United States Office of Water Regulations EPA 440/2-83-012
Environmental Protection and Standards November 1983
AgenCy Washington DC 20460
Water
Economic Impact
Analysis of Effluent
Guidelines and
Standards for the
Electrical and Electronic
Components Industry
Phase II
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Economic Impact Analysis of the
Electrical and Electronics
Components Industry
Phase II
FINAL REPORT
by
Meta Systems Inc
10 Holworthy Street
Cambridge, MA 02138
EPA Contract No. 68-01-6426
(Work Assignment #9)
to
Office of Analysis and Evaluation
U.S. Environmental Protection Agency
401 M Street, SW, (WH-586)
Washington, DC 20460
December 198 3
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This document is an economic impact assessment that was prepared during
che development of the recently-issued effluent guidelines. The report is
being distributed to EPA Regional Offices and state pollution control agencies
and directed to the staff responsible for writing iadustrial discharge
permits. The report includes detailed information on the costs and economic
impacts of various treatment technologies, it should be helpfol to the permit
writer in evaluating the economic impacts on an industrial faciLity that must
comply yith effluent Limitation yuidelines or water quality standards.
The report is also being distributed to the EPA Regional Libraries^ and
copies are available from the National Technical Information Service (NTIS),
5282 Port Royal Koad, Springfield, Virginia 22161 (703/487-4600).
If you have any questions about this report, or if you would like
additional information on the economic impact of the regulation, please
contact the .Economic Analysis Staff in the Office of Water Segulations and
Standards at EPA Headquarters:
431 M Street, S.H. (WK-586)
Waslr.irtgtan^ D.C. 20460
(202) 332-5397
The staff economist for this project is Ren.ee Rico (2Q2/382-5J86) .
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Table of Contents
Section Page
Section Is Executive Summary 1-1
I. Introduction 1-1
II. Industry Profile 1-1
III. Economic Impact Methodology 1-4
III.I Baseline Estimates and Measures of Impact 1-5
III. 2 Closure Analysis 1-7
111.3 Production, Employment and Foreign Trade 1-8
111.4 New Sources 1-3
111.5 Small Business Analysis 1-10
IV. Effluent Limitations Guidelines, Options and Costs 1-10
IV. 1 Treatment Options 1-10
IV. 2 Treatment Costs for Existing Plants 1-11
IV.3 Treatment Costs for New Sources 1-12
IV. 4 Selected Options 1-13
V. Results of the Analysis 1-14
V. 1 Baseline Estimates 1-14
V.2 Impact Estimates: Industry-wide 1-15
V.3 Impact Estimates: Firm Level . . 1-15
V.4 Impact Estimates: Plant Level 1-15
V.4.1 Color TV Picture Tubes 1-15
V.4.2 Other CRTs 1-16
V.4.3 Luminescent Coatings ..... 1-16
V.5 Closure Analysis 1-16
V.5.1 Color TV Picture Tube Plants 1-17
V.5.2 Other CRT Plants 1-18
V.5.3 Luminescent Coatings 1-18
V.5.4 Solvency Analysis . . . 1-19
V.5.5 Reliability of the Impact Ratios 1-19
V.6 Production and Employment Impacts 1-19
V.7 Foreign Trade 1-20
V. 8 New Source b. 1-20
V.8.1 New TV Tube Plants 1-21
V.8.2 New Other CRT Plants 1-21
V. 8.3 New Luminescent Coatings Plants 1-22
V.9 Small Business Analysis 1-22
VI. Limits of the Analysis 1-23
VI.1 Plants with Multiple Product Lines 1-23
VI. 2 Impact Measure Derivations ............... 1-23
VI.3 Discount Factors 1-24
VI. 4 Small Companies 1-24
VI.5 Import Policies 1~24
VII. Sensitivity Analysis 1-25
Section 2: Industry Profile 2-1
I. Industry Definition ..... 2-1
II. Industry Overview 2-1
III. Growth History and Outlook 2-4
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Table of Contents
(continued)
Section Page
Section 2, continued
111.1 Industry Production and the Business Cycle 2-4
111.1.1 Historical Data 2-4
111.1.2 Performance Forecasts 2-6
111.2 Factory Sales 2-8
III. 2.1 Electron Tubes All Types 2-8
111.2.2 Color TV Picture Tubes 2-10
111.2.3 Other Cathode Ray Tubes (CRT) 2-12
111.3 Employment 2-13
III. 4 Prices 2-15
111.5 Markets 2-18
111.6 Foreign Trade 2-20
IV. Firms and Establishments in Scope of Study 2-24
References, Section 2 2-28
Section 3: Economic Impact Methodology 3-1
I. Industry-wide Baseline 3-1
1.1 Color TV Picture Tubes 3-2
1.2 Other CRTs 3-3
1.3 Luminescent Coatings 3-4
II. Impact Projections 3-5
11.1 Industry-wide Impact 3-5
11.2 Plant-Level and Firm-Level Impacts 3-6
11.2.1 Annual Treatment Cost to Sales 3-7
11.2.2 Annual Treatment Cost to Plant-Level Profit . . . 3-7
11.2.3 Annual Treatment Cost to Manufacturing
Conversion Cost 3-9
11.2.4 Annual Treatment Cost to Firms' Profit 3-10
11.2.5 Capital Requirement to Plant Investment 3-11
11.3 Financial Ratios 3-12
11.3.1 Limitations 3-12
11.3.2 Recommended Ratios 3-13
III. Closure Analysis 3-14
111.1 High-Impact Plant Identification 3-14
111.2 Solvency Analysis 3-16
IV. Production and Employment Impacts 3-18
V. Foreign Trade Impacts 3-19
VI. New Sources 3-19
VI. 1 New TV Tube and Other CRT Plants 3-20
VI.2 New Luminescent Coatings Plants 3-22
VII. Small Business Analysis 3-2 2
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Table of Contents
(continued)
Section Page
Section 4: Effluent Limitations Guidelines Options
and Compliance Costs 4-1
I. Introduction. ..... 4-1
II. Treatment Technology Options 4-3
11.1 Cathode Ray Tubes Subcategory 4-3
11.2 Luminescent Coatings Subcategory 4-3
III. Current Treatment and Treatment Costs 4-4
111.1 Current Treatment 4-4
111.2 Treatment Costing 4-4
111.2.1 Treatment Costs for Existing Sources 4-5
111.2.2 Treatment Costs for New Sources 4-7
Section 5: Results of Analysis 5-1
I. Baseline Analysis 5-1
1.1 Industry-wide by Subcategory 5-1
1.2 Financial Ratio Analysis of Firms 5-2
1.3 Baseline Projections ...... 5-6
II. Impact Analysis (Existing Producers) 5-6
11.1 Industry-wide Impacts by Product Sector 5-6
11.1.1 Color TV Picture Tubes 5-6
II. 1.2 Other CRTs 5-8
11.1.3 Luminescent Coatings 5-8
11.2 Impacts on Financial Ratios of Firms 5-8
11.3 Plant Level Impacts (Existing Plants) 5-10
11.3.1 TV Picture Tube Plants 5-10
11.3.2 Other CRT Plants 5-17
11.3.3 Luminescent Coatings Plants 5-19
III. Closure Analysis 5-19
III.l High Impact Plant Identification 5-19
111.1.1 Color TV Picture Tube Plants 5-19
111.1.2 Other CRT Plants 5-21
111.1.3 Luminescent Coatings Plants 5-23
III. 2 Reliability of the Impact Ratios 5-23
III.3 Solvency Analysis 5-24
IV. Production and Employment Impacts 5-25
V. Foreign Trade Impacts ..... 5-26
VI. New Sources 5-27
VI. 1 New TV Tube Plants 5-27
VI. 1.1 Case A s. 5-27
VI.1.2 Case 5-29
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Table of Contents
(continued)
Section Page
Section 5, continued
VI. 2 New Other CRT Plants 5-31
VI. 2.1 Case A 5-31
VI. 2.2 Case B 5-33
VI.3 New Luminescent Coatings Plants 5-35
VII. Small Business Analysis 5-3 7
Selected References, Section 5 5-42
Section 6: Limits of the Analyses 6-1
I. Plants With Multiple Product Lines 6-1
II. Impact Measure Derivation 6-2
III. Discount Factors 6-2
IV. Small Companies 6-3
V. Import Policies 6-4
Appendix A: Sensitivity Analysis a-1
A.l Sensitivity to Sales Estimates A-i
A.1.1 TV Picture Tube Plants a-1
A. 1.2 Other CRT Plants A-1
A. 1.3 Luminescent Coatings A-10
A.2 Sensitivity to Costs A-13
A.3 Solvency Analysis Sensitivity A-15
Appendix B: Total Toxic Organics (TTO) Compliance Costs B-l
B.l TV Picture Tube Plants B-3
B.2 Other CRT Plants . B-3
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List of Tables
Table Page
1-1 Treatment Option by Regulation and Type
of Discharger 1-11
1-2 Summary Table for Existing Sources 1-12
1-3 Treatment Costs by Option for New Sources
(NSPS and PSNS) 1-13
1-4 Selected Options for Final Rules ....... 1-13
1-5 1984 Baseline Estimates 1-14
1-6 1984 Industry-wide Impacts 1-15
1-7 Summary of Impact and Solvency Analysis Results 1-17
1-8 Summary of Impacts on New Sources 1-20
2-1 1981 Factory Sales of Electronic Systems and Components . . . 2-3
2-2 Industrial Production Indices Forecasts 2-7
2-3 Annual U.S. Manufacturer Sales of Electron Tubes,
Selected Types, and Color Television Receivers 2-9
2-4 Annual Factory Sales of Color Television Picture Tubes by
Market, United States, 1971-1981 2-11
2-5 Average Annual Employment, Electron Tubes,
All Types (SIC 3671), 1971-1981 2-14
2-6A Average Factory Level Prices of Electron Tubes,
Selected Types, u.S 2-16
2-6B Average Factory Level Prices of Electron Tubes,
U.S. and Imports 2-16
2-7 Original Equipment Manufacturers' Purchases by End-Use
Market, Electron Tubes, Selected Types; United
States, 1979-1982 2-19
2-8 Annual Imports of Electron Tubes Selected Types,
United States, 1977-1981 2-21
2-9 Annual Exports of Electron Tubes Selected Types,
United States, 1977-1981 2-22
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List of Tables
(continued)
Table Page
2-10 Balance of Trade of Electron Tubes
(1977-1981) 2-23
2-11 Firm and Plant Characteristics for Industry Segments 2-25
4-1 Treatment Option by Regulation and Type of Discharger .... 4-4
4-2 Current Treatment-in-Place for Existing Sources . 4-5
4-3A BAT Treatment Costs by Option and Subcategory 4-6
4-3B PSES Treatment Costs by Option and Subcategory 4-6
4-4 Model Treatment Costs by Option for NSPS and PSNS 4-7
5-1 1984 Baseline Estimates by Industry Segment 5-i
5-2 Financial Ratio Trend Analysis 5-3
5-3 Comparative 1981 Dun and Bradstreet Industry
Ratios (SIC 3671-79) 5-4
5-4 1984 Impact Estimate (1982 $) 5-7
5-5 Comparison of Firms' Assets With Treatment Costs 5-9
5-6A Impact Measures: Color TV Picture Tube Plants,
Option 2 (Level 1) 5-11
5-6B Impact Measures: Color TV Picture Tube Plants,
Option 3 (Level 2) 5-12
5-7A Impact Measures: Other CRT Plants,
Option 2 (Level 1) 5-13
5-7B Impact Measures: Other CRT Plants,
Option 3 (Level 2) 5-15
5-8 Impact Estimates: Luminescent Coatings, Option 2 5-15
5-9 Comparison of the Unadjusted Profit to Sales Ratio (fup)
and the Plant Investment to Sales Ratio (fcap) for
Several Years 5-23
5-10 Comparison of Salvage Value to the PV of Cash Flow 5-24
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List of Tables
(continued)
Table gage
5-11 Case A, impact of Treatment Cost on Hew TV Tube
Plants, In-direct Dischargers . . - • S-2&
5-12 Case B, Impact of Treatment Cost on Sew TV Tiibe
plants. Direct Dischargers . . . 5-30
5-13 Case A, impact of Treatment Cost on Other ckt
Plants, Indirect Dischargees .... 5-32
5-14 Case B, Impact of Treatment Cost on Other CRT
Plants, Direct Dischargees ...... 5-34
5-15 Impact of Treatment Cost on Hex luminescent Coatings
Plants 5-3 fi
5-16 Firm Ranking by 1962 Sales ................. 5-39
5-17 Comparison of Small and Large Firms ............. 5-40
A-1A Color TV, Option 2, Assuming a 10 Percent
Increase in Sales ......... A-2
A-1B Color TV, Option 2, Assuming a 10 Percent
Decrease in Sales . . ........ A-3
A-2A Ool-oc TV, Option i, Assuming a 10 Percent
Increase in Sales A-4
A-26 Color TV, Option 3, Aesumieg a 10 Faxcent
Decrease in Sales . . A-5
K-3A Other CHT Slants, Option 2, A&auming a 10 Percent
Increase Ln Sales ........ A-S
A-33 Other CJt3 Slants, Opti.an 2, Aaa^ing: a IS Pecoeat
Decrease in Sales .................... A-7
A-4A Other car Plants, Option 3, Assyming a 13 Ferce/ifc
increase in sales ...........
fl-43 other CRT Plants, OptLon 3, Assuming a 10 Percent
Decrease in Sales ......... A-9
A-5fc Impact Estimates: Luminescent Coatings Assuming
a 1C Percent Increase in Sales A-ll
JS-5B Impact estimatesi luminescent Coatings Assuming
a 10 Percent Decrease in Sales .............. A-12
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List of Tables
(continued)
Table Page
A-6 Impact Measures - Assuming an Increase in
Costs Resulting in a 10 Percent Decrease in
Profit: Color TV Tubes A-13
A-7 Impact Measures - Assuming an Increase in
Costs Resulting in a 10 Percent Decrease in
Profit: Other CRTs A-14
B-l Impact Measures: Color TV Picture Tube Plants,
Option 2 (Level 1) Plus TTO B-4
B-2 Impact Measures: Color TV Picture Tube Plants,
Option 3 (Level 2) Plus TTO B-5
Br-3 Impact Measures: Other CRT Plants, Option 2
(Level 1) Plus TTO B-6
B-4 Impact Measures: Other CRT Plants, Option 3
(Level 2) Plus TTO B-7
List of Figures
Ziaure Page
2-1 Historical Industrial Production Indices (1967-100) 2-5
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PREFACE
This document is a contractor's study prepared for the Office of Water
Regulations and Standards of the Environmental Protection Agency (EPA). The
purpose of the study is to analyze the economic impact which could result from
the application of new source and pretreatment standards issued under Sections
301, 304, 306 and 307 of the Clean Water Act for two subcategories of the
Electrical and Electronic Components Industry.
The study supplements the technical study (EPA Development Document)
supporting the issuance of these regulations. The Development Document
surveys existing and potential waste treatment control methods and technology
within particular industrial source categories and supports certain standards
and limitations based upon an analysis of the feasibility of these standards
in accordance with the requirements of the Clean Water Act. Presented in the
Development Document are the investment and operating costs associated with
various control and treatment technologies. The attached document supplements
this analysis by estimating the broader economic effects which might result
from the application of various control methods and technologies. This study
investigates these impacts in terms of effects upon production and employment
and the continued viability of affected plants, effects upon foreign trade and
other competitive effects.
The study has been prepared with the supervision and review of the Office
of Water Regulations and Standards of EPA. This report was submitted in ful-
fillment of Contract No. 68-01-6426 by Meta Systems Inc. The analysis was
completed November 1983.
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Section 1
Executive Summary
I. Introduction
This study is concerned with two industry subcategories that are part of
the Electrical and Electronic Component industry. The two subcategories are
Cathode Ray Tubes and Luminescent Coatings.I Cathode ray tubes (CRTs) are
used in a variety of equipment such as television receivers, scientific
instruments, oscilloscopes, computers, industrial controls and military
hardware.* Luminescent coatings are used in the manufacture of all types of
CRTs and also in the manufacture of fluorescent lamps, mercury lamps, lasers,
instrument panels, postage stamps, laundry whiteners and specialty paints.
The 1972 Federal Water Pollution Control Act (and subsequent litigation)
and the Clean Water Act of 1977, require EPA to develop a program and adhere to
a schedule in promulgating effluent limitations guidelines, new source perfor-
mance standards and pretreatment standards for 65 groups of "priority" pollu-
tants for 21 major industries. Several wastewater treatment alternatives were
developed for the two industry subcategories in response to federal legis-
lation. As required by the Clean Water Act,^khis study presents the projected
economic impacts of complying with the final regulations as well as with other
options considered, but not selected, by EPA for the final regulations.[
II. Industry Profile
Color TV picture tubes and other CRTs are but two of a large number of
products associated with the electronics industry which includes electronic
* The cathode ray tube subcategory is subdivided into two industry segments—
color TV picture tubes and other CRTs—for purposes of the impact analysis.
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components, consumer, industrial and military electronics, communications
equipment and systems. Overall factory sales of electronic systems and
components were $114 billion in 1981 of which $24.4 billion (21.4 percent)
was electronic components that include solid state devices ($7.8 billion),
passive components such as resistors and capacitors ($2.9 billion), and
electron tubes. Sales of electron tubes of all types amounted to $2.0
billion of which approximately $1.0 billion was in power and special purpose
tubes (which include CRTs other than color TV picture tubes) .
In the Standard Industrial Classification (SIC) system, electron tubes of
all types are classified within SIC 3671. Luminescent coatings are not
classified as part of the electronics industry but fall primarily within sic
2819, a large group of miscellaneous industrial inorganic chemicals, not
elsewhere classified.
Over the past decade, 1971-1981, the value of U.S. production of color TV
picture tubes increased at an average annual rate of 1.2 percent in real
terms. According to industry forecasts, the outlook is that sales of color
TV picture tubes will increase at a rate averaging 6.9 percent annually, in
current dollars; in real terms, this should result in 1984 sales of $1.08
billion (expressed in 1982 dollars, based on an average annual rate of
inflation of 5.5 percent).
For other CRTs, the value of production, in real terms, grew at an
average annual rate of eight percent between 1972 and 1981. Industrial and
military type CRT sales amounted to $118 million in 1981, equivalent to 35
percent of all sales of electro-optical products; military and industrial
portions cannot be separately identified in the available information, in
1984, the value of sales is expected to be 30.6 percent greater than in
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1982, expressed in c&riStant 1962 dollarss tnis will result Ec&m ari a^sa^
annual tate ot real growth of 14.3 percent.
Frocucticn growth in both industries is projected fcc generally follow the
overall business cycieSf based upon historical 3ata and performance
forecasts, Although production ¦jron'tl7 is expected to fluctuate Xn the
future, 1382 is clearly a very poor growth year due fcc the curreat economic
slump and neither industry is expected to retiM\n to tills lov point through
1990. Thus, while the treatment oast data are developed Cor 1982, the
economic impact analysis is performed using production levels and saLes
piaj^cte-c to I3£4f iJt indeMed to 1SS2 dcil&ts, 1964. Ls fcfie year in which
compliance expenditures will begi?> and it ia expected to be a rsorfe typical
i'ear for the industry than 19&2. values ate indexed Co 1962 dollars to allcw
comparisons with technical coating data, based on that ye*c.
B»pl=?Ben^ i.3 the electron tube industry oveer-all JSXC 36713 increased
only slightly [3-05 perceat annually} over the past decade; in 1931 total
et^Ic-yaeni: <3= *3,£03 and of t'jssz fCi percent Mate production workers. In
tha currant decads, 1990 to 1?90, the Bureau ot l^abcji Statistics forecasts
rising employment, at a rate ot 1.7 to 2,5 pec year.
Prices of color TV picture tutwe in isec averaged ~5a Jail aiaes> far
U.S.—made tubes cocfotei. ta fc56 -or Irnportfi, alasat &li -oi which cose Era^i
Japan; differences in average prices were due in part to the fact that U.S.-
(Eiade picture tubes account for a greater share of the large screen aises.
For other CRTs, industrial and military types ianged in. price from under
$100 to well over $1,000 with an average of $183 pet tufee in 1981,
?©s%i.gri tcade in color TV picture tubes- is linked to foreign trade in
television receivers. Imported tubes have been increasing over the l«t
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five years and in 1981 the number of tubes increased by 67 percent over
1980. The U.S. Tariff Act of 1980 invoked anti-dumping measures for
Japanese-made TV sets. Whether or not the anti-dumping measure for imported
sets will be relaxed, or continued, is currently under evaluation by the
U.S. government. This decision, as well as other potential import limiting
measures for electronic products, could affect the growth of U.S. production
of color TV picture tubes. The value of imports of other CRTs has also been
growing. In 1981 imports accounted for an estimated 24 percent of U.S.
sales of other CRTs. Balance of trade has been positive for color TV
picture tubes with CRTs and for electron tubes of all types. However, for
picture tubes, the balance has declined from $60 million in 1977 to $49
million in 1980 and to $12 million in 1981; for other CRTs the balance has
increased from $11.6 million to $37.9 million in 1981.
Five firms, with seven plants, are known to manufacture color TV picture
tubes in the U.S., not including those who recondition used tubes; the firms
are RCA, Zenith, General Electric, North American Philips and Sony.
