietorships with certain large publicly
held organizations gaining increased importance as factors in the business.
Four of six wool scourers contacted by a 1975 survey were closely held propri-
etorships. In 1972, concentration ratios were very high in the industry sector
(SIC 2299). Approximately 92% of the value of shipments of scouring and comb-
ing mill products (SIC 22993) was accounted for by the four largest companies,
and more than 99% by the 20 largest.
Plant Characterization. Insight into the wool scouring industry can be
obtained by examining the composition and characteristics of the mills that
comprise this sector. The number, size, and location of plants; municipal
IV-1
-------
system dischargers; age of equipment; efficiency and level of technology; and
other characteristics are discussed in this section.
Number, Size, and Location of Plants. In 1972, the Census Bureau reported
25 establishments with a primary product class of 22993 (Products of Scouring
and Combing Mills). These establishments employed an estimated 2,500 persons.
A 1975 report for EPA on the textile industry (A. D. Little) was able to iden-
tify only 12 plants employing 1,252 persons. Results from the economic con-
tractor's survey identified only five plants, which employed 1,698 persons in
this primary product class. The value of shipments by wool scouring plants
by Census region in millions of dollars in 1972 was Northeast ($60.0), North
Central ($2-$4.9), South ($20-$49.9), and West ($2-$4.9). Based on these data,
the estimates of the number of plants, size of employment, and number of em-
ployees shown in Table IV-1 were made.
Table IV-1
WOOL SCOURING AND COMBING PLANTS: NUMBER, EMPLOYMENT SIZE,
AND DISCHARGE STATUS BY REGION, 1972
Region and Employ-
ment Size Category
Northeast
All
20-49
50-99
100-249
North Central
All
100-249
South
All
1-19
20-49
50-99
100-249
250-499
West
All
20-49
United States
All
1-19
20-49
50-99
100-249
250-499
Source: See text.
SIC 22993
Number of
Plants
10
2
5
3
1
1
13
2
2
2
2
5
1
1
25
2
5
7
6
5
Number of
Employees
1,039
121
494
424
170
170
1,259
15
52
90
172
930
32
32
2,500
15
205
584
766
930
Estimated Municipal
System Dischargers
Number of Number of
Plants Employees
6
1
3
2
1
1
7
1
1
1
1
3
1
1
15
1
3
4
4
3
520
61
247
212
170
170
630
8
26
45
86
465
32
32
1,352
8
119
292
468
465
IV-2
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Municipal System Dischargers. Potential impact of the proposed pretreat-
ment regulations depends on the number of plants now using municipal treatment
facilities. Four estimates are available for the proportion of plants which
do — all based on relatively small number of responses. These are presented
below:
1973 1974 1975(a) 1975(b)
Estimated Percent 36 51 50 50
Median: 50
Sources: 1973 - U. S. Environmental Protection Agency, Economic
Analysis of Effluent Guidelines: Textiles Industry, pre-
pared by Arthur D. Little, Inc., June 1975.
1974 - National Commission on Water Quality, Water Pollu-
tion Control Act of 1972, Economic Impacts, Textile Indus-
try, prepared by National Bureau of Economic Research, June
1975.
1975(a) - U. S. Environmental Protection Agency, Draft De-
velopment Document, Pretreatment Standards for Textile
Mills, prepared by Sverdrup & Parcel and Associates, Inc.,
November 1976.
1975(b) - Survey data from the economic contractor's survey.
Application of the median estimate of 50% to the assumed number of plants
and employees by region gives the estimate of potential impact by Census re-
gions shown in Table IV-1. As many as 15 plants and 1,352 employees may be
impacted by the enforcement of pretreatment standards for the sector. Utiliz-
ing the data received from the economic contractor's survey, these firms can
be"classified by production capacity category shown in Table IV-2. Of the 15
plants in the nation impacted by the proposed pretreatment regulations in terms
of production capacity, 12 are medium and three are large.
Age of Equipment. Results from the economic contractor's survey of wool
scourers revealed that there was a substantial proportion of old equipment in
use in the industry. (See Table IV-3.)
Efficiency and Level of Technology. Industry experts believe that the
technology employed in the wool scouring sector is generally that developed in
the early part of this century, but that the technology is adequate for the
task. Cost of materials per dollar of value of shipments is relatively low
(.48), but materials and payroll together bring the figure to.79.
Trends in Wool Scouring. Trend data from the Census are available only
for value of shipments of Scouring and Combing Mill Products. These data, dis-
played in Table IV-4, reflect the downward trend that is associated, in general,
with the wool industry in the U. S. Currently, the outlook for wool products
is good, with increased promotion efforts, new and improved dimensionality prop-
erties, and increased usage by consumers for apparel items. The increased de-
mand may be met by imported wool, however, so the prospects for domestic growth
must be viewed with caution.
IV-3
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Table IV-2
WOOL SCOURING AND COMBING PLANTS
BY PRODUCTION CAPACITY CATEGORY, 1972
Region
Northeast
North Central
South
West
United States
Production
Capacity
Category*
All
Medium
Large
All
Medium
Large
All
Medium
Large
All
Medium
Large
All
Medium
Large
* Medium category production capacity less
large category more than 92,300 Ibs./day.
Number of
Plants
6
6
-
1
1
-
7
4
3
1
1
-
15
12
3
than 92,300
Number of
Employees
520
520
_
170
170
_
630
165
465
32
32
_
1,352
887
465
Ibs./day and
Table IV-3
AGE OF EQUIPMENT IN THE WOOL SCOURING INDUSTRY
(in percent)
Percent of Plant
Production Equipment
0 - 5 years old
6-10 years old
11 - 15 years old
16 - 20 years old
> 20 years old
Mode
(most frequent
percent reported)
15
10
15
15
5
Mean
Median
17
22
17
19
31
15
12
15
20
26
Range
20
40
15
10
45
Number of plants reporting: 6
IV-4
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Table IV-4
TRENDS FROM CENSUS DATA FOR WOOL SCOURING INDUSTRY
SIC 22993: Scouring and Combing Mill Products
(1972 SIC Definition)
Year
1963
1967
1972
1973
1974
Employment
5,800
5,000
2,500
-
-
Estab-
lishments
69
68
25
-
-
Value of
Shipments
Companies (millions)
64 $111.1
65 89.9
60.0
87.3
60.8
Special-
ization
Ratio*
94
85
-
-
Coverage
Ratio**
69
57
—
—
* Specialization Ratio - This ratio measures the extent to which the industry
specializes in making its primary products.
** Coverage Ratio - This ratio measures the extent to which the products pri-
mary to an industry are shipped by plants classified in that industry.
Note: Caution should be exercised in that data are not directly comparable
before and after 1972 due to a change in the SIC definition.
Sources: Annual Survey of Manufactures and Census of Manufactures.
In the 1972 Census of Manufactures, product code 22993 shows a value of
shipments by all industries of $60 million. Included in this are $40.6 million
by SIC 2299 and $19.4 million by all other industries.
Demand, Supply, and Prices
The price for wool scouring services is dependent upon the demand in the
marketplace for products using wool, as well as the supply of wool. Character-
istics of demand, supply, and price for these products are discussed below.
Demand. The textile mill consumption of clean wool in the United States
declined drastically between 1960 and 1976, dropping from 411.1 million pounds
in 1960 to 113 million pounds in 1976. Current annual production is estimated
at 100 million pounds.
The decline can be attributed to the keen competition from synthetic
fibers, which has gained popularity in knit fabrics, and the high cost of wool
as a basic fabric material. The demand for wool in carpets has declined even
more drastically than in clothing.
Supply. The drop in U. S. wool output results from a continuation of the
long-term decline in sheep population in this country. The 1976 shearing is
estimated to total 13.4 million head, or 6.5% less than the 14.3 million head
IV-5
-------
sheared in 1975, which, in turn, was 11% under 1974. The 1976 average fleece
weight is placed at 8.08 pounds, down from 8.31 in 1975.
Wool scouring plants are old and underutilized. Many of them were closed
down because of the lack of business, especially in the Northeast. The inte-
grated scouring mills, including weaving and finishing fabric, have fared better
than nonintegrated mills in withstanding the downward trend of the industry.
Prices. According to the Textile Economics Bureau, Inc.'s Textile Organon,
the current price of $1.90 per pound for domestic fine graded territory wool
(combing and staple, clean basis, on the open market in Boston) compares with
$1.75 a year ago and $1.35 two years ago. Prices for foreign wools also have
risen. In late November 1976, the price of Australian 64s was $2.18 per pound
compared with $2.00 a year ago and $2.05 in 1974.
A government wool price support program has been in effect since 1955 in
the form of incentive payments to sheep raisers, the original purpose of which
was to encourage an annual shorn wool production of up to 300 million pounds
The Agricultural and Consumer Protection Act of 1973 extends through December
Ji, iy//, the federal support program for wool and mohair.
Any difference between the actual average selling price and the incentive
level has been paid to growers out of general funds. However, these payments
on a cumulative basis, are not to exceed 70% of the custom duties collected on
wool and wool products.
The average open market price received by shorn wool growers for the first
nine months of 1976 was 62.9$ per pound (greasy basis), according to the U. S
Department of Agriculture. For the calendar year 1975, the weighted average
was 44.7$. Since the incentive program guarantees a minimum price of 72$ per
pound to growers in both years, the net payments to growers by the government
amounted to 27.3$ per pound in 1975 and have run to 9.1$ for the first nine
months of 1976.
Secondary Price Increases. For insight as to how various types of textile
users would react to possible increases in supplier prices, survey question-
naires were mailed to domestic firms known to purchase large volumes of textile
fiber, yarn, or fabric.
Eight respondents to the textile product users survey, all of which are
classified as wool fabric mills (SIC 223), collectively purchase $31 million
worth of wool fiber annually. Of this figure, $8.9 million worth was imported.
An increase in price of 1-2%, on the average, would cause a substantial switch
in domestic suppliers, and a further price increase to 2-3% would double the
present wool fiber imports of these firms.
If the price of wool fiber is increased 2-3%, the companies intend to pass
on the additional cost to customers. If over 3%, the increase will be partially
passed on and partially absorbed.
Financial Profile
The survey data from wool scouring plants were grouped into two size cate-
gories based on production capacity in pounds of product per day. The reason
IV-6
-------
for using only two groups, medium and large, was that the Development Docu-
ment^/ indicated that no small wool scouring plants now exist in the U. S.
The medium category plant was defined as all plants with capacity of less than
92,300 pounds per day. The large size cateogry was all plants with more than
92,300 pounds per day. In each of these two size categories, the representa-
tive mill sizes specified in the Development Document were used to base the
financial statements for that category. For the wool scouring plants, the
medium representative plant statement was based on a plant capacity of 72,300
pounds per day and the large size representative plant was based on a capacity
of 144,500 pounds per day.
The survey data for 1975 operations reflected capacity utilization of 69%
in the medium-size wool scouring plants which responded to the questionnaire
and 70% in the large-size plants. The data presented on the representative
plant financial statements are for a plant operating at a rate of 85% of
capacity.
Income Statement Data. The income statement data were compiled for the
baseline case, that is, all municipal sewer charges, depreciation, and expenses
for operating and maintaining water pollution abatement systems were removed
from the figures.
The data presented in Table IV-5 are based on the representative plants
of the two size categories of wool scouring plants and the projected data for
the new source operations of medium size. This whole group of plants was found
to be characterized by moderate profit margins for both size categories, which
probably reflects the highly competitive market situation in this size industry.
The price per pound of sales was found to be consistent between the medium
and large plants at approximately $.36 per pound. The survey data exhibited a
price range of $.06 per pound to $1.41 per pound. Due to slightly better effi-
ciency in the large-scale plant, the after-tax profit margin on the same per
pound price was 4% as compared with only 3% in the medium-size plant. Direct
production costs per pound for all wool scouring mills, based on questionnaire
data, ranged from a minimum of $.05 to a maximum of $.53,
The cost structure of this industry group was found to be extremely labor
intensive, with labor constituting approximately 83% of total direct costs.
This is probably attributable to the fact that the plant and equipment in this
industry group are old and, therefore, not labor efficient. The fixed cost
structure of this industry group appears to be high in relation to the other
sectors of the textile industry covered by this report. The fixed cost as a
percentage of sales in the wool scouring plants was almost 23%, which was
higher than in most other sectors of the industry.
Balance Sheet Data. The data presented in Table IV-6 are based on the
representative plants of the two size categories of wool scouring plants and
the projected data for the new source operation of medium size. The balance
sheets for these representative plants reflect a very sound financial structure
I/ U. S. Environmental Protection Agency, Draft Development Document,
Pretreatment Standards for Textile Mills, prepared by Sverdrup & Parcel and
Associates, Inc., November 1976.
IV-7
-------
Table IV-5
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA
FOR THE WOOL SCOURING INDUSTRY
(in thousands of dollars)
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Costs
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
Existing
Medium
(61,455)
.36
6,637
4,728
350
3,943
435
1,519
502
413
604
390
174
216
718
4,260
9.2
5.1
5.9
3.3
Large
(122,825)
.36
13,265
9,313
686
7,772
856
3,037
1,161
833
1,043
914
425
489
1,650
8,515
10.7
5.7
6.9
3.7
New Source
Medium
(61,455)
.36
6,637
3,874
359
3,070
445
1,669
450
615
604
1,094
512
583
1,033
9,821
11.1
5.9
16.5
8.8
IV-8
-------
Table IV-6
PRO FORMA BALANCE SHEET FOR THE
WOOL SCOURING INDUSTRY
(in thousands of dollars)
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Total Assets
Liabilities
Current Liabilities
Long-Term Debt
Owner's Equity/Net Worth
Total Liabilities
Existing
Medium
(61,455)
1,477
3,439
39
628
2,772
4,916
656
1,454
2,806
4,916
Large '•*
(122,825)
2,953
6,873
78
1,256
5,539
9,826
1,311
2,906*
5,609
9,826
New Source
Medium
(61,455)
1,477
9,000
103
1,644
7,253
10,477
656
6,154
3,667
10,477
for firms in this industry group. The financial structure is heavily oriented
toward equity financing and, therefore, the firms are much more financially
stable than some other industry groups. The fixed assets shoypfi in the model
plants' financial statements are relatively high in comparison with total as-
sets for this group. This reflects a low level of current assets and, there-
fore, a very tight control of management on current operations.
Invested Capital. The data presented in Table TV-7 represent the factors
considered in estimating the total invested capital for each of the two repre-
sentative plants in the wool scouring industry and the projection of the invest-
ment capital needed to establish a new source plant of medium size.
Data Quality. The survey data for this industry segment were limited.
However, the data presented in the tables for medium and large-scale operations
are considered to be the best possible representation that could be made of the
representative plants in this industry, based upon the survey data available.
IV- 9
-------
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
Table IV-7
INVESTED CAPITAL FOR THE WOOL SCOURING INDUSTRY
(in thousands of dollars)
Existing
Medium
Book
3,439
1,477
656
821
4,260
Salvage
588
1,477
656
821
1,409
Large
Book
6,873
2,953
1,311
1,642
8,515
Salvage
1,175
2,953
1,311
1,642
2,817
New Source Medium
Book
9,000
1,477
656
821
9,821
Salvage
2,250
1,477
656
821
3,071
I
M
O
-------
Pretreatment Standards, Technologies, and Costs
The effluent control system alternatives and costs presented in this
section were provided by the Environmental Protection Agency as developed
by the technical contractor and submitted in their Development Document.
Industrial wastewaters discharged to publicly owned treatment works
(POTW) are regulated by Section 301(b) of the Federal Water Pollution Control
Act Amendments of 1972 (PL 92-500). Standards which such dischargers must
meet are to be promulgated pursuant to Section 307 of this Act. The intent
of such standards is to require treatment at the point of discharge comple-
mentary to the treatment performed by POTW. Duplication of treatment is not
the goal. The pretreatment by the discharger of pollutants that are not
susceptible to treatment in a POTW is critical to attainment of the overall
objective of the Act by protecting the POTW from process upset and by pre-
venting discharge of pollutants which would pass through or otherwise be
incompatible with the POTW.
Pretreatment Control Technologies. For the wool scouring segment, five
pretreatment technologies have been developed. These technologies were
developed on the basis of information obtained from a survey of POTWs treat-
ing textile wastes and from a consideration of the types of wastes discharged
by this industry subcategory. The survey of the POTWs yielded 50 specific
complaints associated with the treatment of textile wastes. The most common
complaint related to uneven loadings, either hydraulic or organic. The next
most common complaint related to coarse solids, with PH problems, color, low
dissolved oxygens in the POTW influent, grease, and temperature following in
the order listed. Not all of these problems were necessarily found in plants
treating wastes from this segment.
Specific pretreatment technologies are described below. Estimated costs
are developed for wool scouring mills in the production capacity range of 33
to 65 kkg (36 to 72 tons) per day.
Alternative A - No Waste Pretreatment or Control
Cost - None
Reduction Benefits - None
Alternative B - Screeing (S)
This alternative provides fine screening to remove lint, clumps of
fibers, and other coarse solids that tend to clog pumps, foul bearings,
and float in POTW sedimentation tanks.
Costs - Investment costs estimated to range from $31,700 to $37,000.
Total annual costs estimated to range from $13,400 to $14,700.
Reduction Benefits - Alternative B reduces coarse suspended solids by
greater than 95% and accomplishes approximately a 5% reduction in
BOD5_, COD, and total suspended solids.
IV-11
-------
Alternative C - Screening and Equalization (S,E)
This alternative provides fine screening and agitated holding of
approximately 15 hours to equalize the rate of wastewater discharge
to the POTW.
Costs - Investment costs estimated to range front $70,200 to $79,000,
an estimated increase over Alternative B of $38,500 to $42,000.
Total annual costs estimated to range from $30,700 to $36,600,'an
estimated increase over Alternative B of $17,300 to $21,900.
Reduction Benefits - Alternative C provides the benefits of Alternative
B and also prevents the discharge of slug hydraulic loads to the POTW.
Alternative D - Screening, Equalization, and Neutralization (S,E,N)
This alternative includes fine screening, agitated holding of approxi-
mately 15 hours, and controlled addition of acid, as required, to
neutralize alkaline waste slugs.
Costs - Investment costs estimated to range from $104,000 to $116,000,
an estimated increase over Alternative C of from $33,800 to $37,000.
Total annual costs estimated to range from $37,400 to $43,700, an
estimated increase over Alternative C of from $12,600 to $15,900.
Reduction Benefits - Alternative D provides the benefits of Alternative
C and also prevents the discharge of alkaline slug loads to the POTW.
Alternative E - Screening, Equalization, and Chemical Coagulation (S,E,Q
This alternative includes coagulation to remove fine suspended and
colloidal solids. Preliminary treatment by screening and equalization
is provided to improve the efficiency of the coagulation process.
Costs - Investment costs estimated to range from $183,000 to $219,000,
an estimated increase over Alternative D of from $79,000 to $100,000.
Total annual costs estimated to range from $99,500 to $120,200, an esti-
mated increase over Alternative D of from $62,100 to $69,500.
Reduction Benefits - Alternative E reduces the discharge of coarse
suspended solids by greater than 99%, prevents the discharge of slug
hydraulic loads, and reduces BOD5_, TSS, and COD by approximately 50,
60, and 70%, respectively. Oil and grease reduction of up to 95% is
possible depending upon the chemicals used for coagulation.
Alternative F - Screening, Equalization, Chemical Coagulation, and
Biological Treatment (S,E,c,B)
This alternative adds the activated sludge process to Alternative E.
The latter pretreatment alternative serves to reduce the loading
levels sufficiently for effective functioning of the biological system.
Costs - Investment costs estimated to range from $301,000 to $396,000,
an estimated increase over Alternative E of from $118,000 to $177,000.
Total annual costs estimated to range from $136,800 to $174,000, an
estimated increase over Alternative E of from $37,300 to $53,800.
IV-12
-------
Alternative
None
_
S
0
0
S,E
0
0.2
S,E,N
0
0.2
S,E,C
0
0.2
S,E,C,B
0.2
0.3
deduction Benefits - Alternative F reduces the discharge of coarse
suspended solids by greater than 99%, prevents the discharge of slug
hydraulic loads, and reduces BOD5_, TSS, and COD by 95, 98, and 85%,
respectively. Reduction of oil and grease by greater than 95% is
possible, depending upon the chemicals used for coagulation.
The pretreatment alternatives specified for this industry segment require
the availability of land to accommodate equalization wells and basins, aeration
lagoons, and activated sludge facilities. Land area in hectares that is esti-
mated to be required is shown in the following table:
Plant Size
Medium
Large
Land availability indicated by respondents to the economic contractor's
questionnaire was as follows:
No. %_
No Land Available 0 0
Land Available
Less than 0.2 hectare 0 0
0.2 hectare - 1.2 hectares 3 75
No Answer 1. 25
TOTAL 4 100
Discharge Status of the Industry. Current practices in the textile indus-
try have been estimated from information submitted by respondents to question-
naires prepared by the economic contractor. Estimates of the percentage of
plants in this industry segment discharging into POTWs were obtained from four
sources, including the economic contractor's survey. The median value of
these four estimates indicates that 50% of the plants in this segment discharge
into POTWs.
The economic contractor also obtained information relating to pretreatment
practices of dischargers into POTWs. An analysis of the practices submitted
was made to determine the number of plants presently having facilities in place
to perform at least the pretreatment practices recommended by the technical
contractor in each of the pretreatment alternatives. The results of this
analysis are showiin the following table:
IV-13
-------
Treatment
Alternative NO. %
None
1 25
5 2 50
S,E ! 25
S,E,N 0 0
S'E,C 0 0
S,E,C,B 0 0
Other i 25
TOTAL 4
The "other" treatment alternative includes cases which did not include
pretreatment practices recommended by the technical contractor.
It should be noted that the sufficiency of an existing pretreatment prac-
tice cannot be evaluated. Any given pretreatment practice may require upgrad-
ing to perform as adequately as the technical contractor has projected.
Pretreatment Control Costs. The pretreatment control costs, as provided
by EPA, are based on plant production, wastewater flow, pretreatment processes
proposed, and operation requirements. The costs depicted and discussed in this
section are for "typical" yet hypothetical manufacturers in this industry
segment.
Investment Costs. Investment costs include the installed costs of treat-
ment components plus allowances for contingencies and engineering. The
installed cost includes the costs of delivery and erection of major equipment
items, evacuation and backfill, associated electrical and mechanical work,
instrumentation, backup pumps, contractor overhead and profit, and yardwork.
Not included are spare parts, standby power-generating equipment, rock excava-
tion, or the use of pile foundations. A contingency allowance of 15% of the
installed cost was used to cover unexpected costs due to local mill conditions
and differences between the actual system and those used for cost estimates.
No allowance was made for shutdown of the mill during construction and instal-
lation.
Costs are expressed in January 1976 dollars. It was assumed that all
design specifications will be prepared by an outside consulting engineer in
accordance with applicable codes. Construction work was assumed to be per-
formed by an outside contractor with no work to be done by in-plant labor or
maintenance personnel.
Engineering costs are included in the cost estimates and were derived by
using percentages of the installed costs and contingencies. For total costs
of $100 or less, 15% was used. For larger projects, a percentage to the
nearest 0.5% from Curve A in Consulting Engineering was used.
No land acquisition cost is included.
IV-14
-------
Total Yearly Costs. Total yearly costs consist of interest, depreciation,
operation and maintenance, sludge disposal, energy and power, and chemicals.
The cost of money for capital expenditure was assumed to be 10% of the total
investment cost. Installed costs were depreciated over estimated lives of the
components on a straight-line basis.
Estimates were prepared of the number of hours required for operation
of the various component systems. In the case of this industry segment, it
was assumed that the textile mill operates 24 hours a day, 6 days a week,
and 50 weeks a year. Laboratory time is included for the more sophisticated
systems where analytical results would normally be used for operational
control. Ten percent was added to labor hours to cover supervision and admin-
istration. A labor rate of $6.00 per hour was used to cover wages and fringe
benefit costs.
Investment, annual operating, and total yearly costs for existing medium
and large plants and new source medium plants in this industry segment are
given in Table IV-8. Also shown are investment costs as a percent of fixed
assets and total yearly costs as a percent of annual sales.
Table IV-8
PRETREATMENT CONTROL COSTS: WOOL SCOURING
(Costs in $000)
Size, Status, and
Alternative
Medium, Existing
S
S, E
S, E, N
S, E, C
S, E, C, B
Large, Existing
S
S, E
S, E, N
S, E, C
S, E, C, B
Medium, New Source
S
S, E
S, E, N
S, E, C
S, E, C, B
Annual
Investment Operating
Costs Costs
31.7
70.2
104.0
183.0
301.0
37.0
79.0
116.0
219.0
396.0
31.7
70.2
104.0
183.0
301.0
8.2
14.9
21.8
71.9
92.8
8.7
16.6
25.3
87.2
116.0
8.2
14.9
21.8
71.9
92.8
Investment Total
Total Cost Yearly Costs
Yearly as % of as % of
Costs Fixed Assets Annual Sales
13.4
24.8
37.4
99.5
136.8
14.7
27.8
43.7
120.2
174.0
13.4
24.8
37.4
99.5
136.8
0.82
1.82
2.70
4.76
7.82
'0.48
1.03
1.51
2.85
5.16
0.33
0.74
1.10
1.93
3.17
0.20
0.37
0.56
1.50
2.06
0.11
0.21
0.33
0.91
1.31
0.20
0.37
0.56
1.50
2.06
IV-15
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Municipal System User Charges. The data on user charges collected from
publicly owned treatment works were presented for all industry segments in a
previous section. Data collected from respondents to the plant questionnaire
provided the following information on annual sewer charges for 1975 for wool
scouring:
Sewer Charges/
Sewer Charges/ Wastewater
Production Discharge
(in cents/ (in cents/
All Respondents 1,000 pounds) 1,000 gallons)
Mean 550 41
Minimum 532 40
Maximum 1,321 59
Anticipated Reaction to Pretreatment Standards. Although specific pre-
treatment requirements have not been promulgated by EPA, the probable reaction
of manufacturers to such standards was determined by questionnaire. Respondents
were asked to select one of the nine options listed below, given the limited
amount of information which they had about pretreatment requirements and com-
plete treatment requirements at the time:
1. Change from pretreatment to complete treatment
2. Change from complete treatment to pretreatment
3. Upgrade existing pretreatment
4. Upgrade existing complete treatment
5. Initiate pretreatment
6. Initiate complete treatment
7. Close the plant as a result of pollution control standards
8. None of the above, because this plant already conforms to the
proposed standards
9. Other (specify)
Four replies were received from plants in this segment. The nature of
the replies was as follows:
Alternative No. %
Plant conforms to standards 1 25
Other 3^ 75
TOTAL 4 100
Economic Impact Analysis
The imposition of pretreatment controls on the wool scouring industry
segment will have both direct and indirect impacts on the industry, on consumers,
IV-16
-------
on its suppliers, and on communities in which plants are located. The resulting
direct impacts from the imposition of pretreatment controls are analyzed in both
quantitative and qualitative terms: price effects, financial effects, production
effects, employment and community effects, and balance of trade effects.
The previous analysis identified a total of 15 plants operating at the end
of 1972, with 1,352 employees which the proposed pretreatment regulations could
affect. This represented 12 plants which could be classified as medium and
three which could be classified as large in terms of production capacity. In
addition to the examination of the potential impact of pretreatment controls on
existing plants, the analysis considered the impacts on those plants which have
not been constructed and will discharge their effluent to publicly owned
treatment systems (hereafter referred to as "new source").
The economic impact analysis also included a sensitivity analysis which
was performed using pretreatment control costs estimates at levels between 80%
and 200% of the costs provided by EPA. The analysis was based on a wide range
in order to take into account the possibility of regional as well as individual
mill variations in pretreatment costs. In addition to this discussion on the
economic impact analysis, an impact analysis was completed using an incremental
capital cost approach and is included in Appendix A. Since the exact level of
pretreatment which will be required has not been specified, this report pre-
sents data on effects for all levels under consideration.
Finally, it should be noted that this analysis was concerned only with
the impacts of proposed pretreatment guidelines. It is recognized that there
are other regulatory programs by EPA, OSHA, and various state controls, either
existing or emerging, which will influence the profitability of the plants
studied. The analysis does not consider the full impact of this aggregate
of regulations.
Price Effects. The role of price effects in the impact analysis is
critical. The analysis of price effects proceeded with the determination of
what price increases would be required to offset the costs of pretreatment
controls. Next, the market structure for the wool scouring industry segment
was examined to determine if mills would be forced to absorb the price
increases, or if the price increases could be passed on to customers, or if
the price increases could be partially absorbed and partially passed on. Also,
the possibility of secondary price increases was examined in a previous section.
Required Price Increases. An implicit indication of the expected price
effects of pretreatment controls used in this report is the amount of sales
price increase necessary to maintain a mill's profitability, after pretreat-
ment control expenditures, at the same level as the mill without the control
expenses. The ability of mills to pass on such required price increases is
evaluated in the following section.
The required price increases necessary to offset the different levels of
proposed pretreatment control for the representative mills are shown in
Table IV-9. The required price increases for medium wool scouring mills range
from .27% to 2.52%, depending on the level of pretreatment; and, for large mills,
from .15% to 1.65%. For the new source mills, the required price increase to
IV-17
-------
Table IV-9
WOOL SCOURING: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
Representative Plant Size
Existing-Medium
(61,455 Ibs./day)
Required Price Increase
Percent Proposed Control Costs
S
S, E
S, E, N
S, E, C
S, E, C, B
Existing-Large
(122,825 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
New Source-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S / E / C f B
80
.22
.39
.63
1.49
2.06
.13
.22
.36
.91
1.35
.23
.40
.64
1.51
2.11
100
.27
.48
.77
1.82
2.52
.15
.27
.43
1.11
1.65
.28
.49
.78
1.86
2.58
120
.32
.57
.90
2.15
2.97
.18
.32
.51
1.32
1.95
.33
.58
.92
2.20
3.06
200
.51
.92
1.44
3.46
4.73
.29
.52
.83
2.14
3.15
.52
.94
1.48
3.57
4.95
IV-18
-------
offset the pretreatment level ranges from .28% to 2.6%. Also shown are the
sensitivity ranges of required price increases when pretreatment costs vary
from 80% to 200% of the original estimated costs.
Expected Price Increases. Although the previous discussion has identified
the required price increases to offset expenditures for pretreatment control
in order to maintain the mills' current (baseline) profitability levels, it
does not quantify the extent to which price increases can be passed on to
consumers.
Analysis of the expected price increases at the industry level involves
translating the pretreatment cost estimates to changes in market demand and
supply for production. Market responses may take several forms, depending on
how many mills choose to close and the extent of the pass-through of pollution
costs to the consumers. The supply, in turn, depends on the mills' decisions
which will be based on the strength of the market demand, competitors' actions,
and on the market's ability to sustain price increases. There are a number of
demand and supply factors which need to be considered in determining the portion
of pretreatment costs to be passed through. Unfortunately, all such factors
cannot be expressed quantitatively and, by necessity, the projected price
increases involved a considerable amount of judgment. The potential implica-
tions for price effects of some of these factors are discussed below.
Factors which decrease the possibility of pretreatment cost pass-through
are the drastic decline in the market for clean wool and the sustained high
level of imports of wool textiles and apparel products. Also, the cross-
price elasticity of wool consumption with respect to synthetic fiber is 3.07,
which indicates a significant substitute relationship between these two fibers.—
Hence, the magnitude of the price increase by mills processing wool will be
dependent upon these costs incurred by mills producing substitute products
using synthetic fiber. Other factors which decrease the possibility of cost
pass-through are relatively low capacity utilization in the industry and the
nature of industry competition, which is based primarily on price as opposed
to nonprice factors such as quality and product brand.
Factors which increase the possibility of pretreatment cost pass-through
are the relatively inelastic demand for apparel wool (-0.58) and carpet wool
(-0.51). In terms of consumption, this implies that a 10% increase in the
price of wool would lead to 5.8% and 5.1% decreases in consumption of apparel
wool and carpet wool, respectively.
Considering the aggregate effect of these factors on the ability of the
mills to increase prices, it seems likely that very little of the pretreatment
costs can be passed through to consumers.
Price increases to offset the costs of pretreatment controls by the im-
pacted wool scouring mills are expected to occur. However, these price increases
cannot be specified now due to the wide range in the costs associated with the
different levels of pretreatment control. In the following analysis, no price
I/ Elasticities were obtained from the National Commission on Water Quality,
Water Pollution Control Act of 1972, Economic Impacts, Textiles Industry, 1975,
and A. A. Lewis, "An Econometric Analysis of the Demand for Textile Fibers,"
American Journal of Agricultural Economics, May 1972, pp. 238-244.
IV-19
-------
changes were assumed to occur and, accordingly, the financial effects on the
mills are without added revenues from price increases. From the firm's view-
point (that is, a financial viewpoint), the financial effects discussed below
represent the most severe case.
Financial Effects. The financial profiles for the representative mills
in the wool scouring industry segment were described previously. The survey
data, as well as published data, indicated substantial variability in key
financial parameters for mills in this sector. These financial profiles of
representative mills and the estimated costs of pretreatment controls pro-
vided by EPA were used to compute the following financial indicators under
baseline (without pretreatment controls but with municipal user charges)
and with pretreatment controls: after-tax income, after-tax return on sales,
after-tax return on invested capital, cash flow, and cash flow as a percent
of invested capital and net present value.
These financial measures were computed for each representative mill accord-
ing to the discounted cash flow and return on investment procedures outlined in
the methodology. In addition, a sensitivity analysis was performed for each
representative mill, using pretreatment control cost estimates at levels between
80% and 200% of the costs provided by EPA. The results of this analysis are
discussed below.
After-tax Income. As shown in Table IV-10, the imposition of pretreatment
controls on the wool scouring representative plants results in small to rather
significant reductions in income, depending upon the level of pretreatment and
plant size. Expressed as a percent of the baseline incomes, the pretreatment
levels resulted in a decrease in after-tax incomes of between 3% or $6,000 and
27% or $56,000 i$br the medium plant, and between 1% or $6,000 and 15% or $70,000
for the large plant.
The imposition of pretreatment controls on new source medium-size plants
results in a decrease in after-tax income of between 1% and 10%.
After-tax Return on Sales. The after-tax return on sales for the existing
and new source representative wool scouring plants also are shown in Table IV-10.
As would be expected with the above indicated declines in after-tax incomes, the
impacted plants'?returns on sales declined by a corresponding percentage. The
imposition of pretreatment standards obviously would further deteriorate the
already low returns in the wool scouring industry.
From a baseline of 3.1% for the medium plant, the decline ranged from an
after-impact return of 3.0% to 2.3%, depending on the level of pretreatment
control. For the large plant, the imposition of controls would result in no
decline for screening to a decline of 3.0%, a drop of .5%.
The imposition of the different levels of pretreatment controls on the new
source plant does affect the after-tax returns on sales for the plant, but not
to the same degree as on existing plants. For the medium new source plant,
the decline in baseline return on sales of 8.6% ranged from no decline for the
lowest level of pretreatment to 7.8%.
IV-20
-------
Table IV-10
WOOL SCOURING: PRETREATMENT STANDARD IMPACTS ON PROFITABILITY
to
Representative
Plant Size
Existing-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
Existing-Large
(122,825 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
New Source-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
After-Tax Profits ($1,000)
Base- Percent Proposed
line Pretreatment Costs
Case 80 100 120 200
207
470
573
202 201 200 196
199 197 196 188
195 192 190 178
173 164 156 122
162 151 140 96
465 464 463 458
461 459 457 449
457 454 451 438
429 419 408 368
414 400 386 330
569 568 567 562
566 564 561 554
562 559 556 544
539 531 522 488
529 517 506 462
After-Tax Return on Sales (%) After-Tax on Invested Capital (%)
Base- Percent Proposed Base- Percent Proposed
line Pretreatment Costs line Pretreatment Costs
Case
3.11
3.54
3.63
80
100
120
200
3.05 3.03 3.02 2.95
3.00 2.97 2.95 2.84
2.94 2.90 2.86 2.69
2.60 2.48 2.35 1.84
2.44 2.28 2.11 1.44
3.51 3.50 3.49 3.45
3.48 3.46 3.45 3.39
3.44 3.42 3.40 3.30
3.23 3.16 3.08 2.77
3.12 3.02 2.91 2.49
8.57 8.55 8.54 8.47
8.52 8.49 8.46 8.35
8.46 8.42 8.37 8.20
8.12 7.99 7.87 7.40
7.96 7.80 7.63 6.96
Case
4.85
80
100 120
5.52
5.83
200
4.72 4.69 4.66 4.54
4.62 4.56 4.50 4.28
4.50 4.41 4.32 3.99
3.92 3.70 3.48 2.64
3.61 3.31 3.03 1.97
5.44 5.42 5.41 5.34
5.38 5.35 5.31 5.18
5.31 5.26 5.21 5.01
4.94 4.79 4.65 4.11
4.69 4.49 4.29 3.55
5.78 5.76 5.75 5.69
5.73 5.70 5.67 5.57
5.67 5.63 5.59 5.43
5.41 5.30 5.20 4.79
5.25 5.11 4.97 4.43
-------
After-tax Return on Invested Capital. The baseline and impacted wool
scouring plants' returns on invested capital are shown in Table IV-10. After
the imposition of pretreatment controls on the existing plants, return on
investment ranges from 4.69% to 3.31% for the medium plant and from 5.42% to
4.49% for the large plant. In the new source medium plant, the returns
range from 5.76% to 5.11% for the proposed levels of pretreatment.
Cash Flow. Estimated cash flows (after-tax income plus depreciation) are
shown in Table IV-11 for the representative plants. The cash flows as per-
centages of invested capital for the baseline cases are 16.6% for the existing
medium plant, 19.2% for the existing large plant, and 10.4% for the new source
medium plant. Depending on the level of pretreatment, the cash flows as
percentages of invested capital vary between 16.4% and 14.6% for the existing
medium plant, between 19% and 17.7% for the existing large plant, and between
10.4% and 9.7% for the new source medium plant.
Net Present Values. The net present values for the wool scouring repre-
sentative plants are all positive in the baseline case as well as after
incurring pretreatment expenditures (see Table IV-12). This implies that it
would be probable that the representative plants could remain in operation
after meeting pretreatment standards.
Production, Employment, and Other Effects. Production effects related
to pretreatment costs can be attributed to either a reduction in supply, due
to plant closures, or a decrease in consumer demand, hence mill production, due
to price increases.
The price increase that is utilized in the production analysis is assumed
to be equal to the impact that would be experienced by the largest wool
scouring mill. This assumption seems the most pragmatic and realistic consider-
ing the structural characteristics of this industry segment. Another factor
that should be considered, but cannot be at this time, is what the effluent
standards impact will be on the direct dischargers in the wool scouring industry.
Review of Table IV-9 indicates that the required price increases necessary
to offset the different levels of pretreatment control for the large wool
scouring mill range from .15% to 1.65%.
To translate these price increases into impacts on consumer demand and
mill production, the demand elasticities for the wool scourers products must
be known. Unfortunately, there are no data available which relate market
response and higher prices for the mill products. However, the demand elasti-
cities for six major fiber types range from -0.17 for cotton to -1.0 for
synthetics.±/ Using these price elasticities, the percentage reduction in
demand for wool scouring would range between .026% and 1.65%.
V Elasticities were obtained from the National Commission on Water Qual-
ity, Water Pollution Control Act of 1972, Economic Impacts, Textiles Industry,
1975.
IV-22
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Table IV-11
WOOL SCOURING: PRETREATMENT STANDARD IMPACTS ON CASH FLOWS
Cash Flow ($1,000)
Cash Flow as a Percent of Invested Capital
Percent Proposed
Baseline Pretreatment Costs
Representative Plant Size Case 80
Existing-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
»__!
< Existing-Large
M (122,825 Ibs./day)
LO --_ l— - •*
s
S, E
S, E, N
S, E, C
S, E, C, B
New Source-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
709
706
704
702
683
676
1,631
1,628
1,625
1,623
1,599
1,589
1,023
1,020
1,018
1,016
997
990
100
705
702
700
676
667
1,627
1,624
1,621
1,591
1,579
1,019
1,017
1,014
990
981
120
t
704
701
698
669
659
1,627
1,622
1,619
1,583
1,569
1,019
1,015
1,013
984
975
200
702
696
691
643
626
1,624
1,617
1,612
1,551
1,527
1,016
1,010
1,006
957
940
Percent Proposed
Baseline Pretreatment Costs
Case 80
16.64
16.48
16.30
16.16
15.49
15.01
19.15
19.05
18.94
18.86
18.40
18.00
10.42
10.36
10.31
10.26
10.00
9.84
100
16.44
16.22
16.04
15.21
14.63
19.03
18.89
18.78
18.21
17.72
10.35
10.28
10.23
9.90
9.70
120
16.40
16.14
15.93
14.94
14.26
19.00
18.84
18.71
18.03
17.45
10.34
10.25
10.18
9.80
9.56
200
16.24
15.82
15.47
13.90
12.87
18.91
18.64
18.42
17.32
16.41
10.28
10.14
10.03
9.40
9.02
-------
Table IV-12
WOOL SCOURING: PRETREATMENT STANDARD IMPACTS ON NET PRESENT VALUES
(in thousands of dollars)
Net Present Values
Representative Plant Size
Existing-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
Existing-Large
(122,825 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
New Source-Medium
(61,455 Ibs./day)
S
S, E
S, E, N
S, E, C
S, E, C, B
Baseline
Case
2,173
2,670
2,367
2,453
2,604
4,782
5,877
5,209
5,398
5,730
4,548
5,589
4,954
5,133
5,449
Percent
80
2,117
2,548
2,194
2,028
1,976
4,720
5,740
5,016
4,887
4,928
4,492
5,466
4,781
4,708
4,821
Proposed
100
2,103
2,517
2,150
1,922
1,819
4,704
5,706
4,967
4,760
4,827
4,478
5,436
4,737
4,602
4,664
Pretreatment
120
2,089
2,487
2,107
1,816
1,662
4,688
5,671
4,919
4,632
4,527
4,464
5,405
4,694
4,496
4,508
Costs
200
2,032
2,364
1,933
1,391
1,034
4,625
5,534
4,725
4,122
3,724
4,408
5,283
4,520
4,072
3,880
IV-24
-------
In addition to reduction in mill production attributable to increased
prices, there could be plant closures if the wool scouring mills could not
adequately absorb required pretreatment costs. The criteria for determining
whether or not a plant would cease operations were discussed in the method-
ology. This financial analysis was conducted with no price changes assumed
and, therefore, represents the most severe case from the mills' viewpoint.
As shown, the wool scouring mill representative plants maintain positive
profitability levels after incurring the costs of pretreatment control in
all situations (see Table IV-10). Furthermore, review of Table IV-11 reveals
that all representative plants maintain positive cash flows after meeting
pretreatment standards. Review of the net present values for the wool scouring
mills representative plants also shows all positive values after the imposi-
tion of pretreatment costs (see Table IV-12). These profitability measures
indicate that there will be no plant closures attributable solely to the
financial impacts of the pretreatment controls.
The production effects analysis indicates a minimal reduction in produc-
tion of wool scouring mills. The loss of employment, community impacts, and
impacts on the balance of trade due to the imposition of pretreatment standards
will also be minimal.
IV-25
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V. WOOL DYEING AND FINISHING
This industry segment scours, dyes, and finishes (including treatment for
dimensional stability) wool fabrics. Some plants dye and finish only, while
other dyeing and finishing operations are within spinning and weaving plants.
Primary Products
Identification of the primary products of the wool finishing segment
covered in this study is derived from data reported in the 1972 Census of Manu-
factures, the 1972 Standard Industrial Classification Manual, and pertinent
Bureau of the Census Current Industrial Reports. Relative importance in 1975
of each product is shown below as a percentage of production volume for the
individual segment:
Percent of Industry
Production on a
SIC Linear Basis
223121 Men's and boys' woolen and worsted
223122 clothing fabric
223123 Women's and children's woolen and
223124 worsted clothing fabric
223126 Nonapparel woolen and worsted
223128 fabrics
Total woolen and worsted fabrics
(except felts*) 100.0
* Woven felts production amounted to 5,375 thousand pounds.
Industry Description
The wool dyeing and finishing industry segment is comprised, for the most
part, of those mills in SIC 2231, Broad Woven Fabric Mills, Wool. According to
Census data in 1972, only seven plants were engaged primarily in the production
of gray goods; 83% of all shipments of wool fabrics were produced in plants
classified as SIC 2231. Therefore, this SIC will be taken as an approximation
of the wool finishing segment.
The Census definition of this four-digit SIC is as follows:
2231 Broad Woven Fabric Mills, Wool (Including Dyeing and Finishing)
Establishments primarily engaged in weaving fabrics over 12
inches in width, wholly or chiefly by weight of wool, mohair,
or similar animal fibers? those dyeing and finishing all woven
wool fabrics or dyeing wool, tops, or yarn; and those shrinking
and sponging wool goods for the trade. Establishments primar-
ily engaged in weaving wool carpets and rugs are classified in
Industry 2271, and those tufting wool carpets and rugs in
Industry 2272.
V-l
-------
Types of Firms. Census data reveal that SIC 2231 includes 138 establish-
ments (out of a total of 198) which were single-unit companies, with all pro-
duction and administrative facilities at one location. Many of these (74) were
very small firms, employing fewer than 20 persons. These 138 single-unit firms
employed 7,000 of a total of 19,400 persons employed in the sector. On the
other hand, the 50 largest firms produced 90% of the value of shipments of wool
fabric. The picture, then, at the firm level is one of many small single-unit
firms, with little organizational integration to absorb suggested requirements
for large capital expenditures. The economic contractor's survey showed that
87% of wool finishers are privately held corporations or proprietorships.
Plant Characterization. Insight into the wool dyeing and finishing indus-
try can be obtained by examining the compostion and characteristics of the mills
which comprise this sector. The number, size, and location of plants; municipal
system dischargers; age of equipment; efficiency and level of technology,- and
other characteristics are discussed in this section.
Number, Size, and Location of Plants. In 1972, the number of establish-
ments engaged primarily in weaving and finishing of wool was 198. Eighty of
these operated as commission weavers/finishers jobbers. Only seven plants pro-
duced only gray goods. The industry employs a total of 19,400 persons, mostly
in the Northeast and the South. Census figures show a total of 135 establish-
ments employing 11,100 persons in the Northeast, and 32 establishments employ-
ing 6,500 persons in the South. More than 61% of the total number of plants
in this industry segment have fewer than 50 employess, while the 21 largest
plants employ 55% of all employees in the industry. Distribution of plants
and employees by Census region and by employment size group for the industry
are shown in Table V-l.
