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
                                       -i-

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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
                                      -11-

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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
                                      -111-

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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
                                      -IV-

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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
                                     -v-

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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
                                    -vii-

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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
                                  -Vlll-

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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
                                      -ix-

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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
                                       -x-

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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


                                      -xi-

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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
                                      -xii-

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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.
                                    -xiii-

-------
                               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

-------
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

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                                           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

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                                          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

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                                            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

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                                          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

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                                          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

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                               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

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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

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 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

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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

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     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

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     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

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     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

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 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

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                                                                                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

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                                   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

-------
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

-------
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

-------
                                                 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

-------
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

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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

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                                 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

-------
     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

-------
     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

-------
                                    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

-------
                                 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

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                                   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

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                                  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

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     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

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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

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 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

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     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

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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

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                                  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

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 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

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                                                          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

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                                   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

-------
     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

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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

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 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

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      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

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      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

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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

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      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

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               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

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                      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

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      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

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      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

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 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

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                                                                   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

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                                  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

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                                                                                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.

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                                  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

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                                 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

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                                  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

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                                 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

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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

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                                  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

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                                 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

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      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

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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

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     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

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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

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       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

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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 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

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 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

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     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

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                                                                          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

-------
             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

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     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

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                                                          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

-------