Fourteen companies, with seventeen plants, produce CRTs other than TV
picture tubes, including two of the largest (Tektronix and Hewlett Packard)
who use much of their CRT production captively. Five firms (representing
five plants) are known to manufacture luminescent coatings: RCA, General
Electric, Westinghouse, GTE-Philips and U.S. Radium Company.
III. Economic Impact Methodology
The methodology consists of seven steps which address the following
points: (1) baseline estimates for the three industry segments, (2) mea-
sures of treatment cost impacts at the industry, plant and firm levels, (3)
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potential plant closures, (4) production and employment effects, (5) foreign
trade implications, (6) new sources and (7) implications for small businesses.
II1.1 Baseline Estimates and Measures of Impact
Impacts at the industry level, as well as at the firm and plant level,
result from treatment costs incurred by the plants. Estimates of value and
quantity of production and profit—without additional treatment costs—serve
as a baseline against which the impacts of treatment costs are estimated.
The baseline estimates are made for 1984 but in 1982 dollars because
treatment costs were estimated in 1982 dollars. Different methods are used
to estimate indjstry-wide baseline values for each industry segment (color
IV picture tubes, other CRTs and luminescent coatings) because available
data are different with regard to <1) ti.~e periods far viuch data are
reported and (2) level of data aggregation for the different segments.
Industry-wide impacts for each subcategory are considered assuming that
additional costs are absorbed by manufacturers. Thus baseline prices are
unchanged but profits decline. If some of these costs can be passed on in
the form of price increases, then the analysis is overestimating impacts on
profitability.
Three of the financial ratios reported in Dun and Bradstreet are used to
judge the financial health of firms whose plants incur additional treatment
costs. The ratios which are examined for both the baseline and impact pro-
jections are: (1) current assets to current liabilities, {2) sales to net
working capital, and (3) return on assets.
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1-6
Five plant-level impact measures are used in the analysis. Four of
these are ratios of annual treatment costs relative to (1) plant sales, (2)
plant manufacturing cost, (3) plant-level profit, and (4) firm-level
profit. The fifth is a ratio of the capital investment portion of treatment
cost to yearly capital investment by each plant. Plant sales are obtained
from the EIS (Economic Information Systems) data file. Firm-level profit
for publicly-owned companies is obtained from Form 10-K reports and Moody's
Industrial Manual. The denominators of the other three ratios are estimated
from a set of derived factors, multiplied by 1984 plant sales. The factors
are average 1977 values of manufacturing cost per dollar of sales,
plant-level profit per dollar of sales, and annual capital investment per
dollar of sales; sales and value of shipments are assumed to be synonymous.
Factors for other years were calculated to verify the 1977 figures. The
factors are calculated from the 1977 Census of Manufactures at the
four-digit SIC level of aggregation that is most appropriate for each
industry subcategory. For example, a 1984 estimate of the manufacturing
cost for a color TV picture tube plant is estimated as the 1984 plant sales
multiplied by the manufacturing cost-to-sales ratio in 1977 computed for
SIC 3671—electron tubes, all types. This approach treats each plant as if
it operated with the same ratio of manufacturing cost-to-sales and plant
profit to sales and capital investment to sales as described by the average
for the four-digit SIC group. The approach was employed because, other than
sales, no financial information is available for individual plants.
Two appendices supplement the impact analysis. Appendix A is a sensi-
tivity analysis performed on the 1984 sales estimates and on the plant
profits estimates. For this analysis, the impact measures are re-examined
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1-7
under both a ten percent increase and a ten percent decrease in annual
sales. This insures that the conclusions drawn based on the Inspact measures
account Cor any errors made in projecting plant sales. In addition, the
iiapact measures are also re-estimated with a ten percent decrease in plant
profits, to allow for the possibility that the costs of manufacturing inputs
rise faster than the fiv% to six percent Inflation rate assumed (which would
be teflected in a decrease in proEitsJ.
Appendix B addresses the costs of compliance with the total toxic or-
ganise (TTGI limitations, A sensitivity analysis is carried out to deter-
mine if any of the impact measures are affected i>y the addition of TTQ
compliance costs* As information on existing plants shove that all plants
currently have a solvent management pco^rara in place, only the incremental
cost to comply with the TTO limitation (not the total coat of a solvent
management program) by improving the current program is examined, in
general, costs of improved management techniques are offset by soLvent
resale. Some plants may have to haul a^aj theic solventa under the Resource
Conservation and Recovery fcct ^RCRA) requirements. Since it was not
possible to determine trnicb plants, If aay, will fall j>Jar these
requirements, the sensitivity analysis assunes these "worst case* costs for
all plant# which ate not known to be already in compliance,
111.2 Closure Analysis
Highly impacted plants are first identified by examining the values of
the impact nws-aajres, the financial ratios of the parent company, and other
characteristics known aboot some of the firma. ft solvency analysis is then
performed on the highly impacted plants to determine whether or not they
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will close. The solvency analysis involves estimating and comparing the
present value of cash flow after treatment costs to the salvage value of
equity for the plant. A proxy for cash flow is estimated from unadjusted
profit obtained from 1977 census data minus treatment costs and taxes. The
salvage value is computed using financial ratios from the Small Business
Administration's FINSTAT data and sales information for each plant. Using
the results of the solvency analysis for the highly impacted plants, judg-
ments are made about the possibility of plant closure.
111.3 Production, Employment and Foreign Trade
Since it is assumed that there is no pass through of treatment costs, it
is possible that there will be no impacts on total industry production,
because there will be no price-related demand changes. However, there might
be production changes if plants were to close due to reduced profits, and
there were no corresponding increase in production at other locations to
replace that which would be lost. As information concerning the likelihood
of such expansion is not readily available, production and employment
impacts are evaluated in relation to the closure analysis and as a result of
the possible shutdown of specific product lines or plants.
Foreign trade impacts are also evaluated in relation to production
changes resulting from possible plant closures. As a worst case analysis,
it is assumed that production is moved to foreign firms or overseas U.S.
plants and that exports decrease in proportion to total subcategory
production decreases resulting from possible closure.
111.4 New Sources
This analysis examined whether more stringent wastewater treatment
requirements for new sources compared to existing plants could result in
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additional costs sufficient to act as a barrier to new firms entering the
industry or to existing manufacturing firms who might build new plants.
Whether or not current capacity can handle increased demand is not
considered here because no information is available on current plant
capacity and utilization for any of the three industry segments.
Two cases for new TV tube and other CRT plants are considered
representing costs for new indirect and direct dischargers. Case A analyzes
the impact of the incremental treatment cost between Option 2 and Option 3
for new indirect dischargers because existing indirect dischargers will be
required to attain a level of treatment equivalent to PSES-2. Case B
analyzes the impact of the total treatment cost for Option 3 for new direct
dischargers because no regulation is being promulgated for existing direct
dischargers. This is a conservative assumption since, in fact, existing
dischargers do have control technology in place. Five model plant sizes are
used for the new source analysis for color TV picture tubes and other CRTs,
ranging from 10,000 gpd wastewater flow to 500,000 gpd. The three larger
sizes, from 100,000 to 500,000 gpd, best represent new TV tubes plants.
Three model plant sizes were selected for new luminescent coatings
plants ranging from 10,000 gpd to 500,000 gpd. Only one case is evaluated
for coatings plants since new plants will be required to achieve NSPS and
PSNS wastewater treatment levels equivalent to BAT-2 and PSES-2, and
existing plants will not be required to attain any higher level of treatment
over current, in place, treatment.
Production, sales and unit values estimates are approximated for the
model plants using data for existing plants. Judgments are made about
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whether the additional cost for new sources poses an economic disadvantage
to entry into the three industry segments.
III.5 Small Business Analysis
Under the Regulatory Flexibility Act of 1980, the EPA must consider the
effects of the regulations on small businesses. The distribution of
treatment costs incurred by different size firms is estimated to identify
the potential impacts on those firms considered to be small businesses.
IV. Effluent Limitations Guidelines, Options and Costs
Under the Clean Water Act of 1977, the EPA program is to set a number of
different kinds of effluent limitations and standards designated as follows:
o Best Practicable Control Technology Currently Available (BPT);
o Best Available Technology Economically Achievable (BAT);
o Best Conventional Pollution Control Technology (BCT);
o New Source Performance Standards (NSPS);
o Pretreatment Standards for Existing Sources (PSES) and for New
Sources (PSNS).
EPA estimated a total of 29 plants are covered by the proposed
regulation. Treatment technologies appropriate for CRTs and luminescent
coatings are developed in the final Development Document.
IV.1 Treatment Options
For cathode ray tube plants, the three treatment options* are:
* The technology description of each numbered option presented here is
not, in all cases, the same as the description of the same option presented
in the preamble and Final Development Document. Economic option 2 is the
same as technical options 2 and 4. EPA is analyzing them together because
EPA has determined that facilities can meet the regulations through their
combined application. A sensitivity analysis of solvent disposal costs for
option 4 is presented in Appendix B.
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1-11
Option 1; No additional treatment required; specific
conditions are met that allow exclusion of regulatory
requirements.
Option 2: Solvent management to control total toxic organics,
chromium reduction with the use of sulfuric acid and sodium
bisulfite/ chemical precipitation and clarification of all
metals—bearing process wastes, sludge de-watering and pH
adjustment.
Option 3; Option 2 plus multimedia filtration.
For luminescent coatings plants, there are two options:
Option 1: No required treatment.
Option 2: Chemical precipitation and clarification of all
metals-bearing process wastes using lime, a coagulant and a
polyelectrolyte, sludge de-watering and pH adjustment.
The treatment options applied to each regulation and the specific
designations are shown in Table 1-1.
Table 1-1. Treatment Option by Regulation
and Type of Discharger
1
Option
I Existing 1
1 Direct* 1
Existing I
Indirect 1
New Source I
Direct |
New Source
Indirect
1
BPT/BAT-1
PSES-1
NSPS-1
PSNS-1
2
BPT/BAT-2
PSES-2
NSPS-2
PSNS-2
3**
1
1 BPT/BAT-3 |
PSES-3 |
NSPS-3 |
PSNS-3
* BPT, BCT, and BAT all apply to existing direct dischargers.
** Applies only to the CRT subcategory (including TV tubes and other CRTs).
IV.2 Treatment Costs for Existing Plants
Option 1 would require no additional treatment of wastewater effluents.
For existing sources, model plant treatment technology is developed and
costed; the estimates are applied to existing plants by making adjustments
to account for actual flow size and treatment currently in place.
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Table 1-2 summarizes the cost information for the plants included in the
study. Of the 29 total plants, three are direct dischargers, twenty-five
are indirect dischargers, and one discharges no wastewater. Information on
flow and treatment are not available for one indirect discharger. The
treatment costs for the two major industry subcategories are summarized by
direct and indirect dischargers and by option. Option 3 does not apply to
the Luminescent Coatings subcategory.
Table 1-2. Summary Table for Existing Sources
Number of Plants by Industry Subcategory
Luminescent Coatings | CRT
Plants | Plants
Direct I Indirect I Direct | Indirect
Total Number of Plants*
2
2
1
23 ***
Incurring Costs at:
Option 1
0
0
0
0
Option 2
2
2
0
17
Option 3
NA
NA
0
21
Treatments Costs ($000)**
Option 1
Capital Costs
0
0
0
0
Total Annual Cost
0
0
0
0
Option 2
Capital cost
5.00
118.10
0
6,491.30
Total Annual Cost
27.40
82.64
0
3,433.30
Option 3
Capital Cost
NA
NA
0
7,682.95
Total Annual Cost
NA |
NA (
0
1 3,922.70
NA = Not applicable.
* For Luminescent Coatings, there is one zero discharging facility.
** Dollars are 1982 $.
*** Information not available to perform the analysis for one plant.
IV.3 Treatment Costs for New Sources
Treatment costs for new sources are summarized in Table 1-3 for the
various model plant sizes. The costs shown are incremental with respect to
raw waste load treatment technology.
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Table 1-3. Treatment Costs by Option
for Mew Sources (NSPS ana PSNS)*
I Model Plant
I Per Plant
1
I Flow Size
1 Total Annual Costs ($000)
Subcategory
l (gpd)
I Option 2 1
Option 3
Luminescent
Coatings
10,000
58.99
61.39
100,000
31B.75
343.25
250,000
583.85
636.15
CRTS
10,000
69.35
71.5
50,000
162.10
168.70
100,000
351.40
375.90
200,000
571.10
618.40
1
500,000
826.30
921.10
* PSNS compliance costs are the incremental compliance coats from option 2 and 3.
IV.4 selected Options
The EPA has selected the options (summarized in Table 1-4) for the final
regulations. Foe existing CRT plants, that selection is Option 2. Tot new
CHT sources, Option 3 is selected. For new luminescent coatings plants.
Option 2 is selected. Option 1 (i.e., no new regulations) was selected for
the existing direct discharger CRT plant, and for existing direct and
indirect discharger coatings plants.
Table 1-4. Selected Options tor Final Rules
Luminescent Coatings 1
CRT
Plants |
Plants
Existing Sources
BPT/BC T/BA1
BPT/BAT-l
BW/BAT-1
PSES
PSES-1 .
PSES-2
New Sources
NSPS
NSPS-2
NSPS—3
PSNS
PSNS-2 .
PSNS-3
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V. Results of the Analysis
V.1 Baseline Estimates
At the industry level, the 1984 baseline estimates are shown in Table
1-5 for the three industry segments.
Table 1-5. 1984 Baseline Estimates
(1982$)
Color TV
Picture Tubes
I Other |
1 CRTs |
Luminescent
Coatings
Production Quantity
(million units)
13.4
.690
NA
Value of Production
(Millions $)
1076.65
147.48
379.8
Unit value
($ per CRT)
80.15
213.83
NA
Industry Profit
(million $)
374.7
67.55
1 1
145.5
NA « Not available.
At the firm level, the financial health of ten publicly-owned companies
whose plants may incur treatment costs were judged by the three financial
ratios. (Seven other firms are not publicly-owned and therefore the
necessary data are not available.) Several firms have relatively low solvency
ratings (current assets to current liabilities) but no marked weakness in the
other two ratios (net sales to net working capital and return on total assets)
that are indicators of management efficiency and profitability. Return on
assets has been low for several years for all but one of the firms, but none
of the firms are judged to be in serious financial difficulty.
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V.2 Impact Estimates: Industry-wide
At the industry level, impacts are estimated assuming that treatment
costs are fully absorbed by manufacturers. The results summarized in Table
1-6 show that Option 2 and Option 3, estimated baseline average profits
decrease no more than 1.80 and 1.89 percent, respectively (which occur in
the industry segment Other CRTs).
Table
1-6. 1984 Industry'
-Wide Impacts
(1982$)
Industry
11984 Baselinel
Segment
1 (Millions 1
1982 Impacts
(Percent*)
1 1982$) I
Option 2 |
Option 3
Color TV Picture Tubes
Value of Production
1,076.65
0
0
Industry Profit
374.7
-.62%
-.73%
Other CRTs
Value of Production
147.48
0
0
Industry Profit
67.55
-1.80%
-1.89%
Luminescent Coatinqs
Value of Production
379.8
0
NA
Industry Profit
145.5
1 1
-.08%
1
NA
* Percent change from
Baseline Estimate.
V.3 Impact Estimates
: Firm Level
At the firm level, treatment cost impacts
on the financial
health of
publicly owned companies
are imperceptible.
For example, RCA
has three
plants that incur cost under Option 3, however, the total annual cost of
$973 thousand has no significant effect on the financial ratios, given that
total assets of the firm are $7.8 billion.
V.4 Impact Estimates: Plant Level
V.4.1 Color TV Picture Tubes. Three existing plants would incur costs
under selected Option 2, and six under Option 3. Except for two plants
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(Zenith, Melrose Park, Illinois, which is closing according to a recent
announcement and ECG Philips, Ottawa, Ohio), all the impacts based on annual
costs are small, less than two percent. These impacts are annual treatment
cost to: a) sales, b) manufacturing cost, c) plant level plant profit, and
d) firm's net income. The capital investment portion of treatment cost is
less than 21 percent of annual plant investment for Option 3, excluding the
Zenith and Philips plants.
V.4.2 Other CRTs. Fourteen plants incur treatment costs under selected
Option 2 and fifteen under Option 3. Except for four relatively small
plants, all impacts are small. Two of these are owned by one firm, Thomas
Electronics. The most impacted plant is the Thomas Electronics plant in Los
Angeles. It shows an annual treatment cost-to-sales ratio of just under
3.25 percent for either Option 2 or 3; the ratio of annual treatment cost to
manufacturing cost is 4.99 percent, and for annual treatment cost to plant
profit it is 7.06 percent for Option 3. The capital cost for treatment is
1.54 to 1.61 times as great as the annual plant investment for Option 2 and
Option 3, respectively.
V.4.3 Luminescent Coatings. Four of the five existing plants would in-
cur a cost under Option 2. All of the impact measures are small, less than
two percent. Under the selected Option 1, no treatment costs are incurred.
V.5 Closure Analysis
Table 1-7 summarizes the results of the impact and solvency analyses which
are discussed below.
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Table 1-7. Summary of Impact and Solvency Analysis Results
Industry
Segment
Total
Number of
Plants
Analyzed*
Number of
High Impact
Plants
Number of
Expected
Closures
Color TV Tubes
7
1
0
Other CRTs
16
4
0
Luminescent Coatings
5
0
0
* One Other CRT plant not analyzed due to lack of data.
V.5.1 Color TV Picture Tube Plants. One plant owned by Philips in
Ottawa, OH (with sales of $4 9 million) has significant profitability impacts
as a result of this regulation. Financial data show that the parent firm is
financially strong and thus will probably carry the associated treatment
capital investment costs ($1.35 million for Option 2 and $1.54 million for
Option 3).
Based on the impact measures and the above observations, no plant
closures are anticipated as a result of treatment costs. It should be noted
that plant-level impacts are expressed with reference to plant sales.
However, a plant may have multiple product lines, and if treatment costs
were allocated only to those lines which incur the costs, the impacts may be
understated for that product line. Sales data on a product line basis are
not available for TV picture tube plants (or for plants in the other two
industry subcategories). However, the impacts presented here are still
valid as plant-wide impacts.
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V.5.2 Other CRT Plants. Two plants owned by Thomas Electronics (in Los
Angeles, CA and Clyde, NY) and one owned by Litton Industries (in Tempe,
Arizona) show the highest values of impacts. Another plant, Dumont Electronics
(in Clifton, New Jersey) also has relatively high impact measures.
Both of the Thomas Electronics plants [with sales of $2.2 million (CA)
and $3.1 million (NY)] are small relative to a third plant in Wayne, NJ
(with $12 million sales). It is conceivable that the firm might consider
closing one or both of these plants as a result of this regulation and
consolidate CRT manufacturing at the NJ plant. Financial data for this
privately-owned company are not available so it was not possible to analyze
its financial base to determine if it has adequate capital availability to
finance the necessary capital investments ($123.6 thousand for Option 2 and
$129.4 thousand for Option 3 for each of the three plants).
Impact ratios for the Litton Industries plant (with sales of $3.9
million) are moderately high. The financial analysis shows that Litton has
an adequate financial base to afford the wastewater treatment expenditures
(capital investment of $123.6 thousand for Option 2 and $129.4 thousand for
Option 3) and, given the rapidly growing CRT market, will probably choose
not to close the plant.
A fourth plant, Dumont Electronics, Clifton, New Jersey (with sales of
$17.6 million) is borderline according to the impact measures. Since Dumont
Electronics is a privately owned firm no analysis could be made of its
financial strength.
V.5.3 Luminescent Coatings. None of the plants are considered as
closure candidates because no regulation is being written for existing
plants.
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V.5.4 Solvency Analysis. The solvency analysis is applied to the three
plants (the Thomas Electronics plants in NY and CA and the Duraont plant)
with high impact measures and Cor which no financial analysis of the firm
was possible. The results of the analysis show that for each of these
plants, the present value of cash flow is much greater than the salvage
value of the plant. Thus, the plants are worth more if they remain open.
As a result, no plant closures are expected.
v.5.5 Reliability of the Impact Ratios. The factors used for
estimating the impact ratios have been calculated for several other years.
There are no significant differences between factors for later years and the
1977 factors which were used.
v.6 Production and Employment Impacts
As mentioned earlier, production and employment impacts are evaluated in
relation to the closure analysis. Three small CRT plants are identified as
having significant profitability impacts. The solvency analysis showed that
these plants are not expected to close but it is possible that production
and employment reductions could take place as a result of this regulation.
It is likely that these reductions would not remain over the long-term but#
given the rapidly growing CRT market, would merely be temporary adjustments
as production is picked up by expansion at other sites owned by the same
firm or by other firms. Thus, while the industry-wide geographical
distribution of production (and employment) may change# no significant
reductions in total output are anticipated.
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V. 7 Foreign Trade
Foreign trade projections are always difficult to make because there are
so many international factors involved, such as interest rates and
government restrictions, which are hard to predict. Thus, what actually
happens may be very different from what is estimated.