Municipal System Dischargers. The impact of proposed pretreatment regula-
tions will be on wet processors using municipal sewage facilities. There are
four sources of estimates for the percent of segment plants using municipal
sewage plants for discharge of process waste water. Each of these estimates is
biased. The 2972 Census of Manufactures, Water Use in Manufacturing, for
example, reports the number of plants discharging exclusively to public sewers,
but the study includes only those plants with water intake of more than 20 mil-
lion gallons a year or more. The 1974 National Commission on Water Quality
study, the 1976 technical contractor's survey, and the 1976 economic contractor's
survey are biased in unknown ways. Their differing estimates of proportion of
municipal system dischargers are as follows:
1972 1974 1975(a) 1975(b)
Estimated Percent 41 72 64 69
Median 67
Sources: 1972 - U. S. Department of Commerce, 1972 Census of Manu-
factures, Water Use in Manufacturing.
1974 - National Commission on Water Quality, Water Pollu-
tion Control Act of 1972, Economic Impacts, Textile Indus-
try, prepared by National Bureau of Economic Research,
June 1975.
1975(a) - U. S. Environmental Protection Agency, Draft De-
velopment Document, Pretreatment Standards for Textile Mills,
prepared by Sverdrup & Parcel and Associates, Inc., November
1976.
1975(b) - Survey data from the economic contractor's survey.
V-2
-------
Table V-l
WOOL DYEING AND FINISHING PLANTS: NUMBER,
EMPLOYMENT SIZE, AND DISCHARGE STATUS BY REGION, 1972
Estimated Municipal
SIC
Number of
Plants
135
55
27
20
19
13
1
14
5
5
4
32
10
7
5
4
1
4
1
17
9
3
3
1
1
198
79
42
28
28
15
5
1
2231
Number of
Employees
11,100
263*
801*
1,436*
3,255*
4,541*
804*
900
25*
156*
719*
6,500
54*
235*
406*
774*
397*
3,634*
1,000*
1,000
49*
102*
248*
197*
404*
19,400
400
1,300
2,100
5,000
5,500
4,200*
1,000*
System
Number
Plants
91
37
18
13
13
9
1
9
3
3
3
14
7
5
2
11
6
2
2
1
125
53
28
17
17
9
1
Dischargers
of Number of
Employees
7,702
176
537
962
2,181
3,042
804
577
17
78
482
393
36
157
200
464
33
68
166
197
9,136
262
840
1,328
2,860
3,042
804
Region and Employ-
ment Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
North Central
All
1-19
20-49
100-249
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
West
All
1-19
20-49
50-99
100-249
250-499
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
* Estimated.
Source: Based on data from 1972 Census of Manufactures.
V-3
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Applying the median estimate of 67% to the number of plants and employees
by region and assuming that all establishments in SIC 2231 are wet processors,
the potential impact by Census regions can be determined. Also the plants or
plants of corporations with $100 million or more in annual sales were assumed
not to be financially impacted and were removed from consideration. Table V-l
shows the potentially impacted plants. These data indicate that the potential
impact is greatest in the Northeast region, with 91 plants and 7,702 employees
potentially affected. This is out of a U. S. potential of 125 establishments
employing 9,136 persons. Of the total number of potentially impacted estab-
lishments in the nation, 111 are classified as small in terms of production
capacity and only one is classified as large. However, employment is distrib-
uted somewhat differently, with 4,406 employed by small establishments, 3,926
by medium, and 804 by large. (See Table V-2.)
Table V-2
WOOL DYEING AND FINISHING PLANTS
BY PRODUCTION CAPACITY CATEGORY, 1972
Production
Capacity Number of Number of
Region Category* Plants Employees
Northeast All 91 7,702
Small 78 3,179
Medium 12 3,719
Large 1 804
North Central All 9 577
Small 8 370
Medium 1 207
Large
South All 14 393
Small 14 393
Medium - -
Large
West All 11 464
Small 11 464
Medium
Large
United States All 125 9,136
Small HI 4,406
Medium 13 3,926
Large 1 804
* Small category production capacity less than 9,800 Ibs./day;
medium category between 9,800 and 19,800 Ibs./day; and large cate-
gory more than 19,800 Ibs./day.
Age of Equipment. Results from the survey of wool finishers revealed the
information displayed in Table V-3. These data suggest a substantial propor-
tion of relatively old equipment.
V-4
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Table V-3
AGE OF EQUIPMENT IN THE WOOL FINISHING INDUSTRY
(in percent)
Mode
Percent of Plant (most frequent
Production Equipment percent reported) Mean Median Range
0-5 years old 5 14 5 50
6-10 years old 0 14 11 35
11 - 15 years old 10 15 10 50
16 - 20 years old 0 14 10 70
> 20 years old 0 33 16 97
Number of plants reporting: 16
Efficiency and Level of Technology. Cost of materials and cost of mate-
rials and payroll per dollar of shipments have decreased in the past ten years.
Industry experts believe that the level of technology in the wool finishing
sector is relatively low, but is adequate for the task. Physical plants and
work flow plans may be, in many cases, outdated, and the dyeing and finishing
processes have not dramatically changed since the early part of the century.
Degree of Specialization. Plants in this sector are highly specialized,
as is indicated by the ratio of primary products to all shipments in the sector
— 84. Approximately 85% of the 198 plants were 75% or more specialized in
1972. Even if all seven gray goods plants were in this specialization category,
at least 161 plants were highly specialized in the production of finished wool
yarn or fabric.
Trends in the Wool Finishing Segments. Trends in the segment are displayed
in Table V-4. The dramatic reduction in wool markets in the U. S. is clearly
displayed here, and although the demand outlook and prices for wool have im-
proved substantially, the industry in this country may not be able to respond
to the improved demand in time to take advantage of it. The import picture is
discussed elsewhere.
Demand, Supply, and Prices
The price for wool dyeing and finishing services is dependent upon the
demand for and the supply of products using wool. The remarks made in the wool
scouring segment on demand, supply, and prices can be applied in this segment of
wool dyeing and finishing.
Secondary Price Increases. For insight into how various types of textile
users would react to possible increases in supplier prices, survey question-
naires were mailed to domestic firms known to purchase large volumes of textile
fiber, yarn, or fabric. There were ten companies classified as knitting mills,
weaving mills, and carpet producers that returned the textile product users
V-5
-------
Employment
47,400
41,800
19,400
18,400
17,300
Estab-
lishments
361
310
198
Companies
304
262
178
Value of
Shipments
(millions)
$1,010.7
1,090.0
450.1
484.7
530.6
Special-
ization
Ratio*
86
82
84
Table V-4
TRENDS FROM CENSUS DATA FOR THE WOOL FINISHING INDUSTRY
SIC 2231: Broad Woven Fabric Mills, Wool
(including Dyeing and Finishing)
Coverage
Year Employment lishments Companies (millions) Ratio* Ratio**
1963 47,400 361 304 $1,010.7 86 96
1967 41,800 310 262 1,090.0 82 96
1972 19,400 198 178 450.1 84 83
1973
1974
* Specialization Ratio - This ratio measures the extent to which the industry
specializes in making its primary products.
** Coverage Ratio - This ratio measures the extent to which the products pri-
mary to an industry are shipped by plants classified in that industry.
Sources: Annual Survey of Manufactures and Census of Manufactures, 1972.
questionnaire as wool buyers. Collectively they purchase $16 million worth of
wool yarn annually. About $500,000 worth of this yarn was bought directly from
foreign sources. If, however, the wool price to these firms increases by 4-5%,
the percentage of imports used can be expected to increase tenfold. If wool
prices rise only 2-3%, the companies intend to try locating different domestic
supplies. Any yarn price increases of less than 2% will be absorbed in produc-
tion costs, while increases of 2-3% will be passed on to customers. For price
increase of more than 3%, the respondent firms foresee a partial cost
absorption.
Financial Profile
The survey data from wool dyeing and finishing plants were grouped into
three size categories based on production capacity in pounds of product per
day. The small category included all plants with capacities of less than 9,800
pounds per day. The medium category included plants with capacities between
9,800 and 19,800 pounds per day. The large category included plants with more
than 19,800 pounds per day of production capacity.
In each of these categories, the representative mill sizes specified in
the Development Document were used to base the financial statements for that
category. For wool dyeing and finishing plants, the small representative plant
statement presented in this report was based on a capacity of 4,400 pounds per
day, the medium was based on a capacity of 14,800 pounds per day, and the large
was based on a capacity of 29,700 pounds per day. After this categorizing by
V-6
-------
size of the survey data for the wool dyeing and finishing plants that responded
to the questionnaire, it was found that there were inadequate questionnaire
data on the large-size plants. The data presented in this section of the report
for the large-size representative plant are based on data for the medium-scale
operations. This projection for the large-size plant was done on a simple
linear projection basis by doubling the cost and sales figures for the repre-
sentative plants, since the size of the representative large plant was almost
exactly double the size of the medium plant.
The questionnaire data for 1975 operations reflected a capacity utiliza-
tion rate for the small group of 71%, for the medium group of 78%, and for the
large group of 94%. The data presented in the representative plant financial
statements are for a plant operating rate of 85% of capacity.
Income Statement Data. The income statement data were compiled for the
baseline case, that is, all municipal sewer charges, depreciation, and expenses
for operating and maintaining water pollution abatement systems were removed
from the figures.
The data presented in Table V-5 are based on the representative plants of
the three size categories of wool fabric dyeing and finishing plants and the
projected data for the new source operation of a medium size plant using the
most modern technology available. This whole group of plants was found to be
characterized by low profit margins for all size categories, which probably
reflects the fact that the industry is operating with antiquated physical
plants and is not operating efficiently and, therefore, cannot successfully
compete with the imported woolen goods that are prevalent in the U. S. market.
The price per pound of sales used was $3.83 for small, $3.60 for medium,
and $3.59 for large plants. The survey data exhibited a price range of $2.66
per pound to $19.62 per pound.
Direct production costs per pound for all wool finishing plants, based on
questionnaire data, ranged from a minimum of $1.86 to a maximum of $17.85. The
cost structure of the plants in this industry group was found to be relatively
labor intensive, with labor constituting 24% of total direct costs in the small
producers and 30% of direct costs in the medium-size plants. It appears, there-
fore, that there is no significant improvement in labor efficiency between medium
and small-scale operations. The proportion of fixed costs in this industry group
was found to be relatively low, with fixed costs representing only 11% of sales
in the small group and 10% of sales in the medium group.
This cost structure, however, does not carry over into the new source
plant. The new source plant data are based on replacement costs of fixed as-
sets and the resulting fixed costs which will result from this higher level of
fixed assets. The resulting higher depreciation and interest components of
fixed costs result in sufficient cost increases to offset all the anticipated
improvement and efficiency of labor by using new technology and results in an
operating loss for new source medium-sized plants in the wool dyeing and finish-
ing industry. This projected loss for the new source plant, combined with the
overall poor return on investment and poor return as a percentage of sales for
the other size categories in existing plants, indicates the poor financial con-
dition of this industry.
V-7
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Table V-5
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA
WOOL DYEING AND FINISHING INDUSTRY
(in thousands of dollars)
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Costs
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
Small
(3,740)
3.83
4,297
3,619
2,230
877
512
491
45
69
377
187
76
111
156
1,744
10.7
6.4
4.4
2.6
Existing
Medium
(12,580)
3.60
13,586
11,883
5,242
3,560
3,081
1,334
202
215
917
370
164
206
408
4,680
7.9
4.4
2.7
1.5
Large
(25,245)
3.59
27,173
23,767
10,483
7,121
6,162
2,667
404
430
1,833
739
341
398
802
9,360
7.9
4.3
2.7
1.5
New Source
Medium
(12,580)
3.60
13,586
11,571
5,472
2,916
3,183
3,103
916
1,270
917
- 1,087
0
- 1,087
171
21,046
5.2
5.2
8.0
8.0
V-8
-------
Balance Sheet Data. The data presented in Table V-6 are based on
representative plants of the three size categories of wool fabric dyeing
and finishing plants and the projected data for a new source operation of
medium size. This industry segment was found to have an extremely low
level of long-term debt in relation to the level of owners' equity. This
is probably a reflection of the fact that this industry segment is charac-
terized by extremely old plants which have been fully depreciated and fully
paid for and, therefore, the long-term debt structure is very low.
Table V-6
PRO FORMA BALANCE SHEET FOR THE
WOOL DYEING AND FINISHING INDUSTRY
(in thousands of dollars)
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Other
Total Assets
Liabilities
Current Liabilities
Long- Term Debt
Owners' Equity/Net Worth
Total Liabilities
Small
(3,740)
1,712
469
15
173
253
28
2,181
437
428
1,316
2,181
Existing
Medium
(12,580)
5,545
1,946
54
843
860
189
7,491
2,811
538
4,142
7,491
Large
(25,245)
11,090
3,892
108
1,686
1,719
379
14,982
5,622
1,076
8,284
14,982
New Source
Medium
(12,580)
5,545
18,312
507
7,931
8,090
1,784
23,857
2,811
12,696
8,350
23,857
Invested Capital. The data presented in Table V-7 represent the factors
that were considered in estimating the total invested capital for each of the
representative plants in the wool fabric dyeing and finishing industry and the
projected investment capital needed to establish a new source plant of medium
size.
V-9
-------
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
Table V-7
INVESTED CAPITAL FOR THE WOOL DYEING AND FINISHING INDUSTRY
(in thousands of dollars)
Existing
Small
Book
469
1,712
437
1,275
1,744
Salvage
164
1,712
437
1,275
1,439
Medium
Book
1,946
5,545
2,811
2,734
4,680
Salvage
681
5,545
2,811
2,734
3,415
Large
Book
3,892
11,090
5,622
5,468
9,360
Salvage
1,362
11,090
5,622
5,468
6,830
New
Source Medium
Book
18,312
5,545
2,811
2,734
21,046
Salvage
4,578
5,545
2,811
2,734
7,312
I
M
O
-------
Data Quality. The questionnaire data for the wool fabric dyeing and
finishing industry were adequate for the small to medium-size plant. Due to
the fact that no large plants in this industry segment provided financial data,
it was necessary, in order to get a complete picture of the industry, to proj-
ect the medium-size plant data to the large-size scale of operation. Therefore,
the financial profile of the large-size representative plant should be inter-
preted with caution.
Pretreatment Standards, Technologies, and Costs
The effluent control system alternatives and costs presented in this sec-
tion were provided by the Environmental Protection Agency as developed by the
technical contractor and submitted in their Development Document.
Industrial wastewaters discharged to publicly owned treatment works (POTW)
are regulated by Section 301(b) of the Federal Water Pollution Control Act
Amendments of 1972 (PL 92-500). Standards which such dischargers must meet
are to be promulgated pursuant to Section 307 of this Act. The intent of such
standards is to require treatment at the point of discharge complementary to
the treatment performed by the POTW. Duplication of treatment is not the goal.
The pretreatment by the discharger of pollutants that are not susceptible to
treatment in a POTW is critical to attainment of the overall objective of the
Act by protecting the POTW from process upset and by preventing discharge of
pollutants which would pass through or otherwise be incompatible with the POTW.
Pretreatment Control Technologies. For the wool dyeing and finishing seg-
ment, five pretreatment technologies have been developed. These technologies
were developed on the basis of information obtained from a survey of POTWs
treating textile wastes and from a consideration of the types of wastes dis-
charged by this industry subcategory. The survey of the POTWs yielded 50
specific complaints associated with the treatment of textile wastes. The most
common complaint related to uneven loadings, either hydraulic or organic.
The next most common complaint related to coarse solids, with pH problems,
color, low dissolved oxygens in the POTW influent, grease, and temperature
following in the order listed. Not all of these problems were necessarily
found in plants treating wastes from this segment.
Specific pretreatment technologies are described below. Estimated costs
are developed for wool finishing mills in the production capacity range of 2 to
13 kkg (2.2 to 15 tons) per day.
Alternative A - No Waste Pretreatment or Control
Costs - None
Reduction Benefits - None
Alternative B - Screening (S)
This alternative is fine screening to remove flock, clumps of fibers,
and other coarse solids that tend to clog pumps, foul bearings, and
float in POTW sedimentation and aeration tanks.
V-ll
-------
Costs - Investment costs estimated to range from $31,700 to $63,500.
Total annual costs estimated to range from $13,400 to $20,600.
Reduction Benefits - Alternative B reduces coarse suspended solids by
greater than 95%.
Alternative C - Screening and Equalization (S,E)
This alternative includes fine screening and agitated holding of from 8
to 16 hours to equalize the rate of wastewater discharge from the mill
to the POTW.
Costs - Investment costs estimated to range from $70,200 to $115,000, an
estimated increase over Alternative B of from $38,500 to $51,500. Total
annual costs estimated to range from $24,800 to $38,500, an estimated
increase over Alternative B of from $11,400 to $17,900.
Reduction Benefits - This alternative provides the benefits of Alterna-
tive B and also prevents the discharge of slug hydraulic loads to the
POTW.
Alternative D - Screening, Equalization, and Neutralization (S,E,N)
This alternative includes fine screening, equalization for from 8 to 16
hours, and neutralization with alkali.
Costs - Investment costs estimated to range from $108,000 to $218,000,
an estimated increase over Alternative C from $37,800 to $103,000.
Total annual costs estimated to range from $42,400 to $82,000, an
estimated increase over Alternative C of from $17,600 to $43,500.
Reduction Benefits - This alternative provides the benefits of Alterna-
tive C and also maintains the pH of the mill discharge, at or above 6.0.
Alternative E - Screening, Neutralization, and Biological Treatment (S,N,B)
This alternative includes biological treatment in a 72-hour detention
aerated lagoon without solids recycle. Screening and neutralization
with alkali are included as preliminary treatment to improve the opera-
tion and efficiency of the biological process.
Costs - Investment costs estimated to range from $128,000 to $293,000,
an estimated increase over Alternative D of from $20,000 to $75,000.
Total annual costs estimated to range from $45,600 to $118,800, an
estimated increase over Alternative D of from $3,200 to $36,800.
Reduction Benefits - Alternative E provides removal of coarse suspended
solids of greater than 99%, maintains the pH of the effluent to the
POTW at or above 6.0, and provides BOD5_, TSS, COD, and O&G removals of
80, 50, 50, and 15%, respectively. The levels of chromium, and phenol
in the effluent are also reduced.
Alternative F - Screening and Chemical Coagulation (S,C)
This alternative includes fine screening and coagulation for removal of
fine suspended and colloidal solids.
V-12
-------
Costs - Investment costs estimated to range from $147,000 to $337,000,
an estimated increase over Alternative E of from $19,000 to $44,000.
Total annual costs estimated to range from $80,700 to $177,300, an esti-
mated increase over Alternative E of from $35,100 to $58,500.
Reduction Benefits - Alternative F provides complete removal of coarse
suspended solids, and also provides reductions of BOD5_, TSS, COD, and O&G
by 60, 85, 70, and 90%, respectively. Chromium and phenol levels are also
reduced.
The pretreatment alternatives specified for this industry segment require
the availability of land to accommodate equalization wells and basins, aeration
lagoons, and activated sludge facilities. Land area in hectares that is esti-
mated to be required is shown in the following table:
Plant Size
Small
Medium
Large
Land availability indicated by respondents to the economic contractor's
questionnaire was as follows:
No. %
Alternative
None
-
-
-
S
0
0
0
S,E
0
0.4
0.6
S,E,N
0
0.4
0.6
S,E,N,B
0.6
1.2
1.8
S,C
0
0
0.4
No Land Available 3 25
Land Available
Less than 0.2 hectare 5 42
0.2 hectare - l.w hectares 4 33
No Answer _0 0
TOTAL 12 100
Discharge Status of the Industry. Current practices in the textile indus-
try have been estimated from information submitted by respondents to question-
naires prepared by the economic contractor. Estimates of the percentage of
plants in this industry segment discharging into POTWs were obtained from four
sources, including the economic contractor's survey. The median value of these
four estimates indicates that 67% of the plants in this segment discharge into
POTWs.
The economic contractor also obtained information relating to pretreatment
practices of dischargers into POTWs. An analysis of the practices submitted
was made to determine the number of plants presently having facilities in place
to perform at least the pretreatment practives recommended by the technical
contractor in each of the pretreatment alternatives. The results of this
analysis are shown in the following table:
V-13
-------
Treatment
Available No.
None 5 42
S 4 33
S,E 3 25
S,E,N 3 25
S,N,B 0 0
S,C 0 0
Other _3_ 25
TOTAL 12
The "other" treatment alternative includes cases which did not include
pretreatment practices recommended by the technical contractor.
It should be noted that the sufficiency of an existing pretreatment prac-
tice cannot be evaluated. Any given pretreatment practice may require upgrad-
ing to perform as adequately as the technical contractor has projected.
Pretreatment Control Costs. The pretreatment control costs, as provided
by EPA, are based on plant production, wastewater flow, pretreatment processes
proposed, and operation requirements. The costs depicted and discussed in this
section are for "typical" yet hypothetical manufacturers in this industry
segment.
Investment Costs. Investment costs include the installed costs of treat-
ment components plus allowances for contingencies and engineering. The installed
cost includes the costs of delivery and erection of major equipment items,
evacuation and backfill, associated electrical and mechanical work, instrumen-
tation, backup pumps, contractor overhead and profit, and yardwork. Not included
are spare parts, standby power-generating equipment, rock excavation, or the
use of pile foundations. A contingency allowance of 15% of the installed cost
was used to cover unexpected costs due to local mill conditions and differences
between the actual system and those used for cost estimates. No allowance was
made for shutdown of the mill during construction and installation.
Costs are expressed in January 1976 dollars. It was assumed that all
design specifications will be prepared by an outside consulting engineer in
accordance with applicable codes. Construction work was assumed to be per-
formed by an outside contractor with no work to be done by in-plant labor or
maintenance personnel.
Engineering costs are included in the cost estimates and were derived by
using percentages of the installed costs and contingencies. For total costs of
$100 or less, 15% was used. For larger projects, a percentage to the nearest
0.5% from Curve A in Consulting Engineering was used.
No land acquisition cost is included.
V-14
-------
Table V-8
PRETREATMENT CONTROL COSTS: WOOL DYEING AND FINISHING
(Costs in $000)
Size, Status, and
Alternative
Small, Existing
S
S,E
S,E,N
S, N,B
S, C
Medium, Existing
S
S,E
S,E,N
S, N,B
S,C
Large, Existing
S
S,E
S,E,N
S,N,B
S, C
Medium, New Source
S
S,E
S,E,N
S,N,B
S,C
Investment
Costs
31.7
70.2
108.0
128.0
147.0
39.7
91.0
170,0
237.0
216.0
63.5
115.0
218.0
293.0
337.0
39.7
91.0
170.0
237.0
216.0
Annual
Operating
Costs
8.2
14.9
25.5
27.6
57.5
9.3
18.8
33.9
47.4
87.6
10.2
21.7
48.0
77.8
124.3
9.3
18.8
33.9
47.4
87.6
Total
Yearly
Costs
13.4
24.8
42.4
45.6
80.7
15.8
31.7
60.5
80.8
121.6
20.6
38.5
82.0
118.8
177.3
15.9
31.7
60.5
80.8
121.6
Cost
as % of
Fixed Assets
7.91
17.5
26.9
31.9
36.7
2.18
5.00
9.34
13.0
11.9
1.74
3.16
5.99
8.05
9.25
0.21
0.55
1.03
1.43
1.31
Yearly Costs
as % of
Annual Sales
0.31
0.58
0.99
1.06
1.88
0.12
0.23
0.45
0.59
0.90
0.08
0.14
0.30
0.44
0.65
0.12
0.23
0.45
0.59
0.90
V-15
-------
Total Yearly Costs. Total yearly costs consist of interest, depreciation,
operation and maintenance, sludge disposal, energy and power, and chemicals.
The cost of money for capital expenditure was assumed to be 10% of the total
investment cost. Installed costs were depreciated over estimated lives of the
components on a straight-line basis.
Estimates were prepared of the number of hours required for operation of
the various component systems. In the case of this industry segment, it was
assumed that the textile mill operates 24 hours a day, 6 days a week, and 50
weeks a year. Laboratory time is included for the more sophisticated systems
where analytical results would normally be used for operational control. Ten
percent was added to labor hours to cover supervision and administration. A
labor rate of $6.00 per hour was used to cover wages and fringe benefit costs.
Investment, annual operating, and total yearly costs for existing small,
medium, and large plants and new source medium plants in this industry seg-
ment are given in Table V-8. Also shown are investment costs as a percent of
fixed assets and total yearly costs as a percent of annual sales.
Municipal System User Charges. The data on user charges collected from
publicly owned treatment works were presented for all industry segments in a
previous section. Data collected from respondents to the plant questionnaire
provided the following information on annual sewer charges for 1975 for wool
finishing plants:
Sewer Charges/
Sewer Charges/ Wastewater
Production Discharge
(in cents/ (in cents/
All Respondents 1,000 pounds) 1,000 gallons
Mean 447 7
Median 267 10
Minimum 17 2
Maximum 7,886 16
Anticipated Reaction to Pretreatment Standards. Although specific pre-
treatment requirements have not been promulgated by EPA, the probable reaction
of manufacturers to such standards was determined by questionnaire. Respondents
were asked to select one of the nine options listed below, given the limited
amount of information which they had about pretreatment requirements and com-
plete treatment requirements at the time:
1. Change from pretreatment to complete treatment
2. Change from complete treatment to pretreatment
3. Upgrade existing pretreatment
4. Upgrade existing complete treatment
5. Initiate pretreatment
6. Initiate complete treatment
V-16
-------
7. Close the plant as a result of pollution control standards
8. None of the above, because this plant already conforms to the
proposed standards
9. Other (specify)
Twelve replies were received from plants in this segment. The nature
of the replies was as follows:
Alternative No. %
Upgrade existing pretreatment 2 17
Initiate pretreatment 2 17
Close plant 1 8
Plant conforms to standards 3 25
Other _4 33
TOTAL 12 100
Economic Impact Analysis
The imposition of pretreatment controls on the wool finishing industry
segment will have both direct and indirect impacts on the industry, on con-
sumers, on its suppliers, and on communities in which plants are located.
The resulting direct impacts from the imposition of pretreatment controls are
analyzed in both quantitative and qualitative terms: price effects, financial
effects, production effects, employment and community effects, and balance of
trade effects.
The previous analysis identified a total of 125 plants operating at the
end of 1972, with 9,136 employees which the proposed pretreatment regulations
could affect. This represented 111 plants which could be classified as small
in terms of production capacity, 13 plants as medium, and one as large. In
addition to the examination of the potential impact of pretreatment controls
on existing plants, the analysis considered the impacts on those plants which
have not been constructed and will discharge their effluent to publicly owned
treatment systems (hereafter referred to as "new source").
The economic impact analysis also included a sensitivity analysis which
was performed using pretreatment control cost estimates at levels between 80%
and 200% of the costs provided by EPA. The analysis was based on a wide range
in order to take into account the possibility of regional as well as individual
mill variations in pretreatment costs. In addition to this discussion on the
economic impact analysis, an impact analysis was completed using an incremental
capital cost approach and is included in Appendix A. Since the exact level of
pretreatment which will be required has not been specified, this report presents
data on the effects for all levels under consideration.
Finally, it should be noted that this analysis was concerned only with the
impacts of proposed pretreatment guidelines. It is recognized that there are
V-17
-------
other regulatory programs by EPA, OSHA, and various state controls, either
existing or emerging, which will influence the profitability of the plants
studied. The analysis does not consider the full impact of this aggregate of
regulations.
Price Effects. The role of price effects in the impact analysis is criti-
cal. The analysis of price effects proceeded with the determination of what
price increases would be required to offset the costs of pretreatment controls
Next, the market structure for the wool finishing industry segment was examined
to determine if mills would be forced to absorb the price increases, or if the
price increases could be passed on to customers, or if the price increases
could be partially absorbed and partially passed on. Also, the possibility
of secondary price increases was examined in a previous section.
Required Price Increases. An implicit indication of the expected price
effects of pretreatment controls used in this report is the amount of sales
price increase necessary to maintain a mill's profitability, after pretreatment
control expenditures, at the same level as the mill without the control expenses.
The ability of mills to pass on such required price increases is evaluated in the
following section.
The required price increases necessary to offset the different levels of
proposed pretreatment control for the representative mills are shown in
Table V-9. The required price increases for small wool finishing mills range
from .41% to2.21%, depending on the level of pretreatment; for medium mills^
from .16% to 1.08%; and, for large mills, from .11% to .82%. For the new
source mills, the required price increase to offset the pretreatment level
ranges from .13% to .93%. Also shown are the sensitivity ranges of required
price increases when pretreatment costs vary from 80% to 200% of the original
estimated costs.
Expected Price Increases. Although the previous discussion had identified
the required price increases to offset expenditures for pretreatment control in
order to maintain the mills' current (baseline) profitability levels, it does
not quantify the extent to which price increases can be passed on to consumers.
The remarks made in the wool scouring segment on expected price increases can
be applied as well in this segment of wool dyeing and finishing.
The conclusions on increasing prices were that it seems likely that very
little of the pretreatment costs can be passed through to consumers.
Price increases to offset the costs of pretreatment controls by the im-
pacted wool finishing mills are expected to occur. However, these price in-
creases cannot be specified now due to the wide range in the costs associated
with the different levels of pretreatment control. In the following analysis,
no price changes were assumed to occur and, accordingly, the financial effects
on the mills are without added revenues from price increases. From the firm's
viewpoint (that is, a financial viewpoint), the financial effects discussed
below represent the most severe case.
Financial Effects. The financial profiles for the representative mills
in the wool finishing industry segment were described previously. The survey
V-18
-------
Table V-9
WOOL DYEING AND FINISHING: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
Representative Plant Size
Existing-Small
(3,740 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Existing-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Existing-Large
(25,245 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
New Source-Medium
(12,580 Ibs./day)
E
E, N
S, N, B
S, C
Required Price Increase
Percent Proposed Control Costs
80
.34
.59
1.03
1.05
1.82
.13
.25
.50
.61
.89
.09
.15
.34
.44
.67
.11
.20
.40
.50
.76
100
.41
.72
1.25
1.28
2.21
.16
.30
.60
.74
1.08
.11
.19
.41
.54
.82
.13
.24
.48
.61
.93
120
.48
.85
1.47
1.51
2.59
.19
.35
.71
.88
1.28
.13
.22
.48
.64
.96
.15
.28
.56
.71
1.10
200
.76
1.36
2.33
2.41
3.97
.30
.57
1.12
1.42
2.04
.21
.35
.77
1.04
1.55
.24
.45
.89
1.14
1.78
V-19
-------
data, as well as published data, indicated substantial variability in key
financial parameters for mills in this sector. These financial profiles of
representative mills and the estimated costs of pretreatment controls provided
by EPA were used to compute the following financial indicators under baseline
(without pretreatment controls but with municipal user charges) and with pre-
treatment controls: after-tax income, after-tax return on sales, after-tax
return on invested capital, cash flow, and cash flow as a percent of invested
capital and net present value.
These financial measures were computed for each representative mill
according to the discounted cash flow and return on investment procedures
outlined in the methodology. In addition, a sensitivity analysis was performed
for each representative mill, using pretreatment control cost estimates at
levels between 80% and 200% of the costs provided by EPA. The results of this
analysis are discussed below.
After-tax Income. As shown in Table V-10, the imposition of pretreatment
controls on the wool finishing representative plants results in small to rather
significant reductions in income, depending upon the level of pretreatraent and
plant size. Expressed as a percent of the baseline incomes, the pretreatment
levels resulted in a decrease.in after-tax incomes between 6% or $6,000 and 32%
or $35,000 for the small plant; between 3% or $6,000 and 26% or $52,000 for the
medium plant; and between 2% or $7,000 and 19% or $74,000 for the large plant.
The new source medium plant does not appear to be a viable operation, since
it has a negative after-tax profit before the imposition of pretreatment
controls.
After-tax Return on Sales. The after-tax return on sales for the existing
and new source representative wool finishing plant also are showin in Table V-10.
As would be expected with the above indicated declines in after-tax incomes, the
impacted plants' returns on sales declined by a corresponding percentage. The
imposition of pretreatment standards obviously would further deteriorate the
already low returns in the wool finishing industry.
From a baseline of 2.6% for the small plant, the decline ranged from
an after-impact return of 2.4% to 1.7%, depending on the level of pretreatment
control. For the medium plant, the return after controls are imposed resulted
in a decline from the baseline of 1.5% to between 1.4% and 1.1%. For the large
plant, the return declined from a baseline of 1.4% to between slightly less
than 1.4% and 1.1%.
After-tax Return on Invested Capital. The baseline and impacted wool
finishing plants' returns on invested capital are shown in Table V-10. After
the imposition of pretreatment controls on the existing plants, return on
investment ranges from 5.8% to 3.9% for the small plant; from 4.1% to 3.0%
for the medium plant; and from 4% to 3% for large plants.
Cash Flow. Estimated cash flows (after-tax income plus depreciation) are
shown in Table V-ll for the representative plants. The baseline cash flows as
percentages of invested capital are 6.2% for the small plant, 4.2% for the
medium plant, and 10.4% for the large plant. Depending on the level of pre-
treatment, the cash flows as percentages of invested capital vary between 3.9%
and 5.8% for the small plant, between 3.0% and 4.1% for the medium plant, and
between 3.2% and 4.0% for the large plant.
V-20
-------
WOOL DYEING AND FINISHING:
Table V-10
PRETREATMENT STANDARD IMPACTS ON PROFITABILITY
After-Tax Return on
After-Tax Profits ($1,000)
Representative
Plant Size
Baseline % Proposed Pretreatment Costs
Case 80 100 120 200
After Tax Return on Sales (%)
Percent Proposed
Baseline Pretreatment Costs
Case 80 100 120 200
Invested Capital (%)
Percent Proposed
Baseline Pretreatment Costs
Case 80 100 120
200
Existing-Small
(3,740 Ibs./day)
S
S,
S,
S, N,
S, C
Existing-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Existing-Large
(25,245 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
New Source-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Baseline % Proposed Pretreatment
Case 80
109
104
101
95
95
81
198
193
189
180
174
156
382
376
371
357
345
323
-1,102
-1,111
-1,120
-1,137
-1,148
-1,182
100
103
99
92
92
74
192
186
175
168
146
375
368
351
336
308
-1,113
-1,125
-1,146
-1,159
-1,202
120
102
97
89
88
68
191
184
171
162
136
373
366
345
326
293
-1,116
-1,129
-1,154
-1,170
-1,222
Costs
200
98
90
76
75
40
186
174
153
139
94
368
355
320
289
233
-1,126
-1,147
-1,189
-1,216
-1,301
2.53
1.46
1.41
-8.11
2.43 2.40 2.38 2.28
2.35 2.31 2.27 2.09
2.22 2.15 2.07 1.77
2.21 2.13 2.05 1.74
1.89 1.73 1.57 .93
1.
1
1
1
1
1
1
1
1
1
-8
-8
-8
-8
-8
.42
.39
.32
.28
.15
.40
.37
.31
.27
.19
.18
.25
.37
.45
.70
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
-8.
-8.
-8.
-8.
-8.
41
37
29
24
08
38
36
29
24
13
20
28
43
53
85
1.
^
1.
1.
1.
1.
1.
1.
1.
1.
-8.
-8.
-8.
-8.
-9.
40
35
26
20
00
37
35
27
20
08
22
31
50
61
00
1.
1.
1.
1.
1.
1.
1.
1.
-8.
-8.
-8.
-8.
-9.
37
28
12
02
69
35
31
18
06
86
29
45
75
95
58
6.22
4.23
4.08
-5.24
5.89 5.81 5.73 5.42
5.62 5.47 5.33 4.78
5.21 4.98 4.75 3.87
5.14 4.89 4.65 3.73
4.36 3.93 3.52 1.97
4.10
3.97
3.73
3.58
3.22
4.00
3.93
3.75
3.59
3.35
-b.27
-5.30
-5.37
-5.40
-5.57
4.06
3.90
3.61
3.42
2.98
3.98
3.89
3.67
3.48
3.17
-5.28
-5.32
-5.40
-5.45
-5.65
4.03
3.84
3.50
3.27
2.75
3.96
3.85
3.58
3.36
3.00
-5.29
-5.34
-5.43
-5.49
-5.73
3.90
3.59
3.04
2.69
1.85
3.87
3.70
3.27
2.90
2.32
-5.33
-5.41
-5.56
-5.56
-6.06
-------
Table V-ll
WOOL DYEING AND FINISHING: PRETREATMENT STANDARD IMPACTS ON CASH FLOWS
Cash Flow ($1,000)
Representative
Plant Size
Existing-Small
(3.740 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Exi st ing-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Existing-Large
(25,245 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
New Source-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Base-
line % Proposed Pretreatment Cost;
Case 80 100 120 200
Cash Flow as a % of Invested Capital
154
151
148
145
144
133
150
147
143
142
128
150
146
141
139
122
147
141
133
130
102
400
397
394
390
384
368
396
392
387
380
360
396
390
384
376
352
393
384
374
360
320
786
784
779
771
759
742
783
111
767
750
731
782
776
763
745
730
780
768
748
717
675
-180
-193
-201
-213
-224
-256
-196
-205
-220
-234
-274
-177
-209
-227
-243
-291
-205
-224
-254
-281
-361
Base-
line
Case
8.80
8.55
8.40
.88
% Proposed Pretreatment Costs
80
8.53
8.24
7.93
8.00
7.13
8.43
8.28
8.09
7.88
7.58
8.33
8.24
8.09
7.91
7.70
- .92
- .95
-1.01
-1.06
-1.21
100
8.46
8.11
7.73
7.56
6.74
8.40
8.22
7.98
7.72
7.36
8.31
8.20
8.01
7.79
7.54
- .93
- .97
-1.04
-1.10
-1.29
120
8.39
7.98
7.53
7.33
6.47
8.37
8.15
7.87
7.57
7.13
8.29
8.16
7.93
7.67
7.37
- .94
- .99
-1.07
-1.14
-1.37
200
8.13
7.47
6.77
6.48
4.98
8.25
7.90
7.45
6.98
6.27
8.22
8.01
7.63
7.21
6.73
- .97
-1.05
-1.19
-1.31
-1.68
-------
Net Present Values. The calculated net present values (NPV) for the
existing wool finishing representative plants are positive in the baseline
case (see Table V-12). However, the imposition of the proposed pretreatment
costs generates negative NPVs for all levels except screening in the small
and medium plants and screening and equalization in the small plant. As
discussed in the methodology, negative net present values would cause most
firms to cease operations. However, it should be noted that negative NPVs
indicate that the plant would earn less than the estimated 8.7% industry
cost of capital. As stated before, the new source medium plant does not
appear to be a viable operation, since it has a negative after-tax profit
as well as negative net present value before the imposition of pretreatment
controls.
Production, Employment, and Other Effects. Production effects related to
pretreatment costs can be attributed to either a reduction in supply, due to
plant closures, or a decrease in consumer demand, hence mill production, due to
price increases.
The price increase that is utilized in the production analysis is assumed
to be equal to the impact that would be experienced by the larges wool dyeing
and finishing mill. This assumption seems the most pragmatic and realistic
considering the structural characteristics of the wool finishing industry.
Another factor which should be considered, but cannot be at this time, is
what the effluent standards impact will be on the direct dischargers in this
industry segment.
Review of Table V-9 indicates that the required price increases necessary
to offset the different levels of pretreatment control for the large wool
dyeing and finishing mill range from .11% to .82%.
To translate these price increases into impacts on consumer demand and
mill production, the demand elasticities for wool finishing products must be
known. Unfortunately, there are no data available which relate market response
and higher prices for these products. However, the demand elasticities for
six major fiber types range from -0.17 for cotton to -1.0 for synthetics.I/
Using these price elasticities, the percentage reduction in demand for wool
finishing would range between ,019 percent to .82%.
In addition to reduction in mill production attributable to increased
prices, there could be plant closures if the wool finishing mills could not
adequately absorb required pretreatment costs. The criteria for determining
whether or not a plant would cease operations were discussed in the methodology.
This financial analysis was conducted with no price changes assumed and, there-
fore, represents the most severe case from the mills' viewpoint.
As shown, the wool finishing mill representative plants maintain positive
profitability levels after incurring the costs of pretreatment control except
for the new source mill (see Table V-10). Furthermore, review of Table V-ll
reveals that all representative plants but the new source plant maintain
positive cash flows after meeting pretreatment standards. Review of the net
I/ Elasticities were obtained from the National Commission on Water
Quality, Water Pollution Control Act of 1972, Economic Impacts, Textile
Industry, 1975.
V-23
-------
Table V-12
WOOL DYEING AND FINISHING:
PRETREATMENT STANDARD IMPACTS ON NET PRESENT VALUES
(in thousands of dollars)
Net Present Values
Representative
Plant Size
Existing-Small
(3,740 Ibs./day)
S
S, E,
S, E, N
S, N, B
S, C
Existing-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Exi st ing-Large
(25,245 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
New Source-Medium
(12,580 Ibs./day)
S
S, E
S, E, N
S, N, B
S, C
Baseline
Case
140
171
152
179
152
92
113
100
118
100
85
104
92
109
92
-3,893
-4,782
-4,240
-4,994
-4,240
Percent
80
83
49
38
50
- 182
24
44
- 180
- 293
- 401
9
86
- 280
- 474
- 649
-3,960
-4,940
-4,519
-5,404
-4,741
Proposed
100
69
19
85
- 107
- 266
7
83
- 249
- 395
- 526
32
- 134
- 373
- 620
- 835
-3,977
-4,979
-4,589
-5,506
-4,866
Pretreatment
120
55
12
- 133
- 164
- 349
10
- 123
- 319
- 498
- 652
56
- 182
- 466
- 766
-1,020
-3,994
-5,018
-4,659
-5,609
-4,995
Costs
200
1
- 134
- 323
- 393
- 683
77
- 279
- 599
- 908
-1,153
- 150
- 372
- 838
-1,348
-1,762
-4,061
-5,175
-4,938
-6,019
-5,718
V-24
-------
present values for wool finishing mills representative plants indicates
negative net present values for most pretreatment options (see Table V-12).
However, wit/the anticipated price increases to offset the.^«er^f^8
of pretreatment control for the large mill, the situation will be dl««^.
For all pretreatment alternatives, the existing large wool dyeing and finishing
mill will have positive net present values, with negative values for the new
source mill. The existing medium and small representative mills' net present
values with the price increases are:
Net Present Values ($000)
Pretreatment Alternative Existing-Small Existing-Medium
s 87 64
S,E 57 37
S,E,N -13 -20
S,N,B 5 -39
S,C -120 -68
Although the net present value method of determining investment decisions
is the single most valid criterion of plant profitability, with added invest-
ments its applicability varies with plant size. For large-size plants where
it can be assumed that decisions will be made primarily from economic consid-
erations, it carries the greatest weight. For smaller plants, net income
takes on more meaning and cash flow is also very important. Net present
value is not as important for smaller plants in the decision-making process
since operations are confirmed on a year-by-year basis with the expectation
of future profitability. In the case of medium-size plants, all the measures
are important with no measure being given an overriding consideration.
To translate the representative plant closures into the industry's
structure, the number of impacted plants and the percentage of plants with
treatment facilities must be determined, as well as the number of baseline
closures (e.g., those plant closures which would take place even if pretreat-
ment controls were not implemented).
In 1972 there were 111 small-size mills and 13 medium-size mills that
were identified as potentially impacted (see Table V-2). Between 1963 and
1967, the wool finishing industry (direct and indirect dischargers) decreased
about 13 mills per year and, between 1967 and 1972, about 22 mills per year.
However, an examination of employment data indicates that this downward trend
lessened in 1973 and 1974. This stabilization of the industry probably could
be attributed to an improved national economy and the Multi-Fiber Arrangement.
The baseline closures of municipal dischargers projected for the period 1972
to 1977 are five mills annually for a total of 20, all of which are assumed to
be small in size.
In a previous section the present discharge practices of all wool finishing
and dyeing mills were presented. Using these data, Table V-13 below^ich
shows the impacted mills without the required pretreatment controls by pretreat
ment alternative, can be derived.
V-2 5
-------
Table V-13
WOOL DYEING AND FINISHING IMPACTED MILLS, 1977
Pretreatment
Alternative
S, E, N
S, N, B
S, C
Small
Number
68
-
91
Mills
Number of
Employees
2,652
-
3,549
Medium Mills
Number of
Number Employees
10 3,020
13 3,926
13 3,926
If the most severe case were assumed, then the number of mills closed and
employees without jobs would be represented by the figures shown in Table V-13,
since these are the pretreatment alternatives with negative net present values.
In reality, however, as plant closures accelerated, the supply would dwindle
and it would .ie expected that the price would rise. Since complexity of the
market action is beyond the analysis of this report, the most severe case will
be assumed.
Table V-2 shows that the majority of the small and medium wool dyeing and
finishing mills are located in the Northeast region of the United States.
Since a number of textile mills are located in small towns in the Northeast
which have already experienced difficulty in retaining their industry, the
closure of a single mill could have a major economic impact on the local commu-
nity. No substantial foreign trade effects are expected from mill closures,
since exports are not significant and imports are regulated by quotas.
V-26
-------
VI. WOVEN FABRIC DYEING AND FINISHING, EXCEPT WOOL
This industry segment scours, dyes, and finishes fabrics produced by the
broad woven industry. This includes fabrics made from all fiber types except
wool and for all applications except floor coverings. There are separate woven
fabric dyeing and finishing plants as well as operations that are part of
weaving complexes.
Primary Products
Identification of the primary products of the woven fabric finishing seg-
ment covered in this study is derived from data reported in the 1972 Census of
Manufactures, the 1972 Standard Industrial Classification Manual, and pertinent
Bureau of the Census Current Industrial Reports. Relative importance in 1975
of each product is shown as a percentage of production volume for the individual
segment.