The foreign trade assessment is a worst case analysis based on the
closure analysis discussed earlier. If the three CRT plants identified in
that analysis were to reduce production, then foreign trade in the other CRT
subcategory could be affected. However, historical data show this balance
of trade to be steadily improving. Given this favorable outlook, it is
probable that even if these plants did reduce output, that production would
be expanded elsewhere in the U.S. and, therefore, foreign trade would not be
seriously impacted.
V.8 New Sources
Impacts on new sources are summarized in Table 1-8 and discussed below.
Table 1-8. Summary of Impacts on New Sources
Industry
Segment
Discharger
Maximum
Range of Percentage of Annual
Annual Treatment Treatment Cost to
Cost to Sales % Average Unit Value
New Color TV Tubes Indirect (PSNS-3) 0.04-0.14
Direct (NSPS-3) 0.35-2.14
0.2
2.1
New Other CRTs
Indirect (PSNS-3) 0.01-0.04
Direct (NSPS-3) 0.11-1.29
0.1
1.3
New Luminescent
Coatings
Direct and Indirect
(NSPS-2) (PSNS-2) 0.6-7.8
NA
NA ¦ Not applicable.
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V.B.I New TV Tube Plants, fts mentioned earlier, two cases are considered
in analyzing new color TV tube plants. For Case A (indirect discharcers), the
annual treatment cost estimated pet tube ranges from 40.03 to $0.10, which is
less than 0.2 percent of the average unit valuef $"70.44, for color TV picture
tU>n3, Annual tceatfliatat ccust-to-sales renges from 0.04 to 0.14 percent,
depending on plant siae -and the relationship bet-ween flow and production
value, Foi Case B
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small and not likely to pose a major disadvantage for new plants entering the
industry.
V.8.3 New Luminescent Coatings Plants. Annual treatment cost as a
percent of plant sales ranges from 0.6 to 7.8 percent depending on plant
size and the relationship between flow and production value. Based on
larger plant sizes (i.e., 100,000 gpd or greater) and on an average value
per unit of flow, annual treatment costs are 4.2 percent or less of
production value.
The conclusions are: 1) the additional cost burden will not discourage
new plants being built by large firms whose product lines are very likely to
be vertically integrated with coating production; and 2) treatment costs for
small plants, not vertically integrated with CRT or electric lamp manufac-
turing may possibly dissuade a new entry into the industry.
V.9 Small Business Analysis
The selected options for promulgation are not expected to have a signi-
ficant impact on small facilities in this industry. The thirteen largest
firms incur 95.2 percent of the total annual treatment costs for Option 2 and
95.5 percent for Option 3. For these firms, 1982 sales range from $27 billion
for General Electric to $13.3 million for Thomas Electronics.
The small businesses in the study incur 4.76 percent of the total annual
treatment costs for Option 2 and 4.47 percent for Option 3. The Dumont
plant, however, incurs most of it, as its costs are 4.57 percent and 4.30
percent of the totals for Options 2 and 3, respectively. Therefore, EPA
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1-2 J
does not believe that this regulation will cause significant impacts to a
substantial number of small entities,
VI. Liilta of the Analysis
The results of the analysis depend on several major assumptions and on
the accuracy oE the data used in the calculations. These are discussed next.
vi. 1 Plants With Multiple Product Lines
There is a lack of information on product lines for each existing plant/
iciiiatly saL&& itta
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1-24
VI.3 Discount Factors
Annual costs are based on a 13 percent discount rate and a five-year
life for the capital investment portion of treatment costs. Two alternative
discount rates, 10 and 16 percent, were also analyzed. For color TV picture
tubes and other CRTs, annual treatment costs are changed by five percent or
less from those used in the study. The impact ratios are altered by no more
than 0.06 percentage points for color TV tubes and by no more than 0.16
percentage points for other CRTs. None of the conclusions stated earlier
would change if the alternative discount rates had been used.
VI.4 Small Companies
Small plants are likely to be privately owned. Privately owned firms
are not required to provide financial data for public use, therefore finan-
cial ratios cannot be calculated to help in judging the financial condition
of small companies and the potential severity of impacts.
This limitation notwithstanding, an analysis was conducted to determine
whether small firms bear disproportionate impacts. Six firms out of the
nineteen firms in the study which employ fewer than 250 persons are
considered small for this analysis. These firms incur 4.76 percent of
Option 2 and 4.47 of Option 3 annual treatment costs. The thirteen largest
firms incur 95.2 percent of Option 2 annual treatment costs. For Option 3,
the thirteen largest firms incur 95.5 percent of the annual treatment costs.
VI.5 Import Policies
If U.S. levels of production decline, existing plants may be more
adversely impacted than the estimates show because costs will be spread over
a lower base. Imports of TV picture tubes have increased annually in recent
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years; but the future trend is uncertain. The tubes are used in TV sets and
anti-dumping regulations imposed on Japanese sets by the U.S. may or may not
continue. New regulations that apply to the picture tubes as well as the TV
sets could also affect U.S. production, although pressure for such regu-
lation has not been observed.
VII. Sensitivity Analysis
The results of the sensitivity analysis on the plant sales estimates are
as follows. For the Color TV picture tube subcategory, the impact measures
did not change enough to affect the status of any plant. Three plants in
the Other CRT group, however, have impact ratios which differ enough that
initial judgments made about them could change. With a 10 percent decrease
in plant sales, two plants (Dumont and Litton) are much more severely
impacted. For a 10 percent increase in sales, the Thomas Electronics plant
in New York would have much less severe profitability impacts. The
luminescent coatings plants are not affected by a change in the sales
estimates and no different conclusions could be made.
The sensitivity analysis concerned with possible high manufacturing
input costs showed that no impact measures were significantly affected and
that no conclusions would be changed.
The worst case analysis of TTO compliance costs produced the following
results. Only one TV picture tube plant might incur such a cost and its
effect on the impact measures for the plant is almost imperceptible. For
the other CRT plants, the costs for TTO removal are also very small/ and so
are the changes in impact measures.
-------
Section 2
Industry Profile
I. Industry Definition
This study is concerned with three segments of manufacturing that are
part of, or related to, the electronic tube industry. The three segments
include the manufacture of (1) color television picture tubes—a particular
type of cathode ray tube, (2) other cathode ray tubes and (3) luminescent
coatings.
Color TV tubes produce images by controlling a stream of electrons which
strike a surface coated with phosphors resulting in luminescence. Other
cathode ray tubes (i.e. other than color TV tubes) use these same principles
for display and for the storage of data in many different types of equipment
such as scientific and engineering instruments, oscilloscopes, industrial
controls, computers, word processors and military equipment such as radar,
fire control and navigation systems. Luminescent coatings are used in the
manufacture of cathode ray tubes (CRT) and also in fluorescent lamps.
There are many types of electronic tubes other than CRTs such as radio
and television receiving tubes, power tubes and a wide variety of special
purpose tubes. However, the effluent discharges resulting from their manu-
facture are controlled under other regulations.
II. Industry Overview
Color TV picture tubes and other CRTs are but two of a large number of
products associated with the electronics industry. Before analyzing the
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2-2
particular segments that are the focus of this study, an overview of the
electronics industry is presented.
A rough breakdown of factory sales of electronic equipment, systems and
1/
components is shown in Table 2-1. Factory level sales of electronic
components in 1981 accounted for $24.4 billion, or 21.4 percent of the $114
billion electronics industry total. Electron tubes are but one group of
electronic components; tube sales totalled about $2.0 billion of which $1.1
billion is attributed to TV picture tubes, most of which were color tubes.
(In 1981 about 11.1 million color TV tubes were sold, valued at $998.7 mil-
lion.) Thus, color TV picture tubes account for approximately 50 percent of
all electron tube sales, 4.5 percent of all electronic components and
slightly less than one percent of total U.S. industry-wide factory sales of
electronic equipment, systems and components.
Sales of power, transmitting and special purpose tubes amounted to $845
million in 1981. Electro-optical devices showed sales of $337 million and
included other CRTs (other than TV picture tubes).
Five firms manufacture color television picture tubes (RCA, Zenith, GE,
N.A. Philips and Sony). Fourteen firms make other CRTs including two large
producers (Hewlett Packard and Tektronix), three fairly large producers and
nine small producers. (Bureau of the Census information indicates that
2/
fourteen firms make industrial and military-type CRTs ). Five firms
produce luminescent coatings, based on information collected by EPA.
Employment in 1980 for electronic components (i.e., establishments clas-
sified in SIC 367) totaled 498,600 of which 336,600 were production workers.
The electronic tube sector, all types (SIC 3671), accounts for eight percent
of all employment in the components sector. In contrast, the semiconductor
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Table 2-1
1981 Factory Sales of Electronic
Systems and Components
Billions
of
Dollars
Percent
of
Total
U.S. Industry Wide Factory Sales
114.0
100.0
Consumer Electronics (e.g. stereo
equipment, TV sets) 11.4 10.0
Industrial Electronic Products,
including computers & related products 43.5 38.2
Communications Equipment & Systems 34.7 30.4
Electronic Components 24.4 21.4
Electron Tubes 2.0 1.8
TV Picture Tubes* (color and 1.1 0.9
monochrome)
Radio and TV Receiving Tubes 0.1 0.1
Power & Transmitter & Special
Purpose Tubes 0.8 0.7
Solid State Products (e.g. transistors,
diodes and rectifiers/ integrated
circuits, other semi-conductors 7.B 6.B
Passive components (e.g. capacitors,
resistors) 2.9 2.5
Other Components 11.6 10.2
Source: Derived from 1982 Edition Electronic Market Data Book,
Electronic Industries Assoc. (EIAJ
~Includes imports of $71 million which eia includes in U.S. Industry-Hide
Factory Sales.
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2-4
sector (SIC 3674) accounts for about 30 percent of all employment in the
electronics component sector.
III. Growth History and Outlook
III.l Industry Production and the Business Cycle
III.1.1. Historical Data. Figure 2-1 shows historical production index
data for TV and Radio Sets and for Electrical Components, compared with the
y
total industrial production index. As the figure indicates, production
in both industries generally fluctuates similarly to the overall business
cycles except that starting in the late sixties the fluctuations are much
larger, especially for the electrical components industry. Production in
both industries started out below overall industrial production but in the
late sixties grew rapidly. TV and Radio Set production increased at a slower
rate in the 1970's, and in the last ten years has not kept up with overall
industrial production and has had wider fluctuations. Average annual growth
from 1970 to 1980 has been 2.4 percent as compared with 3.2 percent for all
industries. The electrical components industry has continued to grow very
rapidly with large fluctuations. Its annual growth in the last ten years has
been about five times faster than overall production, 15.3 percent compared
with 3.2 percent.
The electronics industry segments which are of interest in this study,
color TV picture tubes, other cathode ray tubes and luminescent coatings, are
not specifically covered by the production indices shown in Figure 2-1.
However, production of TV and radio sets is a fairly good end-use market
indicator for color TV tubes. Electrical components include many products not
covered by this study, the major one being semi-conductors and related
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2-5
Figure 2-1. Historical Industrial Production Indices (1967 = 100}
Index
60 62 64 *66 68 *70 *72
78 '80 *82
Source: DRI Long-Term Review of the U.S. Economy
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2-6
products. Since these products are doing very well/ the electrical components
production index trend may be more optimistic than one which only covers the
products of interest here. However, the industry outlook for these
subcategories remains strong (see below), and this index can be considered to
provide a general indication of how the industry is doing. Luminescent
coatings are used as a production input in each of the other subcategories
covered here and because no more specific information is available on this
sector, it is assumed to follow a trend that is the average of the other two.
III. 1. 2. Performance Forecasts. Table 2-2 shows forecasts to 1990 of
the three industrial production indices shown in Figure 2-1 and discussed
3/
above. For each index, two forecasts have been made by DRI , one
smoothly following historical trends (Trendlong), and the other with more
pronounced cycles (Cyclelong). As indicated by the annual growth rates
compared at the bottom of the table, both industries have a healthy outlook.
Both are expected to grow faster than the overall production rate from 1982
through 1985. TV and Radio Set production is expected to grow at 8.6 percent,
which is much faster than its growth in the 1970 to 1980 period, and
Electrical Component production is expected to grow at 8.1 percent, which is a
considerably slower rate than previously. Production growth over the longer
period from 1982-1990 is expected to be more moderate, 4.0 to 4.6 percent for
TV and Radio Sets and 6.1 to 7.0 percent for Electrical Components, but still
faster than overall production growth, 3.8 to 4.4 percent. Production growth
in both industries is projected to generally follow the overall business
cycles. Although production growth is expected to fluctuate in the future, as
is especially evident from the Cyclelong forecasts, 1982 is clearly a very
poor growth year due to the current economic slump and neither industry is
expected to return to this low point through 1990. Thus, the economic impact
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Table 2-2.
Industrial Production Indices Forecasts
Industrial TV and Radio Electrical Components
Production Index Sets Production Index Production Index
1967=100 196 7=100 1967=100
Trendlong*
Cyclelong**
Trendlong
Cyclelonq
Trendlonq
Cyclelong
1982
139.0
139.0
82.1
82.1
311.4
311.4
(-7.9)
(-7.9)
(-13.4)
(-13.4)
(-0.1)
(-0.1)
1983
142.5
142.5
86.5
86.5
318.3
318.3
(2.5)
(2.5)
(5.3)
(5.3)
(2.2)
(2.2)
1984
153.8
153.8
95.9
95.9
359.6
359.6
(7.9)
(7.9)
(10.9)
(10.9)
(13.0)
(13.0)
1985
163.1
163.1
105.0
105.0
393.2
393.2
(6.0)
(6.0)
(9.5)
(9.5)
(9.3)
(9.3)
1986
170.7
176.6
112.1
117.0
424.1
442.8
(4.7)
(8.3)
(6.7)
(11.4)
(7.9)
(12.6)
1987
178.7
184.6
116.1
123.8
452.0
482.1
(4.7)
(4.5)
(3.6)
(5.8)
(6.6)
(8.9)
198 8
185.8
174.7
118.2
109.2
482.7
446.3
(4.0)
(-5.4)
(1.8)
(-11.8)
(6.8)
(-7.4)
1989
191.7
174.4
119.2
104.5
510.2
447.6
(3.2)
(-0.2)
(0.9)
(-4.3)
(5.7)
(0.3)
1990
195.9
187.7
118.0
112.2
536.3
510.5
(2.2)
(7.7)
(-1.0)
(7.4)
(5.1)
(14.1)
Average
Annual
Rate of
Change (%)
•
•
1982-85
(5.5)
(5.5)
(8.6)
(8.6)
(8.1)
(8.1)
1982-90
(4.4)
(3.8)
(4.6)
(4.0)
(7.0)
(6.1)
Comparison With
Historical Data:
1970-80
(3.2)
(3.2)
(2.4)
(2.4)
(15.3)
(15.3)
* Trendlong--projection of a smooth growth rate in the economy/industry,
where potential output parallels historical output.
** Cyclelong—projected industry/economy growth/ assuming the existence of
business cycles# and major changes in the economy, resulting in a lessening of
potential economic growth.
Source: DRI Long-Term Review of the U.S. Economy.
-------
2-8
analysis is performed using projections for sales and production levels for
1984, the year in which compliance is expected and also a more typical year
for the industry than 1982.
III.2 Factory Sales
III.2.1 Electron Tubes All Types (Including Color TV Tubes and CRT).
The growth history of electron tube sales (all types) has been sluggish since
1971. Analysis of this history differs depending on the data source. Data
from the Electronic Industries Association (EIA) in Table 2-3A, shows that
sales of electron tubes have increased at an annual current dollar rate which
averages six percent since 1971 except for a downturn during the 1975
recession. In 1981, sales were $2,014 billion; over the 1972-81 period the
data show that real growth (i.e., in constant dollars) averaged only 0.6
percent annually. According to the U.S. Department of Commerce data shown in
Table 2-3B, value of product shipments of electron tubes grew at average
y
annual rate of 3.6 percent from 1972 to 1981 (in current dollars) but
in real terms, the value of shipments decreased at an average rate of 1.1
percent per year during that nine year period,*
A major reason for the sluggishness suggested by the historical trends
from both industry and government data sources is the poor performance of the
radio and television receiving tubes segment of the industry. This segment
is being affected by a continuing shift to solid state technology. Increased
import penetration into the US market is another important factor in the
decline of receiving tubes. As a result, shipments of US-made receiving
* Product price index applied to data in Table 2-3 to estimate constant
dollar growth rates.
-------
Table 2-3. Annual U.S. Manufacturer Sales of Electron Tubes, Selected Types, and
Color Television Receivers
(Millions of Current Dollars)
Table 2-2A.
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
Electron Tubes, All types
1094
1258
1338
1196
1071
1233
1296
1451
1586
1778
2014
Color Television Picture Tubes
470
590
676
569
463
586
586
682
761
912
999
Electro-Optical Devices*
80
112
133
138
149
173
215
268
307
307
337
Source: Reference 1; pp. 87, 88, 92.
Electron Tubes, All Types
Source: Reference 3; p. 237.
1972
1189
Table 2-2B.
1977 1978
1257
1428
1979
1526
1980
1680
1981
1636
1982
1718
to
10
Source: Reference 1, Page 6.
1975
2268
Table 2-2C.
1976 1977
2755
3289
1978
3674
1979
3685
1980
4210
1981
4349
* Includes Industrial and Military Cathode Ray Tubes.
-------
2-10
tubes (expressed in current dollars) have decreased 10 percent annually since
1972.
The outlook, according to U.S. Department of Commerce projections, is
that sales of electron tubes (total, all types) are expected to move in a
downward trend at an inflation-adjusted rate of 0.4 percent per year through
V
1986. Industry forecasts show an annual (current dollar) growth rate
y
of 5.7 percent in sales from 1981 to 1985. If a six to seven annual
percentage rate of inflation is assumed, then the two projections are about
the same. Using a sales value of $2,014 billion in 1981 and a 0.4 percent
annual decline, the projected 1985 sales value is about $2.0 billion,
expressed in constant 1981 dollars.
III.2.2 Color TV Picture Tubes. Color TV picture tube sales showed an
eight percent annual (current dollar) growth during the 1971-81 period except
for the 1975 drop, as presented in Table 2-3A. Expressed in constant
dollars, this industry segment's sales increased by 1.2 percent per year.
Manufacturers' sales of color television receivers grew by 11 percent per
year (in current dollars) from 1975 to 1981 while picture tube sales grew by
14 percent annually in the same period (see Table 2-3C). The color TV
picture tube sales trend generally appears to follow that for receivers but
with a higher rate of growth in value. The factors behind this trend can be
seen in Table 2-4. Initial equipment sales grew rapidly in the late seven-
ties (15 percent per year, in current dollars) but declined in 1981. Renewal
sales and exports show a marked decline since the mid-seventies while imports
have increased.
According to industry forecasts, the long-term outlook for color TV
picture tubes is that annual sales are expected to grow at a rate of 6.9
-------
Table 2-4. Annual Factory Sales of Color Television Picture Tubes by Market
(Thousands of Units and Dollars); United States, 1971-1981*
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981
Units
Initial Equipment 5,647.6 6,950.7 7,824.1 6,548.5 5,205.2 6,186.1 6,821.7 8,181.0 9,124.0 10,623.1 10,048.1
Renewal 873.6 856.6 896.9 784.2 697.0 696.7 577.2 456.1 406.5 361.7 362.8
Export 222.1 622.3 976.9 845.8 871.2 1,484.4 1,139.4 958.8 973.3 940.0 675.7
Import 122.4 115.1 81.6 45.9 89.2 191.6 289.9 297.1 354.7 590.3 984.2
Total Units 6,865.7 8,544.7 9,779.5 8,224.4 6,862.6 8,558.8 8,828.2 9,893.0 10,858.5 12,515.1 12,070.8
DOLLAR VALUE: 474,000 595,212 679,025 571,219 469,202 598,414 601,543 699,002 783,228 944,782 1,051,639
fo
I
H
H
~Excludes sales by local rebuilders.
Source: Reference 1, page 89.
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2-12
percent (current dollars) from 1982 to 1986 and of 8.3 percent from 1982 to
1983.-^/ Allowing for an average annual rate of inflation of 5.5 percent,
1984 sales will be 3.5 percent greater than 1982 sales, in constant dollars.
There is a growing demand for color television receivers for the consumer
market due, in part, to the many new uses for the TV screen that are being
developed. The color TV is the basic visual display device for several new
television technologies such as home video games, video cassette recorders,
and home computers.
There do not appear to be any technological innovations that would have
an adverse impact on the TV picture tube market in the near future. Flat
display tubes using semiconductor and/or liquid crystal technology have been
demonstrated. However, substitution of such tubes for the cathode ray type
y
tube will probably not occur until the 1990's.
III.2.3 Other Cathode Ray Tubes (CRT). Sales of electro-optical
devices, which include cathode ray tubes for non-television uses, grew
rapidly at an average annual rate of 13 percent per year* from 1972 to 1981,
as shown in Table 2-3A. Even when expressed in constant dollar terms, growth
was substantial; an average rate of eight percent per year.
According to EIA estimates, industrial and military type CRTs repre-
sented about 35 percent ($118 million) of electro-optical factory sales in
y
1981. Using this $118 million estimate in conjunction with unit value
of the factory level from the 1981 Annual Survey of Manufacturers, a 1981
average price is estimated at 3210 to $225 per CRT, implying a production
level of 550,000 to 600,000 units. (The 1981 Survey indicates 423,000 units
with a value of $81.6 million.) Industry projections indicate that it can
-------
2-13
safely be assumed that growth of CRT sales equalled or exceeded the trend of
the larger, electro-optical segment of the industry.