Percent of Industry
Production on a
SIC Linear Basis
22617 Cotton broadwoven fabrics, finished,
total 43.2
22617 12 Cotton duck 1.6
22617 14 Cotton twills, drills, jeans, and
other 5,3
22617 16 Bedsheeting and pillowcase fabrics 1.7
22617 22 Plain print cloth 6.2
22617 24 Tobacco, cheese, and bandage cloth 8.5
22617 26 Broadcloth 1.1
22617 32 Sateens 1.0
22617 34 Yarn dyed fabrics 1.4
22617 36 Toweling and dishcloth fabrics 6.1
22617 42 Corduroys 2.0
22617 44 Flannels, blanketing and other
napped fabrics 1.7
22617 46 Dimities, lawns, organdies and voiles .3
22617 52 All other cotton fabrics 6.3
22628 Man-made fiber broadwoven fabrics,
finished, total 56.8
22628 12 Filament rayon and/or acetate 5.4
22628 14 Spun rayon and/or acetate 2.5
22628 16 Other rayon and/or acetate 7.0
22628 22 Nylon and chiefly nylon 4.7
22628 24 Polyester - cotton blends, chiefly
polyester 27.4
22628 26 All other polyester and chiefly
polyester 7.3
22628 32 Glass fiber fabrics 1.0
22628 36 All other man-made fiber fabrics 1.6
Total 100.0 100.0
VI-1
-------
Industry Description
The woven fabric finishing industry segment is comprised of those mills
in SIC 2261 (Finishers of Broad Woven Fabrics of Cotton), SIC 2262 (Finishers
of Broad Woven Fabrics of Man-Made Fiber and Silk), SIC 22117 (Finished Cotton
Fabrics Weaving Mills), and SIC 22218 (Finished Man-Made and Silk Broad Woven
Fabric, Weaving Mills). In 1972, 60% of all finished cotton fabrics were pro-
duced in SICs 2261 and 2211. Although other production occurred in SICs 2262
and 2392 (Housefurnishings, n.e.c.), SICs 2261 and 22117 will be taken as ap-
proximations of the finishers of cotton fabrics in this EPA segment.
Approximately 84% of all finished broadwoven fabrics of man-made fiber and
silk were produced in SICs 2262 and 2221 in 1972. Thus, SICs 2262 and 22218
will be taken as the finishers of man-made fabrics of this EPA segment. The
total number of mills in the woven fabric finishing sector is probably larger,
since a number of weaving mills are wet processors, but may not be associated
primarily with product classes 22117 or 22218.
The Census provides the following definitions of the pertinent industry
groups at the four-digit level:
2261 Finishers of Broad Woven Fabrics of Cotton
Establishments primarily engaged in finishing purchased cotton
broad woven fabrics, or finishing such fabrics on a commission
basis. These finishing operations include bleaching, dyeing,
printing (roller, screen, flock, plisse) , and other mechanical
finishing such as preshrinking, calendering and napping. This
industry also includes the shrinking and sponging of cloth for
the trade, and chemical finishing for water repellency, fire
resistance, and mildew proofing. Establishments primarily en-
gaged in finishing wool broad woven fabrics are classified in
Industry 2231; knit goods in Group 225; and those coating or im-
pregnating fabrics in Industry 2295.
2262 Finishers of Broad Woven Fabrics of Man-Made Fiber and Silk
Establishments primarily engaged in finishing purchased man-
made fiber and silk broad woven fabrics of finishing such fab-
rics on a commission basis. These finishing operations
include bleaching, dyeing, printing (roller, screen, flock,
plisse), and other mechanical finishing such as preshrinking,
calendering, and napping. Establishments primarily engaged
in finishing wool broad woven fabrics are classified in Indus-
try 2231; knit goods in Group 225; and those coating or impreg-
nating fabrics in Industry 2295.
Types of Firms. Because of the differing economic trends in the cotton
and man-made fiber segments, these will be discussed separately, and aggregate
data will be presented as well.
In 1972, there were 196 firms operating plants for the finishing of cotton.
Of this number, 131 were single-unit companies (all facilities located at one
place). Many (68) of these single-unit companies employed fewer than 20 per-
sons. This single-unit sector employed 25% of the employees in SIC 2261 (6,500)
VI-2
-------
This is obviously a very fragmented industry. The 50 largest companies pro-
duced 89% of all goods in the sector in 1972. Cotton weaving mills (SIC 2211)
also tend to be fragmented, in the sense that 119 of 307 plants are single-unit
firms. It is likely that there is considerable overlap between all sectors in
this segment by firms owning both weaving and finishing plants.
Finishing of broad woven fabrics of man-made fiber and silk (SIC 2262) was
carried out in 1972 by 258 firms — 166 of which were single-unit companies.
Fifty-nine of these single-unit companies employed fewer than 20 persons. About
30% of the employees (10,600) worked in single-unit firms. Another 10,300 em-
ployees worked in single-unit weaving mills (SIC 2221). Thus, in both finish-
ing plants and weaving mills of man-made fiber and silk, the fragmentation is
severe. On the other hand, 89% of the value of industry shipments for finish-
ing plants (SIC 2262) was produced by the 50 largest firms in the industry.
In summary, while 100 large firms accounted for most of the production in
the segment (SIC 2261 and SIC 2262), 65% of the plants (297) were one-unit firms,
employing more than 17,100 persons. Addition of weaving mills to the segment
does not change the picture with regard to fragmentation to any significant
degree.
Plant Characterization. Insight into the woven fabric finishing industry
can be obtained by examining the composition and characteristics of the mills
that comprise this sector. The number, size, and location of plants; municipal
system dischargers; age of equipment, efficiency and level of technology, and
other characteristics are discussed in this section.
Number, Size, and Location of Plants. In 1972, the number of establish-
ments engaged in the finishing of cotton fabrics (SIC 2261) was 196 and in the
finishing of man-made fibers and silk fabrics (SIC 2262) was 258. Weaving mills
that also finished fabrics (SIC 22117) and SIC 22218) equaled 24 and 44 estab-
lishments, respectively. A conservative estimate of the number of establish-
ments in this industry segment is 522.
Census data, including number of establishments and number of employees by
Census region and by employment size group (with estimates by the economic con-
tractor when necessary), are shown in Table VI-1. Total employment for the
sector is estimated at 108,900. The data emphasize the heavy concentration of
this industry segment in the South, where 175 establishments employ 82,533 per-
sons, and the Northeast, where 305 establishments employ 25,367 persons.
Municipal System Dischargers. The impact of proposed pretreatment regula-
tions will be on wet processors using municipal sewage facilities. There are
four sources of estimates for the percent of segment plants using municipal
sewage plants for discharge of process waste water. Each of these estimates
is biased to some extent.
The 1972 Census of Manufactures, Water Use in Manufacturing, for example,
reports the number of plants discharging exclusively to public sewers, but that
study includes only those plants with water intake of more than 20 million gal-
lons annually. The 1974 National Commission on Water Quality study, the 1976
technical contractor's survey, and the 1976 economic contractor's survey are
biased in unknown ways. The differing estimates of proportion of municipal
system dischargers are as follows:
VI-3
-------
Table VI-1
WOVEN FABRIC DYEING AND FINISHING PLANTS: NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
SIC 22117*
SIC 22218*
SIC 2261
SIC 2262
Total
Region and Employ-
ment Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
North Central
All
1-19
20-49
50-99
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1 , 000+
West
All
1-19
20-49
50-99
100-249
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
Number of
Plants
7
5
2
17
2
2
7
4
2
24
7
2
2
7
4
2
Number of
Employees
72
26
46
15,528
18
838
3,621
4,581
6,470
15,600
44
46
838
3,621
4,581
6,470
Number of
Plants
18
5
4
4
3
2
26
2
2
4
7
7
4
44
7
6
4
7
9
7
4
Number of
Employees
3,195
80
213
584
1,020
1,298
28,905
25
96
1,229
5,382
10,472
11,701
32,100
105
309
584
2,249
6,680
10,472
11,701
Number of
Plants
108
52
23
13
17
2
1
16
9
2
5
66
14
9
8
12
8
13
2
6
6
196
81
34
26
29
10
14
2
Number of
Employees
6,300
367*
742*
956*
2,844*
725*
666*
461*
59*
60*
342*
18,900
98*
286*
581*
1,980*
2,863*
8,542*
4,550*
39*
39*
25,700
600
1,100
1,900
4,800
3,600
9,250*
4,550*
Number of
Plants
172
44
40
35
40
10
3
6
4
1
1
66
12
6
9
16
12
9
2
14
9
2
2
1
258
69
49
47
57
22
12
2
Number of
Employees
15,800
374*
1,322*
2,314*
5,705*
3,693*
2,392*
100*
25*
25*
50*
19,200
115*
223*
669*
2,567*
4,985*
8,071*
2,570*
400
73*
63*
127*
137*
35,500
600*
1,700
3,300
8,600
8,600
10,130*
2 , 570*
Number of
Plants
305
106
69
52
60
14
4
22
13
3
6
175
30
17
17
34
34
33
10
20
15
2
2
1
522
164
91
77
95
48
37
10
Number of
Employees
25,367
847
2,323
3,854
9,569
5,716
3,058
561
84
85
392
82,533
256
605
1,250
6,614
16,851
31,666
25,291
439
112
63
127
137
108,900
1,299
3,076
5,623
16,320
22,567
34,724
25,291
* Estimated.
Source: Based on data from 1972 Census of Manufactures.
-------
1972 1974 1975(a) 1975(b)
Estimated Percent 41 68 45 70
Median 57
Sources: 1972 - U. S. Department of Commerce, 1972 Census of Manu-
factures, Water Use in Manufacturing.
1974 - National Commission on Water Quality, Water Pollu-
tion Control Act of 1972, Economic Impacts, Textile Indus-
try, prepared by National Bureau of Economic Research, June
1975.
1975(a) - U. S. Environmental Protection Agency, Draft Devel-
opment Document, Pretreatment Standards for Textile Mills,
prepared by Sverdrup & Parcel and Associates, Inc., November
1976.
1975(b) - Survey data from the economic contractor's survey.
Applying the median estimate of 57% to the number of plants and employees
by employment size range and assuming all establishments in the sector are wet
processors, the potential establishments and employees to be impacted by Census
regions can be determined. In order to consider only those establishments and
employees in SICs 2261 and 2262 where enforcement of pretreatment standards may
have an impact, establishments and subsidiaries of establishments with annual
sales of $100 million and more are removed from consideration. These large
sales firms were not removed from 22117 and 22218 because the data were not
available at the five-digit level. (See Table VI-2). This table shows that
the potential impact is greatest in the Northeast region, with 170 establish-
ments and 13,584 employees potentially affected. This is out of a total U. S.
potential of 279 establishments employing 53,678 persons. The South has a
potential of 85 establishments employing 39,433 persons to be impacted. Of the
279 potentially impacted establishments in the nation, 243 are classified as
small in terms of production capacity, and only 20 are classified as large.
However, employment is distributed differently, with 17,361 employed by small
establishment, 8,545 by medium, and 27,772 by large. (See Table VI-3.)
Age of Equipment. Results from a contractor survey of woven fabric finish-
ers reveal that, in general, the greatest percentage of plant production equip-
ment is 21 years old or older, although there apparently is a wide variety of
ages of equipment within the industry segment. Table VI-4 shows the average
percentages of plant production equipment in various age groups for the 90
plants responding to the survey.
Efficiency and Level of Technology. Industry opinion on the level of
technology in most finishing plants is that it is relatively high. There is
significant impetus for innovation by suppliers of fiber and dyes. The rela-
tive newness of man-made fibers supports this high level technology. Census
data (SIC 2261 and SIC 2262) reveal that cost of materials (.58) and cost of
materials and payroll (.80) per dollar of value of shipments in the finishing
plants are on a downward trend, suggesting increased production efficiency in
the sector.
Degree of Specialization. Plants in both SIC 2261 and SIC 2262 are, as
their Census definitions suggest, highly specialized. Overall specialization
VI-5
-------
H
I
Table VI-2
WOVEN FABRIC DYEING AND FINISHING PLANTS MUNICIPAL DISCHARGERS: ESTIMATED NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
SIC 22117
SIC 22218
SIC 2261
Region and Employ-
ment Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
North Central
All
1-19
20-49
50-99
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1 , 000+
West
All
1-19
20-49
50-99
100-249
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
Number of
Plants
3
2
1
8
1
1
3
2
1
11
3
1
1
3
2
1
Number of
Employees
39
14
25
8,468
10
457
1,975
2,498
3,528
8,507
24
25
457
1,975
2,498
3,528
Number of
Plants
10
3
2
2
2
1
14
1
1
2
4
4
2
24
4
3
2
4
5
4
2
Number of
Employees
1,767
44
118
323
564
718
15,990
14
53
680
2,977
5,793
6,473
17,757
58
171
323
1,244
3,695
5,793
6,473
Number of
Plants
59
29
13
7
10
9
5
1
3
30
7
5
5
6
2
5
3
3
101
44
19
15
16
2
5
Number of
Employees
2,790
202
423
544
1,621
263
34
34
195
5,393
55
140
331
1,015
551
3,301
22
22
8,468
313
597
1,070
2,636
551
3,301
Number of
Plants
98
25
22
20
23
6
2
4
2
1
1
33
7
3
5
7
6
4
1
8
5
1
1
1
143
39
27
27
31
12
6
1
Number of
Employees
8,988
213
736
1,319
3,252
2,105
1,363
89
14
25
50
9,582
66
127
381
1,150
2,482
3,911
1,465
287
42
36
72
137
18,946
335
924
1,822
4,539
4,587
5,274
1,465
J.UI
Number of
Plants
170
59
38
29
35
7
2
13
7
2
4
85
16
9
10
16
15
15
4
11
8
1
1
1
279
90
50
44
52
22
17
4
-dJ,
Number of
Employees
13,584
473
1,302
2,186
5,437
2,823
1,363
352
48
59
245
39,433
145
320
712
3,302
7,985
15,503
11,466
309
64
36
72
137
53,678
730
1,717
3,215
8,876
10,808
16,866
11 , 466
Source: See text.
-------
Table VI-3
WOVEN FABRIC DYEING AND FINISHING
BY PRODUCTION CAPACITY CATEGORY, 1972
Region
Northeast
North Central
South
West
United States
Production
Capacity
Category*
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
* Small category production capacity less
medium category between 63,000 and 263,
category more than 263,000 Ibs./day.
Table VI-4
Number of
Plants
170
168
1
1
13
13
85
51
15
19
11
11
279
243
16
20
than 63,000
000 Ibs./day;
AGE OF EQUIPMENT IN THE WOVEN FABRIC FINISHING
(in percent)
Percent of Plant
Production Equipment
0 - 5 years old
6-10 years old
11 - 15 years old
16 - 20 years old
> 20 years old
Mode
(most frequent
percent reported)
0
20
0
0
0
Number of plants repo
Mean
19
22
20
12
31
rting: 90
Number of
Employees
13,584
12,221
560
803
352
352
39,433
4,479
7,985
26,969
309
309
53,678
17,361
8,545
27,772
Ibs . /day ;
and large
INDUSTRY
Median Range
11 80
20 100
15 100
11 50
24 100
VI-7
-------
ratios are 79 and 77, respectively. A total of 373 plants in these SICs were
75% or more specialized in 1972.
Trends in Woven Fabric Finishing. Census data show the trends displayed
in Table VI-5. A downward trend is evident in the cotton finishing segment,
while growth is evident in the man-made fiber and silk finishing segment. The
phenomenal growth in the man-made fiber segment suggests that cotton finishing
may eventually be absorbed by this segment. As can be seen from the coverage
ratios, relatively few plants finish only one fiber, such as cotton, and this
trend to horizontal integration is likely to continue.
Table VI-5
TRENDS FROM CENSUS DATA FOR WOVEN FABRIC FINISHING INDUSTRY
SIC 2261: Finishers of Broad Woven Fabrics of Cotton
Year
1963
1967
1972
1973
1974
Employment
42,100
35,700
25,700
24,900
23,700
Estab-
lishments Companies
238
216
196
220
202
181
Value of
Shipments
(millions)
$ 869.7
893.9
623.3
647.5
663.0
Special-
ization
Ratio*
81
75
79
Coverage
Ratio**
60
58
41
SIC 2262; Finishers of Broad Woven Fabrics of Man-Made Fiber and Silk
1963
1967
1972
1973
1974
19,500
25,700
35,500
38,100
37,300
205
233
259
193
212
200
$ 323.7
550.2
1,373.1
1,630.1
1,894.4
91
90
77
46
45
57
* Specialization Ratio - This ratio measures the extent to which the industry
specializes in making its primary products.
** Coverage Ratio - This ratio measures the extent to which the products pri-
mary to an industry are shipped by plants classified in that industry.
Sources: Annual Survey of Manufactures and Census of Manufactures, 1972.
Demand, Supply, and Prices
The price for woven fabric finishing services is dependent upon the demand
for and the supply of nonwool woven fabric products in the marketplace.
VI-8
-------
Characteristics of demand, supply, and price for these products are discussed
below.
Demand. Cotton finishing plants and man-made fiber finishing plants com-
prise the bulk of this segment's operations. The demand for woven fabrics has
increased in the last two decades. The total shipments increased from $896.6
million in 1958 to $2,005.1 million in 1972. The world multi-fiber agreement
in 1971 apparently boosted the domestic production of man-made fabrics. The
domestic cotton woven fabric has shown a downward trend since 1964, while the
production of synthetic fabric has shown a consistent upward trend since 1958.
The contrast in terms of value of industry shipment is great. In 1958, the
value of shipments for cotton woven fabric was more than three times that of
synthetic woven fabric. By 1972, the value of industry shipments for synthetic
fabric was more than two times that of cotton woven fabric. Detailed statistics
on the value of industry shipments for cotton and synthetic woven fabrics are
shown in Table VI-6.
Table VI-6
WOVEN FABRIC FINISHING PLANTS VALUE OF INDUSTRY SHIPMENTS
(in millions of dollars)
Year
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
Source :
Cotton
(SIC 2261)
686.2
795.0
752.5
776.2
781.6
869.7
929.0
792.5
853.9
893.9
840.7
856.8
584.1
704.1
623.3
1972 Census of Manufactures,
Synthetic
(SIC 2262)
210.6
242.0
262.8
269.4
300.5
323.7
338.5
458.0
550.3
550.2
642.0
761.2
908.5
984.9
1,373.1
U . S . Department
Total
896.8
1,037.0
1,015.3
1,045.6
1,082.1
1,193.4
1,267.5
1,250.5
1,404.2
1,444.1
1,482.7
1,618.0
1,492.6
1,689.0
1,996.4
of Commerce .
Supply. The production facilities of cotton and man-made woven fabrics
reflect the market conditions of their respective states. The number of em-
ployees engaged in the production and marketing of cotton woven fabric declined
from 35,700 in 1967 to 25,700 in 1972, while the number increased from 25,700
to 35,200 for synthetic woven fabric in the same period. The number of plants
for cotton woven fabric declined from 216 in 1970 to 190 in 1972, while the
number of synthetic woven plants increased from 233 to 255 in the same period.
The industry faces keen competition from imported fabrics and apparels.
Innovations of domestic textile machinery and technology have helped to counter-
act the advantage of low-wage imported goods.
VI-9
-------
Prices. The high cost of cotton relative to synthetic fabric has led to a
depressed cotton textile industry. The drastic rise of cotton prices in the
last few years has helped to broaden the inroads of synthetic fabrics into tra-
ditional markets for cotton woven fabric. However, rising costs in synthetic
materials, due to a worldwide increase of petro-based materials in recent years,
have played a role in cushioning the downward trend of cotton fabrics. The
prices of cotton fabrics depend to a large extent on the size of the cotton
harvest which, in turn, depends upon production conditions. A bumper harvest
of cotton would materially help the outlook of cotton fabric in the future.
Secondary Price Increases. For insight into how various types of textile
users would react to possible increases in supplier prices, survey question-
naires were mailed to domestic firms known to purchase large volumes of textile
fiber, yarn, or fabric.
Finished broad woven fabrics are bought in volume by apparel manufacturers
(SIC 231, 232, 233, 234, and 236), producers of home furnishings (SIC 239), up-
holstered furniture manufacturers (SIC 251), and carpet makers (SIC 227).
Sixty companies in these various SIC categories indicated in a textile
product user questionnaire that they purchase a total of $370 million worth of
finished woven broadcloth a year. Of this figure, $23 million is the combined
value imported by 26 firms.
If the price of finished piece goods were increased by 4-5%, most of the
60 companies would seek other U. S. sources of supply and, if possible, would
switch up to half of their purchasing power. Should prices advance farther
(5-7%), the 26 manufacturers would increase their imports substantially and be
joined by 11 companies presently buying only domestic goods. The value of
foreign piece goods consumed by the surveyed firms annually would then exceed
$109 million.
Up to 2%, any price increase leveled at the manufacturer would be absorbed.
From 2-4%, the rise would be passed on to the customer; over 4%, a split of the
increase would probably occur.
Financial Profile
The survey data on woven fabric dyeing and finishing plants were grouped
into three size categories based on production capacity in pounds of production
per day. The small category included all plants with capacities of less than
63,000 pounds per day. The medium category included plants with capacities
between 63,000 and 263,000 pounds per day. The large category included plants
with more than 263,000 pounds per day of capacity. In each of these size cate-
gories, the representative mill sizes specified in the Development Document
were used to base the financial statements for that category. For woven fabric
dyeing and finishing plants the small plant statement was based on a capacity
of 40,800 pounds per day. The medium was based on a capacity of 163,000 pounds
per day, and the large was based on 408,500 pounds per day of capacity.
After analyzing the financial data by production capacity categories it
was found that in the small and medium size groups two distinct patterns emerged.
Since a composite model plant pattern would not represent either of these types
VI-10
-------
of operations clearly, it was decided to develop data on two representative
plants in the small and medium size categories.
The questionnaire data for 1975 operations reflected a capacity utiliza-
tion for the small group of 72%, for the medium group of 85%, and for the large
group of 91%. The data presented in the representative financial statements
are for a plant operating rate of 85% of capacity.
Income Statement Data. The income statement data were compiled for the
baseline case, that is, all municipal sewer charges, depreciation, and expenses
for operating and maintaining water pollution abatement systems were removed
from the figures.
The data presented in Tables VI-7 and VI-8 represent the typical plants
of the three size categories of woven fabric dyeing and finishing plants and
the projected data for the new source operations of medium size. This whole
group of plants was found to be characterized by moderate before-tax profit
margins ranging from a high of 8% in the large group down to 7% and 4% for the
medium plants, and 7% for both types of small plants.
Table VI-7
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA
WOVEN FABRIC DYEING AND FINISHING (A)
(in thousands of dollars)
Existing
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Costs
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
Small (A)
(34,680)
.56
5,826
4,608
1,507
1,796
1,305
839
67
55
717
379
169
211
278
2,787
13.6
7.6
6.5
3.6
Medium (A)
(138,550)
.54
22,445
19,059
7,959
3,410
7,690
1,922
559
286
1,077
1,464
689
775
1,334
10,572
13.8
7.3
6.5
3.5
Large (A)
(347,225)
.37
38,542
30,079
12,558
5,349
12,172
5,460
1,577
760
3,123
3,002
1,428
1,575
3,152
18,080
16.6
8.7
7.8
4.1
New Source
Medium (A)
(138,550)
.54
22,445
15,770
8,222
2,291
5,257
4,061
1,289
1,695
1,077
2,614
1,241
1,373
2,662
28,717
9.1
4.8
11.6
6.1
VI-11
-------
Table VI-8
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA
WOVEN FABRIC DYEING AND FINISHING (B)
(in thousands of dollars)
Existing
Small (B) Medium (B)
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Costs
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
(34,680)
1.86
19,351
15,548
8,963
2,830
3,756
2,448
180
198
2,070
1,355
637
718
898
7,472
18.1
9.6
7.0
3.7
(138,550)
1.40
58,192
43,671
25,141
7,940
10,590
12,123
1,276
197
10,650
2,398
1,137
1,260
2,536
24,966
9.6
5.0
4.1
2.2
New Source
Medium (B)
(138,550)
1.40
58,192
35,984
18,818
5,428
11,738
14,931
1,467
2,814
10,650
7,277
3,479
3,797
5,264
45,597
16.0
8.3
12.5
6.. 5
The price per pound used was $.59 and $1.86 for the small representative
plants, $.54 and $1.40 for the medium plants, and $.37 for the large plant.
The survey data exhibited a price range of $.12 per pound to $10.46 per pound.
Direct production costs per pound for all woven fabric finishing plants,
based on questionnaire data, ranged from a minimum of $.11 per pound to $7.44
per pound. The cost structure of this industry group appears to be somewhat
less labor intensive than other industry groups covered by this study. As a
whole, this industry group obviously has good quality physical plants and,
therefore, the labor costs are minimized by efficient machinery and methods.
Balance Sheet Data. The data presented in Tables VT-9 and VI-10 are
based on the representative plant of the three size categories of woven fabric
finishing plants and the projected data for the new source operation of a.
medium size plant using the most modern technology. This whole industry group
was found to have a very low debt in relation to equity financial structure.
This is representative of both a conservative management approach to financial
management and a relatively old physical plant which had depreciated in book
value, and the balance sheet does not reflect the true current value for the
fixed assets. This can be clearly seen in the projected new source data for
VI-12
-------
Table VI-9
PRO FORMA BALANCE SHEET FOR THE
WOVEN FABRIC FINISHING INDUSTRY (A)
(in thousands of dollars)
Existing
New Source
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Other
Total Assets
Liabilities
Current Liabilities
Long-Term Debt
Owners' Equity/Net Worth
Total Liabilities
PRO
WOVEN
Small (A) Medium (A)
(34,680) (138,550)
1,419 7,845
1,910 7,634
67 76
580 1,909
1,223 5,122
40 527
3,329 15,479
542 4,907
669 3,111
2,118 7,461
3,329 15,479
Table VI- 10
FORMA BALANCE SHEET FOR THE
FABRIC FINISHING INDUSTRY (B)
(in thousands of dollars)
Existing
Large (A)
(347,225)
19,895
13,619
135
3,402
9,144
938
33,514
15,434
4,468
13,612
33,514
Small (B) Medium (B)
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Other
Total Assets
Liabilities
Current Liabilities
Long-Term Debt
Owners' Equity/Net Worth
Total Liabilities
(34,680) (138
5,097 20
2,706 8
61
810 1
1,457 7
378
7,803 29
331 4
1,793 7
5,679 17
7,803 29
,550)
,531
,711
102
,317
,051
241
,242
,276
,347
,619
,242
Medium (A)
(138,550)
7,845
25,779
258
6,445
17,298
1,778
33,624
4,907
16,949
11,768
33,624
New Source
Medium (B)
(138,550)
20,531
29,342
343
4,437
23,749
813
49,873
4,276
28,141
17,456
49,873
VI-13
-------
medium-size new operations in comparison with the fixed assets of the existing
medium-size operations. The replacement cost for fixed assets is quite high.
Invested Capital. The data presented in Tables VI-11 and VI-12 represent
the factors considered in estimating the total invested capital for each of
the model plants in the woven fabric dyeing and finishing industry and the pro-
jection of the investment capital needed to establish a new source plant of
medium size.
Data Quality. The survey data for this industry group were very good for
all size plants, and the typical plant financial statements contained in the
tables presented in this section are considered to be representative of the
groups. The data in the small and medium categories exhibited wide variances
in many key parameters, however, including price and capacity. These variances
were not unexpected, because of the many different types of processes and dif-
ferent types of products in this industry segment.
Because of these variances, it was decided to present data on two repre-
sentative plants in both the small and medium size categories. The wide vari-
ance in key parameters indicates, however, that the financial statements of
many plants in the industry will differ significantly from the ones presented.
VI-14
-------
Table VI-11
INVESTED CAPITAL FOR THE WOVEN FABRIC FINISHING INDUSTRY (A)
(in thousands of dollars)
Small
Existing
(A) Medium (A)
Book Salvage Book Salvage
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
1,910
1,419 1
542
877
2,787 1
INVESTED CAPITAL
518 7,634 2,069
,419 7,845 7,845
542 4,907 4,907
877 2,938 2,938
,395 10,572 5,007
Table VI-12
FOR THE WOVEN FABRIC FINISHING
(in thousands of dollars)
Existing
Small (B) Medium
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
Book
2,706
5,097
331
4,766
7,472
Salvage Book
733 8,711
5,097 20,531
331 4,276
4,766 16,255
5,499 24,966
Large
Book
13,619
19,895
15,434
4,461
18,080
INDUSTRY
(B)
Salvage
2,361
20,531
4,276
16,255
18,616
(A)
New Source
Medium (A)
Salvage Book Salvage
3,691 25
19,895 7
15,434 4
4,461 2
8,152 28
(B)
,779 6,445
,845 7,845
,907 4,907
,938 2,938
,717 9,383
New Source Medium (B)
Book
29,342
20,531
4,276
16,255
45,597
Salvage
7,336
20,531
4,276
16,255
23,591
-------
Pretreatment Standards, Technologies, and Costs
The effluent control system alternatives and costs presented in this
section were provided by the Environmental Protection Agency as developed by
the technical contractor and submitted in their Development Document.
Industrial wastewaters discharged to publicly owned treatment works (POTW)
are regulated by Section 301(b) of the Federal Water Pollution Control Act
Amendments of 1972 (PL 92-500). Standards which such dischargers must meet
are to be promulgated pursuant to Section 307 of this Act. The intent of such
standards is to require treatment at the point of discharge complementary to
the treatment performed by the POTW. Duplication of treatment is not the goal.
The pretreatment by the discharger of pollutants that are not susceptible to
treatment in a POTW is critical to attainment of the overall objective of the
Act by protecting the POTW from process upset and by preventing discharge of
pollutants which would pass through or otherwise be incompatible with the POTW.
Pretreatment Control Technologies. For the woven fabric finishing segment,
five pretreatment technologies have been developed. These technologies were
developed on the basis of information obtained from a survey of POTWs treating
textile wastes and from a consideration of the types of wastes discharged by
this industry subcategory. The survey of the POTWs yielded 50 specific com-
plaints associated with the treatment of textile wastes. The most common com-
plaint related to uneven loadings, either hydraulic or organic. The next most
common complaint related to coarse solids, with pH problems, color, low dis-
solved oxygens in the POTW influent, grease, and temperature following in the
order listed. Not all of these problems were necessarily found in plants treat-
ing wastes from this segment.
Specific pretreatment technologies are described below. Estimated costs
are developed for woven fabric finishing mills in the production capacity range
of 19 to 185 kkg (20 to 204 tons) per day.
Alternative A - No Waste Pretreatment or Control
Costs - None
Reduction Benefits - None
Alternative B - Screening (S)
This alternative is fine screening to remove lint, rags, and other
coarse suspended solids.
Costs - Investment costs estimated to range from $39,700 to $153,000.
Total annual costs estimated to range from $15,800 to $46,000.
Reduction Benefits - This alternative provides reduction of coarse
solids by greater than 95%.
Alternative C - Screening and Equalization (S,E)
This alternative includes fine screeing and agitated holding of from 4
to 12 hours to equalize the rate of wastewater discharge to UK.-
VI-16
-------
Costs - Investment costs estimated to range from $91,000 to $230,000, an
estimated increase over Alternative B of from $51,300 to $77,000. Total
annual costs estimated to range from $31,700 to $74,700, an estimated
increase over Alternative B of from $15,900 to $28,700.
Reduction Benefits - Alternative C provides the benefits of Alternative
B and also prevents the discharge of slug hydraulic loads by the mill
to the POTW.
Alternative D - Screening, Equalization, and Neutralization (S,E,N)
This alternative includes fine screening, equalization for from 4 to 12
hours, and neutralization with acid.
Costs - Investment costs estimated to range from $134,000 to $334,000,
an estimated increase over Alternative C of from $43,000 to $104,000.
Total annual costs estimated to range from $49,000 to $127,400, an
estimated increase over Alternative C of from $17,300 to $53,000.
Reduction Benefits - Alternative D provides the benefits of Alternative
C and also maintains the pH of the mill effluent at or below 9.5.
Alternative E - Screening and Biological Treatment (S,B)
This alternative includes screening and pretreatment in an aerated
lagoon providing 72 hours of aeration at average design flow. The
lagoon effluent is not clarified, and the biological suspended solids
are discharged to the POTW.
Costs - Investment costs estimated to range from $155,000 to $565,000,
an estimated increase over Alternative D of from $21,000 to $231,000.
Total annual costs estimated to range from $54,500 to $292,400, an
estimated increase over Alternative D of from $5,500 to $165,000.
Reduction Benefits - Alternative E provides complete removal of coarse
suspended solids and reductions of BODS, TSS, COD, and O&G of 80, 50,
50, and 15%, respectively. Reductions in the chromium, phenol, and
sulfides are also obtained.
Alternative F - Screening, Equalization, and Chemical Coagulation (S,E,C)
This alternative includes chemical coagulation to agglomerate and remove
by sedimentation the fine suspended and colloidal solids. Preliminary
treatment by fine screening and 4 to 12 hours of equalizing holding
are included to improve the efficiency of the coagulation process.
Costs - Investment costs estimated to range from $264,000 to $1,425,000,
an estimated increase over Alternative E of from $109,000 to $860,000.
Total annual costs estimated to range from $145,000 to $656,000, an
estimated increase over Alternative E of from $90,500 to $364,000.
Reduction Benefits - Alternative F provides complete removal of coarse
suspended solids, prevents the release of slug hydraulic loads, and
provides BOD, TSS, COD, AND O&G removals of 50, 85, 70, and 90%, respec-
tively.
VI-17
-------
The pretreatment alternatives specified for this industry segment require
the availability of land to accommodate equalization wells and basins, aeration
lagoons, and activated sludge facilities. Land area in hectares that is esti-
mated to be required is shown in the following table:
Plant Size None £ S,E S,E,N S,B S,E,C
Small
Medium
Large
Land availability indicated by respondents to the economic contractor's
questionnaire was as follows:
No. %
-
-
-
0
0
0
0.4
0.8
1.0
0.4
0.8
1.0
1.2
2.8
4.9
0.4
1.4
2.0
No Land Available 35 45
Land Available
Less than 0.2 hectare 10 13
0.2 hectare - 1.2 hectares 30 39
No Answer o o
TOTAL 77 100
Discharge Status of the Industry. Current practices in the textile indus-
try have been estimated from information submitted by respondents to question-
naires prepared by the economic contractor. Estimates of the percentage of
plants in this industry segment discharging into POTWs were obtained from four-
sources, including the economic contractor's survey. The median value of
these four estimates indicates that 57% of the plants in this segment discharge
into POTWs.
The economic contractor also obtained information relating to pretreat-
ment practices of dischargers into POTWs. An analysis of the practices sub-
mitted was made to determine the number of plants presently having facilities
in place to perform at least the pretreatment practices recommended by the tech-
nical contractor in each of the pretreatment alternatives. The results of this
analysis are shown in the following table:
Treatment
Alternative No. %
None 35 47
S 22 30
S,E 6 8
S,E,N 3 4
S,B 0 0
S,E,C 1 1
Other 17 23
TOTAL 74
VI-18
-------
The "other" treatment alternative includes cases which did not include
pretreatment practices recommended by the technical contractor.
It should be noted that the sufficiency of an existing pretreatment prac-
tice cannot be evaluated. Any given pretreatment practice may require upgrad-
ing to perform as adequately as the technical contractor has projected.
Pretreatment Control Costs. The pretreatment control costs, as provided.
by EPA, are based on plant production, wastewater flow, pretreatment processes
proposed, and operation requirements. The costs depicted and discussed in
this section are for "typical" yet "hypothetical manufacturers in this industry
segment.
Investment Costs. Investment costs include the installed costs of treat-
ment components plus allowances for contingencies and engineering. The installed
cost includes the costs of delivery and erection of major equipment items,
evacuation and backfill, associated electrical and mechanical work, instrumen-
tation, backup pumps, contractor overhead and profit, and yardwork. Not
included are spare parts, standby power generating equipment, rock excavation,
or the use of pile foundations. A contingency allowance of 15% of the installed
cost was used to cover unexpected costs due to local mill conditions and
differences between the actual system and those used for cost estimates. No
allowance was made for shutdown of the mill during construction and installation.
Costs are expressed in January 1976 dollars. It was assumed that all
design specifications will be prepared by an outside consulting engineer in
accordance with applicable codes. Construction work was assumed to be per-
formed by an outside contractor with no work to be done by in-plant labor or
maintenance personnel.
Engineering costs are included in the cost estimates and were derived by
using percentages of the installed costs and contingencies. For total costs
of $100 or less, 15% was used. For larger projects, a percentage to the
nearest 0.5% from Curve A in Consulting Engineering was used.
No land acquisition cost is included.
Total Yearly Costs. Total yearly costs consist of interest, depreciation,
operation and maintenance, sludge disposal, energy and power, and chemicals.
The cost of money for capital expenditure was assumed to be 10% of the total
investment cost. Installed costs were depreciated over estimated lives of the
components on a straight-line basis.
Estimates were prepared of the number of hours required for operation of
the various component systems. In the case of this segment, it was assumed
that the textile mill operates 24 hours a day, 6 day a week, and 50 weeks a
year. Laboratory time is included for the more sophisticated systems where
analytical results would normally be used for operational control. Ten percent
was added to labor hours to cover supervision and administration. A labor rate
of $6.00 per hour was used to cover wages and fringe benefit costs.
VI-19
-------
Investment, annual operating, and total yearly costs for existing small,
medium, and large plants and new source medium plants in this segment are given
in Table VI-13. Also shown are investment costs as a percent of fixed assets
and total yearly costs as a percent of annual sales.
Analysis of the financial data by production capacity categories revealed
two distinct patterns emerging in the small and medium size groups. Since a
composite model plant pattern would not represent either of these types of
operations clearly, it was decided to develop data on two representative plants
in the small and medium size groups. These are included in Table VI-13.
Municipal System User Charges. The data on user charges collected from
publicly owned treatment works were presented for all industry segments in a
previous section. Data collected from respondents to the plant questionnaire
provided the following information on annual sewer charges for 1975 for woven
fabric dyeing and finishing:
Sewer Charges/
Sewer Charges/ Wastewater
Production Discharge
(in cents/ (in cents/
All Respondents (1,000 pounds) 1,000 gallons)
Mean 221 16
Median 461 29
Minimum 1 6
Maximum 4,080 400
Anticipated Reaction to Pretreatment Standards. Although specific pre-
treatment requirements have not been promulgated by EPA, the probable reaction
of manufacturers to such standards was determined by questionnaire. Respondents
were asked to select one of the nine options listed below, given the limited
amount of information which they had about pretreatment requirements and com-
plete treatment requirements at the time:
1. Change from pretreatment to complete treatment
2. Change from complete treatment to pretreatment
3. Upgrade existing pretreatment
4. Upgrade existing complete treatment
5. Initiate pretreatment
6. Initiate complete treatment
7. Close the plant as a result of pollution control standards
8. None of the above, because this plant already conforms to the
proposed standards
9. Other (specify)
Seventy-seven replies were received from plants in this segment. The nature
of the replies was as follows:
VI-20
-------
Table VI-13
PRETKEATMENT CONTROL COSTS: WOVEN FABRIC FINISHING
(Costs in $000)
Size, Status, and
Alternative
Small, Existing (A)
S
S,E
S,E,N
S,B
S,E,C
Medium, Existing (A)
S
S,E
S,E,N
S,B
S,E,C
Large, Existing (A)
S
S,E
S,E,N
S,B
S,E,C
Medium, New
Source (A)
S
S,E
S,E,N
S,B
S,E,C
Small, Existing (B)
S
S,E
S , E , N
S,B
S,E,C
Medium, Existing (B)
S
S,E
S,E,N
S,B
S,E,C
Medium, New
Source (B)
S
S,E
S,E,N
S,B
S,E,C
Investment
Costs
39.7
91.0
134.0
155.0
264.0
106.0
162.0
237.0
315.0
643.0
153.0
230.0
334.0
565.0
1,425.0
106.0
162.0
237.0
315.0
643.0
39.7
91.0
134.0
155.0
264.0
106.0
162.0
237.0
315.0
643.0
106.0
162.0
237.0
315.0
643.0
Operating
Costs
9.3
18.8
28.6
32.4
105.0
14.3
29.1
48.5
93.4
210.0
21.0
41.4
75.4
213.4
436.0
14.3
29.1
48.5
93.4
210.0
9.3
18.8
28.6
32.4
105.0
14.3
29.1
48.5
93.4
210.0
14.3
29.1
48.5
93.4
210.0
Total
Yearly
Costs
15.8
31.7
49.0
54.4
145.0
32.0
52.1
85.5
138.4
308.0
46.0
74.4
127.4
292.4
656.0
32.0
52.1
85.5
138.4
308.0
15.8
31.7
49.0
54.4
145.0
32.0
52.1
85.5
138.4
308.0
32.0
52.1
85.5
138.4
308.0
Investment
Cost
as % of
Fixed Assets
2.95
6.76
10.0
11.5
19.6
1.20
1.83
2.68
3.56
7.27
1.08
1.62
2.35
3.97
10.0
0.35
0.54
0.79
1.05
2.15
1.80
4.13
6.08
7.03
12.0
1.14
1.74
2.55
3.39
6.92
0.34
0.52
0.76
1.01
2.05
Total
Yearly Costs
as % of
Annual Sales
0.27
0.54
0.84
0.93
2.49
0.14
0.23
0.38
0.62
1.37
0.12
0.19
0.33
0.76
1.70
0.14
0.23
0.38
0.62
1.37
0.08
0.16
0.25
0.28
0.75
0.05
0.09
0.15
0.24
0.53
0.05
0.09
0.15
0.24
0.53
VI-21
-------
Alternative No.
Upgrade existing pretreatment 12 15
Initiate pretreatment 9 12
Close plant 9 12
Plant conforms to standards 17 22
Other 3£ 39
TOTAL 77 100
Economic Impact Analysis
The imposition of pretreatment controls on the woven fabric finishing
industry segment will have both direct and indirect impacts on the industry, on
consumers, on its suppliers, and on communities in which plants are located.
The resulting direct impacts from the imposition of pretreatment controls are
analyzed in both quantitative and qualitative terms: price effects, financial
effects, production effects, employment and community effects, and balance of
trade effects.
The previous analysis has identified a total of 279 plants operating at the
end of 1972, with 53,678 employees which the proposed pretreatment regulations
could affect. This represents 243 plants which could be classified as small in
terms of production capacity, 16 plants as medium, and 20 as large. In addition
to the examination of the potential impact of pretreatment controls on existing
plants, the analysis considered the impacts on those plants which have not been
constructed and will discharge their effluent to publicly owned treatment
systems (hereafter referred to as "new source").
The economic impact analysis also included a sensitivity analysis which was
performed using pretreatment control cost estimates at levels between 80% and
200% of the costs provided by EPA. The analysis was based on a wide range in
order to take into account the possibility of regional as well as individual
mill variations in pretreatment costs. In addition to this discussion on the
economic impact analysis, an impact analysis was completed using an incremental
capital cost approach and is included in Appendix A. Since the exact level of
pretreatment which will be required has not been specified, this report presents
data on the effects for all levels under consideration.
Finally, it should be noted that this analysis was concerned only with the
impacts of proposed pretreatment guidelines. It is recognized that there are
other regulatory programs by EPA, OSHA, and various state controls, either
existing or emerging, which will influence the profitability of the plants
studied. The analysis does not consider the full impact of this aggregate of
regulations.
Price Effects. The role of price effects in the impact analysis is criti-
cal. The analysis of price effects proceeded with the determination of what
price increases would be required to offset the costs of pretreatment controls.
Next, the market structure for the woven fabric finishing industry segment was
examined to determine if mills would be forced to absorb the price increases,
VI-22
-------
or if the price increases could be passed on to customers, or if the price
increases could be partially absorbed and partially passed on. Also, the
possibility of secondary price increases was examined in a previous section.
Required Price Increases. An implicit indication of the expected price
effects of pretreatment controls used in this report is the amount of sales
price increase necessary to maintain a mill's profitability, after pretreat-
ment control expenditures, at the same level as the mill without the control
expenses. The ability of mills to pass on such required price increases is
evaluated in the following section.
The required price increases necessary to offset the different levels
of proposed pretreatment control for the representative mills are shown in
Tables VI-14 and VI-15. As previously mentioned, after analyzing small and
medium size categories, two distinct patterns emerged. Since a composite
model plant pattern would not represent either of these types of operations
clearly, it was decided to develop data on two representative plants for
these categories (identified as type A and type B).
The required price increases for small woven fabric mills range from ,27%
to 3.0% for a type A mill and from .11% to .93% for a type B mill, depending
on the level of pretreatment; for medium mills, type A from .22% to 1.77% and
type B from .08% to .68%; and for large mills, from .18% to 2.03%. For the
new source mills, the required price increases to offset the pretreatment level
range from .22% to 1.77% for type A and from .08% to .69% for type B. Also
shown are the sensitivity ranges of required price increases when pretreatment
costs vary from 80% to 200% of the original estimated costs.
Expected Price Increases. Although the previous discussion has identified
the required price increases to offset expenditures for pretreatment control
in order to maintain the mills' current (baseline) profitability levels, it
does not quantify the extent to which price increases can be passed on to
consumers.
Analysis of the expected price increases at the industry level involves
translating the pretreatment cost estimates to changes in market demand and
supply for production. Market responses may take several forms, depending on
how many mills choose to close and the extent of the pass-through of pollution
costs to the consumers. The supply, in turn, depends on the mills' decisions
which will be based on the strength of the market demand, competitors' actions,
and on the market's ability to sustain price increases. There are a number of
demand and supply factors which need to be considered in determining the
portion of pretreatment costs to be passed through. Unfortunately, all such
factors cannot be expressed quantitatively and, by necessity, the projected
price increases involved a considerable amount of judgment. The potential
implications for price effects of some of these factors are discussed below.
The possibility of pretreatment cost pass-through to consumers will depend
to a certain extent on whether the product being finished is cotton woven fabric
or synthetic woven fabric. For cotton fabric finishing, the possibility of
price increases is decreased by the fact that the domestic market for cotton
woven fabric as measured by value of shipments has shown a downward trend since
VI-23
-------
Table VI-14
WOVEN FABRIC FINISHING: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
(Type A Mills)
Representative Plant Size
Existing-Small (A)
(34,680 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Medium (A)
^138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Large (A)
(347,225 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (A)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Required Price Increase
Percent Proposed Control Costs
80
.30
.57
.93
.96
2.46
.18
.26
.43
.62
1.44
.15
.21
.37
.74
1.67
.18
.26
.43
.62
1.45
100
.37
.70
1.13
1.17
3.00
.22
.31
.53
.76
1.77
.18
.26
.45
.91
2.03
.22
.31
.53
.76
1.77
120
.44
.83
1.34
1.38
3.54
.25
.37
.62
.90
2.09
.22
.31
.53
1.08
2.40
.25
.37
.62
.90
2.10
200
.70
1.33
2.13
2.22
5.59
.40
.60
.99
1.46
3.37
.34
.50
.86
1.76
3.86
.40
.60
1.00
1.46
3.39
VI-24
-------
Table VI-15
WOVEN FABRIC FINISHING: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
(Type B Mills)
Required Price Increase
Percent Proposed Control Costs
Representative Plant Size
Existing-Small (B)
(34,680 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Mcdium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
80
.09
.18
.29
.30
.76
.07
.10
.17
.24
.56
.07
.10
.17
.24
.56
100
.11
.22
.35
.36
.93
.08
.12
.20
.29
.68
.08
.12
.20
.30
.69
120
.13
.26
.41
.43
1.10
.10
.14
.24
.35
.81
.10
.14
.24
.35
.81
200
.22
.41
.66
.69
1.78
.16
.23
.38
.56
1.31
.16
.23
.39
.57
1.31
VI-25
-------
1964, and the level of cotton textiles and cotton apparel products has in
recent years averaged about 15% of the domestic market. Also, the cross-
price elasticity of cotton with respect to synthetic fiber is 0.48, which
indicates a substitute relationship between these two fibers. Hence, within
the woven fabric finishing segment, there will be adjustments in the makret
for finishing cotton woven fabric and synthetic woven fabric. Another factor
which decreases the possibility of cost pass-through for cotton woven fabric
finishers is the fact that competition is based primarily on price. A factor
which increases the possibility of pretreatment cost pass-through for cotton
woven fabric is the direct price elasticity of demand for cotton which is
the lowest of all fibers (-0.17).