The outlook for industrial and military CRTs is excellent; the industry
forecasts the sales value will increase at an annual rate of 18.4 percent (in
y
current dollars) from 1982 to 1986 and 25 percent from 1982 to 1933.
y
Allowing for an average annual rate of inflation of 5.5 percent , 1984
sales will be 35 percent greater than 1982 sales, in constant dollars. This
is the segment of the electro-optical devices sector expected to achieve the
y
highest growth rate. The current Administration's committment to
increased expenditures for the Department of Defense, combined with a growing
proportion of electronics equipment in military hardware, supports these
growth projections. Increasing demand by business for the capabilities
offered by data display devices (which allow easy access to information) will
be another source of long-term growth in CRT sales. Expanded consumer use of
personal computers and terminals is also expected to raise demand for CRTs.
Color is an additional feature of CRT screens that will be in demand for such
uses as computer terminals, arcade games and airline cockpit displays.
Technologies like these will promote speedy growth of industrial-military CRT
sales in the future. Display innovations, such as those using lasers, are not
expected to hurt CRT sales and could expand them by stimulating the
y
development of new, previously unattainable, applications.
111.3 Employment
Employment in the electron tube industry (SIC 3671) has increased
slightly over the past ten years, at an average rate of 0.05 percent per year
according to U.S. Department of Commerce and U.S. Department of Labor data.
Table 2-5 shows total employment to be 43,500 in 1981 of which 26,700 were
-------
Table 2-5. Average Annual Employment, Electron Tubes,
All Types (SIC 3671), 1971-1981
(In Thousands)
1971 1972 1973 1974 1975 1976 1977* 1978 1979 1980 1981
All Employees 43.3 47.1 49.7 44.0 37.8 37.6 36.7 42.6 44.0 45.5 43.5
(42.8)
Production Workers 31.9 34.0 36.4 32.7 27.3 27.8 27.5 28.0 28.2 28.4 26.7
(27.5)
* Data in parentheses for the year 1977 and for the following years are from the second source listed.
Sources: Reference 10, page 36E-7 (years 1971-1977); Reference 1, page 117 (years 1977-1981) to
i
M
4*
-------
2-IS
production wcsrfcers. zr.e deta scjczbs indicate an historical decline in
the number of production workers of 1*8 percent annually. The U.S. Indus-
trial OutlooJt for 1982 reports an annual decrease in total employment in the
electron tube industry of two percent between 1972 and 1931 ana a decline of
y
2.3 percent per year in production workers over the same period.
Figures Ear the radio and television receiving tubes sector (SIC 36111)
are not available, however, as mentioned earlier/ this is a declining
industry segment dje to technologicai irmovatiort and product substitution as
well as import penetration.
Based on historical trends, the outlook for employment in other parts of
the electron tube indvratr^ such as colot TV arid other cathode ray tubes may
be better than is apparent from the overall industry data. Bureau of labor
Statistics forecasts show increases in employment ranging from 1.7 to 2.5
percent per year between 1930 and 1990 Cor the electronics Industry as a
V
h-.V-its.
III.4 Prices
Eased on the value oC manufacturer's shipme!>tat 1SSO prises of color
television tubes averaged $76 pet unit for domestic tubes
-------
Table 2-6A. Average Factory Level Prices of Electron Tubes, Selected Types*
($/unit)
1972
1977
1979
1980
Color Television Tubes:
17 Inch and Under
18 and 19 Inch
20 Inch and Over
69**
58
61
74
56
62
81
62
73
92
Other Cathode-Ray Tubes:
Industrial and Military
NA
83
169
197
Source: Reference 6. Table 4, (years 1979, 1980) and Reference 10, page p. 36E-23, (years 1972, 1977).
* Average prices based on value and quantity of shipments.
** Average, all sizes
Table 2-6B. Average Factory Level Prices of Electron Tubes, U.S. and Imports
($/unit)
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981
Color Television Tubes:
U.S. 70 70 70 70 68 70 69 71 72 76 90
Imports 35 44 36 53 67 65 54 56 62 56 54
Source: Reference 1, pp. 87, 88.
N)
H"
-------
2-17
The average price of industrial and military-type cathode ray tubes was
$197 in 1980. (With available production data it is not possible to estimate
price differences between CRTs purchased for industrial use and those for
military purposes.) As shown in the table, prices of color television
picture tubes have increased, depending on tube size,(in current dollars)
between two percent and eight percent per year, over the 1977 to 1980
period. Industrial-military CRTs rose 33 percent annually during the same
period.
Import prices increased four percent per year from 1971 to 1981 (in
current dollars) but have remained lower than U.S. prices, as shown in Table
2-6B. In 1981, for example, the average price of a color TV picture tube
import was $54, or 60 percent of the U.S.-made average picture tube price.
In constant dollars, between 1972 and 1982, import prices fell at an average
annual rate of 2.3 percent while domestic prices fell at an average annual
rate of 1.8 percent. (This is due, in part, to a different mix of tube sizes
among imports compared to U.S-made tubes.) An important factor in the
outlook for the TV picture tube market will be the impact of Japanese imports
(see Foreign Trade).
The average color television receiver price (in current dollars and
including both imports and U.S. made products) in 1981 was $377, in 1980 was
y
$369 and in 1979 was $360, based on factory sales. This suggests that/
at the factory level, color TV picture tube prices recently have been twenty
to twenty-five percent of receiver prices. However, another source indicates
that the ratio of TV picture tube price to TV set price at the retail level
y
was about 40 percent several years ago. Costs of TV set components-
other than the picture tube—are expected to decline due to the use of
-------
2-18
integrated circuits and other innovations, therefore, the ratio of the
picture tube to receiver price will probably start to increase.
III.5 Markets
Market data are available for the electron tube industry in terms of the
value of purchases made by original equipment manufacturers (OEM), broken
down into four categories:
o Commercial—business and government (civilian), trans-
portation (other than consumer) and similar uses;
o Consumer—entertainment equipment, automotive electronics,
appliances and home applications;
o Industrial—manufacturing, instrumentation, medical, process
control, machinery and utilities; and
o Military and space
The market category into which a component is classified is determined by
the end user of the equipment that incorporates the component. Table 2-7
presents market data for electron tubes—all types, color television tubes,
and other cathode ray tubes. The basis for the data shown differ from U.S.
manufacturers sales data in several important ways: imports and distri-
butors' margins are included, while exports, replacement components and cap-
y
tive production are excluded. Consider captive production, for
example. The major portion, possibly all, of the output of two of the
producers of industrial and military cathode ray tubes (Hewlett Packard and
Tektronix) is for their own use, and therefore not included. Nevertheless,
the relative importance of different markets can be roughly outlined.
For electron tubes, all types, the main market is industrial (35
percent), although consumer (29 percent) and military and space (24 percent)
are very important. The fastest growing area since 1979 is the commercial
-------
Table 2-7. Original Equipment Manufacturers' Purchases by End-Use Market,
Electron Tubes,
Selected
Types; United States,
1979-1982
($
million)
Percent of
Average Annual
1979
1980
1981
1982*
Total, 1982
Growth %
Electron Tubes, All Types:
Commercial
53
64
69
78
11.8
14
Consumer
217
194
193
190
28.7
-4
Industrial
201
218
232
234
35.3
5
Military and Space
131
141
147
160
24.2
7
Total:
602
617
641
662
100.0
3
Color Television Tubes:
Commercial
1
1
2
1.1
41
Consumer
182
162
164
160
92.0
-4
Industrial
2
3
5
6
3.4
44
Military and Space
3
4
5
6
3.4
26
Total:
187
170
175
174
100.0
-2
Cathode Ray Tubes, Except TV:
Commercial
42
51
56
62
55.4
14
Consumer
4
5
6
7
6.3
21
Industrial
13
18
22
24
21.4
23
Military and Space
12
14
16
19
17.0
17
Total: 71 88 100 112 100.0 16
Sources: Reference 8, p. 53 (year 1979);
* Reference 9, p. 104 as reported in Predicasts, Forecast Abstracts, pp. B-242, B-243 (years
1980-1982).
-------
2-20
market which has grown at an average rate of 14 percent per year. Consumer
uses declined at an average rate of four percent per year between 1979 and
1982.
By far the major market for color TV picture tubes is consumer uses (92
percent). However, this market share has declined at an average rate of four
percent since 1979 while the other three markets (accounting for eight
percent of TV picture tube OEM purchases) have grown rapidly.
For other cathode ray tubes, the average growth rate for all four markets
is 16 percent. Industrial uses have grown more rapidly, 23 percent annually,
than the others. The largest CRT market is commercial with over one-half the
total value of purchases in 1982. The military and space CRT markets are
also important and growing rapidly.
III.6 Foreign Trade
The history of foreign trade in color TV tubes is linked to foreign trade
in color TV sets. The U.S. Tariff Act of 1980 invoked an anti-dumping order
on the import of Japanese color TV sets. This order was continued in 1981
and complicates the outlook for color TV's in this country. Partly as a
result of the anti-dumping order, Japanese firms have opened manufacturing
plants in the U.S.
U.S. manufacturers of TV tubes desire stricter import rules and allege
that they are adversely affected by the "dumping" practices of the Japanese
tube manufacturers.^ The outcome of current litigation concerning TV
sets and the past U.S. policy aimed at prohibiting dumping of foreign TV sets
on the US market is uncertain and may affect TV picture tube imports. Talks
between the U.S. and Japanese governments may encourage self-imposed
-------
2-21
limitations on television picture tube exports by Japanese manufacturers, but
long-term policies are unclear.
Annual imports of electron tubes—all types—have been steadily
increasing, at an average rate of 18 percent, since 1977 (see Table 2-8).
Imports of electron tubes and related products totaled $300 million in 1981,
up 17 percent in current dollars over the 1980 value of $256.9 million.
Imports were equal to 15 percent of U.S. sales in 1981.
Table 2-8. Annual Imports of Electron Tubes
Selected Types ($ million)
United States, 1977-1981
1977 I 1978 I 1979 I 1980 | 1981
TV Picture Tubes, Color $15.5 $16.6 $22.0 $33.3 $52.9
TV Picture Tubes, B/W 4.7 8.3 10.0 10.5 15.3
Cathode Ray Tubes, NES* 4.8 7.3 13.2 21.3 27.6
Parts of CRTs, Including Glass 38.8 50.3 75.5 76.8 86.7
Electron Tubes, All Types 156.0 j 183.4 ( 232.0 ^ 256.9 j 300.0
*NES = Not elsewhere specified.
Source: Reference 7.
Imports of color TV picture tubes have been increasing by 36 percent per
year from 1977 to 1981 (see Table 2-8). The 1981 value of picture tube
imports, $53 million, was 59 percent higher than the 1980 value of $33
million (in current dollars). Sixty-seven percent more color TV picture
tubes (i.e. units) were imported in 1981 (984.2 thousand) than in 1980 (590.3
thousand)M Imports accounted for nine percent of the quantity and five
percent of the value of annual U.S. factory level sales of color picture
tubes in 1981. Almost all (97 percent) color picture tube imports come from
Japan.
-------
2-22
The value of imports of other cathode ray tubes increased 30 percent from
$21 million in 1980 to $28 million in 1981 (see Table 2-8). The average
annual increase over the period 1977-1981, expressed in current dollars, has
been 55 percent. Imports were about 24 percent of U.S. sales of "Other CRTs"
in 1981.
Exports of electron tubes have also been rising since 1977, at an average
annual rate of 12 percent (see Table 2-9). This rate is lower than that of
imports. Exports of electron tubes and related products totaled $377.3
million in 1981, four percent above the 1980 value of $361.1 million. The
recent balance of trade for electron tubes is positive, as shown in Table
2-9. Exports equaled nineteen percent of US factory sales in 1981.
Table 2-9. Annual Exports of Electron Tubes
Selected Types ($ million)
United States, 1977-1981
1977
1 1978
I 1979
I 1980
1 1981
TV Picture Tubes, Color
$75.7
$67.4
$80.9
$82.0
$65.8
TV Picture Tubes, B/W
1.2
1.8
1.7
1.2
1.3
Cathode Ray Storage Tubes
5.0
5.8
6.6
8.1
9.4
Cathode Ray Tubes, NES*
11.4
25.8
40.2
44.3
56.1
Parts, etc., NES*
Including CRT Glass
63.7
65.8
101.2
100.1
108.3
Electron Tubes, All Types
239.1
256.2
327.8
361.1 (
377.3
*NES = Not elsewhere specified.
Source: Reference 7.
For electron tubes—all types—the balance of trade increased 5.8 percent
between 1977 and 1980 and then declined 26 percent, in current dollars,
between 1980 and 1981 (from $104.2 million to $77.3 million). The overall
average annual growth rate from 1977 to 1981 was 1.4 percent.
-------
2-23
Exports of color TV picture tubes equaled seven percent of the value of
U.S. factory sales in 1981 and have had a mixed history (see Table 2-9).
From 1977 to 1981 there was an average annual decline in exports of three
percent with a 20 percent decline between 1980 and 1981 (from $82 million to
$66 million, in current dollars). Imports of color TV tubes, on the other
hand, increased between 1977 and 1981, and this has resulted in a five
percent decline in the balance of trade over the past five years (see Table
2-10). The decline in color TV picture tube balance of trade between 1980
and 1981 was 73 percent.
Table 2-10. Balance of Trade of Electron Tubes
(1977-1981/$ Million)
BALANCE OF TRADE
I Color | Other I Electron Tubes,
Year I TV Tubes I CRTs* i All Types
1977 60.2 11.6 83.1
1978 50.8 24.3 72.8
1979 58.9 33.6 95.8
1980 48.7 31.1 104.2
1981 12.9 ( 37.9 77.3
~Includes both Cathode Bay Storage Tubes and Cathode Ray Tubes, NES,
from Tables 2-8 and 2-9.
Source: Reference 1.
Exports of other cathode ray tubes increased 25 percent in current
dollars from $52.4 million in 1980 to $65.5 million in 1981 (see Table 2-9).
Since 1977, exports have been increasing at an average annual rate of 41
percent. The value of other CRT exports came to 56 percent of US sales in
1981, a significant factor in this segment's market. The balance of trade of
other CRTs is positive and increasingly favorable as shown in Table 2-9.
-------
2-24
IV. Firms and Establishments in Scope of study
There are five known firms in the US which make color television picture
tubes. The five producers supply about 15 firms, including their own, which
manufacture color TV sets.
Fourteen firms manufacture other CRTs with a significant part of their
production used captively in the production of engineering and scientific
instruments. Five firms produce luminescent coatings. The major companies
are listed in Table 2-11 along with the plants included in this study; there
are seven color TV picture tube plants, 16 other CRT plants and five
luminescent coatings plants.
The firms that manufacture the color television tubes are all large,
publicly owned companies which also manufacture color television receivers
and therefore, in this respect are vertically integrated "downstream". Three
firms (possibly four) make the basic glass enclosure, the raw material item
that color television tubes are made from; the three are: Owens-Illinois,
8/
Corning Glass, and Lancaster Glass. Thus, none of the color TV tube
manufacturers are vertically integrated "upstream" with respect to the basic
glass enclosure. Two firms each have two color TV tube production plants.
Four of the firms produce an estimated 90 percent or more of total color
TV picture tubes in the U.S. The top two firms are RCA and Zenith but their
share of total production is not public information.
The industry segment producing other CRTs includes 14 firms of which two,
Tektronix and Hewlett Packard, are large producers of CRTs; most, perhaps
all, of their CRT production is for captive use in the electronic instruments
they manufacture. Based on plant level sales data, five firms in the CRT
-------
Table 2-1Firit and plant Characteristics Sot Industry Seqments
Industry
Segment
firms
No. of J
Plants* f
Public
Ownership
f
Private
Percent of Total paily
Plant Production*
Color TV Tubes
ICA
Senith
BOG Philips
GE
2
1
2
1
1
x
x
TL
X
31
28
19
12
1Q
19B4
Aanjal Sales
?enoent of Total
IS
million)*
A-Jlual
Ofcfesr cssa
Te ¦: tror.i sc
j
X
712.4
53
Hewlett Packard
1
*.
122.1
ifi.S
Dafcaneiship) - Ecujiwniic lafonaation Systems data
secvice (annual sales).
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2-26
segment are medium-sized producers, while six are very small. Sales data are
unavailable for two firms. Only one firm in the sample, Thomas Electronics,
has multiple (three) plants. Five of the major CRT producers are publicly
owned firms (Tektronix, Westinghouse, Hewlett-Packard, Datagraph, and
Litton); Clinton Electronics is privately owned. Two of the other eight
firms are publicly owned; the rest are private.
The other CRT industry segment may be more competitive than the color TV
picture tube segment, due to the larger number of producers making other
CRTs. On the other hand, the products of each producer may be so specialized
that competition is not a major factor in CRT prices. This suspicion is
supported by the fact that CRT sales for military purposes account for a
sizeable share of current sales and that share is increasing.
The CRT industry segment appears to be almost as concentrated as the
color TV picture tube segment; the top four firms account for almost 87
percent of the total sales of the CRT plants included in the study, it
should be noted that the available sales data are plant-Wide sales and
therefore may include sales of products other than CRTs made at the plants.
As mentioned above, at least two of the firms are vertically integrated
downstream, producing CRTs for use in scientific-engineering instruments and
other products they manufacture.
The luminescent coatings industry segment is characterized by a few
large, publicly owned firms. Each firm has a single plant for producing the
coatings and most are vertically integrated from the production of the phos-
phors to their use in the manufacture of color television tubes, other CRTs
or fluorescent lamps. RCA produces phosphors only for TV, Westinghouse only
lamp phosphors, while the rest produce both. About 90 percent of total
annual sales in the sample are attributed to three plants.
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Of all plants in the three industry segments under study/ 12 are located
in the mid-Atlantic region/ five in the Midwest, eight in the western region
and one each in the southern and eastern regions of the U.S.
Employment in each of the four color TV tube manufacturing plants for
which data are available is between 1000 and 2600 in tube production and up
to 3000 in total plant employment. There is a wide range in employment
levels in the other CRT plants in the sample. Of the nine plants for which
data are available one (Tektronix) has 1000 CRT production employees and
12,000 total plant employees/ one (Hewlett Packard) has 400 production
workers in CRT and 2,300 total plant, one (Datagraphix) has 1,000 total plant
employees, three plants have between 30 and 120 production workers and four
very small plants have less than 20. Employment figures are not readily
available for the luminescent coatings manufacturers.
Product diversification data at the plants are not available. Using very
gross indicators (total employment versus product-specific employment and
total wastewater flow versus product-specific flow), it appears that three
color TV picture tube plants may make other products, two CRT plants are
known to be diversified while five more may be, and two luminescent coatings
plants probably make other products.
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Section 2
REFERENCES
1. Electronic Industries Assoc. (EIA), 1982 Edition Electron^ Market-
Data Book. Washington, D.C., 1982.
2. Current Industrial Reports, U.S. Bureau of the Census, 1980.
3. Data Resources, Inc., U.S. Long-Term Review, Winter 1982-83. 1983.
4. U.S. Department of Commerce, 1982 U.S. Industrial Outlook for 200
Industries with Projections for 1986, January 1982 anti .Tannery 1993.
5. Electronics, January 13, 1982, (p. 126 as reported in Predicasts,
Forecast Abstracts, p. B-242) and January 13, 1983.
6. Evison, Peter, Electronics: The Market to 1982. The Financial Times
Limited, London, 1978, p. 84.
7. U.S. Department of Commerce, Current Industrial Reports, Selected
Electronic and Associated Products. Including Telephone and Telegraph
Apparatus, MA-36N(80)-1, October 1981. ~
8. Personal communication with International Trade Commission personnel.
9. Electronic Business, January 1981.
10. Electronic Buyers Guide 1982, McGraw-Hill, Inc., May 1982.
11. U.S. Department of Commerce, 1977 Census of Manufacturers.
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Section 3
Economic Impact Methodology
The economic impact methodology is performed in seven steps. First, the
methods used to estimate a baseline projection for each of the three industry
subcategories (color TV picture tubes, other CRTs and luminescent coatings)
are discussed. Second, several measures are developed to analyze the impacts
of treatment costs at the industry-level and the plant and firm level. Third,
the approach used to analyze potential closures of existing plants resulting
from treatment costs is described. In the fourth and fifth steps, the
methods for estimating possible effects on production/employment and foreign
trade are presented. Methods to estimate treatment cost impacts on new
sources are discussed in the sixth step and in the last step the section
concludes by describing how the analysis of impacts on small businesses is
conducted.
I. Industry-wide Baseline
Estimates of future production value and quantities—without additional
treatment costs—serve as a baseline against which the impacts from
regulatory action are estimated. Baseline projections for 1984 are developed
for new and existing facilities in each of the three industry subcategories:
color TV picture tubes, other CRTs and luminescent coatings.