Factors which increase the possibility of pretreatment cost pass-through
for finishing of synthetic woven fabric are the rapidly expanding market and
the relatively low level of imports. Although price is important, other non-
price factors, such as stable supplies, are also relevant. On the other hand,
the direct price elasticity of synthetic fiber consumption is -0.988, which
indicates consumption is fairly responsive to changes in the price of syn-
thetic fiber.
Considering the aggregate effect of these factors on the ability of the
cotton and synthetic woven fabric mills to increase prices, it seems that the
finishers of cotton woven fabric would have difficulty in passing on pretreat-
ment costs, while 'the finishers of synthetic woven fabric should not have too
much difficulty in passing on the pretreatment costs. Another factor which
must be considered is the definite trend away from a plant which finishes only
one fiber. Therefore, for a large number of plants there will be an adjustment
to the fiber mix if the necessary price increases are not possible for a fiber
type, such as finishing of cotton woven fabric.
Price increases to offset the costs of pretreatment controls by the im-
pacted woven fabric finishing mills are expected to occur. However, these
price increases cannot be specified now due to the wide range in the costs
associated with the different levels of pretreatment control. In the following
analysis, no price changes were assumed to occur and, accordingly, the financial
effects on the mills are without added revenues for price increases. From the
firm's viewpoint (that is, a financial viewpoint), the financial effects
discussed below represent the most severe case.
Financial Effects. The financial profiles for the representative mills
in the woven fabric finishing industry segment were described previously.
The survey data, as well as published data, indicated substantial variability
in key financial parameters for mills in this sector. These financial profiles
of representative mills and the estimated costs of pretreatment controls pro-
vided by EPA were used to compute the following financial indicators under base-
line (without pretreatment controls but with municipal charges) and with pre-
treatment controls: after-tax income, after-tax return on sales, after-tax
return on invested capital, cash flow, and cash flow as a percent of invested
capital and net present value.
These financial measures were computed for each representative mill ac-
cord i n
-------
for each representative mill, using pretreatment control cost estimates at
levels between 80% and 200% of the costs provided by EPA. The results of
this analysis are discussed below.
After-tax Income. As shown in Tables VI-16 and VI-17, the imposition of
pretreatment controls on the woven fabric finishing representative plants re-
sults in small to rather significant reductions in income, depending upon the
level of pretreatment and plant size. Expressed as a percent of the baseline
incomes, the pretreatment levels resulted in a decrease in after-tax incomes
of between 3% and 31% for the small plant (A); between 1% and 9% for the small
plant (B); between 2% and 18% for the medium plant (A); between 1% and 11%
for the medium plant (B); and less than 1% for all pretreatment options for
the large plants.
The imposition of pretreatment controls on new source medium-size plants
results in a decrease in after-tax income of between less than 1% and 10% for
type A and between less than 1% and 3% for type B.
After-tax Return on Sales. The after-tax return on sales for the existing
and new source representative woven fabric finishing plants also are shown in
Tables VI-16 and VI-17. As would be expected with the above indicated declines
in after-tax incomes, the impacted plants' returns on sales declined by a cor-
responding percentage. The imposition of pretreatment standards obviously
would further deteriorate the already low returns in the woven fabric finishing
industry.
From a baseline return of 3.4% for the small plant (A) and 3.7% for the
small plant (B), depending on the level of pretreatment control the declines
ranged from an after-impact return of 3.3% to 2.4% and 3.6% to 3.3%, respec-
tively. The imposition of pretreatment controls on both of the medium plants
(A and B) resulted in no decline to a drop of .2%. From a baseline of 3.8%
return on sales for the large plant, the after-impact range of return was 3.7%
to 3.3%.
For the new source medium plants (A and B), the returns after controls are
imposed resulted in no decline for the lowest level of pretreatment in both
instances to a decline of .6% for type A and a decline of .3% for type B.
After-tax Return on Invested Capital. The baseline and impacted woven
fabric finishing plants' returns on invested capital are shown in Tables VI-16
and VI-17. After the imposition of pretreatment controls on the existing
plants, return on investment ranges from 6.8% to 4.5% for the small plant (A),
from 9.3% to 8.3% for the small plant (B), from 6.7% to 5.3% for the medium
plant (A), from 4.8% to 4.2% for the medium plant (B), and from 7.9% to 6.3%
for the large plant. In the new source medium plant (A), the returns range
from 4.6% to 4.1% for the proposed levels of pretreatment and, for the new
source medium plant (B), the returns range from 8.2% to 7.8%.
Cash Flow. Estimated cash flows (after-tax income plus depreciation) are
shown in Tables VI-18 and VI-19 for the representative plants. The cash flows
as percentages of invested capital for the baseline cases are 9.5% for the
small plant (A), 11.9% for the small plant (B), 12.2% for the medium plant (A),
VI-27
-------
Table VI-16
H
I
to
CO
WOVEN FABRIC FINISHING:
After-Tax Profits ($1,000)
PRETREATMENT STANDARD IMPACTS ON PROFITABILITY
(Type A Mills)
After Tax Return on Sales (%)
Representative Baseline
Plant Size Case
Existing-Small (A)
(34,680 Ibs./day) 199
S
S, E
S, E, N
S, B
S, E, C
Existing-Medium (A)
(138,550 Ibs./day) "728
S
S, E
S, E, N
S, B
S, E, C
Existing-Large (A)
(347,225 Ibs./day) ,,
S '
S, E
S, E, N
S, B
S, E, C
New Source-Medium (A)
(138,550 Ibs./day) 1,326
S
S, E
S, E, N
S, B
S, E, C
% Proposed Pretreatment Costs
80
194
190
184
183
150
719
713
702
684
624
1,445
1,436
1,418
1,359
1,269
1,317
1,311
1,300
1,282
1,222
100
193
187
180
179
137
717
709
696
673
599
1,442
1,431
1,409
1,335
1,222
1,315
1,307
1,294
1,270
1,196
120
192
185
177
175
125
715
705
690
662
573
1,438
1,426
1,399
1,310
1,175
1,313
1,303
1,287
1,259
1,170
200
187
176
162
159
75
706
690
664
617
469
1,426
1,404
1,360
1,212
987
1,304
1,288
1,262
1,215
1,067
Baseline
Case
3.42
3.24
3.78
5.91
Percent Proposed
Pretreatment Costs
80
100
120
200
3.33 3.31 3.29 3.21
3.25 3.21 3.17 3.01
3.16 3.09 3.03 2.77
3.14 3.07 3.00 2.73
2.57 2.35 2.14 1.29
3.20 3.19 3.19 3.15
3.18 3.16 3.14 3.08
3.13 3.10 3.07 2.96
3.05 3.00 2.95 2.75
2.78 2.67 2.55 2.09
3.75 3.74 3.73 3.70
3.73 3.71 3.70 3.64
3.68 3.65 3.63 3.53
3.53 3.46 3.40 3.14
3.29 3.17 3.05 2.56
5.87 5.86 5.85 5.81
5.84 5.82 5.81 5.74
5.79 5.76 5.74 5.62
5.71 5.66 5.61 5.41
5.45 5.33 5.21 4.75
After-Tax Return on
Invested Capital (%)
Baseline
Case
7.14
6.89
8.06
4.62
Percent Proposed
Pretreatment Costs
80
100
120
200
6.89 6.82 6.76 6.51
6.63 6.51 6.38 5.91
6.36 6.17 5.99 5.29
6.29 6.08 5.89 5.13
4.99 4.49 4.02 2.27
6.75 6.72 6.68 6.55
6.66 6.61 6.55 6.34
6.53 6.44 6.35 6.01
6.32 6.18 6.04 5.51
5.63 5.34 5.05 3.96
7.94 7.91 7.88 7.75
7.86 7.82 7.77 7.57
7.73 7.65 7.57 7.25
7.34 7.16 6.98 6.31
6.60 6.27 5.94 4.71
4.57 4.56 4.55 4.51
4.54 4.53 4.51 4.44
4.50 4.47 4.44 4.32
4.42 4.38 4.33 4.14
4.18 4.07 3.97 3.56
-------
Table VI-17
WOVEN FABRIC FINISHING:
PRETREATMENT STANDARD IMPACTS ON PROFITABILITY
(Type B Mills)
<
H
to
Representative
Plant Size
Existing-Small (B)
(34,680 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
After-Tax Profits ($1,000)
Baseline
Case
706
1,213
3,751
% Proposed Pretreatment Costs
80
701
697
691
690
657
1,205
1,198
1,188
1,169
1,110
3,742
3,736
3,725
3,706
3,647
100
700
695
688
686
644
1,203
1,195
1,181
1,158
1,084
3,740
3,732
3,719
3,695
3,621
120
699
692
684
682
632
1,200
1,191
1,175
1,147
1,058
3,738
3,728
3,712
3,684
3,595
200
694
683
669
666
583
1,192
1,176
1,150
1,103
955
3,729
3,713
3,687
3,640
3,492
After Tax Return on Sales (%)
Percent Proposed
Pretreatment Costs
Baseline
Case
3.65
2.09
6.45
80
100
120
200
3.62 3.62 3.61 3.59
3.60 3.59 3.58 3.53
3.57 3.55 3.53 3.46
3.57 3.55 3.53 3.45
3.39 3.33 3.27 3.01
2.07 2.07 2.06 2.05
2.06 2.05 2.05 2.02
2.04 2.03 2.02 1.98
2.01 1.99 1.97 1.90
1.91 1.86 1.82 1.64
6.43 6.43 6.42 6.41
6.42 6.41 6.41 6.38
6.40 6.39 6.38 6.34
6.37 6.35 6.33 6.26
6.27 6.22 6.18 6.00
After-Tax Return on
Invested Capital (%)
Baseline
Case
9.45
4.86
8.23
Percent Proposed
Pretreatment Costs
80
100
120
200
9.35 9.32 9.30 9.19
9.24 9.18 9.13 8.92
9.12 9.04 8.96 8.64
9.09 9.00 8.91 8.56
8.55 8.33 8.12 7.28
4.81 4.80 4.78 4.73
4.78 4.75 4.73 4.65
4.72 4.69 4.65 4.52
4.64 4.58 4.53 4.31
4.36 4.23 4.11 3.64
8.19 8.18 8.17 8.14
8.17 8.16 8.14 8.09
8.14 8.11 8.09 8.00
8.08 8.05 8.01 7.87
7.91 7.83 7.75 7.45
-------
Table VI-18
WOVEN FABRIC FINISHING:
PRETREATMENT STANDARD IMPACTS ON CASH FLOWS
(Type A Mills)
<
H
O
Representative
Plant Size
Existing-Small (A)
(34,670 Ibs./day)
S
S, E
S, E,
S, B
S, E,
N
Existing-Medium (A)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Large (A)
(347,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (A)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Cash Flow ($1,000)
Base-
line % Proposed Pretreatment Costs
Case 80
266
263
260
257
255
228
1,287
1,284
1,278
1,272
1,253
1,211
3,035
3,030
3,021
3,011
2,955
2,908
2,615
2,611
2,605
2,600
2,581
2,538
100
262
258
255
252
218
1,283
1,275
1,268
1,245
1,192
3,029
3,018
3,005
2,935
2,876
2,611
2,603
2,596
2,573
2,519
120
262
257
252
249
209
1,282
1,273
1,264
1,236
1,172
3,027
3,015
2,999
2,915
2,845
2,610
2,601
2,592
2,564
2,500
200
259
250
243
238
170
1,279
1,263
1,249
1,202
1,096
3,023
3,001
2,975
2,835
2,718
2,606
2,591
2,577
2,530
2,424
Cash Flow as a % of Invested Capital
Base-
line
Case
9.54
12.17
16.79
9.11
% Proposed Pretreatment Costs
80
9.33
9.08
8.88
8.76
7.59
12.05
11.94
11.82
11.58
10.92
16.65
16.54
16.41
15.95
15.13
9.07
9.03
8.99
8.91
8.68
K>0
9.28
8.97
8.72
8.57
7.15
12.01
11.88
11.73
11.43
10.62
16.61
16.48
16.32
15.74
14.75
9.06
9.01
8.97
8.86
8.58
120
9.23
8.86 •
8.56
8.39
6.72
11.98
11.82
11.64
11.29
10.34
16.58
16.42
16.23
15.54
14.37
9.05
9.00
8.94
8.81
8.48
200
9.03
8.42
7.97
7.69
5.14
11.86
11.60
11.31
10.73
9.24
16.44
16.19
15.87
14.76
12.98
9.01
8.92
8.83
8.62
8.08
-------
Table VI-19
WOVEN FABRIC FINISHING:
PRETREATMENT STANDARD IMPACTS ON CASH FLOWS
(Type B Mills)
Cash Flow ($1,000)
i
CO
Representative
Plant Size
Existing-Small (B)
(34,680 Ibs./day)
S
S,
S,
E
E, N
S, B
S, E, C
Existing-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Base-
line % Proposed Pretreatment Costs
Case 80
886
883
880
877
875
848
2,490
2,486
2,480
2,474
2,456
2,413
5,218
5,214
5,208
5,203
5,184
5,141
100
883
878
875
872
838
2,485
2,478
2,471
2,447
2,394
5,213
5,206
5,199
5,175
5,122
120
882
877
873
870
829
2,484
2,475
2,467
2,439
2,375
5,213
5,204
5,195
5,167
5,103
200
879
870
864
859
791
2,481
2,466
2,452
2,405
2,299
5,209
5,194
5,180
5,133
5 , 027
Cash Flow as a % of Invested Capital
Base-
line
Case
11.86
9.97
11.44
% Proposed Pretreatment Costs
80
11.77
11.66
11.57
11.52
11.04
9.92
9.88
9.84
9.74
9.47
11.41
11.39
11.36
11.31
11.15
100
11.75
11.61
11.50
11.44
10.84
9.91
9.86
9.80
9.68
9.35
11.41
11.38
11.34
11.27
11.08
120
11.73
11.57
11.43
11.36
10.64
9.90
9.84
9.77
9.62
9.23
11.40
11.36
11.32
11.24
11.01
200
11.64
11.37
11.16
11.03
9.88
9.85
9.75
9.64
9.40
8.76
11.37
11.31
11.24
11.10
10.72
-------
10% for the medium plant (B), 16.8% for the large plant, 9.1% for the new
source medium plant (A), and 11.4% for the new source medium plant (B).
Depending on the level of pretreatment, the cash flows as percentages of
invested capital vary between 9.3% and 7.2% for the small plant (A), between
11.8% and 10.8% for the small plant (B), between 12.0% and 10.6% for the
medium plant (A), between 9.9% and 9.4% for the medium plant (B), between
16.6% and 14.8% for the large plant, between 9.1% and 8.6% for the new source
medium plant (A), and between 11.4% and 11.1% for the new source medium plant
(B).
Net Present Values. Except in the representative medium plant (B), the
net present values for the woven fabric finishing representative plants are
positive in both the baseline case as well as after incurring pretreatment
expenditures (see Tables VI-20 and VI-21). This implies that it would be
probable that the representative plants could remain in operation after
meeting the imposition of pretreatment standards.
Since for the existing medium plant (B) the net present value is negative
in the baseline case, it could be concluded that very few would be in operation.
However, it should be noted that negative net present value indicates that the
plant would earn less than the estimated 8.7% industry cost of capital. Thus,
such plants may remain in operation provided the firm has been well established
in the industry and has a lower cost of debt capital.
Production, Employment, and Other Effects. Production effects related to
pretreatment costs can be attributed to either a reduction in supply, due to
plant closures, or a decrease in consumer demand, hence mill production, due to
price increases.
The price increase that is utilized in the production analysis is assumed
to be equal to the impact that would be experienced by the largest woven fabric
dyeing and finishing mill. This assumption seems the most pragmatic and
realistic considering the structural characteristics of the woven fabric
finishing industry. Another factor which should be considered, but cannot
be at this time, is what the effluent standards impact will be on the direct
dischargers in this industry segment.
Review Tables VI-14 and VI-15 indicates that the required price increases
necessary to offset the different levels of pretreatment control for the large
woven fabric finishing mill range from .18% to 2.03%.
To translate these price increases into impacts on consumer demand and
mill production, the demand elasticities for the woven fabric mill products
must be known. Unfortunately, there are no data available which relate
market response and higher prices for woven fabric products. However, the
demand elasticities for six major fiber types range from -0.17 for cotton to
-1.0 for synthetics— Using these price elasticities, the percentage reduction
in consumption would range between .031% and 2.03%.
I/ Elasticities were obtained from the National Commission on Water
Quality, Water Pollution Control Act of 1972, Economic Impacts, Textile
Industry, 1975.
VI-32
-------
Table VI-20
WOVEN FABRIC FINISHING: PRETREATMENT STANDARD IMPACTS
ON NET PRESENT VALUES (TYPE A MILLS)
(in thousands of dollars)
Net Present Values
Representative
Plant Size
Existing-Small (A)
(34,680 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Medium (A)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Large (A)
(347,225 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (A)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Baseline
Case
772
949
841
991
872
3,207
3,941
3,493
4,114
3,619
8,315
10,218
9,058
10,668
9,385
10,112
12,425
11,015
12,973
11,413
Percent
80
705
792
616
718
254
3,059
3,677
3,101
3,449
2,255
8,099
9,843
8,479
9,298
6,698
9,964
12,162
10,623
12,308
10,048
Proposed
100
688
753
559
649
100
3,022
3,611
3,003
3,283
1,914
8,045
9,749
8,335
8,956
6,027
9,927
12,096
10,524
12,142
9,707
Pretreatment
120
671
714
503
581
- 54
2,984
3,545
2,905
3,117
1,573
7,991
9,655
8,190
8,614
5,355
9,889
12,030
10,426
11,975
9,366
Costs
200
604
557
277
307
-672
2,836
3,281
2,513
2,452
209
7,775
9,280
7,612
7,244
2,669
9,741
11,766
10,034
11,311
8,002
VI-33
-------
Table VI-21
WOVEN FABRIC FINISHING: PRETREATMENT STANDARD IMPACTS
ON NET PRESENT VALUES (TYPE B MILLS)
(in thousands of dollars)
Net Present Values
Representative
Plant Size
Existing-Small (B)
(34,680 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Existing-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
New Source-Medium (B)
(138,550 Ibs./day)
S
S, E
S, E, N
S, B
S, E, C
Baseline
Case
2,405
2,956
2,620
'3,086
2,715
-2,208
-2,713
-2,405
-2,833
-2,492
22,985
28,244
25,037
29,488
25,942
Percent
80
2,338
2,799
2,394
2,813
2,098
-2,356
-2,977
-2,797
-3,497
-3,856
22,837
27,980
24,645
28,823
24,577
Proposed
100
2,321
2,760
2,338
2,744
1,943
-2,393
-3,043
-2,895
-3,664
-4,197
22,800
27,914
24,547
28,657
24,236
Pretreatment
120
2,304
2,721
2,282
2,676
1,789
-2,430
-3,109
-2,993
-3,830
-4,538
22,762
27,848
24,449
28,490
23,895
Costs
200
2,237
2,564
2,056
2,403
1,171
-2,579
-3,373
-3,386
-4,495
-5,903
22,614
27,584
24,057
27,826
22,531
VI-34
-------
In addition to reduction in mill production attributable to increased
prices, there could be plant closures if the woven fabric dyeing and finishing
mills could not adequately absorb required pretreatment costs. The criteria
for determining whether or not a plant would cease operations were discussed
in the methodology. This financial analysis was conducted with no price changes
assumed and, therefore, represents the most severe case from the mills' view-
point.
As shown, the woven fabric finishing mill representative plants maintain
positive profitability levels after incurring the costs of pretreatment control
in all situations (see Tables VI-16 and VI-17). Furthermore, review of Tables
VI-18 and VI-19 reveals that all representative plants maintain positive cash
flows after meeting pretreatment standards. Review of the net present values
for the woven fabric finishing representative mills indicates positive values
for all pretreatment alternatives with the exception of the existing medium
mill (B) (see Tables VI-20 and VI-21). Even with the anticipated price
increases to offset the different levels of pretreatment control for the
large woven fabric finishing representative mill, the negative net present
values remain. It should be noted, however, that the net present value for
the medium size mill (B) is also negative in the baseline case. Therefore,
it would be doubtful that the representative medium mills (B) could remain
in operation even without pretreatment control requirements unless their
owners are willing to accept less than the industry's cost of capital of
8.7%, or they can improve their profitability utilizing some charagterisitcs
not incorporated in the representative plant. In general, then, these pro-
fitability measures indicate that there will be no plant closures attributable
solely to the financial impacts of pretreatment controls.
The production effects analysis indicates a minimal reduction in woven
fabric finishing production. The loss of employment, community impacts, and
impacts on the balance of trade due to the imposition of pretreatment standards
will also be minimal.
VI-35
-------
VII. KNIT FABRIC DYEING AND FINISHING, EXCEPT WOOL
This industry segment scours, dyes, and finishes fabrics produced by the
knitting industry made from all fiber types except wool. Some mills perform
dyeing and finishing only, while integrated mills perform knitting, cutting,
and sewing, as well as dyeing and finishing.
Primary Products
Identification of the primary products of the knit fabric finishing seg-
ment covered in this study is derived from data reported in the 1972 Census of
Manufactures, and pertinent Bureau of the Census Current Industrial Reports.
Relative importance in 1972 of each product is shown as a percentage of produc-
tion volume of all knitting mills' value of industry shipments.
Percent of Industry
Production on a
Dollar Value Basis
SIC
2251 Women's hosiery, except socks
22513 Women's finished seamless hose, full,
knee-length
2252 Hosiery, N.E.C.
22522 Men's finished seamless hosiery
22523 All other finished seamless hosiery
2253 Knit outerwear mills
22531 Sweaters, knit jackets, jerseys
22532 Knit outerwear sport shirts
22533 All other knit outerwear production
22539 Commission receipts for knit and/or
dyeing knit
2254 Knit underwear mills
22541 Men's, boys' knit underwear and night-
wear
22542 Women's, children's knit underwear
22543 Women's, children's knit nightwear
2257 Circular knit fabric mills
22572 Underwear and nightwear finished fabric
22573 Outerwear finished fabric
22574 High pile finished fabric
22576 All other circular knit finished fabric
22579 Commission knitting and/or dyeing
fabrics
2258 Warp knit fabric mills
22582 Underwear and nightwear finished fabric
22583 Outerwear finished fabric
22584 All other finished warp knit fabric
22589 Commission knitting and/or dyeing
fabrics
Total
10.7
3.7
2.7
7.0
5.5
5.3
2.7
5.4
1.1
.4
23.0
2.3
2.0
4.6
3.6
2.8
2.4
1.2
87.2
12.8
7.8
22.1
7.1
36.5
12.8
99.1
VII-1
-------
Industry Description
The knit fabric finishing industry segment comprises those mills in SIC
2251 (Women's Full Length and Knee Length Hosiery), SIC 2252 (Hosiery, Except
Women's), SIC 2253 (Knit Outerwear Mills), SIC 2254 (Knit Underwear Mills),
SIC 2257 (circular Knit Fabric Mills), and SIC 2258 (Warp Knit Fabric Mills).
SIC 2259 was not included because no water intake was shown for the SIC in the
Census report on Mater Use in Manufacturing.
Determination of the number of wet processors in this large and important
sector is difficult, since both wet and dry processors are included at all four-
digit levels. The categories listed above were all included in the 1973 Water
Use study, so it is evident that a substantial amount of process wastewater is
produced by the sector. Estimates of the percentage of wet processors were
made from available data on value of shipments of gray goods when not available
from water use data.
The Census provides the following definitions for the industry groups:
2251 Women's Full Length and Knee Length Hosiery
Establishments primarily engaged in knitting, dyeing, or
finishing women's and misses' full length and knee length
hosiery, both seamless and full-fashioned, and panty hose.
2252 Hosiery, Except Women's Full Length and Knee Length Hosiery
Establishments primarily engaged in knitting, dyeing, or
finishing hosiery except women's and misses' full length and
knee length seamless and full-fashioned hosiery and panty hose.
2253 Knit Outerwear Mills
Establishments primarily engaged in knitting outerwear from
yarn, or in manufacturing outerwear from knit fabric produced
in the same establishment. Establishments primarily engaged
in hand knitting outerwear for the trade are included in this
industry. Establishments primarily engaged in knitting gloves
and mittens are classified in Industry 2259, and those manu-
facturing outerwear from purchased knit fabric in Major Group
23.
2254 Knit Underwear Mills
Establishments primarily engaged in knitting underwear and
nightwear from yarn, or in manufacturing underwear and night-
wear from knit fabric produced in the same establishment.
Establishments primarily engaged in manufacturing underwear
and nightwear from purchased knit fabric are classified in
Major Group 23.
2257 Circular Knit Fabric Mills
Establishments primarily engaged in knitting circular
(tubular) fabric, or in dyeing or finishing circular (tubular)
knit fabric. Establishments primarily engaged in knitting,
dyeing, or finishing warp fabric are classified in Industry
2258.
VII-2
-------
2258 Warp Knit Fabric Mills
Establishments primarily engaged in knitting warp (flat fabric,
or in dyeing or finishing warp (flat) knit fabric. Establish-
ments primarily engaged in knitting, dyeing or finishing cir-
cular fabric are classified in Industry 2257.
Types of Firms. This discussion includes dry as well as wet processors.
Table VII-1 reveals not only a high degree of fragmentation — many small
single-unit firms — but also a considerable degree of organizational diversity.
It is estimated that at least 30% of the value of shipments is accounted for by
the largest 2% of the companies. In 1972, concentration ratios were very high
in the industry, as shown in Table VII-2.
Plant Characterization. Insight into the knit fabric finishing industry
can be obtained by examining the composition and characteristics of the mills
that constitute this sector. The number, size, and location of plants; munici-
pal system dischargers; age of equipment; efficiency and level of technology;
and other characteristics are discussed in this section.
Number, Size, and Location of Plants. Census data on number of establish-
ments and number of employees by Census region and by employment size group
(with estimates by the economic contractor when necessary) for each SIC in the
sector have been aggregated and are shown in Table VII-3. Total employment of
the sector is estimated at 272,400 for 2,650 establishments. The data emphasize
the heavy concentration of this industry segment in the South, where 1,077
establishments employ 166,100 persons, and the Northeast, where 1,419 establish-
ments employ 91,579 persons.
Municipal System Dischargers. The impact of proposed pretreatment regula-
tions will be on wet processors using municipal sewage facilities. There are
four sources of estimates for the percentages of plants in this segment using
municipal sewage plants for discharge of process wastewater. Each of these
estimates is biased in known and unknown ways. The 1973 Water Use in Manufac-
turing report, for example, reports the number of plants discharging exclusively
to public sewers, but that includes only those plants with water intake of 20
million gallons a year or more. The other surveys are biased in unknown ways.
The estimates of proportion of municipal system dischargers are as follows:
1972 1974 1975(a) 1975(b)
Estimated Percent 64 82 64 91
Median 73
Sources: 1972 - U. S. Department of Commerce, 1972 Census of Manu-
factures, Water Use in Manufacturing.
1974 - National Commission on Water Quality, Water Pollu-
tion Control Act of 1972, Economic Impacts, Textile Indus-
try, prepared by National Bureau of Economic Research, June
1975.
1975(a) - U. S. Environmental Protection Agency, Draft De-
velopment Document, Pretreatment Standards for Textile
Mills, prepared by Sverdrup & Parcel and Associates, Inc.,
November 1976.
1975(b) - Survey data from plant questionnaire.
VII-3
-------
Table VII-1
STRUCTURE OF THE KNIT FABRIC FINISHING SEGMENT
Percent of
Percent of Shipments
SIC
2251
(Women's Hosiery)
2252
(Hosiery, N.E.C.)
2253
(Knit Outerwear)
2254
(Knit Underwear)
2257
(Circular Knit)
2258
(Warp Knit)
Totals
Number of
Plants
312
415
917
87
716
203
2,650
Number of
Single Unit
Companies
211
329
806
43
492
114
1,995
Percent of
Single Unit
Companies
68
79
88
49
69
56
75
Employment in
Single Unit
Companies
27
50
53
15
26
25
Accounted for
8 Largest
Companies
49
29
26
61
31
46
50 Largest
Compan i e s
87
66
59
98
69
Ql
.7.L
-------
Table VII-2
CONCENTRATION RATIOS AND VALUE OF SHIPMENTS
KNIT FABRIC FINISHING INDUSTRY
(1972)
Primary Product
Coverage
Specialization Ratio Ratio
SIC
2251
2252
2253
2254
2257
2258
(percent)
94
95
92
90
93
90
(percent)
97
94
63
94
91
95
Value of Shipments
(million dollars)
984.7
600.6
1,703.8
544.6
2,808.8
987.7
By applying the median estimate of 73% municipal system dischargers and
the various estimated portions (89% in SIC 2251), 87% in SIC 2252, 18% in SIC
2253, 32% in SIC 2254, 94% in SIC 2257, 78% in SIC 2258) of wet processors to
the number of plants and employees by employment size range, the potential
impact by Census regions can be determined. In order to consider only those
establishments where enforcement of pretreatment standards may have an impact,
establishments and subsidiaries of establishments with annual sales of $100
million or more were removed from consideration. (See Table VII-4). This
table shows that the potential impact is greatest in the South, with 561 estab-
lishments and 80,112 employees potentially affected. The Northeast region
follows closely with 539 establishments employing 34,549 persons. This is out
of a U. S. potential of 1,148 establishments employing 119,388 persons. Of
the total number of potentially impacted establishments in the nation, 1,093
are classified as small in terms of production capacity and only 22 are classi-
fied as large. Of the 119,388 potentially impacted employees, 86,637 are em-
ployed by small establishments, 13,129 by medium, and 19,622 by large. (See
Table VII-5.)
Age of Equipment. Results from the economic contractor survey of knit
fabric finishers revealed the information shown in Table VII-6. The industry
segment shows considerable variation but, in general, possesses new equipment
— much of it underutilized at present.
Efficiency and Level of Technology. Industries 2251, 2252, 2253, and
2254 all show similar costs (payroll plus cost of materials) per dollar of
shipments — .79, .78, .79, and .78, respectively — with little change over
the past ten years. SIC 2257 and SIC 2258 have higher costs — .82 and .86,
respectively. Industry experts are, on the whole, complimentary about the
level of technology in the segment. The recently purchased sophisticated
equipment is itself a problem, however, since its high costs demand high utili-
zation. Demand for knit goods has not been strong recently.
Degree of Specialization. Specialization in all industries in the sector
is quite high — an unweighted average of 92%, with a range from 90% to 95%.
VII-5
-------
Table VII-3
KNIT FABRIC DYEING AND FINISHING PLANTS: NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
H
H
Region and
Employment
Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
1, 000+
North Central
All
1-19
20-49
50-99
100-249
250-499
500-999
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
West
All
1-19
20-49
50-99
100-249
250-499
500-999
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1 , 000+
SIC 2251
No. of
Plants
62
31
18
9
3
1
5
3
1
1
242
61
47
23
52
35
18
6
3
1
1
1
312
95
66
33
55
37
20
6
No. of
Employees
2,800
226*
593*
711*
483*
782*
354*
19*
28*
307*
45,300
425*
1,498*
1,741*
8,028*
11,958*
13,500*
8,150*
1,046*
68*
306*
672*
49,500
700
2,100
2,500
8,500
12,700
15,050*
8,150*
SIC 2252
No. of
Plants
39
14
12
5
2
5
1
6
1
1
3
1
370
131
86
65
58
27
3
•9-
415
146
99
70
63
33
4
No. of
Employees
3,300
109*
385*
336*
315*
1,620*
535*
900
8*
35*
509*
348*
28,400
1,048*
2,837*
4,484*
9,393*
8,988*
1,650*
32,600
1,100
3,300
4,800
10,200
11,000
2,200
SIC 2253
No. of
Plants
703
278
207
112
77
20
7
2
30
11
4
2
8
4
1
116
48
17
10
16
9
11
5
68
33
20
10
4
1
917
370
248
134
105
33
20
7
No. of
Employees
42,500
2,148*
6,398*
7,680*
11,527*
6,549*
4,665*
3,533*
4,100
99*
144*
160*
1,395*
1,526*
776*
24,700
397*
562*
734*
2,562*
3,153
7,843*
9,449*
3,000
271*
657*
728*
636*
708*
74,400
3,000
7,900
9,500
16,300
11,200
13,800
12,800
SIC
No. of
Plants
54
10
6
15
15
6
2
3
1
1
1
29
3
1
1
4
9
7
4
1
1
87
13
7
17
19
17
10
4
2254
No. of
Employees
7,312*
79*
165*
1,212*
2,335*
2,122*
1,399*
1,134*
81*
354*
699*
17,200
24*
29*
83*
691*
3,279*
5,044*
8,100*
354*
354*
26,000
107*
193*
1,400
3,000
6,100
7,100
8,100
SIC 2257
No. of
Plants
423
210
100
49
44
15
4
1
14
3
2
2
3
2
2
259
65
54
37
45
43
12
3
20
8
5
4
2
1
716
286
161
92
94
61
18
4
No. of
Employees
25,200
1,922*
3,254*
3,587*
6,934*
5,308*
2,822*
1,373*
2,500
24*
58*
129*
418*
624*
1,247*
39,200
584*
1,724*
2,658*
6,958*
14,928*
8,308*
4,040*
1,100
67*
149*
269*
290*
325*
68,000
2,500
5,200
6,600
14,600
21,200
12,500
5,400
SIC
No. of
Plants
138
43
39
26
21
7
2
1
1
61
4
18
7
17
9
6
3
1
1
1
203
48
59
33
39
16
8
2258
No. of
Employees
10,467*
340*
1,232*
1,719*
3,400*
2,418*
1,358*
32*
32*
11,300
33*
584*
476*
2,827*
3,194*
4,186*
201*
7*
32*
162*
22,000
400*
1,900
2,200
6,400
5,600
5,500
Tots 1
No. of
Plants
1,419
586
382
216
162
53
17
3
59
18
9
5
14
9
4
1,077
312
223
143
192
132
57
18
95
42
26
15
7
3
2
2,650
958
640
379
375
197
80
21
No. of
Employees
91,579
4,824
12,032
15 ,245
24,994
18,017
11,561
4,906
9,020
150
297
370
2,322
3 ,159
2,722
166,100
2,511
7,234
10,176
30,409
45,500
40,531
29,739
5,701
345
838
1,065
1,088
985
1,380
272,400
7,830
20,401
26,856
58,813
67,661
56,194
34,645
* Estimated.
Source: Based on data from 1972 Census of Manufactures.
-------
Table VII-4
KNIT FABRIC DYEING AND FINISHING PLANTS MUNICIPAL DISCHARGERS: ESTIMATED NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
I
-J
Region and
Employment
Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
1 , 000+
North Central
All
1-19
20-49
50-99
100-249
250-499
500-999
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
West
All
1-19
20-49
50-99
100-249
250-499
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
Source: See text.
SIC
No. of
Plants
41
20
12
6
2
1
4
2
1
1
150
39
31
15
33
19
9
4
2
1
1
197
61
44
22
35
21
10
4
2251
No. of
Employees
2,094
147
389
462
314
782
347
12
28
307
25,816
270
973
1,131
5,135
6,320
6,692
5,295
374
68
306
28,631
429
1,390
1,661
5,449
6,933
7,474
5,295
SIC
No. of
Plants
25
9
8
3
1
3
1
5
1
1
2
1
232
83
55
41
37
15
1
262
93
64
44
40
19
2
2252
No. of
Employees
2,290
69
244
213
200
1,029
535
714
8
35
323
348
16,989
666
1,802
2,848
5,965
5,105
603
19,993
743
2,081
3,061
6,488
6,482
1,138
SIC
No. of
Plants
93
37
27
15
10
3
1
3
1
1
1
14
6
2
1
2
1
1
1
9
4
3
1
1
119
48
33
17
14
4
2
1
2253
No. of
Employees
5,121
282
841
1,009
1,515
861
613
184
13
19
152
3,039
52
74
96
291
339
945
1,242
302
36
86
96
84
8,646
383
1,020
1,201
2,042
1,200
1,558
1,242
SIC
No. of
Plants
12
2
1
4
4
1
7
1
1
2
2
1
19
3
1
4
5
3
2
1
2254
No. of
Employees
1,381
18
39
283
545
496
3,863
6
126
661
1,178
1,892
5,244
24
39
283
671
1,157
1,178
1,892
SIC 2257
No. of No. of
Plants Employees
SIC 2258
Total
No. of No. of No. of No. of
Plants Employees Plants Employees
291
144
69
34
30
10
3
1
8
2
1
1
2
1
1
130
1
36
25
29
30
7
2
13
5
3
3
1
1
442
152
109
63
62
42
11
3
17,722
1,319
2,233
2,461
4,758
3,642
1,936
1,373
1,716
16
40
89
287
428
856
25,907
583
1,151
1,786
4,425
10,244
4,946
2,772
857
46
102
185
199
325
46,202
1,964
3,526
4,521
9,669
14,639
7,738
4,145
77
24
22
15
11
4
1
28
2
10
3
7
5
1
109
27
34
18
19
9
2
5,941
194
702
979
1,831
1,377
858
32
32
4,498
19
307
243
1,253
1,665
1,011
201
7
32
162
10,672
220
1,073
1,222
3,246
3,042
1,869
539
236
139
77
58
21
7
1
21
6
5
1
5
3
1
561
132
134
85
109
72
21
27
10
7
5
3
2
1,148
384
285
168
175
98
29
9
34,549
2,029
4,448
5,407
9,163
7,405
4,724
1,373
2,993
49
154
89
762
1,083
856
80,112
1,596
4,307
6,104
17,195
24,334
15,375
11,201
1,734
89
220
349
445
631
119,388
3,763
9,129
11,949
27,565
33,453
20,955
12,574
-------
Table VII-5
KNIT FABRIC DYEING AND FINISHING PLANTS MUNICIPAL DISCHARGERS
BY PRODUCTION CAPACITY CATEGORY, 1972
Production
Capacity Number of Number of
Region Category* Plants Employees
Northeast All 539 34,549
Small 522 25,340
Medium 11 4,429
Large 6 4,780
North Central All 21 2,993
Small 19 1,709
Medium l 428
Large 1 856
South All 561 80,112
Small 526 58,179
Medium 20 7,947
Large 15 13,986
West All 27 1,734
Small 26 1,409
Medium 1 325
Large
United States All 1,148 119,388
Small 1,093 86,637
Medium 33 13,129
Large 22 19,622
* Small category production capacity less than 30,200 Ibs./day;
medium category between 30,200 and 70,200 Ibs./day; and large
category more than 70,200 Ibs./day.
Table VII-6
AGE OF EQUIPMENT IN THE KNIT FABRIC FINISHING INDUSTRY
(in percent)
Mode
Percent of Plant (most frequent
Production Equipment percent reported) Mean Median Range
0 - 5 years old 10 29 20 100
6-10 years old 20 33 25 100
11 - 15 years old 0 21 16 90
16 - 20 years old 0 11 6 90
> 20 years old 0 15 5 100
Number of plants reporting: 96
VII-8
-------
Trends in Knit Fabric Finishing. A historical trend cannot be established
because of changes in SIC classification. (See Table VII-7.) Recent data in-
dicate that the knit goods industry suffered a severe setback in the recent
recession and is still operating at very low utilization rates.
Table VII-7
TRENDS FROM CENSUS DATA FOR KNIT FABRIC FINISHING INDUSTRY
SIC 225; Knitting Mills
Year
1963
1967
1972
1973
1974
Employment
220,500
240,600
276,500***
283,200
256,500
Estab-
lishments Companies
2,698
2,723
2,462
Value of
Shipments
(millions)
$3,326.1
4,519.3
7,703.3
8,138.1
8,319.7
Special-
ization Coverage
Ratio* Ratio**
92
94
* Specialization Ratio - This ratio measures the extent to which the industry
specializes in making its primary products.
** Coverage Ratio - This ratio measures the extent to which the products pri-
mary to an industry are shipped by plants classified in that industry.
*** Caution should be exercised in that the totals are not directly comparable
before and after 1972 because of a change in the SIC definition.
Sources: Annual Survey of Manufactures and Census of Manufactures.
Demand, Supply, and Prices
The price for knit fabric dyeing is dependent upon the demand for and the
supply of those products using knit fabric. Characteristics of demand, supply,
and prices for these products are discussed below.
Demand. In the last 15 years, the demand for knit fabric has made a broad
advance in nearly every knitted-good field — women's hosiery, miscellaneous
hosiery, knit outerwear, knit underwear, circular knit fabric, warp knit fabric,
and other knittings. The consistent upward trend of knit goods production re-
flects the consumer's preference and taste and the persistent increase in expend-
able personal incomes in the nation.
The strong demand for knit goods is caused partly by innovative design on
finished goods and technological improvements made in the knitting process.
Man-made fabric has gained most in the broad advance of knit-good fields at the
expense of cotton fabric.
VII-9
-------
Supply. Mills engaged in knit goods processing are numerous (in the thou-
sands) . Keen marketing competition is characteristic of the industry. The
strong demand for knit goods has attracted new investments. Most mills are
relatively new compared with other segments of the textile industry. Foreign
imports of knit fabrics were only 1.2% of apparent consumption in 1975, while
exports as a portion of industry shipments were 1.1%.
Prices. Although the prices of knit goods have increased along with most
other commodities because of inflation, they remain competitive compared with
woven fabric goods. Due to keen market competition and new technology asso-
ciated with knit mills, the prices of knit goods are very competitive.
Secondary Price Increases. For insight into how various types of textile
users would react to possible increases in supplier prices, survey question-
naires were mailed to domestic firms known to purchase large volumes of textile
fiber, yarn, or fabric.
Principal customers for these fabrics included manufacturers of men's and
boys' furnishings (SIC 231, 232), women's and children's apparel (SIC 233, 234,
236), and other knitting mills (SIC 225).
In response to the textile product users survey, 38 companies classified
in these industries stated that, on an annual basis, they purchase a combined
volume of $132 million worth of knit fabric. Of this figure, 12 companies im-
port $2.5 million worth, less than 2% of the total purchased. Should prices
rise, however, on the average of 3-4%, the firms indicate that they will seek
other sources of knit fabrics. A volume shift of $81 million to new domestic
suppliers and an increase in use of imports by more than $40 million is a
possibility.
For price increases of less than 2%, the companies would absorb the addi-
tional cost. With a price change between 2 and 3%, the increase would be passed
on to the customers, while for over 3%, the difference will be partially ab-
sorbed and partially passed on.
Financial Profile
The survey data from knit fabric finishing plants were grouped into three
size categories based on production capacity in pounds of product per day. The
small category comprised all plants with capacities of less than 30,200 pounds
per day. The medium category consisted of plants with capacities between 30,200
pounds and 70,200 pounds per day. The large category included plants with pro-
duction capacities exceeding 70,200 pounds per day.
In each of these categories, the representative mill sizes specified in
the Development Document were used to base the financial statements for that
category. For knit fabric plants, the small representative plant statement
presented in this report was based on a capacity of 7,500 pounds a day, the
medium was based on a capacity of 50,200 pounds per day, and the large was
based on a capacity of 100,400 pounds per day.
The survey data for 1975 operations reflected a capacity utilization rate
of 67% for the small group, 72% for the medium group, and 93% for the large
VII-10
-------
group. The data presented in the representative plant financial statements are
for a plant operating rate of 85% capacity.
Income Statement Data. The income statement data were compiled for the
baseline case, that is, all municipal sewer charges, depreciation, and ex-
penses for operating and maintaining water pollution abatement systems were
removed from the figures. The data presented in Table VII-8 represent typical
plants of the three size categories of knit fabric dyeing and finishing plants;
also given are projected data for the new source operations of medium size us-
ing the most modern technology. This whole group of plants was found to be
characterized by moderate profit margins for all size categories, probably re-
flecting the highly competitive nature of this industry.
Table VII-8
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA
KNIT FABRIC DYEING AND FINISHING
(in thousands of dollars)
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Cost
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
Small
(6,375)
4.77
9,122
7,594
5,467
1,513
614
1,058
283
98
677
470
212
258
541
2,804
16.8
9.2
5.2
2.8
Existing
Medium
(42,670)
2.33
29,826
24,214
15,108
4,826
4,280
3,480
447
259
2,774
2,132
1,010
1,122
1,569
10,084
21.1
11.1
7.1
3.8
Large
(85,340)
2.05
52,484
41,555
32,416
4,970
4,169
6,641
708
306
5,627
4,289
2,045
2,244
2,952
18,407
23.3
12.2
8.2
4.3
New Source
Medium
(42,670)
2.33
29,826
22,449
15,400
2,688
4,362
5,291
1,069
1,448
2,774
2,086
988
1,098
2,167
24,714
8.4
4.4
7.0
3.7
The price per pound used was $4.77 for small plants, $2.33 for medium-size
plants, and $2.05 for large plants. The survey data exhibited a price range of
$.41 per pound to $24.00 per pound. The price per pound of sales was found to
VII-11
-------
be quite high in the small size category as compared with the medium and large
categories. This probably results from the fact that some of the small category
represents hosiery manufacturers, which are typically small-volume processors
in terms of pounds of product but have high sales levels because of the high
value per pound of product.
Direct production costs per pound for all knit finishers ranged from a
minimum of $.35 to a maximum of $22.00. The cost structure of this industry
group was found to be more labor intensive in the small and medium groups as
compared with the large groups. The cost of labor in the small group was 20%
of the total direct cost compared with 20% in the medium group and 12% in the
large group. The indirect or fixed cost for this industry was found to be
consistent throughout all size categories at about 12%.
Balance Sheet Data. The data presented in Table VII-9 represent typical
plants of the three size categories of knit fabric dyeing and finishing plants;
also given are projected data for the new source operation of medium size. This
whole industry group was found to have an extremely low leverage factor, re-
flecting a high level of equity in the financial structure. This is probably
representative of both a highly conservative management approach to financial
management and relatively old physical plants which, at depreciated book values
on the balance sheets, do not reflect a true current value to the fixed assets.
This can be clearly seen in the projected new source balance sheet, which is
based on estimated current replacement cost rather than on book value of the
fixed assets.
Table VII-9
PRO FORMA BALANCE SHEET
KNIT FABRIC FINISHING INDUSTRY
(in thousands of dollars)
Existing
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Other
Total Assets
Liabilities
Current Liabilities
Long-Term Debt
Owners' Equity/Net Worth
Total Liabilities
Small
(6,375)
2,858
1,108
39
438
564
67
3,966
3,966
Medium
(42,670)
7,873
6,748
129
2,223
4,020
376
14,621
4,537
4,134
5,950
14,621
Large
(85,340)
11,240
11,983
312
3,301
7,956
414
23,223
4,816
6,141
12,266
23,223
New Source
Medium
(42,670)
7,873
21,378
408
7,044
12,737
1,189
29,251
4,537
14,476
10,238
29,251
VTI-12
-------
Invested Capital. The data presented in Table VII-10 represent the factors
considered in estimating the total invested capital for each of the model plants
in the knit fabric dyeing and finishing industry and the projection of the in-
vestment capital needed to establish a new source plant of medium size.
Data Quality. The survey data for this industry group were very good for
the small and medium-size plants. Due to the fact that few large plants re-
sponded to the survey and some of them submitted only consolidated financial
data which represented more than one plant and could not be used, the analysis
of the data to arrive at a typical pattern for the representative plant was
difficult; therefore, the degree of confidence is relatively low. The data
presented in the tables for the large size category are considered to be the
best representation which could be made considering the limitation of the
available data.
VII-13
-------
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
Table VII-10
INVESTED CAPITAL FOR THE KNIT FABRIC FINISHING INDUSTRY
(in thousands of dollars)
Existing
Small
Book
1,108
2,858
1,162
1,696
2,804
Salvage
384
2,858
1,162
1,696
2,080
Medium
Book
6,748
7,873
4,537
3,336
10,084
Salvage
2,342
7,873
4,537
3,336
5,678
Large
Book
11,983
11,240
4,816
6,424
18,407
Salvage
4,158
11,240
4,816
6,424
10,582
New Source
Medium
Book
21,378
7,873
4,537
3,336
24,714
Salvage
5,345
7,873
4,537
3,336
8,681
H
H
-------
Pretreatment Standards, Technologies, and Costs
The effluent control system alternatives and costs presented in this
section were provided by the Environmental Protection Agency as developed by
the technical contractor and submitted in their Development Document.
Industrial wastewaters discharged to publicly owned treatment works (POTW)
are regulated by Section 301(b) of the Federal Water Pollution Control Act
Amendments of 1972 (PL 92-500). Standards which such dischargers must meet
are to be promulgated pursuant to Section 307 of this Act. The intent of such
standards is to require treatment at- the point of discharge complementary to
the treatment performed by the POTW. Duplication of treatment is not the goal.
The pretreatment by the discharger of pollutants that are not susceptible to
treatment in a POTW is critical to attainment of the overall objective of the
Act by protecting the POTW from process upset and by preventing discharge of
pollutants which would pass through or otherwise be incompatible with the POTW.
Pretreatment Control Technologies. For the knit fabric finishing segment,
four pretreatment technologies have been developed. These technologies were
developed on the basis of information obtained from a survey of POTWs treating
textile wastes and from a consideration of the types of wastes discharged by
this industry subcategory. The survey of the POTWs yielded 50 specific com-
plaints associated with the treatment of textile wastes. The most common com-
plaint related to uneven loadings, either hydraulic or organic. The next most
common complaint related to coarse solids, with pH problems, color, low dis-
solved oxygens in the POTW influent, grease, and temperature following in the
order listed. Not all of these problems were necessarily found in plants
treating wastes from this segment.
Specific pretreatment technologies are described below. Estimated costs
are developed for knit fabric finishing mills in the production capacity range
of 3 to 46 kkg (4 to 50 tons) per day.
Alternative A - No Waste Pretreatment or Control
Costs - None
Reduction Benefits - None
Alternative B - Screening (S)
This alternative is fine screening to remove rags, socks, and other
coarse suspended solids from the mill discharge to the POTW.
Costs - Investment costs estimated to range from $31,700 to $106,000.
Total annual costs estimated to range from $13,400 to $32,000.
Reduction Benefits - Alternative B provides reduction of coarse sus-
pended solids by greater than 95%.
VII-15
-------
Alternative C - Screening and Equalization (S,E)
This alternative includes fine screening and equalization in a mixed
basin providing from 6 to 16 hours of detention at the average dis-
charge flow rate.
Costs - Investment costs estimated to range from $70,200 to $162,000, an
estimated increase over Alternative B of from $38,500 to $56,000. Total
annual costs estimated to range from $24,800 to $52,100, an estimated
increase over Alternative B of from $11,400 to $20,100.
Reduction Benefits - Alternative C provides the benefits of Alternative
B and also prevents the release of slug hydraulic discharges to the
public collection system.
Alternative D - Screening, Equalization, and Biological Treatment (S,E,B)
This alternative includes pretreatment in an activated sludge system,
providing either 8 or 24 hours of aeration tank capacity at the average
discharge rate. It also provides solids recycle from the secondary
clarifier to the aeration tank. Preliminary treatment by screening and
equalization is included to improve the operation and efficiency of the
biological system.
Costs - Investment costs estimated to range from $188,000 to $975,000,
an estimated increase over Alternative C of from $117,800 to $813,000.
Total annual costs estimated to range from $57,300 to $235,000, an esti-
mated increase over Alternative C of from $32,500 to $182,900.
Reduction Benefits - Alternative D provides complete removal of coarse
suspended solids, prevents the release to the POTW of hydraulic slug
loads, and accomplishes BOD5_, TSS, COD, and O&G reductions of 90, 65,
70, and 15%, respectively. The levels of chromium, phenols, and
suIfides are also reduced.
Alternative E - Screening, Equalization, and Chemical Coagulation (S,E,C)
This alternative includes chemical addition, flocculation, and sedimen-
tation to reduce the level of fine suspended and colloidal solids. Pre-
liminary treatment by fine screening and equalization is included to
improve the effectiveness of the coagulation processes.
Costs - Investment costs estimated to range from $183,000 to $643,000,
an estimated decrease from Alternative D of from $5,000 to $332,000.
Total annual costs estimated to range from $99,500 to $308,000, an esti-
mated increase over Alternative D of from $42,200 to $73,000.
Reduction Benefits - Alternative E provides complete removal of coarse
suspended solids, prevents the release of slug hydraulic loads, and
reduces BOD5_, TSS, COD, and O&G by 50, 80, 70, and 90%, respectively.
This alternative also reduces total chromium levels.
The pretreatment alternatives specified for this industry segment require
the availability of land to accommodate equalization wells and basins, aeration
lagoons, and activated sludge facilities. Land area in hectares that is esti-
mated to be required is shown in the following table:
VII-16
-------
Plant Size
Small
Medium
Large
Alternative
None
—
-
_
S
0
0
0
S,E
0
0.6
0.8
S,E,B
0.2
1.6
2.0
S,E,C
0
1.0
1.4
Land availability indicated by respondents to the economic contractor's
questionnaire was as follows:
No. %.
No Land Available 52 53
Land Available
Less than 0.2 hectare 14 14
0.2 hectare - 1.2 hectares 24 24
No Answer _§. ——
TOTAL 99 100
Discharge Status of the Industry. Current practices in the textile indus-
try have been estimated from information submitted by respondents to question-
naires prepared by the economic contractor. Estimates of the percentage of
plants in this industry segment discharging into POTWs were obtained from four
sources, including the economic contractor's survey. The median value of
these four estimates indicates that 73% of the plants in this segment dis-
charge into POTWs.
The economic contractor also obtained information relating to pretreat-
ment practices of dischargers into POTWs. An analysis of the practices sub-
mitted was made to determine the number of plants presently having facilities
in place to perform at least the pretreatment practices recommended by the
technical contractor in each of the pretreatment alternatives. The results of
this analysis are shown in the following table:
Treatment
Alternat ive No- *.
None 48 49
s 30 31
S,E 5 5
S,E,B 1 1
S,E,C ° °
Other 2£ 20
TOTAL 98
The "other" treatment alternative includes cases which did not include
pretreatment practices recommended by the technical contractor.
VII-17
-------
It should be noted that the sufficiency of an existing pretreatment prac-
tice cannot be evaluated. Any given pretreatment practice may require upgrad-
ing to perform as adequately as the technical contractor has projected.
Pretreatment Control Costs. The pretreatment control costs, as provided
by EPA, are based on plant production, wastewater flow, pretreatment processes
proposed, and operation requirements. The costs depicted and discussed in this
section are for "typical" yet hypothetical manufacturers in this industry
segment.
Investment Costs. Investment costs include the installed costs of treat-
ment components plus allowances for contingencies and engineering. The in-
stalled costs includes the costs of delivery and erection of major equipment
items, evacuation and backfill, associated electrical and mechanical work,
instrumentation, backup pumps, contractor overhead and profit, and yardwork.
Not included are spare parts, standby power generating equipment, rock exca-
vation, or the use of pile foundations. A contingency allowance of 15% of the
installed costs was used to cover unexpected costs due to local mill conditions
and differences between the actual system and those used for cost estimates.
No allowance was made for shutdown of the mill during construction and instal-
lation.
Costs are expressed in January 1976 dollars. It was assumed that all
design specifications will be prepared by an outside consulting engineer in
accordance with applicable codes. Construction work was assumed to be per-
formed by an outside contractor with no work to be done by in-plant labor
or maintenance personnel.
Engineering costs are included in the cost estimates and were derived by
using percentages of the installed costs and contingencies. For total costs
of $100 or less, 15% was used. For larger projects, a percentage to the
nearest 0.5% from Curve A in Consulting Engineering was used.
No land acquisition cost is included.
Total yearly Costs. Total yearly costs consist of interest, depreciation,
operation and maintenance, sludge disposal, energy and power, and chemicals.
The cost of money for capital expenditure was assumed to be 10% of the total
investment cost. Installed costs were depreciated over estimated lives of
the components on a straight-line basis.
Estimates were prepared of the number of hours required for operation of
the various component systems. In the case of this segment, it was assumed
that the textile mill operates 24 hours a day, 6 days a week, and 50 weeks a
year. Laboratory time is included for the more sophisticated systems wher.e
analytical results would normally be used for operational control. Ten per-
cent was added to labor hours to cover supervision and administration. A
labor rate of $6.00 per hour was used to cover wages and fringe benefit costs.
Investment, annual operating, and total yearly costs for existing small,
medium, and large plants and new source medium plants in this segment are given
in Table VII-11. Also shown are investment costs as a percent of fixed assets
and total yearly costs as a percent of annual sales.
VII-18
-------
Municipal System User Charges. The data on user charges collected from
publicly owned treatment works were presented for all industry segments in a
previous section. Data collected from respondents to the plant questionnaire
provided the following information on annual sewer charges for 1975 for knit
fabric finishing:
All Respondents
Sewer Charges/
Production
(in cents/
1,000 pounds)
Sewer Charges/
Wastewater
Discharge
(in cents/
1,000 gallons)
Mean
Median
Minimum
Maximum
344
419
1
18,500
21
29
1
556
Table VII-11
PRETREATMENT CONTROL COSTS: KNIT FABRIC FINISHING
(Costs in $000)
Size, Status, and
Alternative
Small, Existing
S
S, E
S, E, B
S, E, B
S, E, C
Medium, Existing
S
S, E
S, E, B
S, E, C
Large, Existing
S
S, E
S, E, B
S, E, C
Medium, New Source
S
S, E
S, E, B
S, E, C
Total
Investment Operating Yearly
Costs Costs Costs
31.7
70.2
188.0
183.0
8.2
14.9
30.9
71.9
13.4
24.8
57.3
99.5
2.95
6.54
17.5
17.1
63.5
115.0
667.0
384.0
10.2
21.7
66.8
143.2
20.6
38.5
160.8
201.2
1.66
3.01
17.5
10.1
106.0
162.0
975.0
643.0
14.3
29.1
98.0
210.0
32.0
52.1
235.0
308.0
1.51
2.30
13.9
9.15
63.5
115.0
667.0
384.0
10.2
21.7
66.8
143.2
20.6
38.5
160.8
201.2
Total
Yearly Costs
as % of
Fixed Assets Annual Sales
0.15
0.27
0.63
1.09
0.07
0.13
0.54
0.67
0.06
0.10
0.45
0.59
0.07
0.13
0.54
0.67
0.53
0.95
5.52
3.18
VII-19
-------
Anticipated Reaction to Pretreatment Standards. Although specific pre-
treatment requirements have not been promulgated by EPA, the probable reaction
of manufacturers to such standards was determined by questionnaire. Respondents
were asked to select one of the nine options listed below, given the limited
amount of information which they had about pretreatment requirements and complete
treatment requirements at the time:
1. Change from pretreatment to complete treatment
2. Change from complete treatment to pretreatment
3. Upgrade existing pretreatment
4. Upgrade existing complete treatment
5. Initiate pretreatment
6. Initiate complete treatment
7. Close the plant as a result of pollution control standards
8. None of the above, because this plant already conforms to the
proposed standards
9. Other (specify)
Ninety-nine replies were received from plants in this segment. The nature
of the replies was as follows:
Alternative No. %
Upgrade existing pretreatment 12 12
Initiate pretreatment 10 10
Initiate complete treatment 2 2
Close plant 5 5
Plant conforms to standards 20 20
Other ^0 51
TOTAL 99 100
Economic Impact Analysis
The imposition of pretreatment controls on the knit fabric finishing
industry segment will have both direct and indirect impacts on the industry,
on consumers, on its suppliers, and on communities in which plants are located.
The resulting direct impacts from the imposition of pretreatraent controls are
analyzed in both quantitative and qualitative terms: price effects, financial
effects, production effects, employment and community effects, and balance of
trade effects.
The previous analysis identified a total of 1,148 plants operating at the
end of 1972, with 119,388 employees which the proposed pretreatment regulations
could affect. This represented 1,093 plants which could be classified as small
VII-20
-------
in terms of production capacity, 33 plants as medium, and 22 as large. In
addition to the examination of the potential impact of pretreatment controls on
existing plants, the analysis considered the impacts on those plants which have
not been constructed and will discharge their effluent to publicly owned treat-
ment systems (hereafter referred to as "new source").
The economic impact analysis also included a sensitivity analysis which
was performed using pretreatment control cost estimates at levels between 80%
and 200% of the costs provided by EPA. The analysis was based on a wide range
in order to take into account the possibility of regional as well as individual
mill variations in pretreatment costs. In addition to this discussion on the
economic impact analysis, an impact analysis was completed using an incremental
capital cost approach and is included in Appendix A. Since the exact level of
pretreatment which will be required has not been specified, this report presents
data on the effects for all levels under consideration.
Finally, it should be noted that this analysis was concerned only with the
impacts of proposed pretreatment guidelines. It is recognized that there are
other regulatory programs by EPA, OSHA, and various state controls, either
existing or emerging, which will influence the profitability of the plants
studied. The analysis does not consider the full impact of this aggregate of
regulations.
Price Effects. The role of price effects in the impact analysis is criti-
cal. The analysis of price effects proceeded with the determination of what
price increases would be required to offset the costs of pretreatment controls.
Next, the market structure for the knit fabric finishing industry segment was
examined to determine if mills would be forced to absorb the price increases,
or if the price increases could be passed on to customers, or if the price
increases could be partially absorbed and partially passed on. Also, the possi-
bility of secondary price increases was examined in a previous section.
Required Price Increases. An implicit indication of the expected price
effects of pretreatment controls used in this report is the amount of sales
price increase necessary to maintain a mill's profitability, after pretreat-
ment control expenditures, at the same level as the mill without the control
expenses. The ability of mills to pass on such required price increases is
evaluated in the following section.
The required price increases necessary to offset the different levels of
proposed pretreatment control for the representative mills are shown in
Table VII-12. The required price increases for small knit fabric finishing
mills range from .20% to 1.33%, depending on the level of pretreatment; for
medium mills, from .10% to .82%; and, for large mills, from .09% to.75%. For
the new source mills, the required price increase to offset the pretreatment
level ranges from .10% to .82%. Also shown are the sensitivity ranges of
required price increases when pretreatment costs vary from 80% to 200% of the
original estimated costs.
Expected Price Increases. Although the previous discussion has identified
the required price increases to offset expenditures for pretreatment control
in order to maintain the mills' current (baseline) profitability levels, it
does not quantify the extent to which price increases can be passed on to
consumers.
VII-21
-------
Table VII-12
KNIT FABRIC FINISHING: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
Representative Plant Size
Existing-Small
(6,375 Ibs./day)
Required Price Increase
Percent Proposed Control Costs
S
S, E
S, E, B
S, E, C
Existing-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Existing-Large
(85,340 Ibs./day)
S
S, E
S, E, B
S, E, C
New Source-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
80
.16
.29
.67
1.09
.09
.14
.63
.67
.08
.11
.53
.61
.09
.14
.63
.67
100
.20
.35
.82
1.33
.10
.17
.77
.82
.09
.13
.64
.75
.10
.17
.77
.82
120
.23
.42
.97
1.58
.12
.20
.91
.97
.11
.16
.76
.89
.12
.20
.91
.97
200
.38
.67
1.55
2.55
.19
.33
1.45
1.57
.17
.26
1.21
1.44
.19
.33
1.45
1.57
VII-22
-------
Analysis of the expected price increases at the industry level involves
translating the pretreatment cost estimates to changes in market demand and
supply for production. Market responses may take several forms, depending on
how many mills choose to close and the extent of the pass-through of pollution
costs to the consumers. The supply, in turn, depends on the mills' decisions
which will be based on the strength of the market demand, competitors' actions,
and on the market's ability to sustain price increases. There are a number of
demand and supply factors which need to be considered in determining the portion
of pretreatment costs to be passed through. Unfortunately, all such factors
cannot be expressed quantitatively and, by necessity, the projected price in-
creases involved a considerable amount of judgment. The potential implications
for price effects of some of these factors are discussed below.
Factors which increase the possibility of pretreatment cost pass-through
in the knit fabric finishing industry segment are relatively high capacity
utilization, the broad advance in demand for nearly every knitted-good field
(hosiery, knit outerwear, knit underwear, and knit fabric), and the small
percentage of the domestic market served by foreign producers. Although the
industry is characterized by keen competition, which would indicate that pre-
treatment cost pass-through would be difficult, certain nonprice factors, such
as promotional efforts, the technological changes which have resulted in better
quality products, and the innovative design of finished goods, are also important.
Considering the aggregate effects of these factors on the ability of the
mills to increase prices, it seems likely that all of the pretreatment costs
incurred by the large mills can be passed through to consumers. The price
increases that were utilized in the analysis were assumed to be approximately
equal to the impact that would be experienced by the large representative plant
in the knit fabric finishing industry segment.
Price increases to offset the costs of pretreatment controls by the im-
pacted knit fabric finishing mills are expected to occur. However, these
price increases cannot be specified now due to the wide range in the costs
associated with the different levels of pretreatment control. In the following
analysis, no price changes were assumed to occur and, accordingly, the financial
effects on the mills are without added revenues from price increases. From the
firm's viewpoint (that is, a financial viewpoint), the financial effects
discussed below represent the most severe case.
Financial Effects. The financial profiles for the representative mills
in the knit fabric finishing industry segment were described previously. The
survey data, as well as published data, indicated substantial variability in
key financial parameters for mills in this sector. These financial profiles
of representative mills and the estimated costs of pretreatment controls pro-
vided by EPA were used to compute the following financial indicators under
baseline (without pretreatment controls but with municipal user charges) and
with pretreatment controls: after-tax income, after-tax return on sales, after-
tax return on invested capital, cash flow, and cash flow as a percent of
invested capital and net present value.
These financial measures were computed for each representative mill
according to the discounted cash flow and return on investment procedures
outlined in the methodology. In addition, a sensitivity analysis was performed
VII-23
-------
<
H
H
I
Table VII-13
KNIT FABRIC FINISHING: PRETREATMENT STANDARD IMPACTS ON PROFITABILITY
After-Tax Profits ($1,000)
Representative
Plant Size
Existing-Small
(6,375 Ibs./day)
S
S, E
S, E, B
S, E, C
Existing-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Existing-Large
(85,340 Ibs./day)
S
S, E
S, E, B
S, E, C
New Source-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Baseline
Case
251
1,105
2,209
1,081
% Proposed Pretreatment Costs
80
247
244
235
217
1,099
1,094
1,066
1,041
2,201
2,194
2,152
2,108
1,075
1,070
1,042
1,016
100
246
242
231
209
1,098
1,091
1,056
1,024
2,199
2,191
2,138
2,083
1,073
1,067
1,032
1,000
120
245
240
227
200
1,096
1,089
1,047
1,008
2,196
2,187
2,124
2,057
1,072
1,064
1,022
984
200
241
233
211
167
1,090
1,078
1,008
944
2,188
2,172
2,067
1,956
1,066
1,053
983
919
After-Tax Return on Sales (%)
Baseline
Case
2.76
2
2
2
2
3.71
3
3
3
3
4.21
4
4
4
4
3.62
3
3
3
3
Percent Proposed
Pretreatment Costs
80
.71
.67
.58
.38
.69
.67
.57
.49
.19
.18
.10
.02
.60
.59
.49
.41
100
2.
2.
2.
2.
3.
3.
3.
3.
4.
4.
4.
3.
3.
3.
3.
3.
70
65
54
29
68
66
54
43
19
17
07
97
60
58
46
35
120
2.
2.
2.
2.
3.
3.
3.
3.
4.
4.
4.
3.
3.
3.
3.
3.
69
63
49
20
68
65
51
38
18
17
05
92
59
57
43
30
200
2.
2.
2.
1.
3.
3.
3.
3.
4.
4.
3.
3.
3.
3.
3.
3.
64
55
32
83
66
61
38
16
17
14
94
73
57
53
30
08
After-Tax Return on
Invested Capital (%)
Baseline
Case
8.96
10.96
12.00
4.37
Percent Proposed
Pretreatment Costs
80
100
120
200
8.73 8.68 8.62 8.39
8.53 8.42 8.32 7.91
7.97 7.73 7.51 6.65
7.37 7.00 6.63 5.25
10.85 10.82 10.79 10.68
10.75 10.70 10.65 10.45
10.04 9.83 9.62 8.82
10.01 9.79 9.56 8.70
11.90 11.88 11.85 11.75
11.84 11.80 11.76 11.60
11.22 11.03 10.85 10.15
11.14 10.93 10.73 9.93
4.34 4.33 4.32 4.29
4.31 4.30 4.28 4.22
4.13 4.07 4.01 3.77
4.06 3.98 3.91 3.61
-------
for each representative mill, using pretreatment control cost estimates at
levels between 80% and 200% of the costs provided by EPA. The results of this
analysis are discussed below.
After-tax Income. As shown in Table VII-13, the imposition of pretreat-
ment controls on the knit fabric finishing representative plants results in
small to rather significant reductions in income, depending upon the level of
pretreatment and plant size. Expressed as a percent of the baseline incomes,
the pretreatment levels resulted in a decrease in after-tax incomes of between
2% or $5,000 and 17% of $42,000 for the small plant, between .6% or $7,000 and
7% or $81,000 for the medium plant, and between .5% or $10,000 and 6% or $126,000
for the large plant.
The imposition of pretreatment controls on new source medium-size plants
results in a decrease in after-tax income of between .7% and 7%.
After-tax Return on Sales. The after-tax return on sales for the existing
and new source representative knit fabric finishing plants also are shown in
Table VII-13. As would be expected with the above indicated declines in after-
tax incomes, the impacted plants' returns on sales declined by a corresponding
percentage. The imposition of pretreatment standards obviously would further
deteriorate the already low-to-moderate returns in the knit fabric finishing
industry.
From a baseline of 2.8% for the small plant, the decline ranged from an
after-impact return of 2.7% to 2.3%, depending on the level of pretreatment
control. For the medium plant, the return after controls are imposed resulted
in no decline from the baseline of 3.7% for the lowest level of pretreatment
to a decline to 3.4%. For the large plant, the return did not decline from
the baseline of 4.2% for the lowest level of pretreatment to a decline to 4.0%.
For the medium new source plant, the decline in baseline return on sales of 3.6%
ranged from no decline for the lowest level of pretreatment to 3.4%.
After-tax Return on Invested Capital. The baseline and impacted knit
fabric finishing plants' returns on invested capital are shown in Table VII-13.
After the imposition of pretreatment controls on the existing plants, return on
investment ranges from 8.7% to 7.0% for the small plant, from 10.8% to 9.8%
for the medium plant, and from 11.9% to 10.9% for the large plant. In the new
source medium plant, the returns range from 4.3% to 4.0% for the proposed levels
of pretreatment.
Cash Flow. Estimated cash flows (after-tax income plus depreciation) are
shown in Table VII-14 for the representative plants. The cash flows as percent-
ages of invested capital for the baseline cases are 19.1% for the existing
small plant, 15.4% for the existing medium plant, 15.8% for the existing large
plant, and 8.7% for the new source medium plant. Depending on the level of
pretreatment, the cash flows as percentages of invested capital vary between
18.7% and 16.8% for the existing small plant, between 15.3% and 14.2% for the
existing medium plant, between 15.7% and 14.8% for the existing large plant,
and between 8.7% and 8.3% for the new source medium plant.
VII-25
-------
Table VII-14
KNIT FABRIC FINISHING: PRETREATMENT STANDARD IMPACTS ON CASH FLOWS
Cash Flow ($1,000)
Representative
Plant Size
Existing-Small
(6,375 Ibs./day)
S
S, E
S, E, B
S, E, C
Existing-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Existing-Large
(85,340 Ibs./day)
S
S, E
S, E, B
S, E, C
New Source-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Base-
line
Case
534
1,552
2,917
2,150
% Proposed Pretreatment Costs
80
532
529
524
508
1,550
1,545
1,535
1,504
2,914
2,908
2,892
2,843
2,147
2,143
2,132
2,101
100
531
528
522
502
1,549
1,543
1,530
1,492
2,913
2,906
2,885
2,825
2,146
2,141
2,128
2,089
120
530
527
519
495
1,548
1,541
1,526
1,479
2,912
2,903
2,879
2,806
2,146
2,139
2,124
2,077
200
528
522
509
469
1,545
1,534
1,509
1,431
2,909
2,894
2,853
2,732
2,143
2,132
2,106
2,028
Cash Flow as a % of Invested Capital
Base-
Line
Case
19.06
15.39
15.85
8.70
% Proposed Pretreatment Costs
80
18.79
18.50
17.75
17.22
15.29
15.18
14.45
14.47
15.76
15.69
15.07
15.03
8.67
8.64
8.45
8.40
100
18.73
18.37
17.44
16.79
15.26
15.13
14.23
14.25
15.74
15.65
14.89
14.83
8.66
8.62
8.38
8.32
120
18.66
18.24
17.14
16.37
15.24
15.08
14.02
14.03
15.71
15.61
14.70
14.63
8.66
8.61
8.32
8.25
200
18.40
17.72
16.02
14.79
15.13
14.88
13.21
13.18
15.62
15.45
14.01
13.87
8.63
8.55
8.09
7.96
-------
Table VII-15
KNIT FABRIC FINISHING:
PRETREATMENT STANDARD IMPACTS ON NET PRESENT VALUES
(in thousands of dollars)
Net Present Values
Representative
Plant Size
Existing-Small
(6,375 Ibs./day)
S
S, E
S, E, B
S, E, C
Exist ing-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Existing- Large
(85,340 Ibs./day)
S
S, E
S, E, B
S, E, C
New Source-Medium
(42,670 Ibs./day)
S
S, E
S, E, B
S, E, C
Baseline
Case
882
1,084
1,131
996
5,423
6,663
6,957
6,120
10,527
12,935
13,505
11,881
7,841
9,635
10,060
8,850
Percent
80
826
962
833
571
5,329
6,473
6,059
5,283
10,378
12,671
12,193
10,533
7,748
9,445
9,162
8,013
Proposed
100
812
931
758
465
5,305
6,425
5,835
5,074
10,341
12,605
11,865
10,197
7,724
9,397
8,938
7,804
Pretreatment
120
798
900
683
359
5,282
6,378
5,610
4,865
10,304
12,539
11,537
9,860
7,701
9,350
8,713
7,595
Costs
200
742
778
384
- 66
5,188
6,187
4,713
4,028
10,156
12,276
10,226
8,513
7,607
9,159
7,816
6,758
Wet Present Values. The net present values for the knit fabric finishing
representative plant are all positive in the baseline case as well as after in-
curring pretreatment expenditures (see Table VII-15). This implies that it
would be probable that the representative plants could remain in operation after
meeting pretreatment standards.
VII-27
-------
Production, Employment, and Other Effects. Production effects related to
pretreatment costs can be attributed to either a reduction in supply, due to
plant closures, or a decrease in consumer demand, hence mill production, due to
price increases.
The price increase that is utilized in the production analysis is assumed
to be equal to the impact that would be experienced by the largest knit fabric
dyeing and finishing mill. This assumption seems the most pragmatic and real-
istic considering the structural characteristics of the knit fabric finishing
segment. Another factor that should be considered, but cannot be at this time,
is what the effluent standards impact will be on the direct dischargers in the
industry segment.
Review of Table VII-12 indicates that the required price increases necessary
to offset the different levels of pretreatment control for the large knit fabric
finishing mill range from .09% to .75%.
To translate these price increases into impacts on consumer demand and
mill production, the demand elasticities for the knit fabric finishing mill
products must be known. Unfortunately, there are no data available which
relate market response and higher prices for the mill products. However, the
demand elasticities for six major fiber types range from -0.17 for cotton to
-1.0 for synthetics.i/ Using these price elasticities, the percentage reduction
in demand for knit fabric finishing would range between .015% and .75%.
In addition to reduction in mill production attributable to increased
prices, there could be plant closures if the knit fabric dyers and finishers
could not adequately absorb required pretreatment costs. The criteria for
determining whether or not a plant would cease operations were discussed in
the methodology. This financial analysis was conducted with no price changes
assumed and, therefore, represents the most severe case from the mills' view-
point .
As shown, the knit fabric dyeing and finishing mill representative plants
maintain positive profitability levels after incurring the costs of pretreatment
control in all situations (see Table VII-13). Furthermore, review of Table VII-14
reveals that all representative plants maintain positive cash flows after
meeting pretreatment standards. Review of the net present values for the knit
fabric finishing mills representative plants also shows all positive values
after the imposition of pretreatment costs (see Table VII-15). These profita-
bility measures indicate that there will be no plant closures attributable solely
to the financial impacts of the pretreatment controls.
The production effects analysis indicates a minimal reduction in the
production of knit fabric dyers and finishers. The loss of employment,
community impacts, and impacts on the balance of trad© due to the imposition
of pretreatment standards will also be minimal.
I/ Elasticities were obtained from the National Commission on Water Qual-
ity, Water Pollution Control Act of 1972, Economic Impacts, Textile Industry,
1975.
VII-28
-------
VIII. CARPET MANUFACTURE, DYEING AND FINISHING
This industry segment produces carpets by tufting, weaving, or other means.
There are separate dyeing and finishing plants as well as operations that are
part of a carpet mill.
Primary Products
Identification of the primary products of the carpet mills segment covered
in this study is derived from data reported in the 1972 Census of Manufactures,
the 1972 Standard Industrial Classification Manual, and pertinent Bureau of the
Census Current Industrial Reports. Relative importance in 1975 of each product
is shown as a percentage of production volume for the individual segment.
Percent of Industry
Production on a
SIC Square Yard Basis
2271 Woven carpet and rugs, total 2.3
2272 Tufted carpet and rugs, total 93.9
2272 001 Scatter rugs, bathmats, and sets 7.7
2272 003 Roll goods and rugs larger than
6' X 9' 81.1
2272 005 Automobile and aircraft carpeting 5.1
2279 Other carpet and rugs, total 3.8
Rugs, carpet and carpeting, total 100.0
Industry Description
The carpet industry segment is composed of those mills in SIC 2271 (Woven
Carpets and Rugs), SIC 2272 (Tufted Carpets and Rugs), and SIC 2279 (Carpets
and Rugs, Not Elsewhere Classified). These three cover the great majority of
production of carpets in the U. S. In 1972, the coverage ratio that is, the
extent to which the industry's primary products are shipped by plants classi-
fied in that industry, in SIC 2271 was 85%; in SIC 2272, 98%; and in SIC 2279,
71%. Specialization rates for plants in this sector are high as well and, for
these reasons, these SICs are considered as approximations of the entire out-
put of this segment.
The Census provided the following definitions for these industry groups:
2271 Woven Carpets and Rugs
Establishments primarily engaged in weaving carpets and rugs from
any textile yarn. Important products of this industry include Ax-
minster, Wilton, velvet, and similar woven carpets and rugs; and
woven automobile and aircraft floor coverings.
2272 Tufted Carpets and Rugs
Establishments primarily engaged in tufting carpets and rugs from
any textile fiber. Important products of this industry include car-
pets, rugs scatter rugs, and bathmats and bathmat sets except terry
VIII-1
-------
woven. Finishers of these products also are included in this
industry.
2279 Carpets and Rugs, Not Elsewhere Classified
Establishments primarily engaged in manufacturing rugs, carpets,
art squares, floor mattings, needle punch carpeting, and door mats
and mattings from twisted paper, grasses, reeds, coir, sisal, jute
or rags. Establishments primarily engaged in manufacturing hard
surface floor coverings, except rubber and cork, are classified in
Industry 3996.
Types of Firms. This discussion refers to the sector as a whole. The
data are presented in Table VIII-1. Tufted carpet (2272) is dominant, with many
more firms than the others, and a relatively large proportion of employment in
firms with only one plant location. The textile plant survey showed that about
one third of firms in the sector are privately held.
Plant Characterization. Insight into the carpet manufacturing industry
can be obtained by examining the composition and characteristics of the mills
which compose this sector. The number, size, and location of plants; municipal
system dischargers; age of equipment; efficiency and level of technology; and
other characteristics are discussed in this section.
Number, Size, and Location of Plants. In the floor covering mills indus-
try in 1972, there were 529 plants employing 59,900 persons, as displayed in
Table VIII-2. The table also shows the concentration of the industry in the
South, with 367 establishments employing 46,911 persons. Most of the employ-
ment is found in establishments employing more than 100; this employment amounts
to 87% of the industry employment.
A 1976 Carpet Industry Profile, prepared by R.B.I. International, Carpet
Consultants, permits identification of wet processors in the industry — 42% of
the 315 firms listed were wet processors. Based on this information, the num-
ber of wet processing plants in the segment is estimated to be 222.
Municipal System Dischargers. The impact of proposed pretreatment regula-
tions will be on wet processors using municipal sewage facilities. There are
four sources of estimates for the percentages of plants in this segment using
municipal sewage plants for discharge of process wastewater. Each of these
estimates is biased in known and unknown ways. The 1973 Water Use in Manufac-
turing report, for example, reports the number of plants discharging exclusively
to public sewers, but that includes only those plants with water intake of 20
million gallons a year or more. The other surveys are biased in unknown ways.
The estimates of proportion of municipal system dischargers are as follows:
1972 1974 1975(a) 1975(b)
Estimated Percent 70 69 87 86
Median 78
Sources: 1972 - U. S. Department of Commerce, 1972 Census of Manufactures,
Water Use in Manufacturing.
(continued)
VIII-2
-------
M
I
UJ
Table VIII-1
STRUCTURE IN THE CARPET MIL!, INDUSTRY
SIC
2271
(Carpet Woven)
2272
(Tufted Carpet)
2279
(Carpet, N.E.C.)
Number of
Plants
64
381
83
Number of
Single Unit
Companies
52
243
74
Percent of
Employment in
Single Unit
Companies
11
26
39
Percent of Shipments
Accounted for
8 Largest
Companies
91
33
88
50 Largest
Companies
99
78
99
-------
Table VIII-2
CARPET MILLS: NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
H
H
Region and
Employment
Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
North Central
All
1-19
20-49
50-99
100-249
250-499
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000
West
All
1-19
20-49
50-99
100-249
250-499
500-999
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
SIC 2271
Number of
Plants
17
8
1
3
4
1
4
4
32
24
2
1
1
2
2
12
11
Number of
Employees
1,200
51*
21*
214*
595*
319*
24*
24*
5,145*
142*
132*
138*
296*
1,479*
2,958*
131*
65*
SIC 2272
SIC 2279
65
47
1
6
5
2
2
2
66*
6,500
280*
20*
400
700*
600*
1,500*
3,000
Number of
Plants
21
8
2
1
7
1
2
14
10
1
2
1
295
109
53
30
58
25
14
6
49
17
16
9
1
4
2
379
144
72
42
67
29
17
8
Number of
Employees
4,800
49*
67*
76*
1,185*
744*
2,679*
415*
61*
34*
151*
169*
40,900
655*
1,752*
2,194*
9,645*
8,540*
10,223*
7,891*
4,185*
104*
538*
496*
169*
1,391*
1,487*
50,300
800
2,400
3,100
11,100
9,900
12,400
10,500
Number of
Plants
31
21
7
1
2
8
4
1
2
1
40
30
4
2
4
6
3
1
1
1
85
58
12
5
6
4
Number of
Employees
1,200
75*
276*
72*
777*
641*
11*
55*
276*
299*
866*
83*
121*
110*
552*
393*
8*
31*
55*
299*
3,100
200*
400
300
900
1,300
Total
Number of
Plants
69
37
10
5
11
3
1
2
26
18
1
3
3
1
367
163
57
34
63
26
16
8
67
31
17
11
1
5
2
529
249
85
53
78
35
19
10
Number of
Employees
7,200
175
364
362
1,780
1,096
744
2,679
1,080
96
34
206
445
299
46,911
880
1,873
2,436
10,335
8,836
11,702
10,849
4,709
177
569
617
169
1,690
1,487
59,900
1,328
2,840
3,621
12,729
11,921
13,933
13,528
* Estimated.
Source: Based on data from 1972 Census of Manufactures.
-------
Sources: (Continued)
1974 - National Commission on Water Quality, Water Pollu-
tion Control Act of 1972, Economic Impacts, Textile Indus-
try, prepared by National Bureau of Economic Research,
June 1975.
1975(a) - U. S. Environmental Protection Agency, Draft De-
velopment Document, Pretreatment Standards for Textile
Mills, prepared by Sverdrup & Parcel and Associates, Inc.,
November 1976.
1975 (b) - Survey data from economic contractor survey.
Application of the median estimate of 78% municipal dischargers and the
estimated 42% wet processors to the number of plants and employees by employ-
ment size range, the potential number of establishments and employees to be
impacted by Census regions can be determined. In order to consider only those
establishments where enforcement of pretreatment standards may have an im-
pact, establishments and subsidiaries of establishments with annual sales of
$100 million or more were removed from consideration. (See Table VITI-3.)
This table shows that the potential impact is greatest in the South, with 108
establishments and 9,783 employees potentially affected. This is out of a
U. S. potential of 145 establishments employing 12,276 persons. Of the 145
potentially impacted establishments in the nation, 121 are classified as small
in terms of production capacity, 15 are classified as medium, and only nine are
classified as large. However, employment is more evenly distributed with 3,283
employed by small establishments, 3,392 by medium and 5,601 by large. (See Table
VIII-4.)
Age of Equipment. Results from the economic contractor survey of carpet
mills revealed the information shown in Table VIII-5. Most equipment in 11
reporting plants is relatively new. However, the sample is so small that the
data are not necessarily representative.
Efficiency and Level of Technology. Cost of materials per dollar of ship-
ments and cost of materials and payroll per dollar of shipments do not show con-
sistent trends in the sector. Industry experts estimate that, in general,
practice is adequate, but with much room for improvement.
Energy efficiency, for example, is generally low, and this industry is
heavily dependent on natural gas supplies. A few carpet producers are using a
continuous dye process, and three or four leading firms have developed intri-
cate dye-printing processes — an innovation which may be expected to reduce
effluent volumes.
Degree of Specialization. Specialization is quite high for both woven and
tufted carpets — 97% and 89%, respectively — but is only at 62% for SIC 2279.
Trends in the Carpet Mills Industry. Table VIII-6 displays the differing
trends in the carpet segment from 1963 to 1974. Obviously, the tufted carpet
industry has experienced tremendous growth, doubling the number of establish-
ments and increasing employment by 150% and the value of shipments by 250%.
The other subsegments have shown stagnant or declining trends except for a
tripling of the value of shipments in SIC 2279.
VIII-5
-------
Table VIII-3
CARPET WILLS MUNICIPAL DISCHARGERS: ESTIMATED NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
H
I
Region and
Employment
Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
1,000+
North central
All
1-19
50-99
100-249
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
West
All
1-19
250-499
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
SIC 2271
SIC 2272
SIC 2279
Total
Number of
Plants
14
12
Number of
Employees
239
15
70
154
42
42
18
18
299
75
70
154
Number of
Plants
7
3
1
2
1
4
3
1
88
35
17
9
17
6
3
1
6
5
1
105
46
18
10
19
7
3
2
Number of
Employees
1,304
16
22
388
878
69
20
49
9,457
215
574
611
2,822
1,971
1,924
1,340
396
32
364
11,226
283
596
660
3,210
2,335
1,924
2,218
Number of
Plants
10
7
2
1
2
1
1
13
10
1
1
1
1
1
26
19
3
1
2
1
Number of
Employees
370
25
90
255
94
4
90
284
27
40
36
181
3
3
751
59
130
36
271
255
Number of
Plants
21
12
3
1
3
1
1
6
4
1
1
108
52
18
10
18
6
3
1
10
9
1
145
77
21
12
22
8
3
2
Number of
Employees
1,913
56
112
70
542
255
878
163
24
49
90
9,782
284
614
647
3,003
1,971
1,924
1,340
417
53
364
12,276
417
726
766
3,635
2,590
1,924
2,218
Source: See text.
-------
Table VIII-4
CARPET MILLS, DYEING AND FINISHING PLANTS
BY PRODUCTION CAPACITY CATEGORY, 1972
Production
Capacity
Category*
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
Number of
Plants
21
17
3
1
6
6
-
-
108
89
12
7
10
9
-
1
145
121
15
9
Number of
Employees
1,913
367
668
878
163
163
-
-
9,783
2,700
2,724
4,359
417
53
-
364
12,276
3,283
3,392
5,601
Region
Northeast
North Central
South
West
United States
* Small category production capacity less than 54,400 Ibs./day;
medium category between 54,400 and 94,400 Ibs./day; and large
category more than 94,400 Ibs./day.
Table VIII-5
AGE OF EQUIPMENT IN THE CARPET MILL INDUSTRY
(in percent)
Percent of Plant
Production Equipment
0 - 5 years old
6-10 years old
11 - 15 years old
16 - 20 years old
> 20 years old
Mode
(most frequent
percent reported)
Mean
Number of plants reporting: 11
Median
22
75
0
0
0
32
54
13
3
1.6
25
65
3
.2
.2
Range
100
100
60
22
10
VIII-7
-------
Table VIII-6
TRENDS FROM CENSUS DATA FOR CARPET MILLS
SIC 2271; Woven Carpets and Rugs
Year
1963
1967
1972
1973
1974
Estab-
Employment lishments
13,400
8,700
6,500
6,300
5,900
64
61
64
Com-
panies
56
55
64
Value of
Shipments
(millions)
$ 312.5
240.2
212.3
214.5
211.2
Special-
ization
Ratio*
77
84
89
Coverage
Ratio**
92
84
85
1963
1967
1972
1973
1974
SIC 2272; Tufted Carpets and Rugs
19,900
31,800
50,300
51,500
47,700
181
244
381
167
210
334
$ 801.8
1,426.9
2,782.8
3,338.6
3,070.3
96
96
97
96
99
98
SIC 2279: Carpets and Rugs, Not Elsewhere Classified
1963
1967
1972
1973
1974
2,400
3,100
3,100
2,900
3,400
104
80
83
103
78
78
29.6
90.3
157.9
145.2
177.1
89
83
62
46
69
71
* Specialization Ratio - This ratio measures the extent to which the industry
specializes in making its primary products.
** Coverage Ratio - This ratio measures the extent to which the products pri-
mary to an industry are shipped by plants classified in that industry.
Sources: Annual Survey of Manufactures and Census of Manufactures, 1972.
Demand, Supply, and Prices
The price for dyeing and finishing of carpets is dependent upon the demand
and the supply for carpet in the marketplace. Characteristics of demand, supply,
and prices for carpets are discussed below.
Demand. The demand for rugs, carpet, and carpeting can be indicated by
the value of shipments of these products between 1961 and 1975. (See Table
VIII-7.) The demand remained strong, with an annual growth rate of 10% to 15%,
until 1974. The slowdown of the market reflects the depressed economy as a
whole in the last few years, especially the housing market. Also, it may give
VIII-8
-------
Table VIII-7
VALUE OF SHIPMENTS OF RUGS, CARPET, AND CARPETING: 1961 TO 1975
(In millions of dollars; not seasonally adjusted)
Rugs, Carpet,
and Carpeting Woven Carpet Tufted Carpet Other Carpet
Year Total and Rugs and Rugs and Rugs
1961 881.2 283.3 550.4 47.5
1962 956.7 254.3 656.6 45.7
1963 1,074.4 246.3 779.5 48.6
1964 1,241.5 235.8 952.2 53.6
1965 1,382.4 228.5 1,097.5 56.4
1966 1,497.6 246.7 1,183.4 67.5
1967 1,615.5 228.1 1,299.2 88.2
1968 1,972.3 234.1 1,641.4 96.8
1969 2,186.6 237.4 1,845.7 103.5
1970 2,215.1 202.6 1,914.2 98.3
1971 2,395.5 181.3 2,121.0 93.1
1972 2,936.2 195.4 2,642.1 98.7
1973 3,360.5 193.5 3,064.4 102.6
1974 3,328.8 182.5 3,043.9 102.3
1975 3,092.2 156.6 2,856.0 79.6
Note: Detail may not add to total due to independent rounding.
Source: Current Industrial Reports, Series MQ-22 Q(75)-5, U. S. Department of
Commerce.
a signal of market saturation. The industry is seeking new market outlets out-
side the traditional floor market. Wall carpets are a case in point. The in-
dustry also has tried to increase its market penetration by including stores
that handle building supplies, paint, wallpaper, hardware, and appliances as
its distributors. The industry can be expected to grow at a healthy rate of
10% a year in the near future. However, competition will be increasingly severe
and profit margins will continue to narrow.