The baseline is defined for 1984 because this is when the effluent
guidelines are expected to be implemented. Treatment costs have been
estimated in 1982 dollars but 1982 is a particularly poor year in the
business cycle for the industry, as discussed in Section 2, III.1. As real
growth for the industry is anticipated over the next three to five years, it
was determined that the best approach would be to estimate production
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(quantity) and sales variables in 1982 dollars to correspond to the 1982
treatment cost estimates and then to project these estimates to 1984, using
constant 1982 dollars. In this way we would capture expected real industry
growth in the next few years in the baseline projections, and the estimate of
adverse impacts on existing plants would be more realistic than if 1982
conditions were used.
The variables estimated in the baseline for TV picture tubes and other
CRTs are: production value, quantity, unit prices and industry profit. For
the luminescent coatings subcategory, production quantities are unknown and
only total value of production and industry profit are projected.
Different methods are used to estimate baseline values for the three
subcategories because available data are not consistent with regard to: (1)
time periods for which data are reported by various sources, and (2) level of
data aggregation in the different subcategories. The various methods for
baseline estimation are discussed next.
1.1 Color TV Picture Tubes
The 1984 baseline values are projections in constant dollars of 1982
values estimated from 1980 and 1981 factory sales and quantities published by
EIA (Electronic Industries Association, 1982 Edition, Electronic Market Data
Book) and from the Department of Commerce's estimate of 1981-82 growth in
value of production (1982 Industrial Outlook). The 1982 to 1984 projections
are estimated from industry growth forecasts for 1983 and 1986 in current
dollars from Electronics (January 13, 1983 issue) and from inflation rate
forecasts by Data Resources, Inc. (DRI) (Long-Term Review of the U.S.
Economy). In 1980, U.S. factory sales of color TV tubes was $911.5 million
and in 1981 it was $998.7 million; a five percent increase in total value is
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estimated between 1981 and 1982. A constant dollar growth rate of 3.5
percent is projected for 1982 to the 1984 baseline. The quantity of tubes
manufactured in the U.S. was 11.93 million and 11.09 million in 1980 and
1981, respectively, as imported tubes increased by almost 400 thousand in
that period. 1982 U.S. production is estimated at 11.5 million tubes which
is the average of the preceding two years. Production growth is projected at
16.9 percent between 1982 and the 1984 baseline, based on forecasts of the
production index for TV and Radio Sets from DRI.
The 1982 sales estimate (prior to projection to the 1984 baseline) for
the industry subcategory was checked against plant sales listed in the EIS
(Economic Information Systems) data files. Aggregate plant sales account for
77 percent of the production value for the industry subcategory.* The profit
for the subcategory is estimated by applying a ratio of profit to value of
production. The ratio is derived from aggregate statistics for the
appropriate four-digit SIC group. (The derivation is discussed later under
plant-level impacts.) The use of a profit to sales ratio in the methodology
is common to the other two industry subcategories.
1.2 Other CRTs
For this subcategory, 1984 baseline projections are also constant dollar
projections of 1982 values. The 1982 production values and quantities are
estimated from 1979 and 1980 data published by the Department of Commerce's
* Another method, used for the other CRT subcategory, was considered for
color TV picture tubes. The 1979 and 1980 data reported by the Department of
Commerce's Current Industrial Reports was used to calculate an annual growth
rate in unit value and quantity. The method yielded a 1982 total value of
production 1.75 times greater than aggregate sales of all seven plants
(identified in the Final Development Document) whose sales are listed in the
Economic Information Systems (EIS) data files on a plant-by-plant basis.
Therefore, the more recent 1980-1982 production data published by the BIS was
used.
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Current Industrial Beports 1980, MH-36N (80)-l. The observed 1979-80 rates
of increase in value and production identified under SIC 36713 are projected
to obtain the 1982 estates. The 1979-80 growth in production quantity was
19.5 percent and in unit value it was 16.0 percent in current dollars. A
constant dollar growth rate of 30.6 percent in factory sales, derived from
industry projections from Electronics and from DM inflation forecasts, is
projected from 1982 to the 1984 baseline. Production growth is projected at
38.5 percent between 1982 and the 1984 baseline, based on production quantity
data for 1979 to 1981 from the Current Industrial Reports. W36N(811-1 and
(80)-1.
The industry-wide production value for this subcategory in 1982 is much
less than the aggregate plant sales listed in the EIS file for the CRT plants
identified in the Pinal Development Document; at least one very large plant,
owned by Tektronix-possibly two others, one owned by Hewlett Packard and one
owned by Raytheon--have major product lines other than CRTs which cannot be
separated out of the plant sales data.
1,3 Luminescent coatings
in this industry subcategory, the Department of Commerce data were not
used because coatings are indistinguishable within SIC 2819, a large
miscellaneous group of Inorganic chemicals not elsewhere classified. There-
fore, industry-wide values for 1982 were estimated from plant data. Sales
data for four of the five existing plants identified in the Final Development
Document are listed in the EIS data file. For the fifth plant, employment
information was provided by EPA and an average sales value per employee was
applied to obtain annual sales. The average sales value per employee was
based on the EIS sales and employment data for three plants which ranged from
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3-5
$70,000 to $80,000 per employee. (A fourth plant showed $155,000 per
employee but was not used for purposes of calculating an average value
because the plant's SIC classification indicates that metal working rather
than coatings is the dominant manufacturing activity.)
To estimate the 1982 value for the total industry subcategory, the
employment estimates for all five plants were aggregated and then multiplied
by the average value per worker to calculate the value of total production.
A constant dollar growth rate of 10.1 percent was then applied to this value
to project the 1984 baseline value. The growth rate used was based on the
assumption that since luminescent coatings are used in the production of TV
tubes, other CRTs and electric lamps, that their sales growth should follow
the growth in the end-use markets. As no data were available on the
breakdown of production by end-uses, one-half was assumed to be used for
electric lamps and one-half was equally divided between TV tubes and other
CRTs. Projections used for the latter two products are the same as discussed
above in 1.1 and 1.2. The growth rate for electric lamps was estimated from
value of shipments data for 1977 and 1982 from the Department of Commerce,
Current Industrial Reports M36D (82)-6 and (83)-1.
II. Impact Projections
II.1 Industry-wide Impact
The ability of the industry to pass on treatment costs in the form of
higher prices depends on the strength of demand, the ability of foreign-based
manufacturers to take away U.S. market share, and the distribution of treat-
ment costs among producers. Although demand is expected to continue to be
strong in this industry, both foreign competition and U.S. overseas
production are important factors affecting its future well being. Due to
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these considerations only one impact projection is made. Treatment costs «
not passed through but are assumed to be absorbed by the producers resulting
in profit reductions.
II. 2 Plant-Level and Firm-Level Impacts
Five impact measures are derived to estimate the plant-level impacts of
additional treatment costs. (In addition, several standard financial ratio*
reported by Dun and Bradstreet that are used to estimate the financial health
of firms (see Section II.3, below) are used to aid in the evaluation of fi^
whose plants incur treatment costs.)
The five plant-level impact measures selected are:
1. ratio of annual treatment cost to plant sales;
2. ratio of annual treatment cost to plant-level profit?
3. ratio of annual treatment cost to plant manufacturing
conversion costs;
4. ratio of annual treatment cost to profits of the firm; and
5. ratio of capital investment portion of treatment cost to
annual plant investment.
These measures are used to judge the severity of additional treatment
costs. More than one measure of impact is desirable because accurate infor
mation at the plant level is limited, and confidence is not high in any one
measure. Available plant-level data do not include profits, production coat,
and other financial data that are useful for the evaluation of impacts. ln
addition, there was no 308 Survey* covering the manufacturing subcategories
addressed in this study. Therefore the impact measures were derived using
publicly available data in conjunction with a number of assumptions necessary
* A 308 Survey is a questionnaire sent to firms by the EPA under Secn«
308 of the Clean Water Act to gather technical and financial information 2
an industry subcategory. r
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1-7
toe the plant-level analysis. The remainder of this discussion outlines ttie
assumptions and data used to develop Cite impact measures.
11.2.1 Annual Treatment Cost to SaX^s. This Treasure provides a
simplified screening criterion far identifying plants that may be severely
impacted {ratios of annual treatment costs to sales, gte&tet than, say, two
oc tone percent of plant sales nave been used in other EPA impact analyses
for this purpose). Estimates of 1984 plant-level sales were obtained from
the EIS (Bcononic information systems) data base. The SIS sales tiqaies are
estimated values for 1932 based oii input-output tables froa the Department of
Labor. These 1982 values were projected to 2934 in constant 1932 dollars,
using the growth rates discussed in Sact Ii atoose, for each category, &nrvual
treafcifteefc cost to sales ratios were obtained siaply by dividing annoaliaefl
treatment cost tor a given plant by the eft^ra-.jed :* ar.t sales.
21.2.2 Annual Treatment Cost to frlant-i^vel Profit. Thia measure can
provide another relevant way fco judge the ability of a plant to absorb
additional treatment oast. If annual treatment coat 1b a significant portion
of plant profits, and the additional coats cannot be recovered with higher
prices for the plant's products, then the plant may be a candidate for
closure. Plant level-profit is approximated by an industry-wide ratio,
explained next. Ideally/ the calculations should consider a profit stream
over several years, for the impact projections, the plant-level profit ratio
la estimated for one year as described below. Industry subcategory ratios
Ear several othac recent years have also been estimated for comparison
purposes for ase in tbe closure analysis.
Because plant-level profit ia not tenovn, we have developed a ratio af
profit to sales at the four-digit SIC group lavti based on data in tfte Census
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of Manufactures.* The profit is calculated as the residual of value added by
manufacturing, less wages and depreciation. The profit ratio is obtained by
dividing the residual by the value of shipments (value of shipments is
considered synonymous with plant-level sales). The value of the residual in
the numerator ideally should be reduced further to account for other costs
such as royalty payments, licensing fees, plant utilities and maintenance
costs exclusive of plant labor. However, these costs cannot be identified in
the source data, therefore the residual is referred to as "unadjusted profit".
A ratio of unadjusted profit to sales was obtained at the four digit SIC
code level using the 1977 census data* and then applied to 1984 plant level
sales to approximate 1984 plant level unadjusted profit. As mentioned
earlier, the ratio is also used at the industry subcategory level to estimate
industry profits. In equation form, the relationships are as follows:
w " fup x Sp
where
UP = unadjusted profit, plant-level
Sp = plant-level sales in 1984
fup a unadjusted profit to sales ratio computed at the 4-digit
SIC code level for 1977
* [(value added) - (wages) - (depreciation)]
[value of shipments]
For color TV picture tubes, SIC 3671 was used to calculate the unadjusted
profit ratio. For the Other CRTs subcategory, the average of four different
unadjusted profit ratios was used; the ratios used are from SIC 3671—
Electronic Tubes, all types, SIC 3811—Engineering, Scientific Instruments,
* 1977 Census of Manufactures, U.S. Department of Commerce, Bureau of the
Census.
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SIC 3825—Instruments to Measure Electricity, and SIC 3829—Measuring and
Control Devices, not elsewhere classified. The four SIC groups were used
because cathode ray tubes are not only sold as distinct items made by
manufacturers classified in SIC 36713, but are also incorporated into
instrument packages sold by manufacturers classified in the other three SIC
groups. For luminescent coatings, industrial inorganic chemicals not
elsewhere classified (SIC 2819) is used to derive the ratio. The unadjusted
profit ratios derived from 1977 data are as follows:
Color TV picture tubes fup » 0.348 (SIC 3671)
Other COTs fUp * 0.458 (average of four
SIC groups)
Luminescent Coatings fup « 0.383 (SIC 2819)
II.2.3 Annual Treatment Cost to Manufacturing Conversion Cost, This
measure considers annual tre&tJnent cost as if Lt were an additional
production cost, necessary in the conversion oE raw -materials into products
that are shipped by the plant* The conversion costs are those included in
value added by manufacturing (excluding resales which involve no
manufacturing activity) as defined by the Department of Commerce.* plus cost
of energy and contract work.
As explained above for the unadjusted profit ratio, a manufacturing
conversion cost to sales ratio wae calculated at the four digit SIC level for
1977. The ratio was then applied to specific plant sales in 1984. In equa-
tion form, this is:
* 19 77 Census of Manufactures/ Appendix A.
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MCC
^mc x ®p
where
MCC = manufacturing conversion cost at the plant level
fmc = manufacturing conversion cost ratio computed at the
4-digit SIC code level for 1977
= [(value added by manufacturing) - (value of resales) +
(fuels) + (purchased electrical energy) + (contract work)1
[(value of shipments) - (value of resales)]
For each of the three subcategories, the same SIC groups identified earlier
were used to obtain the averages. The values are as follows:
U.2.4 Annual Treatment Cost to Firms' Profit. Manufacturing plants (or
establishments) are often organizationally treated as independent profit and
loss centers by the parent ficm. That is, the plant martager is responsible
for developing a sales plan and a budget, and then carrying out all activities
(such as operating the facility, purchasing raw materials, maintaining a work
force, marketing the product, etc.) so that a profit results at year end.
However, if capital investment is required for plant modification or new
equipment, the necessary funds may be appropriated from a higher organiza-
tional level than the plant. Assuming the outlays are relatively modest, it
is reasonable for the firm to consider financing the new investment from its
earnings rather than by borrowed capital. Therefore it is useful to consider
how additional plant treatment costs compare to the net income of the parent
firm. To make this comparison, the annual treatment cost is divided by the
Color TV picture tubes
fmc = 0.597
Other CRTs
fmc = 0.647
Luminescent coatings
fmc * 0.632
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reported net income* for the firm. This calculation is possible only for
those firms that are publicly-owned and are required to report.
II.2.5 Capital Requirement to Plant Investment* The total capital cost
(TCC) for treatment is compared to an annual investment estimate at the plant
level. An annual plant investment ratio for each of the three industry
subcategories is estimated for one year based on data reported in the 1977
Census of Manufactures at the four-digit SIC level. Industry subcategory
ratios for several other years are estimated for the closure analysis. The
same SIC groups discussed earlier for each of the three industry
subcategories are used here. The plant investment for each subcategory is
related to value of shipments to derive a ratio as follows:
CAJI = fcap * Sp
where
CAP - Capital investment, plant-level (one year)
^cap = ratio of plant investment to plant-level sales computed at the
four-digit SIC code level foe 1977.
* fnew capital expenditures]
[value of shipments]
The derived values of the ratio for the industry subcategories are:
Color TV picture tubes fc4p =» 0.0327
Other CKTs fcap « 0.0361
Luminescent coatings ^cap ™ 0*0541
* Form 10-K, Securities and Exchange Commission, Washington* D.C. and
Moody's Industrial Manual,
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II.3 Financial Ratios
Production of the electronic components relevant to this study are often
a small part of a firm's total output. Therefore, it is difficult to assess
the impact of treatment costs on the firm except for the crude measure of
annual treatment cost to net income discussed above. However, it is possible
to gauge the relative health of a firm (without considering treatment costs)
by using financial ratios. Three ratios have been selected for this analysis:
1. Current assets to current liabilities ("current ratio");
2. Sales to net working capital; and
3. Return on assets.
Before describing the ratios, it is important to note their limitations.
II.3.1 limitations. Generally, the use of ratio analysis is a series of
necessary, but not sufficient, teste. As the analyst finds satisfactory
ratios, he moves on to the next test. When an unsatisfactory ratio is found,
the factors involved are flagged for further investigation. The way that
further investigation proceeds depends a great deal on the access to accounts
and records usually considered tc be proprietary by the firm. Even exper-
ienced analysts sometimes have difficulty getting to the root cause of an
unsatisfactory trend revealed by a financial ratio.
Hie trends identified using the financial ratios represent the relation-
ships of two financial items but the information provided is rather
superficial since it dees not shed light on the relative behavior of the two
items, as an example, assume a rise in a firm's -current ratio- (current
assets divided by current liabilities--* basic indication of a company's
ability to meet payment obligations from current assets). It is not
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sufficient to know the ratio increased; it is more important to know why.
The cause could be:
1. A rise in current assets and a decline in current liabilities;
2. A rise in both current assets and current liabilities but
with current assets moving at a faster relative rate; and
3. A decline in both but with a more rapid decline of current
liabilities.
In ratio analysis work, another important and most difficult problem is
to establish norms of satisfactory or unsatisfactory relationships. The
quality of a company's management, its policies, operations, competitive
position, and future plans must also be carefully considered. Information
concerning many of these factors are not as readily available as are
financial statements. In addition, the impact of economic, technological and
environmental factors, acquisitions and divestitures as well as many other
factors must be considered. Temporary distortions in financial ratio trends
can be very significant as, for example, when North American Philips acquired
General Telephone and Electronics' television set business in 1981.
II.3.2 Recommended Ratios. The financial relationships of each of the
publicly held firms associated with manufacturing activities in the three
subcategories are calculated to obtain a relatively broad view of the
financial health of the firm. Particular attention is directed towards a
firm's ability to incur additional debt without a major change in its
financial structure. The following ratios are used in the analysis:
Current Assets to Current Liabilities. Current assets are the sum of
cash, notes and accounts receivable (less reserves for bad debt), advances on
merchandise, merchandise inventories, and listed federal, state and municipal
securities not in excess of market value. Current liabilities is the total
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of all liabilities falling due within one year. This is perhaps the most
common test of short-term solvency. Normally a ratio of 2 to 1 or better is
considered good.
Sales to Net Working Capital. The sales figure is divided by net working
capital. This provides a guide as to the extent the company is turning over
its working capital and the margin of operating funds. It is a good measure
of both efficiency and profitability.
Return on Assets. Profit after taxes is divided by total assets. This
ratio is a key indicator of the profitability of a firm. It matches
operating profits with the assets available to earn a return. Firms that
have been effectively managed will have a relatively high return while the
returns of less well-run businesses will be relatively low.
These three ratios are indicators of solvency, ability to meet short and
long term debt, how well a company uses and controls its assets,
profitability, and lastly, how successfully a business is earning a return
for its owners.
III. Closure Analysis
III.l High-Impact Plant Identification
It is possible that a plant, or product line within a plant, may close
due to the burden of additional treatment cost. Lacking information about
product line diversification at each plant as well as production value for
each product line, a high confidence closure analysis is not feasible.
Instead, judgments are made about highly impacted plants by examining the
values of the impact measures, the financial ratios of the parent company and
other characteristics known about some of the firms. In addition, industry
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subcategory impact ratios for annual treatment cost to plant-level profit and
for capital requirement to plant investment for other recent years in
addition to 1977 are examined for comparison purposes to account for any
error that may be caused by using data from a single year.
Three sensitivity analyses supplement the impact analysis. The first is
a sensitivity analysis performed on the 1984 sales estimates and on the plant
profits estimates. For this analysis, the impact measures are re-examined
under both a ten percent increase and a ten percent decrease in annual
sales. This insures that the conclusions drawn based on the impact measures
account for any errors made in projecting plant sales. This analysis is
discussed in Appendix A. In the second sensitivity analysis, the impact
measures are also re-estimated with a ten percent decrease in plant profits.
This allows for the possibility that the costs of manufacturing inputs may
rise faster than the five to six percent inflation rate which has been
assumed throughout the study. Such cost increases would be reflected in a
decrease in profits. This analysis is also included in Appendix A.
The third sensitivity analysis addresses the cost of compliance with the
total toxic organics (TTO) limitations. It is carried out to determine if
any of the impact measures are affected by the addition of TTO compliance
costs. As information on existing plants shows that all plants currently
have a solvent management program in place, only the incremental cost to
comply with the TTO limitation (not the total cost of a solvent management
program) by improving the current program is examined. In general, costs of
improved management techniques are offset by solvent resale. Some plants may
have to haul away their solvents under the Resource Conservation and Recovery
Act (RCRA) requirements. These costs are estimated at $1,200 annually per
plant. Since it was not possible to determine which plants, if any, will
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fall under these requirements, the sensitivity analysis assumes these "worst
case" costs for all plants which are not known to be already in compliance.
This analysis is discussed in Appendix B.
III.2 Solvency Analysis
Once the high impact plants have been identified by the impact analysis
described above, a solvency analysis is carried out to determine whether or
not a plant will close due to the additional treatment costs. This analysis
compares the present value of cash flow to the salvage value of the equity of
the plant. If the present value (PV) of the cash flow is greater than the
salvage value of the plant, then the plant is worth more open and operating
than it is closed. However, if the salvage value is greater than the PV of
the cash flow, the better alternative, from the owner's point of view, is to
close the plant and sell it for the salvage value. If the PV of cash flow is
nearly equal to the salvage value, then other factors must be considered to
determine whether the plant will close.
The PV cash flow is the sum of the cash flow over the lifetime of the
plant. It is equivalent to the amount of money, if invested today, that is
necessary to be able to draw off each year an amount equal to the cash flow of
the plant. It is calculated as follows:
PV (CP) ¦
n
CP
_ cp [1-(1+r) -n]
i-1 (1+r)
i
r
where n is the life of the investment, CP is the cash flow of the plant after
treatment costs, and r is the rate of return on the investment. The life of
the investment, n, is assumed to be 15 years. An eight percent value is used
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for r, a rate that currently prevails in the marketplace. As a means for
comparison, a 10 percent rate is also used.
Since data are unavailable to estimate plant level cash flow for the
industry subcategories included in this analysis, unadjusted profit is used as
a proxy. Unadjusted profit at the plant level is obtained as described in
Section II.2.2, above. Annual treatment costs for Option 3 (as a worst case)
for the plant are then subtracted. As the cash flow-salvage value comparison
is an after-tax analysis, unadjusted profit is further reduced by one-half as
a conservative estimate of after-tax cash flow.