Supply. Carpet companies used to be family-owned businesses. As the in-
dustry has grown, many of them went public during the last decade, and others
are now part of large corporations which are publicly owned. The industry is
characterized by hundreds of mills in keen competition. Because of the nature
of the product, it is difficult to create individuality among products. Foreign
imports of carpets and rugs was 2.9% of apparent consumption in 1975, while ex-
ports as a portion of industry shipments was 2.1%.
Prices. The price trend of carpet products has shown a remarkable down-
ward dip in the past three decades. (See Table VIII-8.) The causes of the
declining price trend can be attributed to innovation in processing technology,
efficient uses of labor and materials, and the keen competition among numerous
producers. Only in the last two years have carpet prices stopped the downward
dip because of the high and rising cost of labor and materials. The acquisition
of small mills by larger companies and the consequent improved financial posi-
tion have created a degree of price stability and perhaps more disciplined
management.
VIII-9
-------
Table VIII-8
DOMESTIC BROADLOOM CARPET
AVERAGE MILL VALUE PER SQUARE YARD
Year All Broadloom Woven Tufted
1950 $6.26
1955 5.30 $6.19 $3.36
1960 4.50 6.56 3.49
1965 3.76 6.09 3.40
1966 3.69 6.32 3.30
1967 3.60 6.19 3.29
1968 3.75 6.28 3.50
1969 3.76 6.45 3.53
1970 3.56 6.42 3.36
1971 3.50 6.36 3.34
1972 3.38 6.49 3.23
1973 3.56 6.85 3.42
1974 3.77 6.74 3.64
1975 3.90 7.16 3.77
Source: The Carpet and Rug Institute Industry Review, 1975-76.
Secondary Price Increases. Since carpets are primarily sold directly to
consumers, price increases rising from their manufacture cannot be absorbed by
subsequent finishing or fabricating operations. Consequently, there were no
responses to the textile users product survey relevant to the carpet industry
seqment of the study.
Financial Profile
The survey data from carpet mills were grouped into three size categories
based on production capacity in pounds of product per day. The small category
comprised all plants with capacities of less than 54,400 pounds per day. The
medium category included plants with capacities of between 54,400 and 94,400
pounds per day. The large category was defined as all plants with capacities
of more than 94,400 pounds per day. In each of these size categories, the
representative mill sizes specified in the Development Document were used to
base the financial statements for that category. For the carpet mills, the
small representative plant statement was based on a plant capacity of 22,300
pounds per day, the medium-size representative plant was based on a capacity
of 74,400 pounds per day, and the large-size plant was based on a capacity of
148,800 pounds per day.
The survey data for 1975 operations reflected a capacity utilization rate
in the carpet mills of 93% in the small capacity group, 90% in the medium-size
group, and 64% in the large-size group. This wide variation in the capacity
utilization of the carpet mills can be attributed to the relatively poor mar-
keting conditions in 1975, and it reflects the fact that the smaller mills
were probably more able to adjust their operations to the reduced market for
carpet. As will be seen in the next section, the pattern of better response
to the market conditions by the smaller firms was carried through consistently
VIII-10
-------
in the financial results of the 1975 operation. The financial data presented
on the representative plant financial statements which follow are for a plant
operating at a rate of 85% capacity.
Income Statement Data. The income statement data were compiled for the
baseline case, that is, all municipal sewer charges, depreciation, and expenses
for operating and maintaining water pollution abatement systems were removed
from the figures.
The price per pound of sales was found to be consistent throughout all
three size categories, averaging $1.83 in the small category, $2.03 in the
medium category, and $2.06 in the large category. The survey data exhibited
a price range of $.18 to above $9.00 per pound.
Direct production costs per pound for all carpet mills, based on question-
naire data, ranged from a minimum of $.12 to a maximum of over $7.00.
The cost structure of the carpet mills in the three size categories was
found to be relatively materials intensive, since labor in all three cases con-
stituted a low percentage of the direct costs associated with producing the
product. The indirect or fixed costs for this industry were found to decline
as the scale of operation was increased, with the small category having a 16%
indirect cost as a percentage of sales, the medium category having a 14% in-
direct cost as a percentage of sales, and the large category having a 13% fixed
cost as a percentage of sales.
The data presented in Table VIII-9 represent typical plants of the three
size categories of carpet manufacturers; also given are projected data for the
new source operations of a medium-size plant using the most modern technology.
The carpet plant group as a whole was found to be characterized by moderate
before-tax profit margins of between 5% and 8% of sales.
Balance Sheet Data. The data presented in Table VIII-10 represent typical
plants in the three carpet mill size categories; also given are projected data
for the new source operation of medium size. This whole industry group was
found to have a relatively larger portion of the financial structure concen-
trated in long-term debt as compared with other segments of the textile indus-
try covered by this report. This is probably due to the fact that the physical
plants in the carpet industry are, on the average, much newer than the plants
in the other segments of the textile industry in this report.
Invested Capital. The data presented in Table VIII-11 represent the fac-
tors considered in estimating the total investment capital for each of the rep-
resentative plants in the carpet manufacturing industry and the projection of
the invested capital needed to establish a new source plant of medium size.
Data Quality. The survey data for this industry were very good for the
small and large size categories. Due to the fact that few medium-size plants
responded to the survey and some of those that responded would not provide
usable financial data, the analysis of the data to arrive at a typical pattern
for the medium-size model plant utilized financial data from all size cate-
gories. It is believed that resulting statements presented in the tables
fairly represent the medium scale of operation and can be considered valid.
VIII-11
-------
Table VII1-9
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA
CARPET MILLS
(in thousands of dollars)
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Cost
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
Small
(18,955)
1.83
10,406
7,833
6,000
762
1,071
1,702
64
115
1,523
871
405
466
530
3,117
27.9
15.0
8.4
4.5
Existing
Medium
(63,240)
2.03
38,513
30,698
18,813
4,785
7,101
5,356
59
153
5,144
2,459
1,167
1,292
1,351
15,908
15.5
8.1
6.4
3.4
Large
(126,480)
2.06
78,164
64,165
37,875
15,829
10,461
9,966
257
424
9,285
4,033
1,922
2,111
2,368
32,287
12.5
6.5
5.2
2.7
New Source
Medium
(63,240)
2.03
38,513
30,086
19,092
3,787
7,207
7,377
892
1,341
5,144
1,050
491
560
1,452
24,785
4.2
2.3
2.7
1.5
VIII-12
-------
Table VIII-10
PRO FORMA BALANCE SHEET
CARPET MILLS
(in thousands of dollars)
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Other
Total Assets
Liabilities
Current Liabilities
Long-Term Debt
Owner's Equity/Net Worth
Total Liabilities
Small
(18,955)
2,011
1,746
64
599
953
130
3,757
640
1,558
1,559
3,757
Existing
Medium
(63,240)
14,671
8,956
176
3,284
5,140
356
23,627
7,719
7,030
8,878
23,627
Large
(126,480)
29,775
18,178
349
7,546
9,598
685
47,953
15,666
19,692
12,595
47,953
New Source
Medium
(63,240)
14,671
17,833
351
6,539
10,234
709
32,504
7,719
13,409
11,376
32,504
VIII-13
-------
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
Table VIII-11
INVESTED CAPITAL FOR CARPET MILLS
(in thousands of dollars)
Existing
Small
Book
1,746
2,011
640
1,371
3,117
Salvage
415
2,011
640
1,371
1,786
Medium
Book
8,956
14,671
7,719
6,952
15,908
Salvage
2,132
14,671
7,719
6,952
9,084
Large
Book
18,178
29,775
15,666
14,109
32,287
Salvage
4,326
29,775
15,666
14,109
18,435
New
Source
Medium
Book
17,833
14,671
7,719
6,952
24,785
Salvage
4,458
14,671
7,719
6,952
11,410
H
M
I
-------
Pretreatment Standards, Technologies, and Costs
The effluent control system alternatives and costs presented in this
section were provided by the Environmental Protection Agency as developed by
the technical contractor and submitted in their Development Document.
Industrial wastewaters discharged to publicly owned treatment works (POTW)
are regulated by Section 301(b) of the Federal Water Pollution Control Act
Amendments of 1972 (PL 92-500). Standards which such dischargers must meet
are to be promulgated pursuant to Section 307 of this Act. The intent of such
standards is to require treatment at the point of discharge complementary to
the treatment performed by the POTW. Duplication of treatment is not the goal.
The pretreatment by the discharger of pollutants that are not susceptible to
treatment in a POTW is critical to attainment of the overall objective of the
Act by protecting the POTW from process upset and by preventing discharge of
pollutants which would pass through or otherwise be incompatible with the POTW.
Pretreatment Control Technologies. For the carpet mills segment, three pre-
treatment technologies have been developed. These technologies were developed
on the basis of information obtained from a survey of POTWs treating textile
wastes and from a consideration of the types of wastes discharged by this indus-
try subcategory. The survey of the POTWs yielded 50 specific complaints asso-
ciated with the treatment of textile wastes. The most common complaint related
to uneven loadings, either hydraulic or organic. The next most common complaint
related to coarse solids, with pH problems, color, low dissolved oxygens in the
POTW influent, grease, and temperature following in the order listed. Not all
of these problems were necessarily found in plants treating wastes from this
segment.
Specific pretreatment technologies are described below. Estimated costs
are developed for carpet mills in the production capacity range of 10 to 68 kkg
(11 to 74 tons) per day.
Alternative A - No Waste Pretreatment or Control
Costs - None
Reduction Benefits - None
Alternative B - Screening (S)
This alternative comprises fine screening to remove lint, rags, and
other coarse suspended solids that tend to clog pumps, foul bearings,
and otherwise hinder POTW operations.
Costs - Investment costs estimated to range from $31,700 to $63,500.
Total annual costs estimated to range from $13,400 to $20,000.
Reduction Benefits - Alternative B provides better than 95% reduction
of coarse suspended solids.
Alternative C - Screening and Equalization (S,E)
This alternative includes fine screening and equalization in mixed
holding basins sized to provide detention periods of from 8 to 16
hours.
VIII-15
-------
Costs - Investment costs estimated to range from $70,200 to $115,000, an
estimated increase over Alternative B of from $38,500 to $51,500. Total
annual costs estimated to range from $24,800 to $38,500, an estimated
increase over Alternative B of from $11,400 to $17,900.
Reduction Benefits - Alternative C provides the benefits of Alternative
B and also eliminates the discharge of slug hydraulic loads by the
carpet mill to the POTW.
Alternative D - Screening, Equalization, and Chemical Coagulation (S,E,C)
This alternative includes chemical coagulation to remove latex particles
and fine suspended and colloidal solids. Preliminary treatment by
screening and equalization is included to improve the effectiveness of
the chemical coagulation process.
Costs - Investment costs estimated to range from $183,000 to $384,000,
an estimated increase over Alternative C of from $112,800 to $269,000.
Total annual costs estimated to range from $99,500 to $201,200, an esti-
mated increase over Alternative C of from $74,700 to $162,700.
Reduction Benefits - Alternative D provides complete removal of coarse
suspended solids, prevents the discharge of hydraulic slugs to the
public collection system, and achieves reductions of BOD5_, TSS, COD, and
O&G of 50, 90, 70, and 90% respectively. Chromium levels are also reduced.
The pretreatment alternatives specified for this industry segment require
the availability of land to accommodate equalization wells and basins, aeration
lagoons, and activated sludge facilities. Land area in hectares that is esti-
mated to be required is shown in the following table:
Alternative
Plant Size
Small
Medium
Large
Land availability indicated by respondents to the economic contractor's
questionnaire was as follows:
No. %
None
-
-
-
S
0
0
0
S,E
0
0.4
0.6
S,E,C
0
0.4
1.0
No Land Available 7 33
Land Available
Less than 0.2 hectare 5 24
0.2 hectare -1.2 hectares _9 43
TOTAL 21 100
Discharge Status of the Industry. Current practices in the textile indus-
try have been estimated from information submitted by respondents to question-
naires prepared by the economic contractor. Estimates of the percentage of
VIII-16
-------
plants in this industry segment discharging into POTWs were obtained from four
sources, including the economic contractor's survey. The median value of these
four estimates indicates that 78% of the plants in this segment discharge into
POTWs.
The economic contractor also obtained information relating to pretreat-
ment practices of dischargers into POTWs. An analysis of the practices submit-
ted was made to determine the number of plants presently having facilities in
place to perform at least the pretreatment practices recommended by the tech-
nical contractor in each of the pretreatment alternatives. The results of
this analysis are shown in the following table:
Treatment
Alternative No. %
None 3 14
S 16 76
S,E 1 5
S,E,C 0 0
Other _2_ 10
TOTAL 21
The "other" treatment alternative includes cases which did not include
pretreatment practices recommended by the technical contractor.
It should be noted that the sufficiency of an existing pretreatment prac-
tice cannot be evaluated. Any given pretreatment practice may require upgrad-
ing to perform as adequately as the technical contractor has projected.
Pretreatment Control Costs. The pretreatment control costs, as provided by
EPA, are based on plant production, wastewater flow, pretreatment processes
proposed, and operation requirements. The costs depicted and discussed in this
section are for "typical" yet hypothetical manufacturers in this industry
segment.
Investment Costs. Investment costs include the installed costs of treat-
ment components plus allowances for contingencies and engineering. The installed
cost includes the costs of delivery and erection of major equipment items, evac-
uation and backfill, associated electrical and mechanical work, instrumentation,
backup pumps, contractor overhead and profit, and yardwork. Not included are
spare parts, standby power generating equipment, rock excavation, or the use of
pile foundations. A contingency allowance of 15% of the installed cost was used
to cover unexpected costs due to local mill conditions and differences between
the actual system and those used for cost estimates. No allowance was made for
shutdown of the mill during construction and installation.
Costs are expressed in January 1976 dollars. It was assumed that all design
specifications will be prepared by an outside consulting engineer in accordance
with applicable codes. Construction work was assumed to be performed by an out-
side contractor with no work to be done by in-plant labor or maintenance personnel.
VIII-17
-------
Engineering costs are included in the cost estimates and were derived by
using percentages of the installed costs and contingencies. For total costs
0 £ f °rr, ' W3S US6d- F°r larger Pr°3^ts, a percentage to the nearest
0.5% from Curve A in Consulting Engineering was used.
No land acquisition cost is included.
Total Yearly Costs. Total yearly costs consist of interest, depreciation
operation and maintenance, sludge disposal, energy and power, and chemicals.
The cost of money for capital expenditure was assumed to be 10% of the total
investment cost. Installed costs were depreciated over estimated lives of the
components on a straight-line basis.
Estimates were prepared of the number of hours required for operation of
the various component systems. In the case of this segment, it was assumed
that the textile mill operates 24 hours a day, 6 day a week, and 50 weeks a
year. Laboratory time is included for the more sophisticated systems where
analytical results would normally be used for operational control. Ten percent
was added to labor hours to cover supervision and administration. A labor
rate of $6.00 per hour was used to cover wages and fringe benefit costs.
Investment, annual operating, and total yearly costs for existing small,
medium, and large plants and new source medium plants in this segment are given
in Table V-l. Also shown are investment costs as a percent of fixed assets and
total yearly costs as a percent of annual sales.
Table VIII-12
PRETREATMENT CONTROL COSTS: CARPET MILLS
(Costs in $000)
Size, Status, and
Alternative
Small, Existing
S
S, E
S, E, C
Medium, Existing
S
S, E
S, E, C
Large, Existing
S
S, E
S, E, C
Medium, New Source
S
S, E
S, E, C
Investment Operating
Costs Costs
31.7
70.2
183.0
39.7
91.0
264.0
63.5
115.0
384.0
39.7
91.0
264.0
8.2
14.9
71.9
9.3
18.8
105.0
10.2
21.7
143.2
9.3
18.8
105.0
Total
Yearly
Costs
13.4
24.8
99.5
15.8
31.7
145.0
20.6
38.
201.
15.8
31.7
145.0
Investment Total
Cost Yearly Costs
as % of as % of
Fixed Assets Annual Sales
2.48
5.50
14.3
1.
2.
24
84
8.25
23
23
7.46
0.62
1.43
4.14
0.13
0.24
0.96
0.04
0.08
0.38
0.03
0.05
0.26
0.04
0.08
0.38
VIII-18
-------
Municipal System User Charges. The data on user charges collected from
publicly owned treatment works were presented for all industry segments in a
previous section. Data collected from respondents to the plant questionnaire
provided the following information on annual sewer charges for 1975 for carpet
mills:
Sewer Charges/
Sewer Charges/ Wastewater
Production Discharge
(in cents/ (in cents/
All Respondents 1,000 pounds) 1,000 gallons)
Mean 289 50
Median 113 22
Minimum 5 5
Maximum 86,667 467
Anticipated Reaction to Pretreatment Standards. Although specific pre-
treatment requirements have not been promulgated by EPA, the probable reaction
of manufacturers to such standards was determined by questionnaire. Respondents
were asked to select one of the nine options listed below, given the limited
amount of information which they had about pretreatment requirements and complete
treatment requirements at the time:
1. Change from pretreatment to complete treatment
2. Change from complete treatment to pretreatment
3. Upgrade existing pretreatment
4. Upgrade existing complete treatment
5. Initiate pretreatment
6. Initiate complete treatment
7. Close the plant as a result of pollution control standards
8. None of the above, because this plant already conforms to the
proposed standards.
9. Other (specify)
Twnety-one replies were received from plants in this segment. The nature
of the replies was a follows:
Alternative No. %
Upgrade existing pretreatment 1 5
Initiate pretreatment 1 5
Plant conforms to standards 4 19
Other 15. 71
TOTAL 21 100
VIII-19
-------
Economic Impact Analysis
The imposition of pretreatment controls on the carpet industry segment-
will have both direct and indirect impacts on the industry, on consumers, on
its suppliers, and on communities in which plants are located. The resulting
direct impacts from the imposition of pretreatment controls are analyzed in
both quantitative and qualitative terms: price effects, financial effects,
production effects, employment and community effects, and balance of trade
effects.
The previous analysis identified a total of 145 plants operating at the
end of 1972, with 12,276 employees which the proposed pretreatment regulations
could affect. This represented 121 plants which could be classified as small
in terms of production capacity, 15 plants as medium, and 9 as large. In
addition to the examination of the potential impact of pretreatment controls
on existing plants, the analysis considered the impacts on those plants which
have not been constructed and will discharge their effluent to publicly owned
treatment systems (hereafter referred to as "new source").
The economic impact analysis also included a sensitivity analysis which
was performed using pretreatment control cost estimates at levels between 80%
and 200% of the costs provided by EPA. The analysis was based on a wide range
in order to take into account the possibility of regional as well as individual
mill variations in pretreatment costs. In addition to this discussion on the
economic impact analysis, an impact analysis was completed using an incremental
capital cost approach and is included in Appendix A. Since the exact level of
pretreatment which will be required has not been specified, this report presents
data on the effects for all levels under consideration.
Finally, it should be noted that this analysis was concerned only with the
impacts of proposed pretreatment guidelines. It is recognized that there are
other regulatory programs by EPA, OSHA, and various state controls, either
existing or emerging, which will influence the profitability of the plants
studied. The analysis does not consider the full impact of this aggregate of
regulations.
Price Effects. The role of price effects in the impact analysis is criti-
cal. The analysis of price effects proceeded with the determination of what
price increases would be required to offset the costs of pretreatment controls.
Next, the market structure for the carpet industry segment was examined to
determine if mills would be forced to absorb the price increases, or if the
price increases could be passed on to customers, or if the price increases
could be partially absorbed and partially passed on. Also, the possibility
of secondary price increases was examined in a previous section.
Required Price Increases. An implicit indication of the expected price
effects of pretreatment controls used in this report is the amount of sales
price increase necessary to maintain a mill's profitability, after pretreatment
control expenditures, at the same level as the mill without the control expenses.
The ability of mills to pass on such required price increases is evaluated in
the following section.
VIII-20
-------
The required price increases necessary to offset the different levels
of proposed pretreatment control for the representative mills are shown in
Table VIII-13. The required price increases for small carpet mills range
from .18% to 1.18%, depending on the level of pretreatment; for medium mills,
from .06% to .47%; and, for large mills, from .04% to .31%. For the new
source mills, the required price increase to offset the pretreatment level
ranges from .06% to .47%. Also shown are the sensitivity ranges of required
price increases when pretreatment costs vary from 80% to 200% of the original
estimated costs.
Expected Price Increases. Although the previous discussion has identified
the required price increases to offset expenditures for pretreatment control
in order to maintain the mills' current (baseline) profitability levels, it
does not quantify the extent to which price increases can be passed on to
consumers.
Analysis of the expected price increases at the industry level involves
translating the pretreatment cost estimates to changes in market demand and
supply for production. Market responses may take several forms, depending on
how many mills choose to close and the extent of the pass-through of pollution
costs to the consumers. The supply, in turn, depends on the mills' decisions
which will be based on the strength of the market demand, competitors' actions,
and on the market's ability to sustain price increases. There are a number of
demand and supply factors which need to be considered in determining the portion
of pretreatment costs to be passed through. Unfortunately, all such factors
cannot be expressed quantitatively and, by necessity, the projected price in-
creases involved a considerable amount of judgment. The potential implications
for price effects of some of these factors are discussed below.
Factors which increase the possibility of pretreatment cost pass-through
in the carpet industry segment are the strong growth in demand for rugs, carpets,
and carpeting as indicated by the value of shipments of these products and the
small percentage of the domestic market served by foreign producers.
A factor which decreases the possibility of pretreatment cost pass-through
is the fact that competition within the industry is based primarily on price.
This is partially due to the nature of the product, which makes it difficult
to create product differentiation.
This intense competition is evidenced by the decline in the prices of
carpet products over the past three decades, which indicates that reduced
costs attributed to innovations in processing technology are being passed on
to the consumers.
Considering the aggregate effects of these factors on the ability of
the carpet mills to increase prices, it seems likely that all of the pretreat-
ment costs incurred by the large mills can be passed through to consumers.
The price increases that were utilized in the analysis were assumed to be
approximately equal to the impact that would be experienced by the large
representative plant in the carpet industry segment.
VIII-21
-------
Table VIII-13
CARPET INDUSTRY: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
Required Price Increase
Representative Plant Size
Existing-Small
(18,955 Ibs./day)
S
S, E
S, E, C
Existing-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
Existing-Large
(126,480 Ibs./day)
S
S, E
S, E, C
New Source-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
80
.14
.26
.96
.05
.09
.38
.03
.05
.26
,05
09
38
100
.18
.31
1.18
.06
.11
.47
.04
.07
.31
.06
.11
.47
120
.21
.37
1.40
.07
.13
.55
.05
.08
.37
.07
.13
.55
200
.33
.60
2.27
.11
.21
.90
.07
.12
.60
.11
.21
.89
VIII-22
-------
Price increases to offset the costs of pretreatment controls by the
impacted carpet mills are expected to occur. However, these price increases
cannot be specified now due to the wide range in the costs associated with the
different levels of pretreatment control. In the following analysis, no price
changes were assumed to occur and, accordingly, the financial effects on the
mills are without added revenues from price increases. From the firm's view-
point (that is, a financial viewpoint), the financial effects discussed below
represent the most severe case.
Financial Effects. The financial profiles for the representative mills
in the carpet industry segment were described previously. The survey data,
as well as published data, indicated substantial variability in key financial
parameters for mills in this sector. These financial profiles of representative
mills and the estimated costs of pretreatment controls provided by EPA were
used to compute the following financial indicators under baseline (without pre-
treatment controls but with municipal user charges) and pretreatment controls:
after-tax income, after-tax return on sales, after-tax return on invested
capital, cash flow, and cash flow as a percent of invested capital and net
present value.
These financial measures were computed for each representative mill accord-
ing to the discounted cash flow and return on investment procedures outlined
in the methodology. In addition, a sensitivity analysis was performed for each
representative mill, using pretreatment control cost estimates at levels
between 80% and 200% of the costs provided by EPA. The results of this analysis
are discussed below.
After-tax Income. As shown in Table VIII-14, the imposition of pretreatment
controls on the carpet representative plants results in small to rather significant
reductions in income, depending upon the level of pretreatment and plant size.
Expressed as a percent of the baseline incomes, the pretreatment levels resulted
in a decrease in after-tax incomes between 1.1% or $5,000 and 9.1% or $42,000
for the small plant; between .5% or $6,000 and 4.8% or $62,000 for the medium
plant; and between .3% or $7,000 and 3.8% or $80,000 for the large plant.
The imposition of pretreatment controls on new source medium size plants
results in a decrease in after-tax income of between 1.1% and 11.1%
After-tax Return on Sales. The after-tax return on sales for the existing
and new source representative carpet plants also are shown in Table VIII-14. As
would be expected with the above indicated declines in after-tax incomes, the
impacted plants' returns on sales declined by a corresponding percentage. The
imposition of pretreatment standards obviously would further deteriorate the
already low returns in the carpet industry.
Prom a baseline return of 4.4% for the small plant, 3.3% for the medium
plant, 2.7% for the large plant, and 1.4% for the medium new source plant, the
imposition of pretreatment controls resulted in the following after-impact
returns: for the representative plants and the return did not change for the
lowest level of pretreatment to a decline to 4.0% for the small plant, to 3.2%
for the medium plant, to 2.6% for the large plant, and to 1.3% for the new
source medium plant.
VIII-23
-------
Table VIII-14
CARPET INDUSTRY: PRETKEATMENT STANDARD IMPACTS ON PROFITABILITY
M
I
NJ
Representative
Plant Size
Existing-Small
(18,955 Ibs./day)
S
S, E
S, E, C
Existing-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
Existing-Large
(126,480 Ibs./day)
S
S, E
S, E, C
New Source-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
After-Tax Profits (SI,000)
Baseline % Proposed Pretreatment Costs
Case 80
461
457
454
427
1,282
1,277
1,273
1,232
2,090
2,085
2,079
2,026
549
544
540
500
100
456
452
419
1,276
1,270
1,220
2,083
2,077
2,010
543
538
488
120
455
450
410
1,275
1,268
1,208
2,082
2,074
1,994
542
535
475
200
451
443
377
1,269
1,258
1,158
2,076
2,063
1/929
537
526
426
After Tax Return on Sales (%)
Percent Proposed
Pretreatment Costs
Baseline
Case
4.43
3.33
2.67
1.43
80
100
120
200
4.39 4.38 4.37 4.33
4.36 4.34 4.33 4.26
4.11 4.03 3.94 3.62
3.32 3.31 3.31 3.30
3.30 3.30 3.29 3.27
3.20 3.17 3.14 3.01
2.67 2.67 2.67 2.66
2.66 2.66 2.65 2.64
2.59 2.57 2.55 2.47
1.41 1.41 1.40 1.39
1.40 1.40 1.39 1.37
1.30 1.27 1.23 1.11
After-Tax Return on
Invested Capital (%)
Baseline
. Case
14.80
8.06
6.47
2.22
Percent Proposed
Pretreatment Costs
80
100
120
200
14.55 14.48 14.42 14.17
14.30 14.18 14.06 13.59
13.10 12.70 12.30 10.81
8.01 8.00 7.99 7.94
7.96 7.94 7.92 7.82
7.65 7.54 7.44 7.05
6.45 6.44 6.43 6.40
6.42 6.41 6.40 6.34
6.22 6.15 6.09 5.84
2.19 2.19 2.18 2.16
2.17 2.16 2.15 2.10
2.00 1.95 1.89 1.68
-------
After-tax Return on Invested Capital, The baseline and impacted carpet
plants' returns on invested capital are shown in Table VI11-14. After the
imposition of pretreatment controls on the existing plants, return on invest-
ment ranges from 14.5% to 12.7% for the small plant, from 8% to 7.7% for the
medium plant, and from 6.5% to 6.2% for the large plant. In the new source
medium plant, the returns range from 2.2% to 2.0% for the proposed levels of
pretreatment.
Cash Flow. Estimated cash flows (after-tax income plus depreciation) are
shown in Table VIII-15 for the representative plants. The cash flows as per-
centages of invested capital for the baseline cases are 16.9% for the existing
small plant, 8.4% for the existing medium plant, 7.3% for the existing large
plant, and 5.8% for the new source medium plant. Depending on the level of
pretreatment, the cash flows as percentages of invested capital vary between
16.6% and 14.9% for the existing small plant, between 8.4% and 8.0% for the
existing medium plant, between 7.3% and 7% for the existing large plant, and
between 5.8% and 5.6% for the new source medium plant.
Net Present Values. The net present values for the carpet representative
plants are all positive in the baseline case as well as after incurring pretreat-
ment expenditures (see Table VIII-16). This implies that it would be probable
that the representative plants could remain in operation after meeting pretreat-
ment standards.
Production, Employment, and Other Effects. Production effects related to
pretreatment costs can be attributed to either a reduction in supply, due to
plant closures, or a decrease in consumer demand, hence mill production, due to
price increases.
The price increase that is utilized in the production analysis is assumed
to be equal to the impact that would be experienced by the largest carpet mill.
This assumption seems the most pragmatic and realistic considering the struc-
tural characteristics of the carpet industry. Another factor which should be
considered, but cannot be at this time, is what the effluent standards impact
will be on the direct dischargers in the carpet industry. Review of Table
VIII-13 indicates that the required price increases necessary to offset the
different levels of pretreatment control for the large carpet mill range from
.04% to .31%.
To translate these price increases into impacts on consumer demand and
mill production, the demand elasticities for the carpet mill products must
be known. Unfortunately, there are no data available which relate market
response and higher prices for carpet mill products. However, the demand
elasticities for six major fiber types range from -0.17 for cotton to -1.0
for synthetics.I/ Using these price elasticities, the percentage reduction in
carpet consumption would range between .007% and .31%.
I/Elasticities were obtained from the National Commission on Water
Quality, Water Pollution Control Act of 1972, Economic Impacts, Textiles
Industry, 1975.
VIII-25
-------
Table VIII-15
CARPET INDUSTRY: PRETREATMENT STANDARD IMPACTS ON CASH FLOWS
Cash Flow ($1,000)
H
ro
Representative
Plant Size
Existing-Small
(18,955 Ibs./day)
S
S, E
S, E, C
Existing-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
Existing-Large
(126,480 Ibs./day)
S
S, E
S, E, C
New Source-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
Base-
line
Case
525
1,341
2,348
1,441
% Proposed Pretreatment Costs
80
523
520
499
1,338
1,335
1,303
2,345
2,340
2,299
1,439
1,435
1,403
100
522
519
493
1,337
1,333
1,293
2,344
2,339
2,287
1,438
1,433
1,394
120
521
518
486
1,337
1,331
1,283
2,343
2,337
2,775
1,437
1,432
1,384
200
519
513
460
1,334
1,325
1,245
2,341
2,330
2,226
1,434
1,426
1,346
Base-
line
Case
16.85
8.43
7.27
5.82
% Proposed Pretreatment Costs
80
16.63
16.40
15.29
8.39
8.35
8.08
7.25
7.23
7.05
5.80
5.77
5.61
100
16.58
16.28
14.93
8.39
8.33
8.00
7.25
7.22
7.00
5.79
5.76
5.56
120
16.53
16.17
14.57
8.38
8.31
7.91
7.24
7.21
6.95
5.79
5.75
5.51
200
16.31
15.74
13.20
8.34
8.23
7.58
7.22
7.16
6.73
5.77
5.71
5.32
-------
Table VIII-16
CARPET INDUSTRY: PRETREATMENT STANDARD IMPACTS ON NET PRESENT VALUES
(in thousands of dollars)
Net Present Values
Representative
Plant Size
Existing-Small
(18,955 Ibs./day)
S
S, E
S, E, C
Existing-Medium
(63,240 Ibs./day)
S
S, E
S, E, C
Existing-Large
(126,480 Ibs./day)
S
S, E
S, E, C
New Source-Medium
(63,240 Ibs./day)
S
S,E
S, E, C
Baseline
Case
2,659
3,267
3,001
4,152
5,102
4,687
5,141
6,317
5,802
1,847
2,269
2,084
Percent
80
2,602
3,145
2,577
4,085
4,946
4,069
5,047
6,126
4,965
1,779
2,113
1,467
Proposed
100
2,589
3,115
2,470
4,068
4,907
3,915
5,024
6,079
4,756
1,763
2,073
1,313
Pretreatment
120
2,575
3,084
2,364
4,051
4,867
3,761
5,000
6,031
4,547
1,746
2,034
1,158
Costs
200
2,519
2,962
1,940
3,984
4,711
3,143
4,906
5,841
3,710
167
1,877
541
VIII-27
-------
In addition to reduction in mill production attributable to increased
prices, there could be plant closures if the carpet mills could not adequately
absorb required pretreatment costs. The criteria for determining whether or
not a plant would cease operation were discussed in the methodology This
financial analysis was conducted with no price changes assumed and, therefore,
represents the most severe case from the mills' viewpoint.
_As shown, the carpet mill representative plants maintain positive profit-
ability levels after incurring the costs of pretreatment control in all
situations (see Table VIII-14). Furthermore, review of Table VIII-15 reveals
that all representative plants maintain positive cash flows after meeting
pretreatment standards. Review of the net present values for the carpet mills
representative plants also shows all positive values after the imposition of
pretreatment costs (see Table VIII-16). These profitability measures indicate
that there will be no plant closures attributable solely to the financial
impacts of the pretreatment controls.
The production effects analysis indicates a minimal reduction in carpet
mill production. The loss of employment, community impacts, and impacts on
the balance of trade due to the imposition of pretreatment standards will also
be minimal.
VIII-28
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IX. STOCK AND YARN DYEING AND FINISHING, EXCEPT WOOL
This industry segment includes the dyeing and finishing of textiles in
yarn form and fiber form, except for wool. Included are plants involved in
dyeing and finishing only, as well as operations that are a part of spinning
and weaving mills.
Primary Products
Identification of the primary products of the stock and yarn dyeing and
finishing segment covered in this study is derived from data reported in the
1972 Census of Manufactures, the 1972 Standard Industrial Classifications
Manual, and pertinent Bureau of the Census Current Industrial Reports. Rela-
tive importance in 1972 of each product is shown as a percentage of production
volume for the individual segment.
SIC
22812 71
22690 12
22811 87
22690 21
22812 51
22690 23
22628 30
22218 30
22814 41
22814 81
22690 27
22690 28
22812 61
22690 32
22690 42
22690 61
22690 71
22690 00
22690 02
Yarns bleached
Yarns dyed; carded cotton
Yarns dyed; combed cotton
Yarns dyed; rayon and/or acetate
Yarns dyed; spun non-cellulosic and
silk yarns
Mercerized cotton yarns
Raw stock, bleached or dyed, except
wool
Printed plastic film
Finished, braided, or woven narrow
fabrics
Textile finishing, N.E.C.
Textile finishing, N.E.C.
Finished yarn, raw stock, and narrow
fabrics, except knit and wool (not
spun, thrown, woven, or braided in
same establishment)
Percent of Industry
Production Based
on Dollar Value
3.8
6.6
7.5
5.4
62.6
2.7
1.7
100.0
IX-1
-------
Industry Description
The stock and yarn finishing industry segment is comprised of mills in
Sic 2269 (Finishers of Textiles, Not Elsewhere Classified) and SIC 2281 (Yarn
Spinning Mills: Cotton, Man-Made Fibers, and Silk). Together these SIC codes
account for 80% of the dyed or finished yarns. Because of this fact and recog-
nizing that stock and yarn dyeing occurs in other industries, notably weaving
mills, carpet mills, and throwing and winding mills, this analysis will be
confined to data on SIC 2269 and SIC 2281.
The Census provides the following definitions for these industry groups:
2269 Finishers of Textiles, Not Elsewhere Classified
Establishments primarily engaged in dyeing and finishing tex-
tiles, not elsewhere classified, such as bleaching, dyeing,
printing and finishing of raw stock, yarn, braided goods, and
narrow fabrics, except wool and knit fabrics. These establish-
ments perform finishing operations on purchased textiles or on
a commission basis.
2281 Yarn Spinning Mills: Cotton, Man-Made Fibers and Silk
Establishments primarily engaged in spinning yarn wholly or
chiefly by weight of cotton, man-made fibers, or silk. Estab-
lishments primarily engaged in dyeing or finishing purchased
yarns or finishing yarns on a commission basis are classified
in Industry 2269.
Types of Firms. This industry segment includes dry as well as wet pro-
cessors (SIC 2281); SIC 2269 includes only wet processors. The information in
Table IX-1 reflects a pattern common to almost all segments of the textile
industry — a high degree of fragmentation.
Table IX-1
STRUCTURE OF THE STOCK AND YARN DYEING INDUSTRY
SIC 2269
SIC 2281
Number of plants
Number of companies
Number of single-unit companies
Percent employment in single-unit companies
Percent of shipments accounted for by:
8 largest companies
50 largest companies
201
189
121
24
36
86
424
263
154
20
31
74
Plant Characterization. Insight into the stock and yarn finishing indus-
try can be obtained by examining the composition and characteristics of the
mills that comprise this sector. The number, size, and location of plants;
municipal system dischargers; age of equipment; efficiency and level of tech-
nology; and other characteristics arc discussed in this section.
IX-2
-------
Number, Size, and Location of Plants. Table IX-2 displays the Census
estimated number of plants and employees by size groups and Census regions for
SICs 2269 and 2281. The bulk of employment is in firms with more than 100
employees. The total number of plants in this industry segment is 625. Employ-
ment is significant at 108,200 persons. By far the largest proportion of estab-
lishments and employment is in the South. This Census region has 87% of all
employees and 68% of all establishments. Of secondary importance is the North-
east, which includes 27% of establishments and 6% of employment in this industry
segment.
Municipal System Dischargers. The impact of proposed pretreatment standards
will be on wet processors using municipal sewage facilities. The four sources
for estimates of the proportion of plants using municipal treatment facilities
for discharge of process wastewater are displayed below:
1972 1974 1975(a) 1975(b)
Estimated Percent 59 80 74 89
Median 77
Sources: 1972 - U. S. Department of Commerce, 1972 Census of Manufac-
tures, Water Use in Manufacturing.
1974 - National Commission on Water Quality, Water Pollution
Control Act of 1972, Economic Impacts, Textile Industry, pre-
pared by National Bureau of Economic Research, June 1975.
1975(a) - U. S. Environmental Protection Agency, Draft De-
velopment Document, Pretreatment Standards for Textile Mills,
prepared by Sverdrup & Parcel and Associates, Inc., November
1976.
1975(b) - Survey data from economic contractor's survey.
Application of the median estimate of 77% municipal dischargers and the
various estimated percents (100% in SIC 2269, and 15% in SIC 2281) of wet pro-
cessors to the number of plants and employees by employment size range, the
potential number of establishments and employees to be impacted by Census re-
gions can be determined. In order to consider only those establishments where
enforcement of pretreatment standards may have an impact, establishments and
subsidiaries of establishments with annual sales of $100 million or more were
removed from consideration (See Table IX-3.) This table shows that the poten-
tial impact is greatest in the South, with 90 establishments and 14,637 em-
ployees potentially affected, and in the Northeast, with 92 establishments and
5,631 employees potentially affected. This is out of a U. S. potential of 197
establishments employing 22,058 persons. Of the 197 potentially impacted estab-
lishments in the nation, 151 are classified as small in terms of production
capacity and only eight are classified as large. However, employment is dis-
tributed differently, with 6,313 employed by small establishments, 10,217 by
medium, and 5,528 by large. (See Table IX-4.)
Age of Equipment. Results from the economic contractor's survey of stock
and yarn dyers revealed that equipment in the industry varies greatly in age.
The dyeing process for stock and yarn is limited essentially to two methods —
package and skein dyeing. Table IX-5 displays the results of the survey which
reflect the variation inherent in having both stock and yarn dyers and inte-
grated producers and dyers of yarn in the same segment.
IX-3
-------
Table IX-2
STOCK AND YARN DYEING AND FINISHING PLANTS:
EMPLOYMENT SIZE BY REGION, 1972
NUMBER AND
Region and
Employment
Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
North Central
All
1-19
20-49
50-99
100-249
250-499
500-999
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
West
All
1-19
20-49
50-99
100-249
250-499
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
SIC
No. of
Plants
109
45
30
15
12
6
1
8
3
1
1
I
2
76
20
14
12
18
8
4
8
5
2
1
201
73
45
30
32
14
7
2269
No. of
Employees
6,600
290*
994*
1,008*
1,757*
2,011*
540*
1,460*
21*
36*
73*
159*
1,171*
10,100
147*
528*
918*
2,999*
3,052*
2,456*
340*
35*
146*
159*
18,500
500
1,600
2,200
5,100
5,100
4,100
SIC
No. of
Plants
61
26
11
12
6
5
1
5
2
2
1
350
34
14
34
157
82
23
6
8
5
1
1
1
424
67
26
46
164
90
25
6
2281
No. of
Employees
4,300
163*
305*
795*
859*
1,566*
612*
1,204*
12*
603*
589*
83,700
240*
439*
2,542*
25,381*
28,999*
15,896*
10,203*
496*
30*
27*
138*
301*
89,700
500
800
3,400
26,300
31,500
17,100
10,100
No. of
Plants
170
71
41
27
18
11
2
13
5
1
1
1
2
3
426
54
28
46
175
90
27
6
16
10
1
2
2
1
625
140
71
76
196
104
32
6
Total
No. of
10,900
453
1,299
1,803
2,616
3,577
1,152
2,664
33
36
•J \J
73
* —f
1 59
-L — ' ^
603
1,760
93,800
387
967
3,460
28,380
32,051
18,352
10,203
836
65
27
146
297
301
108,200
1,000
2,400
5,600
31,400
36,600
21,200
10,100
*Estimated.
Source: Based on data from 1972 Census
of Manufactures.
IX-4
-------
Table IX-3
STOCK AND YARN DYEING AND FINISHING PLANTS MUNICIPAL DISCHARGERS:
ESTIMATED NUMBER AND EMPLOYMENT SIZE BY REGION, 1972
Region and
Employment
Size Category
Northeast
All
1-19
20-49
50-99
100-249
250-499
500-999
North Central
All
1-19
20-49
50-99
100-249
500-999
South
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
West
All
1-19
50-99
100-249
United States
All
1-19
20-49
50-99
100-249
250-499
500-999
1,000+
Source: See text.
SIC
No. of
Plants
85
35
23
12
9
5
1
7
2
1
1
1
2
52
15
11
8
11
5
2
7
4
2
1
151
56
35
23
22
10
5
2269
No. of
Employees
5,205
223
765
776
1,353
1,548
540
1,455
16
36
73
159
1,171
5,960
113
407
668
1,716
1,814
1,242
332
27
146
159
12,952
379
1,208
1,663
3,387
3,362
2,953
SIC 2281
No. of No. of
Plants Employees
7
3
1
1
1
1
38
4
2
4
17
8
2
1
1
1
46
8
3
5
18
9
2
1
426
19
35
92
99
181
8,617
27
45
275
2,775
2,980
1,397
1,178
3
3
9,106
49
80
367
2,874
3,161
1,397
1,178
Total
No. of
Plants
92
38
24
13
10
6
1
7
2
1
1
1
2
90
19
13
12
28
13
4
1
8
5
2
1
197
64
38
28
40
19
7
1
No. of
Employees
5,631
242
800
868
1,452
1,729
540
1,455
16
36
73
159
1,171
14,637
140
452
943
4,491
4,794
2,639
1,178
335
30
146
159
22,058
428
1,288
2,030
6,261
6,523
4,350
1,178
IX-5
-------
Table IX-4
STOCK AND YARN DYEING AND FINISHING PLANTS
BY PRODUCTION CAPACITY CATEGORY, 1972
Region
Northeast
North Central
South
West
United States
Production
Capacity
Category*
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
All
Small
Medium
Large
Number of
Plants
92
82
9
1
7
4
1
2
90
58
27
5
8
7
1
-
197
151
38
8
* Small category production capacity less than 35,600 Ibs /day-
medium category between 35,600 and 76,600 Ibs./day; and large
Car_Panv\7 mr~,r-^ 4-V,^,,, -In fnr\ -i , / -, -* -•->^-•-j<_
Number of
Employees
5,631
2,766
2,325
540
1,455
125
159
1,171
14,637
3,246
7,574
3,817
335
176
159
22,058
6,313
10,217
5,528
category more than 76,600 Ibs./day.
Table IX-5
AGE OF EQUIPMENT IN THE STOCK AND YARN DYEING AND FINISHING INDUSTRY
(in percent)
Percent of Plant
Production Equipment
0-5 years old
6-10 years old
11 - 15 years old
16 - 20 years old
Mode
(most frequent
percent reported)
Mean
0
0
0
0
16
18
15
8
Number of plants reporting: 81
Median
Range
100
100
89
100
IX-6
-------
Efficiency and Level of Technology. The level of technology in this seg-
ment is comparable to that in the woven fabric dyeing and finishing segment.
There are, however, fewer options for handling stock and yarn, and thus the
dyeing technology tends to be uniform across the sector. In the yarn spinning
sector, a great deal of modernization has taken place in response to the rapid
expansion of the knitting industry, so that a substantial amount of the spinning
equipment is not yet fully amortized. Cost of materials and payroll per dollar
of shipment have tended to remain relatively stable.
Trends in Stock and Yarn Finishing. Trend data in the two segment compon-
ants. as displayed in Table IX-6, reveal that this sector has grown substan-
tially in the last 10 to 15 years. Employment, number of establishments, and
production have been on a strong upward trend, reflecting the impetus from the
many new fibers that have been developed.
Estab-
lishments
178
192
201
_
„
Com-
panies
174
187
189
_
_
Shipments
(millions)
$ 206.9
290.9
637.3
649.4
587.8
ization
Ratio*
89
84
92
-
Coverage
Ratio**
64
52
54
-
Table IX-6
TRENDS FROM CENSUS DATA FOR STOCK AND YARN DYEING AND FINISHING INDUSTRY
SIC 2269: Finishers of Textiles, Not Elsewhere Classified
Value of Special-
Estab- Com- i
Year Employment
1963 9,200
1967 12,300
1972 18,500
1973 17,500
1974 14,700
SIC 2281: Yarn Spinning Mills: Cotton, Man-Made Fibers and Silk
1963 61,600 317 234 $1,067.0 96 83
1967 74,500 377 256 1,422.5 95 84
1972 89,700 426 264 2,250.6 92 86
1973 95,500 - - 2,615.9
1974 94,100 - - 2,918.2
* Specialization Ratio - This ratio measures the extent to which the industry
specializes in making its primary products.
** Coverage Ratio - This ratio measures the extent to which the products pri-
mary to an industry are shipped by plants classified in that industry.
Sources: Annual Survey of Manufactures and Census of Manufactures, 1972.
Demand, Supply, and Prices
The price for dyeing and finishing stock and yarn is dependent upon the
market demand for and the supply of products using stock and yarn. Character-
istics of demand, supply, and price for these products are discussed on the
next page.
IX-7
-------
Demand. The demand for stock and yarn had shown a remarkable growth until
1974. According to the American Yarn Spinners Association, the decline in total
spun yarn production experienced in 1974 continued through 1975 with a total drop
over the two-year period of 18%, as compared with 1973 production levels. The
general economic slowdown in the last few years is believed to be the cause of
the downward move. However, the demand for stock and yarn is recovering from
the decline and is expected to resume a significant growth.
Supply. The supply of stock and yarn in the nation, like most other seg-
ments of the textile industry, is characterized by numerous firms (in the hun-
dreds) engaged in keen competition. Imports are a significant force in the
market for yarn. According to the American Yarn Spinners Association, the im-
ported volume of yarn in 1975 was equivalent to 25.5% of the total domestic
sales yarn production. The degree of foreign penetration in the domestic sales
yarn market in 1975 differed by fiber — cotton, 13.7% (equivalent of the domes-
tic production) ; and man-made, 30.8%.
Prices. Like most other segments of the textile industry, the pricing of
yarn producers is set by marginal producers who are willing to sell at a price
for survival only.
Secondary Price Increases. For insight into how various types of textile
users would react to possible increases in supplier prices, survey question-
naires were mailed to domestic firms known to purchase large volumes of textile
fiber, yarn, or fabric. Principal customers for this raw stock and finished
yarns include yarn and thread mills (SIC 228), weaving mills (SIC 221, 222, and
223), knitting mills (SIC 225), and carpet mills (SIC 227).
Of the companies responding to the textile product users questionnaire,
53 firms all of which are classified in one of the above groupings, buy varying
quantities of stock and yarn. The collective total of annual purchases are
$471 million. Twenty-two of the returns listed imports valued at $15 million.
If the cost of domestic textile yarns increases an average of 3-4%, pur-
chasing agents, finding other U. S. sources of supply, will switch more than
half of their requirements. A further price increase to 4-5% will turn 17 ad-
ditional firms to foreign yarns. Conceivably, yarn imports from these 39 com-
panies could reach $180 million per year.
A price rise of less than 2% will probably be absorbed by the mill. In-
creases of 2-3% will be passed on, and all changes over 3% will be split between
mill and customer.
Financial Profile
The survey data from stock and yarn dyeing and finishing plants were
grouped into three size categories based on production capacity in pounds of
product per day. The small category included all plants with capacities of
less than 35,600 pounds per day. The medium category included plants with
capacities between 35,600 and 76,600 pounds per day. The large category in-
cluded plants with more than 76,600 pounds per day of production capacity.
In each of these size categories, the representative mill sizes specified
in the Development Document were used to base the financial statements for that
IX-8
-------
category. For the stock and yarn dyeing plants, the representative plant state-
ment for the small category was based on a plant capacity of 16,700 pounds per
day, the medium-size representative plant was based on a capacity of 55,600
pounds per day, the large-size plant was based on a capacity of 111,100 pounds
per day.
The survey data for 1975 operations for stock and yarn dyeing and finishing
plants showed a rate of utilization for the small group of 63%, for the medium
group of 75%, and for the large group of 74%. The data presented in the repre-
sentative plant financial statements are for a plant operating at a rate of 85%
of capacity.
Income Statement Data. The income statement data were compiled for the
baseline case, that is, all municipal sewer charges, depreciation, and expenses
for operating and maintaining water pollution abatement systems were removed
from the figures.
The data presented in Table IX-7 are based on the representative plants of
the three size categories of stock and yarn finishing plants and the projected
Table IX-7
PRO FORMA INCOME STATEMENT AND FINANCIAL DATA FOR THE
STOCK AND YARN DYEING AND FINISHING INDUSTRY
(in thousands of dollars)
Production (Ibs./day)
Sales $/lbs.
Total Sales
Direct Costs
Materials
Labor
Other Direct Cost
Indirect (Fixed) Costs
Depreciation
Interest
Other Indirect Costs
Net Income Before Tax
Income Tax
Net Income After Tax
Other Financial Data
Cash Flow
Invested Capital
Return on Invested Capital
Before Tax %
After Tax %
Return on Sales
Before Tax %
After Tax %
Small
(14,195)
1.81
7,708
6,268
4,191
958
1,119
957
138
55
764
482
218
264
Existing
Medium
(47,260)
1.61
22,826
18,397
10,958
4,282
3,157
2,482
451
120
1,911
1,948
921
1,026
Large
(94,435)
1.08
30,664
24,799
14,780
5,788
4,231
2,455
447
360
1,648
3,409
1,623
1,786
New Source
Medium
(47,260)
1.61
22,826
16,988
11,319
2,408
3,261
4,927
1,270
1,746
1,911
912
424
488
402
2,852
16.9
9.3
6.3
3.4
1,477
7,762
25.1
13.2
8.5
4.5
2,233
11,709
29.1
15.3
11.1
5.8
1,758
28,644
3.2
1.7
4.0
2.1
IX-9
-------
data for the new source operations of medium size. This whole group of plants
was found to be characterized by moderate profit margins for all size categories,
with the best margins being found in the large operations.
The price per pound figures used were $1.81 for small, $1.61 for medium,
and $1.08 for large-size plants. The survey data exhibited a price range of
$.18 per pound to over $13.00 per pound. The price per pound of sales was
found to be lowest in the large categories and highest in the small categories.
This price pattern probably reflects both less efficiency and more customized
operations in the small categories.
Direct production costs per pound for all stock and yarn finishers based
on survey data ranged from a minimum of $.13 to a maximum of over $8.00. The
cost structure of this industry was found to be highly materials intensive in
all size categories, with the labor intensity varying from 15% in the small
operations to 23% in the large operations. The indirect or fixed costs for
this group were found to decline with increase in scales of operations. The
fixed costs as a percentage of sales in the small group was found to be 12%;
in the medium group, 11%; and in the large group, 8%.
Balance Sheet Data. The data presented in Table IX-8 are based on the
representative plants of the three size categories of stock and yarn finishing
plants and the projected data for the new source operation of medium size. This
industry group was found to have a very low leverage factor, reflecting a very
high degree of equity financing throughout the industry. The only exception to
this was the large operations, which exhibit a 50% equity, 50% debt tendency.
It also can be observed from the balance sheet information that this industry
group has a very low average age of physical plants. This can be seen in the
very low figures for fixed assets as compared with the replacement costs of
fixed assets in the model new source plant.
Invested Capital. The data presented in Table IX-9 represent the factors
considered in estimating the total invested capital for each of the representa-
tive plants in the stock and yarn dyeing and finishing industry and the projec-
tion of the invested capital needed to establish a new source plant of medium
size.
Data Quality. The survey data for this industry group were very good
throughout all size categories. In fact, a large number of small operations
responded to the questionnaire, and a good representative sampling of responses
was received from plants in the medium and large categories. It should be noted
that the financial data showed significant variability for key measures.
Pretreatment Standards, Technologies, and Costs
The effluent control system alternatives and costs presented in this sec-
tion were provided by the Environmental Protection Agency as developed by the
technical contractor and submitted in their Development Document.
Industrial wastewaters discharged to publicly owned treatment works (POTW)
are regulated by Section 301(b) of the Federal Water Pollution Control Act
Amendments of 1972 (PL 92-500). Standards which such dischargers must meet are
to be promulgated pursuant to Section 307 of this Act. The intent of such
IX-10
-------
Table IX-8
PRO FORMA BALANCE SHEET FOR THE
STOCK AND YARN DYEING AND FINISHING INDUSTRY
(in thousands of dollars)
Production (Ibs./day)
Assets
Current Assets
Fixed Assets
Land
Buildings
Equipment
Other
Total Assets
Liabilities
Current Liabilities
Long-Term Debt
Owners' Equity/Net Worth
Total Liabilities
Small
(14,195)
2,973
1,285
39
308
822
116
4,258
1,406
640
2,212
4,258
Existing
Medium
(47,260)
6,561
4,520
67
1,262
3,021
170
11,081
3,319
1,476
6,286
11,081
Large
(94,435)
7,532
7,353
123
2,050
5,070
110
14,885
3,176
5,854
5,855
14,885
New Source
Medium
(47,260)
6,561
25,402
376
7,090
16,979
957
31,963
3,319
17,457
11,187
31,963
IX-11
-------
Table IX-9
INVESTED CAPITAL FOR THE STOCK AND YARN DYEING AND FINISHING INDUSTRY
(in thousands of dollars)
Existing
Small
Fixed Assets
Current Assets
Current Liabilities
Net Working Capital
Total Invested Capital
Book
1,285
2,973
1,406
1,567
2,852
Salvage
761
2,973
1,406
1,567
2,328
Medium
Book
4,520
6,561
3,319
3,242
7,762
Salvage
2,676
6,561
3,319
3,242
5,918
Large
Book
7,353
7,532
3,176
4,356
11,709
Salvage
4,353
7,532
3,176
4,356
8,709
New Source
Medium
Book
25,402
6,561
3,319
3,242
28,644
Salvage
6,351
6,561
3,319
3,242
9,593
X
M
to
-------
standards is to require treatment at the point of discharge complimentary to
the treatment performed by the POTW. Duplication of treatment is not the goal.
The pretreatment by the discharger of pollutants that are not susceptible to
treatment in a POTW is critical to attainment of the overall objective of the
Act by protecting the POTW from process upset and by preventing discharge of
pollutants which would pass through or otherwise be incompatible with the POTW,
Pretreatment Control Technologies. For the stock and yarn dyeing and
finishing segment, four pretreatment technologies have been developed. These
technologies were developed on the basis of information obtained from a survey
of POTWs treating textile wastes and from a consideration of the types of wastes
discharged by this industry subcategory. The survey of the POTWs yielded 50
specific complaints associated with the treatment of textile wastes. The most
common complaint related to uneven loadings, either hydraulic or organic. The
next most common complaint related to coarse solids, with pH problems, color,
low dissolved oxygens in the POTW influent, grease, and temperature following
in the order listed. Not all of these problems were necessarily found in plants
treating wastes from this segment.
Specific pretreatment technologies are described below. Estimated costs
are developed for stock and yarn dyeing and finishing mills in the production
capacity range of 8 to 50 kkg (8 to 56 tons) per day.
Alternative A - No Waste Pretreatment or Control
Costs - None
Reduction Benefits - None
Alternative B - Screening (S)
This alternative is fine screening to remove lint, flock, and other
coarse suspended solids.
Costs - Investment costs estimated to range from $31,700 to $63,500,
Total annual costs estimated to range from $13,400 to $20,600.
Reduction Benefits - Alternative B provides better than 95% reduction
of coarse suspended solids.
Alternative C - Screening and Equalization (S, E)
This alternative includes fine screeing and equalization in mixed
holding basins.
Costs - Investment costs estimated to range from $70,200 to $115,000, an
estimated increase over Alternative B of from $38,500 to $51,500. Total
annual costs estimated to range from $24,800 to $38,500, an estimated
increase over Alternative B of from $11,400 to $17,900.
Reduction Benefits - Alternative C provides the benefits of Alternative
B and also eliminates the discharge of slug hydraulic loads to the
POTW.
Alternative D - Screening, Equalization, and Neutralization (S, E, N)
This alternative includes fine screening, equalization, and addition of
alkali and mixing, when required, to neutralize acid waste streams.
IX-13
-------
Costs - Investment costs estimated to range from $108,000 to $218,000,
an estimated increase over Alternative C of from $37,800 to $103,000.
Total annual costs estimated to range from $42,400 to $82,000, an esti-
mated increase over Alternative C of from $17,600 to $43,500.
Reduction Benefits - Alternative D provides the benefits of Alternative
C and also maintains the pH of wastewater discharged to the POTW collec-
tion system at or above 6.0.
Alternative E - Screening, Equalization, Neutralization, and Biological
Treatment (S,E,N,B)
This alternative includes pretreatment by activated sludge, either
extended aeration or conventional 8-hour aeration. Prior treatment
includes screening, equalization, and neutralization to increase the
efficiency of the biological process.
Costs - Investment costs estimated to range from $224,000 to $772,000,
an estimated increase over Alternative D of from $116,000 to $554,00.
Total annual costs estimated to range from $72,400 to $201,800, an esti-
mated increase over Alternative D of from $30,000 to $119,800.
Reduction Benefits - Alternative E provides complete removal of coarse
suspended solids, eliminates the release of slug hydraulic loads and
acid wastewaters, and reduces the BOD, TSS , COD, and O&G by 85, 65, 60
and 15% respectively. Chrominum, phenol, and sulfide discharges are
also reduced.
The pretreatment alternatives specified for this industry segment require
the availability of land to accomodate equalization wells and basins, aeration
lagoons, and activated sludge facilities. Land area in hectares that is esti-
mated to be required is shown in the following table:
Plant Size
Small
Medium
Large
Land availability indicated by respondents to the economic contractor's
questionnaire was as follows :
No . %
Alternative
None
-
-
-
S
0
0
0
S,E
0
0.4
0.6
S,E,N
0
0.4
0.6
S,E,N,B
0.2
0.6
1.6
No Land Available 20 25
Land Available
Less than 0.2 hectare 19 24
0.2 hectare - 1.2 hectares 41^ 51_
TOTAL 80 100
IX-14
-------
Discharge Status of the Industry. Current practices in the textile indus-
try have been estimated from information submitted by respondents to question-
naires prepared by the economic contractor. Estimates of the percentage of
plants in this industry segment discharging into POTWs were obtained from four
sources, including the economic contractor's survey. The median value of
these four estimates indicates that 77% of the plants in this segment discharge
into POTWs.
The economic contractor also obtained information relating to pretreat-
ment practices of dischargers into POTWs. An analysis of the practices sub-
mitted was made to determine the number of plants presently having facilities
in place to perform at least the pretreatment practices recommended by the
technical contractor in each of the pretreatment alternatives. The results of
this analysis are shown in the following table:
Treatment
Alternative
None
S
S,E
S,E,N
S,E,N,B
Other
TOTAL
No.
30
17
6
4
0
_1B
75
40
23
8
5
0
24
The "other" treatment alternative includes cases which did not include
pretreatment practices recommended by the technical contractor.
It should be noted that the sufficiency of an existing pretreatment prac-
tice cannot be evaluated. Any given pretreatment practice may require upgrading
to perform as adequately as the technical contractor has projected.
Pretreatment Control Costs. The pretreatment control costs, as provided
by EPA, are based on plant production, wastewater flow, pretreatment processes
proposed, and operating requirements. The costs depicted and discussed in this
section are for "typical" yet hypothetical manufacturers in this industry seg-
ment.
Investment Costs. Investment costs include the installed costs of treat-
ment components plus allowances for contingencies and engineering. The in-
stalled cost includes the costs of delivery and erection of major equipment
items, evacuation and backfill, associated electrical and mechanical work,
instrumentation, backup pumps, contractor overhead and profit, and yardwork.
Not included are spare parts, standby power generating equipment, rock excava-
tion, or the use of pile foundations. A contingency allowance of 15% of the
installed cost was used to cover unexpected costs due to local mill conditions
and differences between the actual system and those used for cost estimates.
No allowance was made for shutdown of the mill during construction and in-
stallation.
IX-15
-------
Costs are expressed in January 1976 dollars. It was assumed that all
design specifications will be prepared by an outside consulting engineer in
accordance with applicable codes. Construction work was assumed to be per-
formed by an outside contractor with no work to be done by in-plant labor or
maintenance personnel.
Engineering costs are included in the cost estimates and were derived by
using percentages of the installed costs and contingencies. For total costs
of $100 or less, 15% was used. For larger projects, a percentage to the
nearest 0.5% from Curve A in Consulting Engineering was used.
No land acquisition cost is included.
Total Yearly Costs. Total yearly costs consist of interest, depreciation,
operation and maintenance, sludge disposal, energy and power, and chemicals.
The cost of money for capital expenditure was assumed to be 10% of the total
investment cost. Installed costs were depreciated over estimated lives of
the components on a straight-line basis.
Estimates were prepared of the number of hours required for operation of
the various component systems. In the case of this segment, it was assumed
that the textile mill operates 24 hours a day, 6 days a week, and 50 weeks a
year. Laboratory time is included for the more sophisticated systems where
analytical results would normally be used for operational control. Ten percent
was added to labor hours to cover wages and fringe benefit costs.
Investment, annual operating, and total yearly costs for existing small,
medium, and large plants and new source medium plants in this segment are given
in Table IX-10. Also shown are investment costs as a percent of fixed assets
and total yearly costs as a percent of annual sales.
Municipal System User Charges. The data on user charges collected from
publicly owned treatment works were presented for all industry segments in a
previous section. Data collected from respondents to the plant questionnaire
provided the following information on annual charges for 1975 for stock and
yarn dyeing and finishing:
Sewer Charges/
Sewer Charges/ Wastewater
Production Discharge
(in cents/ (in cents/
All Respondents 1,000 pounds) 1,000 gallons)
Mean 302 23
Median 286 24
Minimum 20 2
Maximum 1,834 402
Anticipated Reaction to Pretreatment Standards. Although specific pre-
treatment requirements have not been promulgated by EPA, the probable reaction
of manufacturers to such standards was determined by questionnaire. Respondents
IX-16
-------
Table IX-10
PRETREATMENT CONTROL COSTS: STOCK AND YARN DYEING AND FINISHING
(Costs in $000)
Size, Status, and
Alternative
Small, Existing
S
S,E
S,E,N
S,E,N,B
Medium, Existing
S
S,E
S,E,N
S,E,N,B
Large, Existing
S
S,E
S,E,N
S,E,N,B
Medium, New Source
S
S,E
S,E,N
S,E,N,B
Investment
Costs
31.7
70.2
108.0
224.0
39.7
91.0
170.0
407.0
63.5
115.0
218.0
772.0
39.7
91.0
170.0
407.0
Operating
Costs
8.2
14.9
25.5
41.5
9.3
18.8
33.9
72.7
10.2
21.7
48.0
93.8
9.3
18.8
33.9
72.7
Total
Yearly
Costs
13.4
24.8
42.4
72.4
15.8
31.7
60.5
129.7
20.6
38.5
82.0
201.8
15.8
31.7
60.5
129.7
Investment
Cost
as % of
Fixed Assets
4.87
10.8
16.6
34.4
0.84
1.93
3.60
8.61
1.22
2.20
4.17
14.8
0.14
0.32
0.60
1.44
Total
Yearly Costs
as % of
Annual Sales
0.17
0.32
0.55
0.94
0.07
0.14
0.27
0.57
0.07
0.13
0.27
0.66
0.07
0.14
0.27
0.57
were asked to select one of the nine options listed below, given the limited
amount of information which they had about pretreatment requirements and
complete treatment requirements at the time:
1. Change from pretreatment to complete treatment
2. Change from complete treatment to pretreatment
3. Upgrade existing pretreatment
4. Upgrade existing complete treatment
IX-17
-------
5. Initiate pretreatment
6. Initiate complete treatment
7. Close the plant as a result of pollution control standards
8. None of the above, because this plant already conforms to the proposed
standards
9. Other (specify)
Eighty replies were received from plants in this segment. The nature of
the replies was as follows:
Alternative No. %
Upgrade existing pretreatment 6 8
Initiate pretreatment 14 18
Initiate complete treatment 1 1
Close plant 2 2
Plant conforms to standards 21 26
Other j>6_ 415
TOTAL 80 100
Economic Impact Analysis
The imposition of pretreatment controls on the stock and yarn dyeing and
finishing industry segment will have both direct and indirect impacts on the
industry, on consumers, on its suppliers, and on communities in which plants are
located. The "resulting direct impacts from the imposition of pretreatment con-
trols are analyzed in both quantitative and qualitative terms: price effects,
financial effects, production effects, employment and community effects, and
balance of trade effects.
The previous analysis identified a total of 197 plants operating at the end
of 1972, with 22,058 employees which the proposed pretreatment regulations could
effect. This represented 151 plants which could be classified as small in terms
of production capacity, 38 plants as medium, and 8 as large. In addition to the
examination of the potential impact of pretreatment controls on existing plants,
the analysis considered the impacts on those plants which have not been construc-
ted and will discharge their effluent to publicly owned treatment systems (here-
after referred to as "new source") .
The economic impact analysis also included a sensitivity analysis which was
performed using pretreatment control cost estimates at levels between 80% and
200% of the costs provided by EPA. The analysis was based on a wide range in
order to take into account the possibility of regional as well as individual
mill variations in pretreatment costs. In addition to this discussion on the
economic impact analysis, an impact analysis was completed using an incremental
capital cost approach and is included in Appendix A. Since the exact level of
pretreatment which will be required has not been specified, this report presents
data on the effects for all levels under consideration.
IX-18
-------
Finally, it should be noted that this analysis was concerned only with the
impacts of proposed pretreatment guidelines. It is recognized that there are
other regulatory programs by EPA, OSHA, and various state controls, either exist-
ing or emerging, which will influence the profitability of the plants studied.
The analysis does not consider the full impact of this aggregate of regulations.
Price Effects. The role of price effects in the impact analysis is criti-
cal. The analysis of price effects proceeded with the determination of what
price increases would be required to offset the costs of pretreatment controls.
Next, the market structure for the stock and yarn finishing industry segment
was examined to determine if mills would be forced to absorb the price increases,
or if the price increases could be passed on to customers, or if the price
increases could be partially absorbed and partially passed on. Also, the
possibility of secondary price increases was examined in a previous section.
Required Price Increases. An implicit indication of the expected price
effects of pretreatment controls used in this report is the amount of sales
price increase necessary to maintain a mill's profitability, after pretreatment
control expenditures, at the same level as the mill without the control expenses.
The ability of mills to pass on such required price increases is evaluated in
the following section.
The required price increases necessary to offset the different levels of
proposed pretreatment control for the representative mills are shown in Table
XI-11. The required price increases for small stock and yarn finishing mills
range from .24% to 1%, depending on the level of pretreatment; for medium mills,
from .10% to .75%; and, for large mills, from .10% to .92%. For the new source
mills, the required price increase to offset the pretreatment level ranges from
.10% to .74%. Also shown are the sensitivity ranges of required price increases
when pretreatment costs vary from 80% to 200% of the original estimated costs.
Expected Price Increases. Although the previous discussion has identified
the required price increases to offset expenditures for pretreatment control in
order to maintain the mills' current (baseline) profitability levels, it does
not quantify the extent to which price increases can be passed on to consumers.
Analysis of the expected price increases at the industry level involves
translating the pretreatment cost estimates to changes in market demand and
supply for production. Market responses may take several forms, depending on
how many mills choose to close and the extent of the pass-through of pollution
costs to the consumers. The supply, in turn, depends on the mills1 decisions
which will be based on the strength of the market demand, competitors' actions,
and on the market's ability to sustain price increases. There are a number of
demand and supply factors which need to be considered in determining the portion
of pretreatment costs to be passed through. Unfortunately, all such factors
cannot be expressed quantitatively and, by necessity, the projected price in-
creases involved a considerable amount of judgment. The potential implications
for price effects of some of these factors are discussed below.
Factors which increase the possibility of pretreatment cost pass-through
are the strong demand growth for stock and yarn and the relatively inelastic
demands for cotton (-0.17). However, a factor which decreases the possibility
IX-19
-------
Table IX-11
STOCK AND YARN DYEING AND FINISHING: REQUIRED PRICE INCREASES
NECESSARY TO OFFSET PRETREATMENT CONTROL COSTS
Required Price Increase
Representative Plant Size
Ex i st ing-Smal1
(14,195 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Large
(94,435 Ibs./day)
S
S, E
S, E, N
S, E, N, B
New Source-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
80
.19
.34
.60
1.00
.08
.15
.30
.61
.08
.14
.30
.76
.08
.15
.30
.61
100
.24
.42
.73
1.22
.10
.18
.37
.75
.10
.17
.37
.92
.10
.18
.37
.74
120
.28
.49
.86
1.44
.11
.22
.43
.89
.12
.20
.43
1.09
.11
.22
.43
.88
200
.44
.79
1.38
2.31
.18
.35
.70
1.43
.19
.32
.69
1.74
.18
.35
.69
1.42
IX-20
-------
of pretreatment cost pass-through is the degree of foreign penetration in the
domestic yarn market, which differed by fiber — cotton, 13.7%, and man-made
30.8%. Also, the elasticity of demand for synthetic fiber is -0.988, which
indicates that synthetic fiber consumption is fairly responsive to changes in
its price. Like most other segments of the textile industry, the large number
of firms and nature of the products are such that industry competition is
based primarily on price.
Considering the aggregate effects of these factors on the ability of the
stock and yarn dyers to increase prices, it seems likely that all of the pre-
treatment costs incurred by the large mills can be passed through to consumers.
The price increases that were utilized in the analysis were assumed to be
approximately equal to the impact that would be experienced by the large repre-
sentative plant in the stock and yarn finishing industry segment.
Price increases to offset the costs of pretreatment controls by the im-
pacted stock and yarn finishing mills are expected to occur. However, these
price increases cannot be specified now due to the wide range in the costs
associated with the different levels of pretreatment control. In the following
analysis, no price changes were assumed to occur and, accordingly, the finan-
cial effects on the mills are without added revenues from price increases.
From the firms's viewpoint (that is, a financial viewpoint), the financial
effects discussed below represent the most severe costs.
Financial Effects. The financial profiles for the representative mills in
the stock and yarn dyeing and finishing industry segment were described pre-
viously. The survey data, as well as published data, indicated substantial
variability in key financial parameters for mills in this sector. These finan-
cial profiles of representative mills and the estimated costs of preteratment
controls provided by EPA were used to compute the following financial indicators
under baseline (without pretreatment controls but with municipal user charges)
and with pretreatment controls: after-tax income, after-tax return on sales,
after-tax return on invested capital, cash flow, and cash flow as a percent of
invested capital and net present value.
These financial measures were computed for each representative mill accord-
ing to the discounted cash flow and return on investment procedures outlined in
the methodology. In addition, a sensitivity analysis was performed for each rep-
resentative mill, using pretreatment control cost estimates at levels between
80% and 200% of the costs provided by EPA. The results of this analysis are
discussed below.
After-tax Income. As shown in Table IX-12, the imposition of pretreatment
controls on the stock and yarn finishing representative plants results in small
to rather significant reductions in income, depending upon the level of pretreat-
ment and plant size. Expressed as a percent of the baseline incomes, the pre-
treatment levels resulted in a decrease in after-tax incomes between 2.3% or
$6,000 and 10.4% or $27,000 for the small plant; between .6% or $6,000 and 4.6%
or $46,000 for the medium plant; and between .5% or $8,000 and 3.7% of $65,000
for the large plant.
The imposition of pretreatment controls on new source medium-size plants
results in a decrease in after-tax income of between 1.3% and 9.7%.
IX-21
-------
H
X
Table IX-12
STOCK AND YARN DYEING AND FINISHING: PRETREATMENT STANDARD IMPACTS ON PROFITABILITY
After-Tax Profits ($1,000)
Representative
Plant Size
Ex i st ing-Sma11
(14,195 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Large
(94,435 Ibs./day)
S
S, E
S, E, N
S, E, N, B
New Source-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Baseline % Proposed Pretreatment
Case 80
259
254
251
246
238
1,011
1,007
1,002
993
975
1,757
1,751
1,746
1,732
1,705
473
468
463
455
436
100
253
249
242
232
1,005
1,000
989
965
1,749
1,743
1,725
1,692
467
461
450
427
120
252
248
239
227
1,004
997
984
956
1,748
1,740
1,719
1,679
466
459
446
418
Costs
200
248
240
226
206
999
988
966
919
1,742
1,729
1,694
1,627
461
449
428
381
After-Tax Return on Sales (%)
Percent Proposed
Pretreatment Costs
Baseline
Case
3.36
4.43
5.73
2.07
80
100
120
200
3.30 3.29 3.27 3.22
3.26 3.24 3.21 3.12
3.19 3.14 3.10 2.93
3.08 3.02 2.95 2.68
4
4
4
4
5
5
5
5
2
2
1
1
.41
.39
.35
.27
.71
.69
.65
.56
.05
.03
.99
.91
4.
4.
4.
4.
5.
5.
5.
5.
2.
2.
1.
1.
40
38
33
23
70
68
63
52
04
02
97
87
4
4
4
4
5
5
5
5
2
2
1
1
.40
.37
.31
.19
.70
.67
.61
.47
.04
.01
.95
.83
4
4
4
4
5
5
5
5
2
1
1
1
.38
.33
.23
.03
.68
.64
.53
.31
.02
.97
.87
.67
After-Tax Return on
Invested Capital (%)
Baseline
Case
9.07
13.03
15.00
1.65
Percent Proposed
Pretreatment Costs
80
100
120
200
3.84 8.79 8.73 8.51
8.64 8.54 8.43 0.03
8.36 8.19 8.02 7.37
7.84 7.56 7.28 6.25
12.91 12.89 12.86 12.74
12.79 12.73 12.67 12.44
12.58 12.47 12.36 11.93
12.05 11.82 11.59 10.72
14.89 14.86 14.83 14.72
14.79 14.74 14.69 14.48
14.57 14.47 14.36 13.95
13.83 13.55 13.29 12.28
1.63 1.63 1.62 1.60
1.61 1.60 1.60 1.56
1.58 1.56 1.55 1.48
1.51 1.47 1.43 1.29
-------
After-tax Return on Sales. The after-tax return on sales for the existing
and new source representative stock and yarn finishing plants also are shown in
Table IX-12. As would be expected with the above indicated declines in after-
tax incomes, the impacted plants' returns on sales declined by a corresponding
percentage. The imposition of pretreatment standards obviously would further
deteriorate the already low-to-moderate returns in the stock and yarn finishing
industry.
From a baseline of 3.4% for the small plant, the decline ranged from an
after-impact return of 3.3% to 3.0%, depending on the level of pretreatment
control. For the medium and large plants, the return after controls are im-
posed resulted in no declines from the medium baseline of 4.4% and the large
baseline of 5.7% for the lowest level of pretreatment to declines to 4.2% for
the medium plant and to 5.5% for the large plant. The imposition of pretreat-
ment controls on the medium new source plant resulted in the decline of the
baseline return on sales from 2.1% to between 2.0% and 1.9%.
After-tax Return on Invested Capital. The baseline and impacted stock and
yarn finishing plants' returns on invested capital are shown in Table IX-12.
After the imposition of pretreatment controls on the existing plants, return on
investment ranges from 8.8% to 7.6% for the small plant, from 12.9% to 11.8% for
the medium plant, and from 14.9% to 13.6% for the large plant. In the new source
medium plant, the returns range from 1.6% to 1.5% for the proposed levels of
pretreatment.
Cash Flow. Estimated cash flows (after tax income plus depreciation) are
shown in Table IX-13 for the representative plants. The cash flows as percent-
ages of invested capital for the baseline cases are 13.9% for the existing small
plant, 18.8% for the existing medium plant, 18.8% for the existing large plant,
and 6.1% for the new source medium plant. Depending on the level of pretreat-
ment, the cash flows as percentages of invested capital vary between 13.6% and
12.3% for the existing small plant, between 18.7% and 17.5% for the existing
medium plant, between 18.7% and 17.4% for the existing large plant, and between
6.1% adn 5.9% for the new source medium plant.
Net Present Values. The net present values for the stock and yarn dyeing
and finishing representative plants are all positive in the baseline case as
well as after incurring pretreatment expenditures (see Table IX-14) . This
implies that it would be probable that the representative plants could remain
in operation after meeting pretreatment standards.
Production, Employment, and Other Effects. Production effects related
to pretreatment costs can be attributed to either a reduction in supply, due
to plant closures, or a decrease in consumer demand, hence mill production,
due to price increases.
The price increase that is utilized in the production analysis is assumed
to be equal to the impact that would be experienced by the largest stock and
yarn finishing mill. This assumption seems the most pragmatic and realistic
considering the structural characteristics of this industry segment. Another
factor which should be considered, but cannot be at this time, is what the
effluent standards impact will be on the direct dischargers in the stock and
yarn dyeing and finishing industry.
IX-23
-------
Table IX-13
STOCK AND YARN DYEING AND FINISHING: PRETREATMENT STANDARD IMPACTS ON CASH FUDWS
Cash Flow ($1,000)
Cash Flow as a % of Invested Capital
H
X
I
to
Representative
Plant Size
Existing-Small
(14,195 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Large
(94,435 Ibs./day)
S
S, E
S, E, N
S, E, N, B
New Source-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Base-
line
Case
397
1,463
2,204
1,743
% Proposed Pretreatment Costs
80 100 120 200
394
392
388
383
1,460
1,456
1,452
1,438
2,201
2,196
2,188
2,177
1,740
1,737
1,733
1,719
393
390
386
379
1,459
1,455
1,449
1,432
2,200
2,195
2,184
2,170
1,739
1,735
1,730
1,713
393
389
384
376
1,458
1,453
1,447
1,426
2,200
2,193
2,181
2,163
1,739
1,733
1,727
1,707
1,455
1,447
1,436
1,402
2,197
2,186
2,165
2,136
1,736
1,727
1,717
1,683
Base-
line
Case
13.91
18.84
18.82
6.08
% Proposed Pretreatment Costs
80
13.69
13.47
13.22
12.63
18.73
18.58
18.38
17.78
18.72
18.61
18.41
17.66
6.07
6.05
6.02
5.93
100
13.64
13.36
13.05
12.33
18.70
18.52
18.27
17.53
18.69
18.56
18.31
17.38
6.06
6.04
6.00
5.90
120
13.59
13.25
12.88
12.05
18.67
18.46
18.16
17.29
18.66
18.51
18.22
17.12
6.06
6.03
5.99
5.86
200
13.38
12.83
12.25
10.97
18.56
18.21
17.73
16.35
18.56
18.31
17.83
16.12
6.04
5.99
5.92
5.71
-------
Table IX-14
STOCK AND YARN DYEING AND FINISHING:
PRETREATMENT STANDARD IMPACTS ON NET PRESENT VALUES
(in thousands of dollars)
Net Present Values
Representative
Plant Size
Existing-Small
(14,195 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Exist ing-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Existing-Large
(94,435 Ibs./day)
S
S, E
S, E, N
S, E, N, B
New Source-Medium
(47,260 Ibs./day)
S
S, E
S, E, N
S, E, N, B
Baseline
Case
616
757
671
790
4,064
4,994
4,427
5,214
8,623
10,596
9,393
11,063
3,971
4,880
4,326
5,095
Percent
80
560
635
481
416
3,997
4,837
4,148
4,544
8,530
10,406
9,021
9,961
3,904
4,723
4,046
4,425
Proposed
100
546
604
434
322
3,980
4,798
4,078
4,377
8,506
10,358
8,928
9,686
3,887
4,684
3,977
4,257
Pretreatment
120
532
574
386
228
3,963
4,759
4,008
4,209
8,483
10,311
8,835
9,410
3,870
4,645
3,907
4,090
Costs
200
476
451
197
-147
3,895
4,602
3,729
3,539
8,389
10,120
8,463
8,309
3,803
4,488
3,627
3,420
IX-25
-------
Review of Table Xl-11 indicates that the required price increases neces-
sary to offset the different levels of pretreatment control for the large stock
and yarn finishing mill range from ,10% to .92%.
To translate these price increases into impacts on consumer demand and
mill production, the demand elasticities for the carpet mill products must
be known. Unfortunately, there are no data available which relate market
response and higher prices for stock and yarn dyeing and finishing. However,
the demand elasticities for six major fiber types range from -0.17 for cotton
to -1.0 for synthetics.— Using these price elasticities, the percentage
reduction in consumption would range between .017% and .92%.
In addition to reduction in mill production attributable to increased
prices, there could be plant closures if the stock and yarn finishing mills
could not adequately absorb required pretreatment costs. The criteria for
determining whether or not a plant would cease operations were discussed
in the methodology. This financial analysis was conducted with no price
changes assumed and, therefore, represents the most severe case from the
mills' viewpoint.
As shown, the stock and yarn finishing mill representative plants maintain
positive profitability levels after incurring the costs of pretreatment control
in all situations (see Table IX-12). Furthermore, review of Table IX-13 reveals
that all representative plants maintain positive cash flows after meeting pre-
treatment standards. Review of the net present values for the mills represen-
tative plants also shows all positive values after the imposition of pretreat-
ment costs (see Table IX-14). These profitability measures indicate that there
will be no plant closures attributable solely to the financial impacts of the
pretreatment controls.
The production effects analysis indicates a minimal reduction in stock and
yarn dyeing and finishing. The loss of employment, community impacts, and im-
pacts on the balance of trade due to the imposition of pretreatment standards
will also be minimal.
I/ KlrtsiV.U'U it's wore obtained from the National Commission on Water Qual-
ity, Water Pollution Control Act of 1972, Economic Impacts, Textile Industry,
1975.
IX-26
-------
LIMITS OF THE ANALYSIS
-------
X. LIMITS OF THE ANALYSIS
This discussion on the limits of the analysis covers the general accuracy
of the report, the possible ranges of error for different sections, the major
critical assumptions used, and questions which should be addressed in more
detail.
General Accuracy
The data and information used in this study were compiled from government
reports, journals, textile industry trade associations, and surveys of the tex-
tile industry, textile products end-users, and the publicly owned treatment
works. Recommended pretreatment systems and costs were furnished by EPA. Data
and other information used were reviewed to verify the accuracy. Representa-
tives of EPA, the textile industry, trade associations, and others will review
this study, and their comments will be considered in completing the analysis.
Descriptive information on the textile industry segments (e.g., wool scour-
ing, etc.), such as structure of the industry segment and number, location, and
size of plants, is not readily available. Using industry data from the Census
of Manufactures, together with information obtained from the surveys and other
sources, made the characterization of the industry segments possible. The sizes
of the representative plants for each industry segment used in the analysis were
those specified by the technical contractor in the Development Document.
Although financial information concerned with investments, operating costs,
and returns were available for the textile industry as a whole, such data do
not exist for the industry segments as defined for this study. As a result,
the financial aspects of the impact analysis for an industry segment were, of
necessity, based on representative plant costs and returns obtained from the
survey data. These costs and returns were validated where possible with pub-
lished financial performance data.
The Effluent Guidelines Division, EPA, together with its technical con-
tractor, provided recommended alternative effluent control systems, investment
costs, and annual operating costs adapted to the types and sizes of representa-
tive plants used in this analysis. It is believed that the analysis represents
a usefully accurate evaluation of the economic impact of the proposed pretreat-
ment guidelines.
Range of Error
For the different data series and different sections of the analysis, the
estimated data error ranges are as follows:
Error Range
(percent)
1. Information regarding the structure of the indus-
try, number, location, and size of plants, and
other information descriptive of industry segments +15
(continued)
X-l
-------
(Continued) Error Range
(percent)
2. Information regarding the discharge status of the
industry segments (e.g., direct or indirect dis-
chargers) +20
3. Financial information concerning the industry +10
4. Financial information on representative plants
for the industry segments +20
5. Alternative pretreatment costs No range
specified by
technical
contractor
Critical Assumptions
In an economic impact analysis of an industry, it is inevitable that sim-
plifying assumptions must be made to bring the problem into a framework of
analysis consistent with the constraints of time, budget, and data availability.
The major critical assumptions used in this analysis are as follows:
1. Types and sizes of the model plants are representative of plants ac-
tually existing in the industry and of plants expected to be built in
the future.
2. It is assumed the financial data are representative of costs and re-
turns of existing plants or new plants to be constructed after promul-
gation of proposed guidelines.
3. Levels of profitability reflected in representative plant profiles
will be the same in the future.
4. It was assumed that the economic impacts of pretreatment controls on
those plants not included in the detailed analysis of representative
plants could be evaluated in general terms through associating them
with those representative plants for which detailed analyses were made.
5. The information regarding the discharge status of the industry seg-
ments is realistic.
6. Pretreatment control costs and control status estimates were supplied
by the Effluent Guidelines Division, EPA. It is assumed that these
data are realistic in terms of (a) applicability of effluent treatment
systems recommended and (b) investment and annual operating costs for
systems.
Remaining Questions
Issues which were outside of the scope of this study but which deserve
attention are:
1. A question not addressed by this study is what the impact will be on
direct dischargers of effluent guidelines and how this will affect
the impact of pretreatment controls on indirect dischargers.
X-2
-------
2. There was some indication that municipal user charges, especially those
connected with industrial cost recovery as required by PL 92-500, Fed-
eral Water Pollution Control Act and Amendments of 1972, will be in-
creasing significantly in the future.
3. Another question which remains unanswered arises from the fact that
this analysis was concerned only with the impacts of proposed pretreat-
ment controls. It is recognized that there are other regulatory pro-
grams either in effect or emerging that will influence the operations
and profitability of the plants studied. For example, a Department of
the Treasury study, "The Textile Industry," published in 1976, provided
forecasted annual capital expenditures required to meet effluent, noise,
and dust criteria. For the period 1974 to 1982, the projected expendi-
tures amounted to $1.4 billion for effluent, $2.7 billion for noise,
arid $.4 billion for dust. This shows the significance of other regula-
tions. This analysis does not consider the full impact of the aggregate
of regulations.
X-3
-------
APPENDIX
-------
Appendix A
INCREMENTAL CAPITAL COST AND IMPACT ANALYSIS
This appendix supplements the final report in that it provides incremental
economic impacts for each of the representative textile plants developed. The
impact analysis was completed using an incremental capital cost approach, with
capital costs ranging from $25,000 to $300,000 and the cost increment being
$25,000. Estimates of the operating and maintenance costs for each segment were
developed by the technical contractor and were estimated to be 36% of the capi-
tal cost (referred to as the investments costs in the Development Document).
Depreciation was assumed to be straight-line over a 15-year asset life.
For each of the representative plants an impact analysis was completed for
the following impact indicators: required price increase, after-tax income,
after-tax return on sales, after-tax return on invested capital, estimated cash
flow, cash flow as a percent of invested capital, and net present value.
The impacts are shown in the following tables.
A-l
-------
Table A-l
INCREMENTAL IMPACT ANALYSIS
WOOL SCOURING, EXISTING MEDIUM MILL
>
»#»»»»»«»»»»#•»»**»»»»*»•»»»»»*»****«*<
*
* INC
^ * N *"*
» INU
» INJ
» INC
* INC
* I N2
» INC
* IN.,
* INC
* INC
» INC
CASE (
•^CENTAL
c _ K £ N 7 A L
-..CENTAL
- E. C £ N T A L
- .CENTAL
~-:: CENTAL
- .CLNTAL
-•ICENTAL
-..CENTAL
it CENTAL
.-. :>EN r AL
-.cCENTAL
>#».»»* RESULTS OF IMPACT AN AL YSIS*******"*******'
p-
-------
Table A-2
INCREMENTAL IMPACT ANALYSIS
WOOL SCOURING, EXISTING LARGE MILL
00
*
*£A3L
» IMC
* I No
» IN;,
» INC
* INC
» INC
» INC
* IN"
* IN;
» IN,:
* INC
» INC
» » *»»
PRICE AFTE- TAX AFTE? TAX AFT£» TAX NET
INCREASE INCOME RETURN ON RETURN ON PRESENT
('/.) (CCOJ> SALtS(X) INV. CAP. VALUE
CASE (LIFETIME OF 15 YEAP3) 470.
, y r ^ J A (_
re CENTAL
- ."ENTAL
-1CCNT4L
~£!CENTAL
"CENTAL
T_CE,NTAL
-.CENTAL
-JCENTAL
-".CENTAL
•^CENTAL
•*»»»»*»<
STEP
ST£ 3
3TE =
STEP
STEP
3T£n
STEP
STEP
STE3
STEP
STEP
STLP
F**»*4
NJCEER
NUMfcER
NUPBER
NJC6ER
MUCBER
NUMBER
NUMBER
N'JCBER
NUNPER
NU^3ER
NUf DER
NUMBER
k»»» «•*«•<
1
2
3
£,
5
6
7
8
9
10
11
12
»* *4»»»»*««4
.11
.22
.53
• 44
.54
.65
.76
. t>7
.98
1.09
1.20
1.3G
i»**»»#****¥*****
464.
459.
453.
443 .
443.
437.
432 .
426.
421.
416,
410.
405.
***•*»»»»**<
3
3
3
3
3
3
3
3
3
3
3
3
3
» + **«
.54
.50
.46
.42
.38
.34
.30
.26
.21
.17
.13
.09
.05
»»»»»*<
5.52
5.45
5.39
5.33
5.26
5.20
5.13
5.07
5.01
4.94
4. 68
4.S2
4.75
k» *•»»»»» »JM
5393.
5323.
525i .
5139.
5120.
5050.
49S1.
4911.
4C42 .
4773.
47U3.
4634.
4564.
.»»#» »»»»
CASH CAiH FuOH *
FLCn AS A X OF »
( sooo) INVESTED •
1631.
16J7.
16?3.
1S1 J.
1616.
1612.
1603.
1604.
16U1.
1597.
15*3.
1559.
1536.
** **»»»<
19.15
19.05
16.95
lfc.85
18.75
18.66
16.56
1 ft. 4 6
lo . 3 7
18.27
i e . i f.
ie . o e
17.99
****** ** '
*
*
*
*
*
*
*
*
*
*
*
*
*
>*»
-------
Table A-3
INCREMENTAL IMPACT ANALYSIS
WOOL SCOURING, NEW SOURCE MEDIUM MILL
*
*....•
»BASE
P-UCE AFTLK TAX AFTEX TAX AFTER TAX NET
INCREASE INCOME RETURN ON RETURN ON PRESENT
('/.) (AOOO) SALES(X» IMV. CAP. VALUE
CASE (
LIFETIME CF
• INC^
* INC-
* INC-
* INC-'
» INC-
» INC-
* INC-
* INC-
» INC-
* INCK
* INC-i
» INC-;
«»•»*»
r. CENTAL
LffcNTAL
. CENTAL
L CENTAL
L "ENTAL
:. CENTAL
: CENTAL
;.CENTA|_
c-CENTAL
i CLNTAL
•1 f E N T A L
Lf-ENTAL
* »*»»»»
STEP NUMBER
STEP NUKECR
STEP NUMBER
STEP NUMBER
STEP NUMBER
STE-3 NUCCcR
STE» NUC6ER
STEP NUfOER
STt" NUMBER
STEP N'JffcER
STEP NUCQER
STEP NUMBER
»»»»•»»»*»»»«
15 YCARS)
1
2
3
<»
5
6
7
a
9
10
11
12
**«*«•***•»**«*«•<
.22
• 't'f
.65
.07
1. J9
1.31
1.53
1 . 7*«
1.96
2.18
2*'»0
2.61
i**« *«*** + ***
573.
563.
562.
557.
551.
5«*«***»****•»***
n n >
5133.
5064.
4994.
4925 .
4855.
4 7tio .
4716.
4647.