An accurate estimate of salvage value requires detailed plant level
financial data that is unavailable for this study. A reasonable substitute
has been derived from the Small Business Administration's FINSTAT data. This
data base is obtained from Dun & Bradstreet's Financial Profiles data base.
The data of interest to us are from SIC 3671 (Radio, TV Electron Tubes, SIC
3672 (Cathrode Ray TV Tubes), and SIC 3673 (Trans, Ind Elec. Tubes). From
this data, two ratios were calculated to estimate salvage value. The first
ratio is total assets to sales, the second is current liabilities to total
assets. The ratios were ranked from smallest to largest and the ratio at the
75th percentile (with a value of .67) is used to represent the industry-wide
asseta to sales ratio. The median of the current liabilities to assets ratio
(with a value of .27) is used as the industry-wide value. Taking these two
values overestimates both the salvage value and the salvage value of equity
which makes this analysis quite conservative.
Using these values, the plant specific salvage values were calculated in
the following mannert
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S
e
S - L
where:
S
S,
L
e
salvage value of equity
salvage value of the plant
current liabilities of the plant
and:
S = .67 x sales x .60
L = (.67 x sales) x .27
in which:
.6 7 = industry-wide assets to sales ratio
^27 s industry—wide current liabilities to assets ratio
.60 = a factor to reflect the fact that any plant is probably only 60
percent convertible to another use.
Judgments are made about closure possibilities by considering the results
of the solvency analysis as well as other information known about the plants
and firms.
IV. production and Employment impacts
Reductions in total industry output could result if cost increases due to
treatment are passed on in the form of higher prices and the demand is
sensitive to the price change. However, since this impact analysis assumes
no pass through of costs, treatment costs are absorbed by the manufacturers,
and profits are reduced. Since there is no change in price, it is possible
that there will be no change in total industry production. Therefore the
uncertainty concerning change in total production involves plant closures.
If there are plant closures due to reduced profits, then total production may
be reduced if there is not a corresponding increase in production at other
locations to replace production lost due to closures. Since information
-------
3-19
concerning the likelihood of such expansion is not readily available,
production and employment impacts are evaluated in relation to the closure
analysis and as a result of the shutdown of specific product lines or plants.
V. Foreign Trade Impacts
Judgments about foreign trade are difficult because factors other than
treatment costs are important, but currently are subject to major uncertainty.
These factors have resulted in: (1) U.S. firms opting to close plants here,
and transferring their production overseas to other plants owned by the U.S.
parent firm; (2) foreign-owned firms opting to open plants in the United
States; and (3) increasing imports from foreign companies. Since no pass
through of treatment costs is assumed, then foreign trade impacts are not
related to price changes but to production changes resulting from plant
closures or product line shutdowns. Foreign trade impacts are evaluated in
relation to the closure analysis; as a worst case analysis, it is assumed that
production lost as a result of closure is moved to foreign firms or overseas
U.S. plants, and that exports decrease in proportion to total subcategory
production decreases resulting from closure.
VI. New Sources
The additional costs that a new source might incur if higher treatment
requirements are imposed, compared to existing sources, could pose a barrier
to new firms entering the industry or to existing firms which might otherwise
build new plants. The baseline situation of whether or not there will be
sufficient demand to attract new plant investments is not addressed. That
issue depends to a large degree upon information on current industry capacity
and the intensity with which it is utilized, which are not available.
-------
3-20
Therefore, the analysis concentrates on the first issue concerning potential
barriers to entry into the three industry subcategories.
To estimate the possible cost disadvantage for new sources, costs
associated with higher treatment levels are postulated for new sources and
compared to unit costs and to sales values. The incremental cost for the
higher level of treatment is attributed to the treatment requirements
promulgated for new sources.
VI. 1 New TV Tube and Other CRT Plants
Two cases for new TV tube and other CRT plants are considered using
treatment costs relative to raw waste load. Case A analyzes the impact of
the incremental treatment cost between Option 2 and Option 3 because existing
indirect dischargers will be required to attain a level of treatment
equivalent to PSES-2.
Case B analyzes the impact of the total treatment cost for Option 3
because no regulation is being promulgated for existing direct dischargers.
Therefore, a new direct discharger would incur an incremental cost equal to
the total cost between no treatment (i.e., raw waste load) and a level of
treatment equivalent to BAT-3.
Five model plant sizes are used for the new source analysis for color TV
picture tubes and other CRTs, ranging from 10,000 gpd wastewater flow to
500,000 gpd. The three larger sizes, from 100,000 to 500,000 gpd, best
represent new TV tubes plants. The plant sizes—specified in terms of
wastewater flow—are based on the range of plants identified in the Final
Development Document. The wastewater flows are related to model plant
production using a range of production to flow relationships. The relation-
-------
3-21
ship between quantity of tubes produced and wastewater flow for six of the
existing color TV picture tube plants ranges from 10 to 30 tubes per thousand
gpd with an average of 20; these values, derived from flow and production
data obtained from EPA, are applied to both TV picture tube and other CRT
new model plants, since no production to flow data are available for existing
other CRT plants.
Based on 2 50 days per year of plant operation, annual production levels
are estimated for the five model plants for the low, average and high values
of 10, 20 and 30 tubes per thousand gallons per day. The annual treatment
cost is then divided by the annual tube production estimates to obtain the
cost per unit.
To convert the level of production to annual sales in 1986, the value per
tube is projected for 1986. Since there are no industry projections for
other CRT tubes as a group, the value per tube is calculated using historical
data from 1979 to 1981 acquired from the U.S. Department of Commerce Current
Industrial Reports. Production increased an average of 17.7 percent and the
value of production increased at 26 percent per year over this period. Using
a 5.5 percent inflation rate, the average value per other CRT tube in 1986 is
estimated to be $222 (1982$). The average value per color TV tube is
calculated using industry projections of an increase in value of 6.9 percent
and an increase in production of 8.08 percent. This yields a 1986 value per
tube of $70.44 in 1982 dollars. The annual treatment cost is then compared
to the projected 1986 value of production (based on the $222 and the $70.44
average values per CRT and TV tubes, respectively) for each model plant. The
capital investment portion of the model plant treatment cost is also
considered in judging the potential impacts of treatment requirements on new
sources.
-------
3-22
VI.2 New Luminescent Coatings Plants
Three plant sizes were selected covering the range from small (10,000
gpd) to large (500,000 gpd). New plants will be required to achieve NSPS and
PSNS wastewater treatment level equivalent to BAT-2 an PSES-2 and existing
plants will not be required to attain any higher level of treatment over
current, in place, treatment. Therefore, the additional treatment cost
burden for new sources relative to existing plants is the total treatment
cost of Option 2.
In contrast to the new source TV tube and other CRT analyses (where there
is some information available on plant production quantities and wastewater
flow) , there is no information on plant production quantities for luminescent
coatings plants to obtain a relationship between flow and output quantities.
Based on two of the five existing plants where total plant output appears to
be only one product, luminescent coatings, a range of plant sales from $304
to $1,682 (average, $993) per thousand gallons of wastewater flow is
obtained. Using this crude relationship between wastewater flow and sales
and the industry projected growth rate discussed in Section 1.3, above, a
1986 sales value (in 1982 dollars) is estimated for the model plants. Annual
treatment cost-to-sales ratios are computed and used to assess impacts on new
sources.
VII. Small Business Analysis
The Regulatory Flexibility Act of 1980 requires that the effects of
regulations on small businesses be considered. The analysis considers the
distribution of treatment costs among firms, using company sales and
employment to describe the size of the firm. Defining a small firm as one
-------
3-23
with fewer than 250 employees, the proportion of total treatment costs borne
by small and large firms is calculated and compared.
-------
Section 4
Effluent Limitations Guidelines, Options
and Compliance Costs
I. Introduction
The Federal Water Pollution Control Act Amendments of 1972 established a
comprehensive program to "restore and maintain the chemical, physical, and
biological integrity of the Nation's waters" (Section 101 (a)). To implement
the Act, EPA was to issue effluent limitations guidelines, pretreatment stan-
dards, and new source performance standards for industrial dischargers. The
Act included a timetable for issuing these standards. However, EPA was
unable to meet many of the deadlines and, as a result, in 1976, it was sued
by several environmental groups. In settling this lawsuit, EPA and the
plaintiffs executed a court approved "Settlement Agreement." This Agreement
required EPA to develop a program and adhere to a schedule in promulgating
effluent limitations guidelines, new source performance standards, and pre-
treatment standards for 65 "priority" or toxic pollutants and classes of
pollutants for 21 major industries (see Natural Resources Defense Council,
Inc., v. Train, 8 ERC 2120 (D.D.C. 1976), modified, 12 ERC 1833 (D.D.C. 1979).
Many of the basic elements of this Settlement Agreement program were
incorporated into the Clean Water Act of 1977. Under the Act, the EPA pro-
gram is to set a number of different kinds of effluent limitations and stan-
dards. The following is a brief summary:
Best Practicable Control Technology Currently Available (BPT)
BPT applies to existing direct dischargers. The limitations are
generally based on the average of the best existing performance at plants
of various sizes, ages and unit processes.
-------
4-2
Best Available Technology Economically Achievable (BAT)
BAT also applies to existing direct dischargers. These limitations, in
general, represent the best existing performance in the industrial sub-
category or category.
Best Conventional Pollutant Control Technology (BCT)
BCT replaced BAT for the control of conventional pollutants (BOD^, TSS,
oil and grease and pH). The Clean Water Act requires that BCT limita-
tions be assessed in light of a two part "cost-reasonableness" test.
Mew Source Performance Standards (NSPS)
NSPS apply to new facilities which discharge directly into the Nation's
waterways and are based on the best available demonstrated technology.
Pretreatment Standards for Existing Sources (PSES) and for New Sources
(PSNS) "
PSES and PSNS control the discharge of pollutants which pass through,
interfere with, or are otherwise incompatible with the operation of a
publicly owned treatment works (POTW). These limitations are to be
technology-based, with PSES analogous to BAT and PSNS to NSPS.
The role of this report is to analyze the economic impact of water
pollution controls on two subcategories of the electronics industry, Cathode
Ray Tubes, and Luminescent Coatings. As required by the Clean Water Act,
this study presents for consideration the projected economic impacts of
complying with promulgated regulations and alternatives EPA considered in
their development.
-------
4-3
II. Treatment Technology Options
A total of 29 plants are covered by the final regulation. Treatment
technologies appropriate to the two subcategories are developed in the Final
Development Document in Section 7. The treatment technologies considered are
summarized below:
11.1 Cathode Ray Tubes Subcategory
Option 1: No required treatment. The Clean Water Act and the Settlement
Agreement allow exclusion of regulatory requirements under specific condi-
tions. Thus, this is a zero cost option because current treatment of waste-
water is sufficient.
Option 2: Solvent management to control total toxic organics, chromium
reduction with the use of sulfuric acid and sodium bisulfite, chemical pre-
cipitation and clarification of all metals-bearing process wastes, sludge
de-watering and pH adjustment.
Option 3; Option 2 plus multimedia filtration.
11.2 Luminescent Coatings Subcategory
Option 1: No required treatment.
Option 2: Chemical precipitation and clarification of all metals-
bearing process wastes using lime, a coagulant aid and a polyelectrolyte,
sludge de-watering and pH adjustment.
These treatment options apply to each regulation. The specific
designations of options by regulation appear in Table 4-1.
-------
4-4
Table 4-1. Treatment Option by Regulation
and Type of Discharger
1
Option |
Existing 1
Direct* |
1 Existing
Indirect
1 New |
1 Direct |
1 New
Indirect
1
3PT/BAT-1
PSES-1
NSPS-1
PSNS-1
2
BPT/BAT-2
PSES-2
NSPS-2
PSNS-2
3**
1
BPT/BAT-3
PSES-3
1
NSPS-3
1
PSNS-3
1
* BPT, BCT, and BAT all apply to existing direct dischargers. However BCT
limitations are not being set more stringent than BPT for this industry. '
Hereafter, the treatment options will be referred to as BAT-1, BAT-2, etc., f0
simplicity. '
** Option 3 applies only to the Cathode Ray Tubes subcategory.
III. Current Treatment and Treatment Costs
III.l. Current Treatment
EPA contacted or visited as many of the existing facilities as possible to
determine current treatment practices. Table 4-2 summarizes the treatment in
place determinations.
III.2 Treatment Costing
This part covers the estimation of treatment costs for new and existing
sources. In all cases, Option 1 is excluded from treatment costing because
it would require no treatment of wastewater effluents.
-------
4-5
Table 4-2. Current Treatment-in-Place
for Existing Sources
Subcategory
Number of
Plants
Option 1
BAT-1 or
PSES-1
Option 2
BAT-2 or
PSES-2
Option 3
BAT-3 or
PSES-3
Luminescent Coatings
5
Direct
2
2
2*
NA
Indirect
2
2
1*
NA
Zero
1
NA
NA
NA
Cathode Ray Tubes**
24
Direct
1
1
1
1
Indirect
23
23
5
1
Zero
0
NA
NA
NA
* Some plants have partial treatment in-place for Option 2.
** EPA has no treatment or flow information for one plant in the CRT
subcategory.
NA = Not applicable.
III. 2.1. Treatment Costs for Existing Sources. Model plant costs are
developed in Section 9 of the Final Development Document. The detailed
discussion of assumptions and of cost sources appears in that section. From
those model plant costs (which are calculated for a variety of flow sizes),
specific plant costs are determined based on EPA's knowledge of the flow size
and existing treatment at each facility. CPA realizes that actual costs at
each facility may differ depending upon raw waste pollutant concentrations,
geographical considerations, etc.
Monitoring of wastewater is required for direct and indirect dischargers.
Therefore, for these plants, $2,500 for capital investment and $13,000 per
year for operation and maintenance is included in the treatment cost for
monthly monitoring for total toxic organics (TTO). An additional $7,500 per
year is included for monitoring the remaining pollutants three times a week.
-------
4-6
Since monthly limitations (which do not include TTO) are based on 10-day
sampling, these costs overestimate the cost of the expected monitoring
requirements. For plants that are zero dischargers, there are no monitoring
costs.
Tables 4-3A and 4-3B summarize the estimated treatment costs for
existing sources; annual costs shown are calculated as the sum of the
investment cost annualized over five years at a discount rate of 13 percent,
plus the yearly operation and maintenance cost.
Table 4-3A
BAT Treatment Costs by Option and Subcategory
($000)
Sub- |
Number
I Number of Plants 1
Capital Investment
1 Total Annual Cost-e
1
category I
of
I Incurring Costs I
1
Plants
1 Option 21Option 31
Option 2|Option 3
1 Option 2|Option t
Luminescent
Coatings
2
2 NA
5.00 NA
27.4 NA
CRTs
1
0 0
0 0
0 0
Table 4-3B
PSES Treatment Costs by Option and Subcategory
($000)
Sub- I Number I Number of Plants I Capital Investment [Total Annual Costa
category I of I Incurring Costs I I
| plants I Option 21 Option 31 Option 2 I Option 3 I Option 21Option 3
Luminescent
Coatings 2 2 NA 118.1 NA 82.64 NA
CRTs 23 17 21 6,491.30 7,682.95 3,433.30 3,922.70
NA = Not applicable.
-------
4-7
III.2.2 Treatment Costs for New Sources Because it is difficult to
project the type of facility that may be built in the future, three model
sizes of plants were costed for the luminescent coating subcategory and five
model plant sizes were costed for the CRT subcategory. All treatment costs
are estimated with respect to raw waste load. The model plant treatment
costs are shown in Table 4-4; the estimates include the same per plant
monitoring costs discussed earlier.
Table 4-4. Model Treatment Costs by Option for NSPS and PSNS*
($000)
I Model Plant I Capital Investment I Total Annual Costs
Subcategory I Flow Size (gpd) | Option 2 I Option 3 I Option 2 | Option 3
Luminescent
Coatings 10,000 100.5 106.33 58.99 61.39
100,000 636.3 695.4 318.75 343.25
250,000 1,180.1 1,306.2 583.85 636.15
CRTs 10,000 123.6 129.43 69.35 71.75
50,000 289.6 305.4 162.1 168.70
100,000 701.3 760.4 351.4 375.9
200,000 1,151.2 1,265.5 571.1 618.4
500,000 1,578.5 1,807.0 826.3 921.1
* PSNS compliance costs are the incremental cost from Option 2 to Option 3.
-------
Section 5
Results of Analysis
I. Baseline analysis
I.1 Industry-wide by Subcategory
Table 5-1 shows the 1984 baseline estimates for three industry segments:
color TV picture tubes, other CRTs and luminescent coatings. For TV picture
tubes and other CBTs, baseline values are shown for production quantity, value
of production, unit price and industry profit. For the luminescent coatings,
production quantities and unit prices are not known and only total value of
production and industry profit are estimated.
¦Table 5-1
1984 Baseline Estimates by Industry Segment
(1982 $)
I Color TV
t Picture
I Tubes
1 i
I Other 1
I CRT 1
Luminescent
Coatings
Production
Quantity (million units)
13.43
.69
NA
Value of Production (million $}
1,076.65
147.48
379.8
Average unit value (t per tube]
80.15
213.83
MA
Industry Profit (million $)*
374.7
I
67.55
I 1
145.5
1
Notes:
MA » not available.
''¦Industry profit baaed on r
-------
5-2
For color TV picture tubes, 13.4 million picture tubes is the estimated
1984 production with a value of $1.08 billion based on an average unit value
of $80.15 per tube. Unadjusted profit is estimated at $374.70 million (based
on the unadjusted profit to sales ratio of 0.348 derived in Section 3).
For other CRTs, 1984 production is estimated at 0.69 million units with a
value of $14 7.48 million based on an average unit value of $213.83 per tube
The unadjusted profit for this industry subcategory is estimated at $67.55
million (based on an unadjusted profit to sales ratio of 0.458 derived in
Section 3).
For luminescent coatings, total value of production in 1984 is estimated
at $379.8 million. The unadjusted profit for this subcategory is estimated at
$14 5.5 million (based on the unadjusted profit to sales ratio of 0.383 derived
in Section 3).
1.2 Financial Ratio Analysis of Firms
Financial ratios discussed in Section 3 were calculated for the 10
corporations in this study whose financial statements were available. Results
are shown in Table 5-2. Five of these firms produce color TV picture tubes,
five produce other CRTs, and four of these tubes manufacturers also produce
luminescent coatings. Financial statements are unavailable for the smaller
firms which are primarily privately held.
Based on the analysis of one year (1981) alone, not one of these firms
appears financially weak, although Sony and Tektronix are at, or somewhat
below, the median in all three ratios. Each firm has also been evaluated
using data covering several years (two to five depending on the data
available), shown in Table 5-2. When the ratios are averaged over several
-------
5-3
Table 5-2
Financial Ratio Trend Analysis
Firm's 5j;catfe- ¦
Sat La
L Average i
(Ratio Values-
gory and Firm |
Code*
1 Hat io
' 1982 1
IS 31 1
1980 1
1979
[ 197S
CoLoc TV Tubes
<3etvecal Electric**
1
1,3
1.27
1.24
1.3
1.37
2
11.26
12.03
13.16
10.S9
3.94
3
e%
8%
a%
3t
8ft
Nft Philips'**
1
2.69
2.72
2.48
2.86
(fbraecly GT-5S
2
3.45
3.76
3.63
2.95
3
5%
Vi
Si
56
FCA**
1
1.5 2
1.17
1.78
1.49
1.45
1.69
2
9.52
16.57
10.59
7.11
7.47
5.86
3
4«
3%
U
4%
5%
6%
Smy
1
1.37
1.30
1.72
1.27
1.18
2
6.41
5.70
S. 73
6.51
7.64
3
6%
4%
6'e
10%
2%
Senith
1
2.37
2.22
2.13
2.76
2
4.28
4.65
4.42
3.76
1
3
( W
i ^ 1
2S 1
4% f
1
Other CRT
Hewlett Pacfcarel
1
2,32
2.57
2.42
2,16
2.12
2
3.53
3.15
2*42
2.16
2.12
3
US
lit
11%
12%
11%
Litton
I
1.57
1.69
1.53
1.49
Z
4.93
4.39
5.19
p.21
3
a%
8%
&%
9%
Raytheon
1
1.34
1.39
1.33
1.32
1.31
1.35
2
9.15
8. 22
9.6
10.09
9.53
e.3i
3
9%
9%
10%
10%
9»
a%
Jiektronix
1
2.48
2.67
2.67
1.79
2.3
2
2.92
3.08
2.96
2. SO
2.85
3
S.5*
£3
3*
10%
12%
West ingbova se* *
1
1.14
.97
1.03
1.26
1.2S
2
33.85
0
a 4.oi
9.99
7.56
1
3
i 44
1 M 1
6> i
1%
l
Sourcei 1982, 10-K Reports.
*hn'a averaga far eacb aE tte three cation is tsaeed on valuer over the 2
to 5 yeacs. as die Flayed in the table. tetlc code ie as Eollowsi
1 » Current Jiatio {Cfcfrent Assets to Current liabilities} <
2 ¦ Net Sales to Set Working Capital.