4577.
453 t »
4439.
436 J.
43DO.
» » * * » *
CAjH CASH FLOW «•
FLOW AS A •/. OF «
(«000) INVESTED *
n ft ^ T T A i m
1023.
1C19.
11J15.
1012.
1008.
1CC4.
1000.
997.
993.
• 939.
365.
9*2.
978.
***** * *J
»^MI-A i " U • •
10.42 *
10.35
1C. 2?
10.22
1C. 16
1C. 1C
1C. 03
9.97
9.91
°. 35
9.76
9.72
9.66
>»*»»-» *«
*
*
*
»
*
*
*
«
*
*
*
• »»»
-------
Table A-4
INCREMENTAL IMPACT ANALYSIS
WOOL DYEING AND FINISHING, EXISTING SMALL MILL
(J1
»»»**»*»»»»»*»
*
*
.#»»»#»». »««»«»»*»»»«*»**»«»»a£3ULTS OF IMPACT A^Ac YSIS»***»****»****'
PRICE AFTER TAX AFTER TAX AFTER TAX
IivCr<.EAS£ INCOME RETURN ON RETURN ON
{'/.) (iOOO) SALESO.) INV. CAP.
»5AiE: CASE. (LIFETIME OF 15 Yt'AKS)
» INJrHr-ENTAL STc? NUMBER
* I "i "" ' ~ 1" f N T A i_
» I N ^ •" r r" " N T A L
» I N ; >~ : f £ N T A L
» INC-IPENTAL
* I N f' - CENTAL
• IN ^CENTAL
* IN/'EPENTAL
» IN^'^ENTAL
STEP
STEP
ST£P
STEP
STEJ
STtP
STEP
STL3
STEP
STEP
STLP
NUKRER
NUf PFR
NUP ee?.
Mff-E*
N'JI' BER
NJM g£i3
NJI*P£R
NUMBER
N(Jf*e£(\
NUMBER
1
2
3
5
6
7
e
9
10
11
12
*.JtM.MM.ILM.JltLM.itJ
1
1
1
a.
2
2
3
j
3
« J( Jl Jt Jt M M MX M
.32
• 6<»
. 96
.23
.59
.20
• VJ
.76
.06
.33
.57
«***.*.*
109.
103.
93.
92.
67.
61.
76.
71.
65.
60.
5
-------
Table A-5
INCREMENTAL IMPACT ANALYSIS
WOOL DYEING AND FINISHING, EXISTING MEDIUM MILL
***** »***«***
*
*
ii*************,,,,,,*,.,,,,,,,,.,,^^^ OF J^CACT ANAL Ysis*****»»*»***»*«
PKICE AFTEP TAX AFTER TAX AFTER TAX
INCREASE INCOME RETURN ON RETURN ON
(X) (iCOO) SALES(X) INV. CAP.
'BASE CASE (LIFETIME OF 15 YEARS)
INCrCf-ENTAL
INC-" :>tNTAL
INC-V^ENTAL
I N C x 1 \> £ N T A L
INC-icfElSTAL.
INC-J^ENTAL
INJ'^lPENTAL,
INC-'ifENTAL
STEP
STEP
STEP
STEP
ST£°
STEP
STEP
STEP
STEP
STc°
STEP
NJfBER
NUf BER
NUMBER
NUMBER
NUMBER
f«Ul"BE3
NUMBER
NUMBER
t4'JMBE^
1
2
3
5
6
7
e
9
10
11
1*
.10
.21
.31
.52
.62
.73
.33
.93
1. J3
1.14
1.24
196.
192.
ia7.
132.
176.
171.
165.
163.
155.
149.
144.
138.
133.
1.42
1.3d
1.34
1.30
.1.26
1.22
1.16
1.14
1.10
1.06
1.C2
.98
4.23
4.CC
3.77
3.65
3.53
3. '42
3.30
3.19
3.C7
2.96
2.64
»***«*«.**
NET
PRESENT
VALUE
1G3.
-36.
-313.
-333.
-452 .
-522.
-591.
-661.
-730.
******************
CASH CASH FLOW *
Fi.CH A3 A '/. OF *
7.46
7.35
7.13
*
*
*
*
*
*
*
,
*
,
*
-------
Table A-6
INCREMENTAL IMPACT ANALYSIS
WOOL DYEING AND FINISHING, EXISTING LARGE MILL
«•»
*
*
P^.ICE AFTE" TAX AFTER TAX AFTER TAX
INCREASE INCOME kETURN ON RETURN OM
UOOO) SALES(X) INV. CAP.
»GA>£ CASE (LIFETIME OF 15 YEAFS) 362. !.<*!
•» I-IC^ .MENTAL STEP NUMBER
&
1
»
»
*
*
*
*
*
*
«
*
*
INC
INC
I '1C
INC
IDC
I'lC
INC
INC
INC
INC
•;-.*EKTAL
=~ MENTAL
r .r-ENTAL
' MENTAL
-;;M ENTAL
.-".CENTAL
-..CENTAL
-•IMENTAL
^MENTAL
-.ZMENT6L
STEP
STE°
STEP
STE°
STkP
STEP
STEP
STEP
STtP
STEP
NUMBER
NUMBER
NJMEER
NUM3ER
NJM'HER
NJMEER
NUMBER
NUMBER
NUMBER
NUMEER
NUMBER
1
2
3
it
5
6
7
6
9
•10
11
12
.05
.11
.16
.21
.26
.32
.37
• «*2
.46
.53
.58
.63
377.
371.
366.
361.
355.
350.
3<»»»
»»•»»*»)
-------
Table A-7
INCREMENTAL IMPACT ANALYSIS
WOOL DYEING AND FINISHING, NEW SOURCE MEDIUM MILL
03
*******
*
*
,
»* *»*»***»*<
>*»*»»»»»»»»»4>«AMnMf¥4|l4>¥¥RESlJLTS 0(- JM?ACT ANaLYSIS*»**»*»»»»*»»»¥,m»,¥^»+^,,
»3A3E CASE (LIFETIME OF
* .....
9- inc=*
* i;JCji
* I '1C ^ <~.
• I'C-<.I
• I'JC-L
» I'.'C-1-
* INC^E
» I NOT
* inc~i
* T f ' P '
* If»C-"£
* INC-.-,
*******
CENTAL STEP
CENTAL STEP
CENTAL STEP
^'E^^AL STCo
CENTAL STEP
.-ENTAL STEP
^iNTAL STEP
CENTAL STEP
"LNTAL STE?
CENTAL STEP
CENTAL STEP
fENTAu STEP
NUMBER
NUMBER
NUMBER
NU^PER
NUMBER
NUrEER
NUMBER
fJUf 8ER
NUMOER
NUMBER
NUMBER
NUMBER
t + ** * * *
15 YEAFSJ
1
2
3
k
5
6
7
e
9
1C
11
* * *¥**^-¥-¥4-** + J
P.%ICt
INCREASE
(7.)
.U9
.17
.26
.35
• *»3
.52
. 61
.59
.73
.
-------
Table A-8
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, EXISTING SMALL MILL
TS OF IMPACT ANALYSIS****
*
»
*
4
»EASE
* . . . .
* INC^
* 1:40
• iNCr
* INC~
* I^C-5.
* JNC"
* INCS
* INC-
* I '4C R
» I 'JC ~:
* INC*
* INC-:
** ««* *
CASE (LIFETIME CF
...INCREMENTAL COST
JMENTAL STEP N'UMEER
LfENTAL STE=
.'.CENTAL STEP
'IrENTAL STE"
-IMENTAL STE?
tC£NTAL STEP
^CENTAL ST£3
£CENTAL STEP
E ;* E N T A L STE3
ECENTAL STEP
cCtNTAL STEP
^CENTAL STEP
v * * + + + w jf + wt
NUV SER
N'J^PER
fJUMEER
NUMBER
NUMBER
NUMOER
NUMBER
NUMBER
NUMBER
NUM2ER
NUMBER
»»»*»*-»
15 YCAw-S)
1
2
3
it
5
6
7
6
9
10
11
12
***««.»**«*«**
PRICE
INCREASE
(%)
.2*
.*9
.73
.97
1.21
1 •*&
1.70
1.9*
2. IS
d. *1
2.65
2. b9
*»*»»•**»»*»
AFTE- TAX
INCOME
(f.uOOl
199.
19*.
183.
183.
177.
172.
167.
161.
156.
150.
1*5.
139.
13*.
»»**»***«>*«
AFTER TAX
RETURN CN
SALES(X)
3.*2
3.32
3.23
3.1*
3.0*
2.95
2.66
2.76
2.67
2.58
2.*9
2,39
2.30
.*****«« »**«
APTEi? TAX
RETURN 0."4
INV. CAP.
7.1*
6.95
6.75
6.56
6. 56
6.17
5.97
5.76
5.59
5.39
5.20
5.CC
*.ei
*»» » » »* ***'
NET
PRESENT
VALUE
872.
302.
733.
663.
59*.
52*.
*55.
386.
316.
2*7.
177.
10d.
3S.
>»»* »»»»»i
CASH
FtCW
(5000)
266.
262.
259.
255.
251.
2*7.
2**.
2*0.
2^6.
232.
229.
225.
221.
1 ** »*«*
CAiw FLOW
AS A X OF
I^VESTf.D
9.33
9.11
6.90
fc.69
e. * =
t .29
S.09
7.90
7.71
7.52
7.3*
7.16
******* •¥**
*
*
*
.#
*
*
»
*
*
*
»
*
*
*
*
*
*
*
*»
-------
Table A-9
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, EXISTING MEDIUM MILL
*****•»»»»****»***»*»*»*»*»***»*»*»*»
*
*
****»f?£suLTs OF IMPACT ANALYSIS*******»***************»»*******»*»»»*»»*»
P^.ICE AFTEP TAX AFTER TAX AFTE? TAX NET - CAUH CASH FLOW »
INCREASE INCOME RETURN ON RETURN ON PRESENT FLCH AS A 7. OF *
(X) (tOCO) SALESU) INV. CAP. VAwUE (iUOQJ INVESTED*
'EASE CASE (LIFETIME OF 15 YEARS)
*
*
»
*
*
*
*
*
*
»
*
*
»«
INCREMENTAL
INO-ifENTAL
INCREMENTAL
IHZ~ -MENTAL
If.C-£h£NTAL
INCREMENTAL
INC^E fENTAL
IN;;- ^>ENTftL
I N7rC MENTAL
INC-'-Cf-ENTAL
I N „ n L M L N T A L
,™,!;^™t«
STEP
STEP
STEP
STEP
STEP
STEP
STEP
STuP
ST..P
STLP
ST£D
STEP
»***«4
NUMBER
NUMBER
NUMBER.
NUMBER
NUMBER
NUMBER
NUMPER
NUMBER
NUMBER
NUMBER
N U M. E E P
NUMBER
L««****<
1
2
3
it
5
6
7
e
9
1C
11
1«**********
.06
.13
.19
.26
. 32
.39
• <«5
.52
.56
.65
.71
.77
«*«***«*«.«*****
723.
723.
717.
712.
706.
701.
695.
690.
685.
67-J.
67V.
668.
663.
****** *****
3.2<»
3.22
3.20
3.17
3.15
3.12
3.10
3.07
3.05
3.03
3.00
2. J6
2.95
i«*********i
6.89
<=>. 63
6.78
6.73
6.68
6. £3
6.56
6.53
6.U6
6.««2
6.37
6.32
6.27
>** ** w** 4
3619.
3550.
3*»81 .
3*411 .
33«»2.
3272.
32C3.
3133.
306** .
2 9 4'« .
2925.
265f-,.
278^.
r*********
1267.
I2d3.
1279.
1276.
1272.
1 2bd .
126«« .
1261.
1257.
1253.
12'»3.
12H6.
12<«2.
. U *- r A 1 M U.
12.17
12.11
12.05
11.9?
11.92
11.66
11.79
11.73
11.67
11.61
11.55
11 . ^ 9
*
*
*
*
»
*
»
*
*
»
*
-------
Table A-10
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, EXISTING LARGE MILL
*«
*
*
P*Zo£ AFTES TAX AFTE3 TAX AFTER TAX NET
INCKEASE INCOME RETURN ON RETURN ON PRESENT
(/.» (SCO,)) SALES(X) 1MV. CAP. VALUE
*663E CASE (LIFETIME OF 15 YEARS)
IP
I
*
*
*
*
*
*
*
*
INCREMENTAL STEP NUMBER
INCREMENTAL STEP NUMBER
INCREMENTAL STEP NUMOER
INCREMENTAL STEP NUMEER
INCREMENTAL STE3 NUMBER
1NC-EMENTAL STL° NUMBER
INC-EMcNTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
STEP
STEP
STEP
STEP
STE°
STEP
HUhcEP.
NUMBER
NUM,6f*
NUKBEK
NUMBER
1
2
3
5
6
7
e
9
10
11
12
.11
.15
.19
.23
!30
.36
'.11
i<«5e.
H.52.
1^25.
iUZO.
110-9.
1399.
1393.
3.78
3.77
3.75
3.7«*
3.73
3.71
3.70
3.63
3.67
3.66
3.63
3.61
i*jt*««**«*«<
8.06
3.C3
d.OO
7.97
7.9<»
7.91
7.58
7. 35
7. £2
7.79
7.76
7.73
7.7C
»*««»+***•*'
9385.
9315.
92<»6.
9176.
9107.
9037.
6963.
€760.
6690.
6621.
6551.
»»«*»****
»*•»»»**»«»»•«»*»»
CA3H CASH FLOW •
FLOW Ai A X OF »
(scoo) INVESTCC *
CAPITAL..'
3035.
3031.
3027.
3023.
3016.
3012.
3005.
30J1.
2943.
16. 79
16.70
16.65
16.61
16.57
16.52
lo . H 5
16.<*<«
16.39
16.35
*
, ,»
•
»
*
*
*
»
*
*
16.31 »
16.27 •
»* «»»* «*»**
-------
Table A-ll
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, NEW SOURCE MEDIUM MILL
*****
*
*
r
to
4
»bA3t
*****
*, * * * * v +
************
****»REoULrS o
P«ICE
INCREASE
(X.)
CASE (LIFETIME OF 15 YEARS)
INCS; CENTAL
INC
INC
INC
INC
INC
INC
INC
INC
INC
>***.*
^ CENTAL
•-•CENTAL
•-I: CENTAL
*; Pt.NTAL,
*:>ENTAL
-CENTAL
rc^ENTAL
c". ft NT AL
•• * « *«***4
STEP
STEP
STEP
STE3
STL"
STEP
STCB
STEP
STEP
STE3
STEP
3TE»
*«**«
NUMBER
NUMBER
NUf 6ER
NU^EER
NUMBER
NU.M6ER
NUMBER
NUMBER
N'Jf 8ER
NURSES
NUMBER
NUMEER
»»#»«*»
1
2
3
5
6
7
8
9
1C
11
12
.06
.13
.19
.26
.32
.39
.45
.52
.58
.65
.71
.78
1 + + Jfi+ + 4}+. + + + + + + 4
F IMPACT ANALYSIS***************
AFTER TAX AFTER TAX AFTER TAX
INCOME RETURN ON RETURN CN
(5000) SALES(X) INV. CAP.
1326.
1320.
1315.
1310.
1304.
129*.
1293.
12S8.
1232.
1277.
1272.
1266.
1261.
'^&*t^&^1t^ + 9'4
5.91
5.88
5.36
5.83
5.81
5.79
5.76
5.74
5.71
5.69
5.67
5.64
5.62
'* **^*#**^ ^M
4.62
4.60
4.56
4.56
4.54
4.52
4. 50
4.48
4.47
4.4,5
4.43
4.41
4.39
L*********
**«*****4
NET
VALUZ
(« **********
CfloH FLOW *
Ao A 7. OF *
.CAPITAL..*
9.11 *
9.06
9.04
5. G 2
9 . fl ii
J • U w
j) Cl J
fc . 36
6.94
8.92
fc.dr
6.36
* « *« ** «
*
*
*
*
*
*
*
*
,
^
*
*»»»
-------
Table A-12
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, EXISTING SMALL MILL
RESULTS OF IMPACT ANALYS!
PxICE AFTI^ TAX AFT£-? TAX
INCREASE INCOME RETURN CN
(X) (SOOO) SALES(X)
00
•BASE CASE (uIFETIME OF 15 YEARS)
* .......INCREMENTAL CCST APPROACH
* INCREMENTAL STEP NUMBER 1
» INCREMENTAL STtP NUMBER ~
» INC-^MENTAL STEP NUMPER
» INCREMENTAL STEP NUMBER
•» INC-cIMENTAL STEP NUMBER
» INCREMENTAL STEP
STEP NUMBER
STEP NUMBER
INC;.cMENTAu STEP NUMBER
STEP NUMBER 1C
INCREMENTAL STEP NUMBER 11
INCREMENTAL STEP NUMBER 12
706.
3.65
.«***»**
AFTEP TAX NET
RETURN ON "RESENT
INV. CAP. VALUE
,..(•/.)...
9.«»5
• «••«»•» »*»•»
CASH CASH FLOW *
Fi.CW AS A X OF *
(£000) INVESTED »
<*COJ) CAPITAL..*
2715. 656. 11.86 »
2576.
2507.
2<«37.
2-368.
229^.
2229.
215'J.
2C90.
2020.
1951.
1662.
-------
Table A-13
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, EXISTING MEDIUM MILL
» '
*
»
.,„„.„,.„„. •»*««» •»••*••*»#«. •»»»»«»»«^£S,,LTS OF Jf1pAcr ANALYSIS****»*****»»»*»»»»»»*»*»
«MICE AFTER TAX AFTE* TAX AFTES TAX NET
INCREASE INCOME RETURN CN RETURN CN PRESENT
(X> ($000) SALESC/.I INV. CAP. VALUE
•BASE CASE (LIFETIME OF 15 YEAF.S)
•
»
*
»
*
•
*
•
*
*
•
INC-.;. CENTAL
IfJC '£MENTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
INCREMENTAL
IfiC-EMENTAL
STEP
STEP
STEP
STEP
STr:?
STEP
STEB
STEP
STEP
STEP
STEP
» INCREMENTAL STEP
»••»»«•»••••*•«»••«
NUMBER
NUMBER
NUMBER
NUMBER
NUMSE-?
NUMBER
NUMPE-?
NUMBER
.NUMBER
NUMGE3
NJM8ER
NUMBER
i»»#»«»«
3
«***•**»«««*
.02
.05
.10
.12
.15
.17
.20
.22
.25
.27
.30
»•*»»»»*•«• **« i
1213.
1203.
1203.
1197.
1192.
1186.
1141.
1176.
1170.
1165.
115S.
li<»S.
t***»m«*«*«j
2.09
2.oa
2.07
2.06
2.05
2.3<»
2.03
2.02
2.01
2. CO
1.99
1. iS
1.97
KAJ1MM&..M..M.M..H. m. M
«..£6 -2<«92.
*». £*» -2561.
'••S2 -2631.
•
«».75 -263J.
<». 71 -^973 .
^ • • * L 7 ( «J •
^.69 -3flt|7.
*f.&7 -3117.
4 . 6<* -31 66 .
U m f*S" •• I? ~.f*
^.Ct — Oc^O.
4.60 -3325.
»***»»»«»«»».»«»«»»
CASH CASH FLOW »
FLCW AS A % OF *
(SOOO) INVFSTEC *
"Kw."'
2«»73.
2^71.
C<«fc7.
2*459.
2A56.
5 , *
zJlJl
CAPITAL
9.97
c . at:
* • » j
9.92
9.90
9.d5
9.52
9H A
• O U
9.77
9.75
C Tf
y . f C
^ T rt
'5.70
9.67
. .
*
«
*
*
*
•
^P
*
«
4h
^F
»
-------
Table A-14
INCREMENTAL IMPACT ANALYSIS
WOVEN FABRIC DYEING AND FINISHING, NEW SOURCE MEDIUM MILL
••»»»«»»*•«»»*<
r
M
Ul
SjESJLT5
e.-UCE
INCREASE
(7)
IMPACT ANALYS IS
TAX AFTER TAX
INCOME RETURN ON
(JCOO> SAuESU)
• •••••••••
BASE C"SE
............»»••••••••••••••
(LIFETIME OF 15 YEAkS)
REM.ENTAL COST APPROACH
IflC- IMENTAL STEP NUMBER 1
INCREMENTAL STEP NUMBER 2
INC = £i"E.NTAL STEP NUMBER 3
INCv£.''ENTAL STEP NUMBER «»
I-IC'T-MtNTAL STEP NUMRER 5
r'(CJ-:<"£NTAL STEr NUMBER 6
INCREMENTAL STEP NUMEER 7
IMC-*-:!»ENTAL STEP NUM.SER fl
INCREMENTAL STEP NUMBER 9
IMC?'.vCNTAu STEP NUMBER 10
STEP NUMBER 11.
STEP NUMBER 12
• •••»••
• ••*••• I
3751.
6.<»5
AFTE3 TAX
RETURN ON
INY. CAP.
• •*(<£)• ••*
6.23
NtT
PRESENT
VAUUE
, { f. 0 G 0 > . • .
25942.
>»*.*»»»»»
CASH CAjf« FLOW *
FLCd AS A 7. OF »
(fOOO) INVL~ST£0 *
CAFITCL..*
521d. 11.44 *
.63
.05
. J 8
.10
.13
.15
.16
.20
.13
.25
.29
.30
37<*5.
3V*»0.
373U.
3729.
372<«.
3713.
3713.
3707.
3702.
3696.
3691.
6.1*1*
6.U3
6.<*2
6.40
6.39
6.3d
6.37
6.36
6.35
6.3<*
6.33
8.21
b.20
8.19
a. ie
8.17
9.15
8.1**
8.13
S.I 2
8.11
«.09
3.06
25633.
25733.
2566<».
255 }k .
25525.
25(«55.
25346.
25317.
252<»7.
25174.
2510S.
521C.
52C6.
5203.
5199.
5195.
5191.
51d5.
51c<».
51dO.
5176.
5173.
^.^ M. M. JL M M.
11.41
11.40
11.39
11 .37
11.36
11.34
11.33
11.31
11. 3C
11.22
11.27
MM«K»« tf*»4
-------
Table A-15
INCREMENTAL IMPACT ANALYSIS
KNIT FABRIC DYEING AND FINISHING, EXISTING SMALL MILL
CTi
****"******»*******»*»»»»**«*******»*»*»•» RESULTS OF IMPACT ANALYSIS****************
PRICE AFTE-. TAX AFTER TAX AFT£c TAX
INCREASE INCOME RETURN ON RETURN ON
n.) (JCOO) SALES(X) INV. CAP.
EASE CASE (LIFETIME OF 15 YEARS) «?5l.
INC = [>'LNTAL
INC^OENTAL
INCREMENTAL
INC -t. MENTAL
IMCS-:,"ENTAL
I HC-il CENTAL
INC = -:MJ:NTAL.
IfiCP-;."-EN'TAL
I NC- rl M'Nf AL
I,NC
-------
Table A-16
INCREMENTAL IMPACT ANALYSIS
KNIT FABRIC DYEING AND FINISHING, EXISTING MEDIUM MILL
»»••*»
*
*
.•BASE
* I NC -
» !NC-
* INC-
* INC '
» INC-!
» INC-
» INC-
» INC-
* 1NC-.
* INCJ.
» INU-;
* INC'*
PRICE AFTCx TAX AFTER TAX
INCREASE INCOME RETURN ON
CO (£000) SALES(X)
CASE (L
JMEISTAL
:ME\TAL
, K £ s r A L
"MENTAL
I'cNTAL
:.VENTAL
>ENTAL
-.MENTAL
'.MENTAL
iMENTAL
•IMENTAL
EMENTAL
IFETIME OF 15 YEAPS)
STEP
STEP
STE3
STEP
STC'3
STEP
STEP
STEP
STEP
STEP
STEP
STEP
NUMBER
NUMBER
NUMBER
NUMBER
MUMPER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
1
2
3
<»
5
6
7
8
9
10
11
12
.05
.10
.15
.19
.2^
.29
. J<»
.39
«<*
-------
Table A-17
INCREMENTAL IMPACT ANALYSIS
KNIT FABRIC DYEING AND FINISHING, EXISTING LARGE MILL
03
*«••«««
»
»
*•».«..
«* « ***4
*»»»»»**»»»»
*»**»*£SULTS OF IMPACT ANAL YSIS »*«»**+*»***»»«
P*ICE AFTE^ TAX AFTE-? TAX AFTER TAX
INCREASE INCOME KETU3N ON RETURN ON
<*> (iOOO) SALESC/.) INV. CAP.
*EAS£ CASE (LIFETIME OF 15 YEARS)
• INC-,:
* X NC ^ *"
* IUC-r.
» INC;-
» INCS'I
• INC^:
» INC-:
* INC-vI
* INC>£
* lie = :
» INC-JL
* INC-:
MENTAL
ftNTAL
MENTAL
MENTAL
CENTAL
ME N T A L
MENTAL
MENTAL
MLNTAL
MENTAL
MLNTAL
STEP
STE°
STEP
STEo
STE°
STEP
STEJ
STEP
STEP
STEP
STEP
STEP
NUMBER
NUMBER
NUMiOcR
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMOE*
NUMBER
NUKEE*
1
2
3
4
5
6
7
8
9
10
11
12
.06
.06
.11
.14
.17
.13
.22
.25
.28
.31
.33
2209.
2199.
2193.
218-J.
2182.
2177.
2171.
2166.
2161.
2155.
215C.
4.21 12.
4.20 11.
4.19 11.
4. Id 11.
4.17 11.
.4.16 11.
4.15 11.
4.14 11.
4.13 11.
4.12 11.
4.11 11.
4.39 11.
3C
97
94
91
fly
86
6C
77
74
71
65
'**» »*»»»
PRcStNT
VALUC
neai.
lieu.
11742.
11672.
11603.
1 1 C33 .
11464.
113^5.
11325.
11256.
1 11 86 .
1 11 17 .
11347.
******•**•***••**********«»** «»**»»»»»«*»**»»»»»»»»»»»»»»#*****»*»*»»*»»»*.»».)M
»»*»»•*»»«#»*» »»44»
CASH CAih FLCH *
FLCH AS A X OF »
(JGOO) INVESTED *
2917.
2910.
2 3C6.
2595.
2 ft oil
~> e76.
2d72.
'**»***»« 4
L A»-l 1 04.
15.35
15.81
15.77
15.72
15.66
15.60
15.56
15.52
1 5 • <+ 5
1 \* • *4 4
15.35
. .»
»
*
*
*
*
»
*
«
*
^
*
'*»
-------
Table A-18
INCREMENTAL IMPACT ANALYSIS
KNIT FABRIC DYEING AND FINISHING, NEW SOURCE MEDIUM MILL
ANALYSIS*******
.»»»»»«»»»»»»»»»»»»«» »»<
VD
* PrUCE AFTE"-^ TftX AFTEx TAX AFTER TAX
* INCREASE INCOME SCTUSN ON RETU-N ON
» (7.) U.GOC) SALESU) INtf. CAP.
Q.
*
4^
•
»
»
»
*
»
»
*
*
*
*
*
6A3C CASE (LIFETIME OF 15 YEARS)
INr>:f-hKTAL STEP NUf-BER 1
lNC'_f£NTAL STL? NUMPE* 2
INCREMENTAL STEP NUMrE* 3
IN' -:>ENTAL STEP UU^GER 4
iNv. -.>ENTAL STL° NUf^PE^ 5
IW^--^ENTAL STEP NUN PER 6
I^J^-.^£NTAL STL? N'J^PE*? 7
INC-.£f-ENTAL STtlP NUPBE* 8
INC-^II'ENTAL STEP NJ^EER 9
INC-.ir'f-EKTAL STEP NUHBER 10
INCSCrENTAL STEP NUDGES 11
INC^^^t-NTAL STEP NUKEE^ 12
.05
.10
.15
.13
.24
.29
.34
.39
.44
.49
.54
.58
1G81.
1075.
1070.
1C65.
1C59.
1054.
1048.
1043.
1037.
1032.
1027.
1021.
1016.
3
3
3
5
3
3
'3
3
3
3
3
3
3
.62
.61
.59
.57
.55
.53
.51
.50
.48
.46
.44
.42
.41
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
37
35
33
31
29
26
24
22
20
16
15
13
11
NET
Pr tSLNT
VALU-:
865C.
8781.
6711.
8642.
8572.
8503.
Sd33.
8364.
8294.
8225.
8155.
6036.
8C17.
CASH CASH F^G'-i *
FLCrf AS A '/. JF •
(ioUU) INVESTEC *
2153.
2146.
2142.
2139.
2135.
c 131.
2127.
2124.
2120.
2116.
2112.
2109.
2105.
8.73 *
8.67
8.65
8.63
8.60
8.58
8.56
5.53
8.51
6.43
A. 46
e. 4<<
e.4i
^
*
*
*
*
«
»
»
»
*
*
*
*
««»»»«»»•*»»»»«.»«..•»»»»»»»»»»»»»»*»»»».•»»»•+ »»* »*»»»*«»»»»»»»»•»»»»»»»»»**»»»»»*»»»»»*»»»»*»»•»*»»«»»**»»»»»»*»»»
-------
Table A-19
INCREMENTAL IMPACT ANALYSIS
CARPET MANUFACTURE, EXISTING SMALL MILL
I « »» »»*4
OF IMPACT ANALYSIS'
!«**•»*<
>•»»•••»»•»»»••»»»»
>
NJ
0
»
* ...
•eAsi
» INC
• IN-;
» IN;
» IN,;
» INJ
» INC
» I NO
» in;
» INC
* IN,,
* INC
PRICE AFTER TAX AFTER TAX
INCREASE INCOME RETURN ON
<'/.) UCOG) SALESU)
CASE (LIFETIME OP 15 YEAFS) 461. 4.43
-•-CENTAL
- :MENTAL
-riMENTAL
•MMENTAL
-JMEMAL
••-'MENTAL
^Ifdf.TAL
-'.MENTAL
-C CENTAL
-df-ENTAL
STCP
STEP
STtP
STEP
STEP
STEP
STtP
STEP
STEP
STEP
STEP
k «*«.*«
MUMPER
NUMBER
NUMPER
UUMOEP
N J M n E R
MUM.EER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
lM,±*t*MMM
1
3
5
6
7
e
9
1C
11
LM^JiJlMMJ&^
-------
Table A-20
INCREMENTAL IMPACT ANALYSIS
CARPET MANUFACTURE, EXISTING MEDIUM MILL
•»»»»»»»»»»*»»»»<
Jl T5 OF IMPACT fli^ftL YSJS******************** **********************
*
?
*
•
*
*
»
*
»
*
*
INC
I NC,
INC
INC
IN-;
INC
INC
IN.:
IN.:
IN:
INO
INC
CASE (LIFETIME OF 15 YEA^.S)
-' Ef-EMAL STE = FJ'JMGER
-L'l*ilNrAL
- El" E N T A L
^EfENTAL
rEfENTAL
--.CENTAL
-". I 1" E N T A L
-IfENTAL
•" _ f E N T A L
••r.fENTAL
-ENENTAL
-ufENTAL
STLP
STEP
STE°
STEP
STEP
STt.P
STEP
STL'P
STc..°
STtP
STEP
NUKBER
NUfBEP
NUf PER
NUKSEft
NUf EER
NUMBER
MUXPER
NUfGER
NUfDER
NUI"!3EK
NUfGER
1
2
3
4
5
6
7
e
9
10
11
12
.0**
.08
.11
.15
.19
.23
.26
• oG
.3*»
.36
• <«2
.45
.1282.
1276.
1271.
1266.
1260.
1255.
1249.
1244.
1233.
1233.
i<:28.
1222.
1217.
3.33
3.31
3.3C
3.29
3.27
3.26
3.24
T.23
3.22
3.20
3.19
3.17
3.16
CASH C
f L. 0 h A
(«OGG1
8.C6 4687. 1341.
».G2
7.99
7.96
7.92
7.69
7.55
7.82
7.79
7.75
7.72
7.66
7.65
4617.
4548 .
4473.
4409 .
43.1 :*•
4270.
4209.
4131.
4062 .
39 q^.
3S23.
3853.
1337.
1333.
133C.
1326.
1322.
13l
-------
Table A-21
INCREMENTAL IMPACT ANALYSIS
CARPET MANUFACTURE, EXISTING LARGE MILL
» 9 » »»
*
jp
* . . . .
•EASE
* . . •
* I f J' '
• INO
* If.J
* IK'J
* :>;j
| * A I* w
10 « T|,"
to ll<0
» in.;
* INC
» IMC
» INC
#»»•«
».»•»*»»»»»»»#«#«•«*, «»*«»»»*«*»«»»**pcSULTS op ;MPACT ANALYSIS«»*»»»**»*»»»»
PRiCE AFTER TAX AFTER TAX AFTE* TAX
INCREASE INCOME RETURN ON RETURN 0-4
CiSE (LIFETIME OF
-c'fEKTAL
=ENTAL
•»»•»•»».
STEP NUMBER
STEP NU^P.ER
STEP NU^OEr;
STEP NUMBER
STtP NUMBER
STEP NUMBER
STtP ti(JP Pt^
STEP NU«OE^
STEP N'JfGER
STEP NUMBER
STEP NUCCER
STE3 NUMBER
15 YEARS)
1
2
3
5
6
7
6
9
1C
11
12
» * * ¥ ***+«*•••**••••
2093.
2085.
2080.
2C69.
2063.
2C53.
20W.
2Q<+2.
2036.
2C31.
2025.
»•«»»» *« «j
SALES(X) INV. CAP.
................
2.67
2.67
2.66
2.65
2.65
2. 6<»
2.63
2.63
2.62
2.61
2.61
2. 60
2.59
»«»**»»»•*•«»»»»<
( 7. > . . . .
6. '+7
6.46
6." If
6.39
6.37
6. 36
6.3<+
6.32
6.31
6.29
6.27
>« **»»* .
*******+•** 4
NET
PPESENT
CASH CASH FLOW *
F'OrV AS A •' OF »
VALU£ (3000
. (SO OC > . . . ,
5cC2.
5733.
RF- P> <
J C O « .
559-'+.
552*4 .
5*»5&.
53e5.
5316.
5177.
5103.
5C33.
»•»» ** •» **«
* . . • .
23*,*,
2336
2325
2321
2 3i 7
231*4
2310
23C6
23J2
) INVESTED
...CAPITAL.
7.27
7.25
7.22
7 o |)
• r • C U
7.18
7.17
7.15
7.1 j
7.12
7.1 j
7.06
7.07
««»*•»*»»»»<
*
'*
*
*
*
*
*
*
*
i*
-------
Table A-2 2
INCREMENTAL IMPACT ANALYSIS
CARPET MANUFACTURE, NEW SOURCE MEDIUM MILL
»»*•»*»»»*«»»»***»*»*»»#»*•»»«»*****»'
*
*
K)
U)
* t
*
»
*
*
*
*
*
«
*
*
*
•
•*»»»R£SULTS OF IMPACT AN At YSIS»»»**»»*********
P^ICE AFTE- TAX AFTER TAX AFTER TAX
INCREASE INCOME RETURN ON RETURN ON
C/.) (SJOO) .SA..ESU) INV. CAP.
ASE (LIFETIME OF 15 YEAf-3)
I'JC^.f-ENTAU STEP NU^DER
INC*'"
T,;C,"
I'JC-^
inC ' L
INC-r
It.C ~L
INC '--
INC-;.-:
»**»»*•
I"E NTAL
CENTAL
t-ENTAL
"LNTAL
CENTAL
fENTAL
f- £ f j T A L
CENTAL
f ENTAL
."tSTAL
***•«*<
STE°
STE?
STEP
STEP
STEP
STcP
STEP
STE°
STL?
STEP
STEP
>»•»*<
Nllf EER
N'Jf HER
NUf EER
NU^"?E*<
NU^dt'S
NUf GtfJ
NUI-6ER
NUI"F-E^
N'JMBE*
NUMBER
NUf FE^
fr******^
1
2
3
4
5
6
7
a
C
10
11
12
^.f********1**
.U4
.OS
.11
.15
.19
.23
.26
.30
.34
.33
.41
.45
* * ****** *******
•349.
544.
539.
5 3 J .
523.
•>22.
517.'
f> 11 .
506.
501.
495.
490 *
494.
**** ******J
1.43
1.41
1.40
1.36
1.57
1.36
1.34
1.33
1.31
1.30
1.29
1.27
1.26
£*** V ***** *4
2.22
2.19
2.17
2.15
2.13
2.11
2.09
2.06
2.U4
2.02
2. DC
1 . 9
-------
Table A-23
INCREMENTAL IMPACT ANALYSIS
STOCK AND YARN DYEING AND FINISHING, EXISTING SMALL MILL
NJ
,,,,«..»,,,***»*,*« + *, »»»»»»,»»»»»»*»», »^R£s,jLrs QF JMPACT ANALYSIS******* »**»«*»<
* PRICE AFTER TAX AFTER TAX AFT^S TAX
*
*
*«»«««
*6A3E
# T f ' ' ^
* INUt
» INC-
» INO--
» INC-
* INC'
* I No •*
* IN'-'
* INCS
* INC*
* * » * ••*• #
CASE (LIFETIME OF
•ZMt'NTAL STEP
LMENTAL STEP
:MCNTAL STEP
IMENTAL STEP
^MENTAL STE=
:MENTAL STEP
^MENTAL 3Tc°
CMENTAL STEP
i ^ c.' N V A L STEP
•IMENTAL STEP
IMENTA'. STcP
* * «. M MMM»JtJKMJKJI
NUMDEP
DUMBER
NUMBER
NUMPER
NUMBER
NUMBER
••JUMBE-<
IMUMEEK
NUM.eFR
NUMBER
NUMBER
NUMBER
15 YCAKS)
1
2
3
i,
5
6
7
3
9
10
11
12
INCREASE
C/.l
.19
.37
.56
.7k
.93
1.11
1.29
I.
-------
Table A-2 4
INCREMENTAL IMPACT ANALYSIS
STOCK AND YARN DYEING AND FINISHING, EXISTING MEDIUM MILL
*
*
*
'EASE
»«»»»»»».»»»»»»»».».»*»»»»»»*»»».».».»
****»RcSllLT3 Of IM°ACT AN ALYS IS********** *****»«**»•»**
r^ICE AFTE- TAX AFTE* TAX AFTE=i TAX NET
INCREASE INCOME KETUSN ON RETURN ON PRESENT
C/.) {J300) SALES(7.» INV. CAP. VALUE
CASE (LIFETIME OF 15 YEArS)
* INC
* INC
• I.4C
* I N C
» INC
* INC
> • INC
NJ * IMC
1/1 » INC
* : jc
» INL
» INC
»»»*«
• CENTAL
~ PLMAL
- CENTAL
^CENTAL
-<••• CENTAL
-_C:ENTAL
- CENTAL
- CENTAL
•; J r ii N T A L
<-.r£NTAL
-.'.fLNTAL
^.fENTAL
¥*'»»»»»»(
STEP
ST€°
STtP
STE°
STEP
STEP
STEP
STEP
STEP
STEP
STEP
STEP
N'JMfiEK
fi'LJMGE-?
HUKBER
N'jMf-Erj
N'JMBfP
NU^DEr?
NJP 6 Ex
fjijf EER
NUMBER
NUMBER
NU^EE?
NUMBER
I
?
3
4
5
6
7
8
9
10
11
12
.06
.13
.19
.25
.32
.36
.45
.51
.^7
.64
.70
.76
1C11.
1206.
1001.
995.
990.
984.
979.
974.
96<».
963.
957.
952.
946.
<,
4
4
4
4
4
4
4
4
4
4
4
4
.43
.41
.36
.36
.34
.31
.29
.26
.24
.22
.19
.17
.15
13
12
12
12
12
12
12
12
12
12
12
12
12
.03
.96
.89
.P2
.75
.66
.61
.54
.47
.40
.33
.26
.19
4567.
4517.
4443.
4376.
4309.
4240.
4170.
41C1.
4C31.
3962.
3892.
3623.
3753.
CASH CASH FLOW *
FLOft AS A '/. OF *
(iOCO) INVESTED »
9 .^ACTTAI *
1462.
1453.
1455.
1451.
1447.
1444.
144C.
1436.
1432.
1429.
1425.
1421.
1417.
• i«* " r A p ^ t i
ie.84
18.73
18.62
It. 52
16.41
16.30
ie.2o
16.13
17.99
17.69
17.79
17.66
17.56
*
*
»
»
•
*
*
»
»
*
*
»
•
^^^^^^^M^V^VV^^V^fV^^M^^V^^^^^^^^^^^VV^*^**^^^^^*^^^^*^^*^*^^*^^^^^^*^^**^*^^^^^^^^.^^****^^* ««.«**
-------
Table A-25
INCREMENTAL IMPACT ANALYSIS
STOCK AND YARN DYEING AND FINISHING, EXISTING LARGE MILL
10
o
»»»»»»
*
************4
L»»»»»»»»»»¥»»»***#*»»**RESiJLTS^ OF IMPACT ANALYSIS*****
PxICE AFTEF TAX AFTE1? TAX
INCREASE INCOME RETURN ON
(X) (TOOO) SALES(X)
**«« V «*«.*«<
AFTc* TAX
RETURN ON
1 N V . CAP.
>»»»» *» »•»
NET
PRESENT
VALUE
»»+*»*»»»»»»»*+»»*
CASH CAjH FLOW *
FLOW AS A X OF »
(tooo) INVESTED »
* INC-
» INC >
* I f» C '
* INC -
* INC-
» INC*
• IN~-
» INC"
» INC-
» INC-
» I N C -
» INC-
CASE (LIFETIME OF
Tiur*OC'MC~MTAt f*l")CT
tfENTAL STEP NUMBER
£KtNTAL STEP
i^ENTAL STEP
£fENTAL STEP
£CENT4L STEP
:^E^TAL STEP
£f£NTAL STEP
rfENTAL STEP
uf^cNTAL STEP
^r-ENTAt STEP
-CENTAL STEP
£f-ENTAL STEP
NUKEER
NUf'PER
NUM9EK
NUMBER
NJCBER
NUMBER
N'JI*GE^
rJUfPER
N'JMEER
NUf 8E\
NUfPEK
15 YEARS)
1
2
j
^
5
6
7
6
9
10
11
12
.05
.09
.14
.19
.24
.28
.33
.39
.43
.47
.52
.57
1757.
1751.
i746.
1740.
1735.
1730.
1724 .
1719.
1713.
1708.
1702.
1697.
1692.
5.73
5.71
5.69
5.63
5.66
5.64
5.62
5.60
5.59
5.57
5.35
5.53
5.52
15. OC
14.96
14.91
14 . 66
14. 62
14.77
14.72
14. 6d
14.63
14. 59
1 4. 54
14.49
•KM M.M.MM.MMMJI.J
S733.
5663.
5594.
9524 .
9455.
5365.
53 IS.
92«*7.
5177.
9103.
903^.
896 3.
6895.
tJL.M..MM,MJl^Jl
2204.
2200.
-------
Table A-26
INCREMENTAL IMPACT ANALYSIS
STOCK AND YARN DYEING AND FINISHING, NEW SOURCE MEDIUM MILL
*
*
*EASE
>
I
10
-4
*
»
*
*
•
*
*
*
*
*
*
*
INC-
INCi
INC-
INC -
INC-
INC'
INCr
INC-
INC*
INCC
»** »» »
CASE (LIFETIME OF 15 YEAF-3)
. .IN'^fT'JTfli r r. c T Acc«.'fiAru_
-CENTAL
^ENTAL
:r£NTAL
- fENTAL
IfcNTAL
IrENTAL
J. !• E N T A L
-1 1" E N T A L.
•CENTAL
-CENTAL
« * * * *** 4
. • i. i ^ i -
STEP
5TL0
STEP
STEP
STEP
STEP
STE.o
STEP
STE°
STEP
STEP
STEP
»****<
NUMBER
NUCBEtf
NU^GER
NUMBER
NUf EER
NLirEER
NUP6E3
NUMBER
NJf EER
NUMBER
^»**** *4
1
2
3
»* »*»» »*
CASH
(fOl-0)
1743.
1739.
1735.
1732.
1728.
1724.
1720.
1717.
1713.
17C9.
1705.
1702.
1693.
******
******* *****
as A y. OP »
INVESTED *
6. 05
6.07
6.05
6.03
6.01
5.99
5.97
5.96
5.94
5.92
5.93
5.89
5.37
*
*
*
*
*
*
*
*
*
*
*
*
*
************
-------
TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
1 REPORT NO.
EPA 440/1-77-009
2.
. TITLE AN& SUBTITLE"
Economic Analysis of Pretreatment Standards
for the Textile Industry
. AUTHOR(S)
..PEBFORMING ORGANIZATION NAME Af
Office or Analysis and Eval
Water Economics Branch
401 M Street, S.W.
Washington, D.C. 20460
^X™mV?RESS
on Agency
Standards
3. RECIPIENT'S ACCESSIOr*NO.
5. REPORT DATE
July 1977
6. PERFORMING ORGANIZATION CODE
WH-586
8. PERFORMING ORGANIZATION REPORT NO.
EPA 440/1-77-009
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
68-01-4348
13. TYPE OF REPORT AND PERIOD COVERED
14. SPONSORING AGENCY CODE
700/01
5. SUPPLEMENTARY NOTES
6. ABSTRACT
This study is designed to analyze the economic impact on the textile industry
of the costs of pretreatment requirements under the Federal Water Pollution
Control Act amendments of 1972. This reports contains, in order, a description
of the methodology used in the study, an overview of the textile industry,
impact analyses by industry segments, and an explanation of the limits of the
analyses. The section on methodlogy also contains the sources of data used in
the study. The overall textile industry situation is examined because of the
number of factors that are common to all of the studied segments of the industry,
For each of the textile industry segments (wool scouring, wool finishing, woven
fabric finishing, knit fabric finishing, carpet manufacturing, and stock and
-arn dyeing and finishing), the industry's structure a-nd financial and pricing
characteristics are examined. From these data, representative plants are
developed which serve as a baseline (before pretreatment controls) from which
impacts can be measured. The model plants are impacted, utilizing pretreatment
control costs provided by the Environmental Protection Agency, and the overall
industry impacts are determined.
7. KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
8. DISTRIBUTION STATEMENT
ELEASE TO PUBLIC
b. IDENTIFIERS/OPEN ENDED TERMS
19. SECURITY CLASS (This Report)
UNCLASSIFIED
20. SECURITY CLASS (This page)
UNCLASSIFIED
c. COSATI Field/Group
21. NO. OF PAGES
100
22. PRICE
PA Form 2220-1 (9-73)
ft U S GOVERNMENT PRINTING OFFICE • 1977 25]-7.W6S95
------- |