3 » Return on Total Assets in Percent*
**!flaeae firms also produce luminescent coatings.
-------
5-4
years and compared to Dun and Bradstreet industry medians and high and low
quartiles shown in Table 5-3, it appears that most TV picture tube and other
CRT manufacturers have experienced a number of financially lean years despite
the growth of these two market sectors. Several reasons can be identified
which explain these circumstances. First, and most importantly, each of
these firms is large and diversified, producing many products, some of which
have been severely affected by nationwide economic conditions. Second, these
industries are under heavy pressure from international competition. Also,
the performance of the dollar in relation to other currencies has made their
task more difficult as have high interest and inflation rates.
Table 5-3
Comparative 1981 Dun and Bradstreet Industry Ratios (SIC 3671-79)
Electronic Components and Accessories (108 Firms}**
I Current Assets 1
I Net Sales
1 Net Profit
I Current I
I Liabilities I
Net Working
1 Capital |
1
1 Total Assets
Upper Quartile
3.8
9.0
18.2
Median
2.5
4.9
10.6
Lower Quartile
1 1,7 1
3.2 ,
6.S
Source: Key Financial Ratios in 125 Lines of Business, Dun and Bradstreet
Inc. 1981.
**The Dun and Bradstreet industry (SIC) ratios are arranged in order of
"quality" with the best at the top and the weakest at the bottom. The figure
in the middle becomes the median for that ratio in that line of business. The
upper and lower figures typify the experience of firms in the top and bottom
halves of the sample. Though not relevant to the data shown in this table, it
is important to note that upper quartile figures are not always the highest,
nor are lowest quartile figures always the lowest numerically. The upper
quartile listings represent judgmental ranking, thus the upper quartile
represents the best condition in any given ratio and is not necessarily the
highest numerical value.
-------
5-5
Analysis of each of the three ratios shown in Table 5-2 based on the
firm's multi-year averages, results in the following observations.
Current Ratio (Current Assets to Current Liabilities); Only two firms
(Tektronix and N.A. Philips) exceeded the median. Since the rule of thumb
for healthy solvency is 2, it is obvious that money is tight for this
industry sector. However, solvency is not necessarily the main issue because
other ratios indicate relative strength in other areas.
Net Sales to Net Working Capital; This ratio indicates that four
corporations are below the median (Zenith, Tektronix, Hewlett Packard and
N.A. Philips). According to the current ratio analysis, N.A. Philips and
Tektronix are among the most solvent firms in the sample. Furthermore, Hew-
lett Packard has one of the highest reputations among the nation's corpora-
tions. In these three cases, it is unlikely that inefficient management of
assets is the cause of the relatively low ratios.
Return on Total Assets: Returns have been low for several years for
almost all firms included in the analysis. Only Hewlett Packard's corporate
three-year average reached the 1981 Dun and Bradstreet median.
In summary, when these firms' performance is evaluated with respect to
all three ratios, the following observations can be made. Several firms have
a relatively low solvency rating but show no marked weakness in the ratios
that highlight management efficiency and profitability. Hewlett Packard,
N.A. Philips, Tektronix and Zenith have relatively low net sales to working
capital ratios but all of these except zenith are at the top of the industry
in other ratios. Return on assets has been low for several years for all
firms except Hewlett Packard which indicates that these are difficult
-------
5-6
economic times but none of the publicly held corporations in this study are
judged to be in serious financial difficulty.
I.3 Baseline Projections
As discussed in Section 2, annual growth in color TV picture tubes between
1982-86 is anticipated to be 6.9 percent (in current dollar value) by industry
observers. Allowing for a 5.5 percent annual rate of inflation over that
period, the real increase (1.75 percent annually) would result in a 1984 value
of production that is 3.5 percent greater than in 1982. The 1984 U.S.
production value is projected to be $1.08 billion, in constant 1982 dollars.
(This projection assumes no major changes in U.S. market penetration by
imported tubes nor large reduction in import share of the U.S. market due to
protectionist measures adopted by the U.S. government.)
Military and industrial uses of other CRTs will create additional demand
over the next several years. An 18.4 percent annual growth over the 1982-86
period is anticipated by industry experts. Allowing for a 5.5 percent annual
rate of inflation suggests that the 1984 production value will be 30.6 percent
(in real terms) greater than the 1982 value. Therefore, the 1984 value of
production is projected to be $146 million, in constant 1982 dollars.
II. Impact Analysis (Existing Producers)
II.1 Industry-wide impacts by Product Sector
II.1.1 Color TV Picture Tubes. Table 5-4 shows the impact of Options 2
and 3 on the TV picture tube industry subcategory, in Option 2, total annual
cost is $2,308 million. With treatment costs fully absorbed by manufacturers,
baseline profit is reduced by this amount which is 0.62 percent of the
-------
Table 5-4. 1984 Impact Estimate (1932$)
1
1984 Baseline
Industry
Seg stent
Treatment Costs
{Million $)
l Indus tiy Profit iVfc-ar
(Treatment Costs iHiliiorj $J
I Value o£ | Industry J
I Production [ Profit I 1
} {Million J (Million $) I Option 2 i Option 3 I Option 2 | Option 3
Color TV
Picture Tub-is
Other CRTs
Luinescent
Coatings
1,376.65
147.4B
379.8
374-7
67.55
14 5.5
2.3083
1.21775
.11004
2.7414
1.27825
NA
372.4
66.33
(-1.80%)
145.4
372.0
<—>73% >
66.27
(-1.B9i)
NA.
I (~.03%}
1/ Percent chances fxoja baseline are noted in parentheses.
-------
5-8
baseline profit for the industry subcategory. For Option 3 the total annual
cost is $2.7414 million when treatment costs are fully absorbed and baseline
profit is reduced by 0.73 percent.
11.1.2 Other CRTs. Table 5-4 shows the impact of Options 2 and 3 on the
other CRT industry subcategory. For Option 2, total annual cost is $1,218
million. When treatment costs are fully absorbed by manufacturers, baseline
profit is reduced by an amount equal to the treatment cost; this is 1.80 per-
cent of the baseline profit for the industry subcategory. For Option 3,
total annual cost is $1,278 million and when fully absorbed by manufacturers,
baseline profit is reduced by this amount which is 1.8 9 percent of the
baseline profit for the industry subcategory.
11.1.3 Luminescent Coatings. Table 5-4 shows the impact of Option 2 on
the luminescent coatings industry. For Option 2, total annual cost is $110.0
thousand, with fully absorbed treatment costs, baseline profit is reduced by
this amount which is 0.08 percent of the estimated baseline profit.
II.2 Impacts on Financial Ratios of Firms
The publicly owned companies are large and the impacts measured by the
financial ratios are small. Table 5-5 compares total assets with the treat-
ment cost for Option 3; for example, the annualized treatment costs of three
RCA plants combined ($995,100) has no measurable affect on the financial
ratios given that RCA's total assets are $7.9 billion. Thus, the firm-level
financial ratios are insensitive to the relatively very small changes in value
of assets associated with additional treatment equipment or facilities.
-------
5-9
Table 5-5
Comparison of Firms' Assets
with Treatment Costs
($000)
I | Treatment Cost
I | (Option 3)
I Total | Capital I
I Assets I Investment I Annual
Color TV Tubes
General Electric*
N.A. Philips*
RCA*
Sony
Zenith
20,942,000
1,854,100
7,856,700
5,287,400
743,200
114.3
1,542.0
1,988.5
140.0
1,698.0
47.3
782.0
995.1
56.0
861.0
Other CRT's
Hewlett Packard 2,758,000 5.83 2.4
Litton 3,687,600 129.43 71.8
Raytheon 3,363,800 760.4 375.9
Tektronix 953,735 0.0 0.0
Westinghouse* . 8,316,200 . 305.4 . 168.7
*These firms also produce luminescent coatings.
Note: This table includes only publicly owned firms for which asset
information is available.
-------
5-10
As discussed later in the plant-level impact analysis, one firm (Thomas
Electronics) has three plants with relatively higher impacts than other
plants. However, the firm is privately owned and therefore not required to
publish financial data that would allow analysis of the financial ratios.
II.3 Plant Level Impacts (Existing Plants)
The impact measures developed in Section 3 for individual plants are
shown in Tables 5-6, 5-7 and 5-8 for the three industry product sectors,
color TV picture tubes, other CRTs and luminescent coatings, respectively.
The tables also display the plant sales and annual treatment costs for Option
2 and Option 3, by plant. These impacts are discussed below. Sensitivity
analyses have been conducted on these impact measures and are presented in
Appendices A and B.
II.3.1 TV Picture Tube Plants. Three existing plants incur treatment
costs under Option 2 and six under Option 3. Tables 5-6A and 5-6B reveal
that all the impact measures based on annual costs are .relatively small, less
than two percent, except for two plants (Zenith, IL, and Philips, OH).
Excluding the Philips, OH, plant, the total annual treatment cost to
plant sales (ATC/Sp) ratio is less than 0.54 percent for Option 3 and the
ratio of annual treatment cost to manufacturing conversion cost (ATC/MCC), is
less than 0.91 percent. The ratio of annual treatment cost to unadjusted
profit at the plant level is less than 1.5 percent for Option 2 and less than
1.6 percent for Option 3, again for all plants except the Philips, OH plant.
These ratios (ATC/Sp, ATC/MCC, ATC/UP) are higher for the Philips, OH plant.
The largest of the three is the annual treatment cost to unadjusted profit at
4.59 for Option 3. However, the ATC/NI ratio is very small for both Options
-------
Table 5-6A
Impact Measures: Color TV Picture Tube Plants
Option 2 (Level 1)
1
1
Plant 1
1 Treatment
1 (Mill
I Invest- |
I ment I
Cost |
. $) 1
1
Annual |
Annual
Sales
(Mill. $)
1
f
1 ATC
1 Sp
Impact
1 ATC
1 MCC
Measures
I ATC
1 UP
(Percent)*
1 ATC
1 NI
I TCC
1 CAP
RCA, PA
0
0
114.8
0
0
0
0
0
Zenith, il
1.5
.78
160.1
.487
0.816
1.4
4.83
28.7
GE, NY
0
0
77.0
0
0
0
0
0
RCA, IN
1.578
.8263
264.6
0.312
0 .524
0.897
1.48
18.2
Philips, OH
1.3488
.702
49.0
1.43
2.41
4.11
0.653
84.2
philips, NY
0
0
36.7
0
0
0
0
0
Sony, CA
0
0
131.7
0
0
0
0
0
Total, Option 2
! 4.4268 (
2.3083!
833.9
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant sales, MCC
Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment, TCC = Capital
investment portion of treatment cost.
-------
Table 5-6B
Impact Measures: Color TV Picture Tube Plants
Option 3 (Level 2)
1
Treatment
Cost |
1
Impact
Measures
(Percent)*
1
(Mill.
$) 1
Annual
1
1
! Invest- I
1
Sales
1 ATC
1 ATC
1 ATC
1 ATC
1 TCC
Plant
I ment I
Annual 1
(Mill. $)
1 Sp
I MCC
1 UP
I NI
1 CAP
RCA, PA
.182
.074
114.8
.0644
.108
.185
.133
4.85
Zenith, IL
1.698
.861
160.1
.538
.901
1.55
5.33
32.4
GE, NY
.1143
.0473
77.0
.0614
.102
.177
.003
8.28
RCA, IN
1.8065
.9211
264.6
.348
.583
1.0
1.56
20.9
(ECG) Philips, OH
1.542
.782
49.0
1.59
2.68
4.59
.926
96.3
(BCG) Philips, NY
0
0
36.7
0
0
0
0
0
Sony, CA
.14
.056
131.7
.043
.072
.123
.189
3.26
Total, Option 3
( 5.4828 (
2.7414
833.9
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant sales, MCC
Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment, TCC = Capital
investment portion of treatment cost.
-------
Table 5-7A
Impact Measures: Other CRT Plants
Option 2 (Level 1)
1
Treatment
Cost I
1
Impact
Measures
(Percent)
*
1
(Mill.
$) 1
Annual
1
1
Plant |
Invest- |
ment I
1
Annual |
Sales
(Mill. $)
I ATC
1 Sp
I ATC
I MCC
I ATC
1 UP
1 ATC
1 NI
I TCC
1 CAP
Raytheon, MA
.7013
.3514
124.1
.283
.438
.619
.083
15.7
Clinton Elec.,IL
.2896
.1621
53.8
.301
.466
.658
NA
14.9
Thomas Elec., NY
.1236
.06935
3.1
2.21
3.42
4.83
NA
109.3
Thomas Elect-
ronics, NJ 2/
.1236
.06935
12.0
.577
.896
1.26
NA
28.5
Thomas Electronics,
CA y
.1236
.06935
2.2
3.12
4.83
6.82
NA
154.2
Hewlett Packard,
CO y
0
0
122.1
0
0
0
0
0
General Atronics,
PA y
0
.00165
5.9
.028
.044
.061
NA
0
Litton Ind., AZ j
.1236
.06935!
3.9
( 1.78
( 2.75
( 3.88
( .022
1 87.8
(Table 5-7A continues).
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. NA = Data not available.
•^Treatment cost assumed to be the same as for Thomas Electronics in Clyde, NY
2/
—'Owned by N.A. Philips.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant sales, MCC
Manufacturing conversion cost, NI » Company net income, CAP = Annual plant investment, TCC = Capital
investment portion of treatment cost.
-------
Tabl« 5-7A
Impact Measures:
Cpt i o-i 2
(continued!
Ctbsc CRT Plants
i Level 1)
Plant
I Treatment Cost i i
} jHill. 5} } iMwuwl I
t Invest- ( I Sales > JVTC 1 MC
? merit ! Anneal I {Mill. $| I £p i XCC
Impaat Measures (Pece&nt}*
I SK i gc \ XCC
: 0? ' SI ' CAP
Dumont
Electiosiics, HJ
B-Bca.ci Xr«., Ph
VUao Display
Corp., GA
Vlestir^Kjust, fiV
Special PurjioSe
Technologies, CA
Tektromx. OB
Te i- VI cfeo Man., TJ»
Oatagrapfcix, CA
.3896
.2836
0
0
.1621
.03155
.GC165
. 16 21
.00165
a
.00155
.03165
17.6
2.0
2.7
94
>JA
712.4
311
96.2
Total* Option Z ^ 2,3645 ^ 1.125 ^ 1252.0
.919
.JW4
.3603
.172
.001
.13
. 2t*6
S.S.
0 0
»A HA
i.Cl
.154
.132
MA 45.5
HA LI
Kft 0
.<3i7J £.53
Na H.".
lift NA
.002 .CC-t SA
N?l
s
*
Hates-. MMal Seles are from £JS data £ilei 1962 $. adjusted to 1964. NA = Data not available.
y
Treatment cost assumed ta be ttae sane as for Thomas. El-ectronics in Clyde, N¥
If
— Crafted by W.A, Philips-
*ill iwpact sseasuees -are shown as percents. A1C 35 Pjwnual treatment cost, Sp = ?l3ot sales, Ji.CC «=
Manufacturing conversion cost. Ml = Cowpan? net income., CA? = Annual plant iavestnejit, TCC = Capital
investment portion of treatment cost.
-------
Table 5-7B
Impact Measures: Other CRT Plants
Option 3 (Level 2)
1 Treatment
Cost I
1
Impact
Measures
(Percent)*
I (Mill.
$) 1
Annual
1
I Invest- |
1
Sales
I ATC
1 ATC
1 ATC
I ATC
I TCC
Plant
I ment I
Annual I
(Mill. $)
1 Sp
I MCC
I UP
1 NI
I CAP
Raytheon, MA
.7604
.3759
124.1
.303
.469
.662
.089
17.0
Clinton Elec, IL
.3054
.1687
53.8
.313
.485
.685
NA
15.7
Thomas Elec, NY
.12943
.07175
3.1
2.29
3.54
5.0
NA
114.4
Thomas Elec. NJ U
.12943
.07175
12.0
.597
.927
1.3
NA
29.8
Thomas Elec.,CA i/
.12943
.07175
2.2
3.23
4.99
7.06
NA
161.5
Hewlett
Packard, CO 2/
.00583
.0024
122.1
.002
.0031
.0043
.001
.13
Gen. Atronics, PA 2/
0
.00165
5.9
.0 28
.044
.061
NA
0
Litton Ind. AZ
.12943
.0 7175
3.9
1.84
2.84
4.02
.023
91.9
Dumont
Electronics, NJ
.3054
.1687
17.6
.957
1.48
2.09
NA
48.0
B-Scan inc, pa
0
.00165
2.0
.083
.13
.184
NA
0
Video Display, GA
0
.00165
2.7
.0 60 2
.093
.132
NA
0
Westinqhouse, NY
.3054
.1687
94
.179
.277
.392
.029
9.0
Special Purpose
Technologies, CA
0
.00165
NA
NA
NA
NA
NA
NA
Tektronix, OR
0
0
712.4
0
0
0
0
0
Tex-Video Man, TX
0
.00165
NA
NA
NA
NA
NA
NA
Dataqraphix,
0
.00165
96.2
.002
.002
.004
NA
0
Total, Option 3
( 2.20015 (
1.1813
1252.0
1
I
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. NA
= Data not available.
2/ Treatment cost assumed to be the same as for Thomas Electronics in
Clyde, NY
2/ Owned by N.A. Philips.
*All impact measures are shown as percents. ATC = Annual treatment cost,
Sp = Plant sales, MCC = Manufacturing conversion cost, NI = Company net
income, CAP = Annual plant investment, TCC = Capital investment portion of
treatment cost.
-------
Table 5-8
Impact Estimates: Luminescent Coatings
Option 2
1
1 Treatment
1
Cost I
1984
Annual
Impact
Measures
(Percent)*
Plant
I (Mill. 1982 $) 1
| Invest- | 1
| ment I Annual I
Sales
(Mill.
1982 $)
ATC
Sp
ATC
MCC
I ATC
1 UP
1 ATC I
1 NI |
TCC
CAP
RCA, Lancaster, PA
.0025
.0137
129.0
.011
.017
.037
.023
.035
GTE, Towanda, PA
.0025
.0137
238.6
.005
.009
.0 20
.015
.019
GE, Cleveland, CXI
.0025
.0137
14.4
.095
.151
.336
.001
.321
U.S. Radium,
Morristown, NJ
0
0
4.0
0
0
0
0
0
Westinqhouse,
Bloomfield, NJ
.1156
.06894
115.2
.06
.094
.156
.014
1.85
Total, Option 2
1 -1231 1
.11004 |
501.2
1
1
1
1 1
Notes: Annual Sales are from EIS data file; except one plant where sales
are derived from employment; 1982 (, adjusted to 1984.
~All the impact measures are shown as percents. ATC = Annual treatment
cost, Sp = Plant sales, MCC = Manufacturing conversion cost, NI = Company net
income, CAP = Annual plant investment, TCC = Capital investment portion of
treatment cost.
-------
5-17
2 and 3 Cor this plant which suggests that a decline in one plant's profit
will not significantly affect the parent firm's income.
The annual cost of treatment to the firm's net income (ATC/NI) ranges up
to 4.83 percent for Option 2 and up to 5.33 percent for Option 3. These
values are associated with one plant (the Zenith plant in Melrose Park,
Illinois) and if it is excluded, the ratio is less than 1.60 for Options 2
and 3. It should be noted that this Zenith plant is closing and its
production will move to Taiwan according to a recent announcement in
Electronic News.
The capital investment portion of treatment cost (TCC/CAP), is less than
21.0 percent of annual plant investment if the Zenith and Philips plants are
excluded; if they are included, the ratio is as high as 96.3 percent for
Option 3.
II.3.2 Other CRT Plants. Fourteen existing plants incur treatment costs
under Option 2 and fifteen incur costs for Option 3 as shown in Tables 5-7A
and 5-7B.
The ratio of annual treatment cost to plant sales (ATC/Sp), ranges up to
3.12 percent for Option 2 and up to 3.23 percent for Option 3. For annual
treatment cost relative to manufacturing conversion cost (ATC/MCC), the ratio
is as high as 4.83 percent for Option 2 and 4.99 percent for Option 3. For
annual treatment cost to unadjusted plant level profit (ATC/UP) the ratio is
as high as 6.82 percent for Option 2 and 7.06 percent for Option 3.
For all three of the impact ratios discussed above, the high values are
associated with one plant owned by Thomas Electronics of California. The
plant showing the second highest impact in terms of these three impact
-------
5-18
measures is owned by same parent company, the Clyde, New York plant. The
third highest values are associated with the Litton Industries, Arizona plant.
To consider the total annual treatment cost burden to the Thomas
Electronics Company, aggregate costs were compared to aggregate sales for the
three plants. The ratio of aggregate annual treatment costs to aggregate
plant sales is 1.20 percent for Option 2 and 1.24 percent for Option 3.
Because Thomas Electronics is privately owned and not required to publish
financial data, estimates of annual treatment costs to net income cannot be
carried out.
The ratio of plant annual treatment cost to the firm's net income (ATC/NI)
is less than 0.09 percent for any of the publicly owned plants for either
Option 2 or 3. However, it should be noted that net income data are
fragmentary for this industry subcategory. The ratio of capital investment
for treatment to annual plant investment (TCC/CAP) is less than 30 percent for
all plants, except for the Thomas Electronics, CA and NY plants, Litton, CA
plant and Dumont, NY plant. For the most severely impacted plant (Thomas
Electronics, CA plant), the ratio is 154 percent for Option 2 and 162 percent
for Option 3.
Returning to the first mentioned impact measure of annual treatment costs
to sales (ATC/Sp), this ratio has sometimes been used in other EPA impact
studies to identify plants that potentially might experience severe impacts.
If a value of this ratio equal to, or greater than, one percent is used as a
screening criterion, three plants are severely impacted under Option 2 and
Option 3; two are owned by Thomas Electronics and one by Litton Industries.
The Dumont Electronics plant comes very close to being impacted under this
criterion. If a value equal to, or greater than, two percent is used, only
-------
5-19
the two Thomas Electronics plants are noted as potentially severely impacted.
With three percent as a screening criterion, only one plant (Thomas
Electronics of California) is severely impacted. With a criterion of four
percent, no plants are severely impacted under either Option 2 or Option 3.
II.3.3 Luminescent Coatings Plants. Four of the five existing plants
would incur treatment costs under Option 2 as shown in Table 5-8. The U.S.
Radium, Morriston, N.J. plant has no discharge and therefore has no treatment
costs. (Option 3 does not apply to this subcategory.)
All the impacts based on annual treatment costs are relatively small.
None of the impact measures based on annual costs exceed 0.34 percent. The
highest ratio of the capital investment impact measure is less than 1.9
percent.
III. Closure Analysis
III.1 High-Impact Plant Identification
III.1.1 Color TV Picture Tube Plants. As discussed above, the Philips
plant in Ottawa, OH shows the highest impacts under both Options 2 and 3.
Annual treatment costs to sales ratios are greater than one percent but less
than two percent for both options. The ratios of annual treatment costs to
manufacturing conversion costs and to unadjusted plant profit are also high,
above two and four percent, respectively, for both options. The impact
measure comparing treatment capital investment to annual firm capital
investment is also quite high, 84 percent for Option 2 and 96 percent for
Option 3. Thus, these impact measures indicate that this plant would have
significant profitability impacts. Even the "best case" sensitivity analysis
results do not contradict this conclusion (see Appendix A). However, based on
-------
5-20
the financial ratio trend analysis conducted in Section 1.2, Philips is a
financially strong firm. In addition, as shown in Table 5-5 total annual
treatment costs are very small when compared to the firm's total assets.
Therefore, it is probable that the firm will not close the plant, but will
carry the treatment costs given the growing market, its overall strong
position and the fact that the plant is a large integrated facility.
For the other plants in this industry segment, the first mentioned impact
measure indicates annual treatment costs to plant sales will be less than 0.6
percent. A plant may have multiple product lines with treatment facilities
dedicated to one or more particular product lines. If so, the treatment costs
should be allocated to the selected product line (or lines) which incur the
additional treatment costs. In such cases, the ratio of annual treatment cost
to product line sales could be higher than the values estimated in the above
impact analysis; if higher than the ratios calculated for the plant, a product
line shutdown may be implied. However, sales data on a product line basis are
not available.
Two other impact measures—annual treatment cost to manufacturing
conversion cost and to unadjusted plant profit—support the above conclusion
that impacts are slight on all except the Philips plant, because the ratios
are less than two percent (Option 2 or Option 3).
The next impact measure of annual treatment cost to firm net income is as
high as 5.63 percent for one plant (Zenith, Melrose IL). However this plant
is closing as noted earlier, for reasons other than treatment cost impacts.
Some of the larger firms engaged in TV picture tube manufacturing show
relatively low net incomes# for example, Zenith with $15 million in 1981.
However, Zenith and the other firms manufacture complete color TV sets and
-------
5-21
therefore it does not seem reasonable to consider a possible TV tube plant or
product line shutdown without considering the plant's relationship as a sup-
plier to one of the firms' major product lines. Firms such as RCA are large
and highly diversified (for example, broadcasting, major appliances, and
defense hardware) and capital investment for treatment at the plant level is
not exorbitant compared to annual investments routinely contemplated by large,
diversified firms. (The Zenith plant has the highest ratio but capital
investment for Option 3 is less than 35 percent of the annual investments at
the plant level) .
Based on the observations discussed above, no closures are anticipated
among the color TV picture tube manufacturing plants under either Option 2 or
Option 3.
III.1.2 Other CRT Plants. Two plants owned by Thomas Electronics and one
owned by Litton Industries show the highest impacts as pointed out earlier.
In particular, annual treatment costs for the Thomas Electronics, Los Angeles
plant are somewhat more than three percent of sales under either Option 2 or
*
Option 3, and the capital investment component of treatment cost is 154 to 162
percent of the average annual plant investment for the two options,
respectively. This plant, with annual sales of $2.2 million, is small
relative to total company sales (over $17 million). Hie Clyde, NY, Thomas
Electronics plant is also small (sales of $3.1 million) and shows significant
impacts, though not as great as the Los Angeles plant. It is conceivable that
Thomas Electronics might consider closing either the California plant or the
New York plant or both, and consolidate all CRT manufacturing at the Wayne, NJ
plant if (1) the Wayne, NJ plant (with CRT sales greater than the aggregate
sales of the other two Thomas CRT plants) has slack capacity and (2) the
company's major market opportunities are compatible with expanding their
-------
5-22
operations on the East Coast. However, such a decision is more likely to be
driven by other factors such as labor costs, marketing prospects, raw material
acquisitions, and transportation costs. Since Thomas Electronics is a
privately-held firm, it was not possible to analyze its financial base.
The analysis for the Litton Industries, Tempe, AZ plant also shows
moderately high impacts, as indicated above. The annual treatment costs to
sales ratios are between one and two percent for both options, and treatment
capital costs are 88 percent and 92 percent of the firm's annual capital
investment for Options 2 and 3, respectively. The worst case sensitivity
analysis supports the conclusion that there may be plant profitability impacts
(see Appendix A). Although Litton Industries has a low current ratio, as
discussed in the Financial Ratio Analysis of Firms, Section 1.2, it shows no
weakness in the ratios that are indicators of management efficiency and
profitability. In addition, total annual treatment costs are very small when
compared to the firm's total assets, as shown in Table 5-5. Thus, Litton has
an adequate financial base to afford the wastewater treatment expenditures and
gi^en the rapidly growing CRT market, will probably choose not to close the
plant.
Dumont Electronics, located in Clifton, NJ, is a borderline plant
according to the impact measures discussed previously. This plant has annual
treatment cost to sales ratios which are near one percent for both options and
fairly high percentages (46 and 48 percent) of treatment capital costs to
annual firm investment. When the worst case sensitivity analysis is
considered (i.e., if the sales estimates have been underestimated by 10
percent) it supports the conclusion that this plant may be adversely impacted
(see Appendix A). Since Dumont Electronics is a privately-owned firm, no
analysis can be made of its financial strength.
-------
5-2 3
Based on the observations discussed above, it is anticipated that the
Thomas Electronics firm will be severely impacted by Option 2 or Option 3 and
that its Los Angeles, CA and Clyde, NY plants are candidates for closure.
Closure is also possible at the Dumont Electronics, Clifton, NJ plant.
II1.1.3 Luminescent Coatings Plants. None of the coatings plants are
closure candidates. As noted earlier, all of the impact measures are
relatively small.
III.2 Reliability of the Impact Ratios
The ratios used to estimate the plant level impacts of additional treat-
ment costs were derived from the 1977 Census of Manufactures. These ratios
might not typify the current relationships for each of the industry subcat-
egories. In order to test the reliability of these ratios, they have been
recalculated for the years 1979, 1980 and 1981 and are shown in Table 5-9.
Table 5-9.
Comparison of the Unadjusted Profit to Sales Ratio (fUp)
and the Plant Investment to Sales Ratio (fcap) f°r Several Years
1 1
1 1977 |
1 1
1
1979 |
1
1
1980 i
1
1
1981 I
1
I average
1
Color TV
^up
f
*-cap
.348
.0327
.328
.0316
.341
.0278
.328
.0371
.336
.0323
Other CRT
^up
^cap
.458
.0361
.468
.0413
.456
.04
.471
.0415
.463
.0397
Luminescent
Coatings
fup
^cap
.383
.0541
1 1
.42
.0562
1
.44
.0495
1
.425
.0514
1
.417
.0528
1
Source: U.S. Department of Commerce, Annual Survey of Manufactures.
-------
5-24
As this table illustrates, the 1977 values are very close to the four-year
averages. The 1977 f ratio for other CRT plants differs the most from
cap
the average. Using the Thomas plant in California under Option 3 as an
example, this difference in ratios results in only an 8.7 percent change in
the impact measures (147 percent vs. 161 percent). Thus, using the 1977
ratios gives us reasonably accurate measures.
III.3 Solvency Analysis
This solvency analysis is applied to three plants which have high impact
measures and are judged to be possible candidates for closure. All three of
these plants are privately owned, so it was not possible to conduct a
financial analysis of the firms. As discussed in Section 3, Methodology, a
proxy for cash flow minus annual treatment costs for Option 3 is compared with
the estimated salvage value of each plant. The results of this analysis are
shown in Table 5-10 below.
Table 5-10.
Comparison of Salvage Value to the PV of Cash Flow
I se I PV8 I pv10 I se | se
Plant j (Mill.$) | (Mill.$) | Mill.$) | PV8 | PV10
Thomas Elec., NY 0.685 5.77 5.13 .119 .127
Thomas Elec., CA 0.486 4.01 3.56 .121 .137
Dumont Elec., NJ 3.89 ( 33.78 ( 30.02 ( .115 ( .13
Se = Salvage value of equity.
PVg = Present value of cash flow at 8 percent.
PV10 = Present value of cash flow at 10 percent.
-------
5-25
From this table, it is obvious that for all three plants the salvage
value is much less than the present value of cash flow after treatment cost.
In all instances, the ratio of salvage value to PV of cash flow is less than
fourteen percent. Thus, the plants are worth more to the owners if they
remain open. Even if the actual cash flow of the plants is only one-half or
one-third of the estimates made here (due to other costs such as maintenance
not accounted for by the unadjusted profit estimates used as proxies for cash
flow) the cash flow of the plants is still sufficiently high that the plants
would remain open. On the basis of this analysis, no plant closures are
foreseen as a result of the treatment costs.
IV. Production and Employment Impacts
As discussed in Section 3, Methodology, this impact study assumes that
treatment costs are absorbed by the manufacturers and therefore prices of
plant output remain unchanged because costs are not passed through, so that
total production and employment will not be changed due to price-related
demand changes. However, the impact measures indicate that several plants
will have significant profitability impacts, and, while the solvency analysis
shows that these plants will not close, it is possible that production and
employment reductions could take place. Whether these reductions would remain
over the long-term or whether they would merely be temporary adjustments as
production is picked up by expansion at other sites, is subject to many
uncertainties.
The three small CRT plants discussed in III.1.2, above, are not expected
to close, but even assuming that some or all of them did, does not necessarily
imply an overall loss of production. If Thomas Electronics closed its plants,
their decision might be based on increasing production at the Thomas
-------
5-26
Electronics, NJ plant. Or, if they did not choose to maintain their share of
total industry CRT output and if Dumont Electronics decided to reduce its
share, then other firms might increase their production to replace that which
would be lost. Thus, while the industry-wide geographical distribution of
production (and employment) might change, given the rapidly growing CRT
market, no significant reductions in total output are anticipated as a result
of any of the options.
V. Foreign Trade Impacts
Foreign trade projections are always difficult to make because there are
so many international factors involved, such as government restrictions,
interest rates and changes in the strength of the dollar, which are hard to
predict. Historical data on imports, exports and balance of trade are
presented in Tables 2-8, 2-9 and 2-10. No balance of trade estimates for the
industry subcategories for 1982 or 1984 are readily available and therefore
foreign trade impacts have to be evaluated using the historical data from
Section 2. However, because of factors such as those just mentioned, what
actually happens may be very different from what is estimated.
As explained in Section 3, the foreign trade assessment presented here is
a worst case analysis based on the closure analysis discussed earlier. That
analysis, in III.1.2, above, concludes that three small CRT plants are
expected to incur adverse profitability impacts due to the additional
treatment costs but are unlikely to close. If production were reduced at
these sites, then foreign trade in the other CRT subcategory could be
affected. However, the balance of trade for other CRTs appears to be steadily
improving (see Table 2-9). The 1981 balance of trade was $37.9 million.
Given this favorable outlook, it is probable that even if these plants did
-------
5-2 7
reduce output, production would be increased elsewhere in the U.S. and
therefore, foreign trade would not be seriously impacted.
The decision of some U.S. firms to relocate their production in foreign
countries and the decision of some foreign owned firms to open manufacturing
plants in the U.S. are based on much more fundamental reasons than can be
associated with the relatively small effects of treatment costs. These
reasons include labor cost differentials and overall cost of operations,
corporate strategy for increasing market share and existence (or threat) of
import quotas and/or other measures undertaken at the national level.
VI. New Sources
VI.1 New TV Tube Plants
As discussed in Section 3, Methodology, two cases are considered for new
TV tube and other CRT plants, representing costs for indirect dischargers
(Case A) and direct dischargers (Case B).
VI.1.1 Case A. Treatment costs relative to wastewater flow are presented
in Table 4-4, Section 4. Sizes of color TV picture tube plants are likely to
be over 100,000 gpd wastewater flow based on existing plants (none of which
are smaller than 200,000 gpd). For new source indirect dischargers, the
incremental costs are between Option 3 and Option 2. The incremental capital
costs range from $59,100 to $228,500 and the incremental annual costs, from
$24,500 to $94,800 for the three plant sizes above 100,000 gpd.
The annual production of TV tubes for the three model plants is shown in
Table 5-11 for the low, average and high values o£ 10, 20 and 30 tubes per
thousand gallons per day. The annual treatment costs per TV tube range from
-------
5-28
Table 5-11. Case A
Impact of Treatment Cost on New TV Tube Plants
Indirect Dischargers
I I I 1986 I | Annual
| | | Annual I Annual I Treatment
1
1 CRTs I
I Annual Plant I
Annual I
1 Plant 1
1 Treatment |
Cost
Plant
1 Produced
I Production I
I Treatment
I Sales**
I Cost to |
per
Size
I per 1000 I
I of CRTs 1
Cos t * i
1 (Mill. ,
1 Sales |
Tube
(gpd)
1 gpd 1
! (000) 1
($000)
1 1982$)
1 % 1
$
100,000
10
250
24.5
17.6
.139
.10
20
500
24. 5
35.2
.070
.05
1
1 30 1
1 750 1
24. 5
1 52.8 |
1 *046 1
.03
200,000
10
500
47.3
35.2
.134
.09
20
1,000
47.3
70.4
.067
.05
1
30 1
1,500 !
47.3
! 105.7 (
.045 ,
.03
500,000
10
1,250
94.8
88.1
.108
.08
20
2,500
94.8
17 6.1
.054
.04
1
30 1
3,750
94.8
264'2 1
.036
.03
Notes Annual production is based on 250 days per year of plant operation.
* Treatment cost is the increment from Option 2 to Option 3 and is
calculated as the difference between the annual treatment costs for these
Options shown in Table 4-4.
** Based on an average unit price of $70.44 per TV Tube (1982 $) .
-------
5-29
$0.0 3 to $0.10. Annual treatment costs to plant sales are also presented and
are less than 0.2 percent.
A new plant would take advantage of more up-to-date, efficient production
processes than used in existing plants; thus overall costs of manufacturing
(including the additional cost for Option 3) are likely to result in a lower
cost per TV tube than can be met in existing plants.
The incremental capital investment costs for Option 3 are modest and the
per-unit cost increases that might stem from Option 3 are very small. Thus,
in our judgment there are no significant barriers to new indirect discharger
sources entering the TV tube industry that are attributable to treatment
costs.
VI.1.2 Case B. The total cost for TV tube plants to achieve new source
standards equivalent to Option 3 for direct dischargers are presented in
Section 4, Table 4-4. Assuming that new color TV picture tube plants are
going to be over 100,000 gpd wastewater flow, treatment costs would range
from $760.4 thousand to $1,807.0 thousand for capital investment and from
$375.9 to $921.1 thousand for annual costs for the three larger model
plants. Table 5-12 shows the impacts of treatment costs. The costs per TV
tube range from $1.50 for a 100,000 gpd plant with a low output (i.e., 10 TV
tubes produced per 1,000 gpd) to $0.25 for a 500,000 gpd plant with high
output (i.e., 30 TV tubes produced per 1,000 gpd).
The average unit value of color TV picture tubes is projected to be
$70.44 in 1986. The annual treatment cost per tube ranges from $1.50 to
$0.50 per tube or from 2.1 percent to 0.71 percent of the unit value.
-------
5-30
Table 5-12. Case B
Impact of Treatment Cost on New TV Tube Plants
Direct Dischargers
Plant
Size
I I
I CRTs | Annual Plant
I Produced | Production
I per 1000 | of CRTs
Annual
Treatment
Cost *
($000)
I 1986
I Annual
I Plant
I Sales**
I (Mill.
I 1982$)
I Annual
Annual iTreatment
Treatment I Cost
Cost to I per
Sales I Tube
% I $
100,000
1
10
20
30
250
500
, 750
375.9
375.9
( 375.9
17.6
35.2
j 52.8
2.14
1.07
! 0.71
1.50
0.75
( 0.50
200,000
1
10
20
30
500
1,000
, 1,500
618.4
618.4
( 618.4
35.2
70.4
1105.7
1.76
0.88
! 0.59
1.24
0.62
! 0.41
500,000
1
10
20
30
1,250
2,500
, 3,750
921.1
921.1
921.1
88.1
176.1
12 64.2
1.05
0.52
( 0.35
0.74
0.37
0.25
* Treatment cost is total for Option 3 (i.e., not the increment between
Option 3 and Option 2) .
** Based on an average unit price of $70.44 per TV Tube (1982 $).
-------
5-31
For the color TV tube industry segment the ratio of cost to sales value
is less than 2.2 percent. However, this value is associated with the 100,000
gpd plant and, as mentioned above, no existing plant has a flow less than
200,000 gpd. Thus, for new plants of the same sizes as existing ones (i.e.
200,000 gpd or greater), the cost to sales ratio would be 1.76 percent or
less. The value of production per tube includes plant profits and,
therefore, the ratio of treatment cost to production cost would be somewhat
higher than this. Even so, both annual and capital investment cost increases
are modest and, therefore, it appears that there are no significant barriers
for new direct discharger sources to enter the color TV tube industry.
VI.2 New Other CRT Plants
VI.2.1 Case A. Existing plants producing other CRTs range widely in
size; many are smaller than the typical TV tube plant. Thus, for this
industry segment all five model plant sizes will be considered. For indirect
dischargers, the incremental cost is between Option 3 and Option 2.
Incremental treatment capital costs range from $5,830 to $228,500 and incre-
mental annual costs from $16,100 to $108,500 based on model plant costs
presented in Table 4-4.
The annual production of other CRT tubes for the five model plants is
shown in Table 5-13 for the low, average and high values of 10, 20, and 30
tubes per thousand gallons per day. Annual treatment costs range from $0.02
to $0.10 per CRT. Annual treatment costs to plant sales are less than 0.1
percent. As discussed above for TV tube plants, a new CRT plant is likely to
be more efficient and therefore have lower costs per CRT than can be met in
existing plants.
-------
5-3 2
Table 5-13. Case A
Impact of Treatment Cost on Other CRT Plants
Indirect Dischargers
1
1986
1 Annual
Annual
Annual
1 Treatment
1
CRTs
Annual Plant
Annual
Plant
Treatment
1 Cost
Plant
Produced
Production
Treatment
Sales**
Cost to
1 per
Size
per 1000
of CRTs
Cost *
(Mill.
Sales
I Tube
(gpd)
gpd
(000)
($000)
1982$)
%
1 $
10,000
10
25
2.4
5.55
.043
.10
20
50
2.4
11.1
.022
.05
30
75 .
2.4
16.7
.014
1 .03
50,000
10
125
6.6
27.8
.024
.05
20
250
6.6
55.5
.012
.03
30
375
6.6
83.3
! .008
1 *02
100,000
10
250
24.5
55.5
.044
.10
20
500
24.5
111.0
.022
.05
30
750
j 24.5
166.5
1 .015
i -03
200,000
10
500
47.3
111.0
.043
.09
20
1,000
47.3
222.0
.021
.05
30
, 1/500
1 47.3
1 333.0
( .014
j .03
500,000
10
1,250
94.8
277.5
.034
.08
20
2,500
94.8
555.0
.017
.04
30
, 3,750
1 94.8
1 832.5
.011
i -03
Notes Annual production is based on 250 days per year of plant operation.
* Treatment cost is the increment from Option 2 to Option 3 and is
calculated as the difference between the annual treatment costs for these
Options shown in Table 4-4.
** Based on an average unit price of $222 per CRT (1982 $).
-------
5-33
Assuming that even a small plant will require capital expenditures of at
least one million dollars, the incremental capital investment costs Cor
Option 3 are modest. Thus, as cost increases are small, in our judgment
there are no significant barriers to new indirect discharger sources entering
the CRT industry that are attributable to treatment costs.
VI. 2.2 Case B. The total cost for CRT plants to achieve new source
standards equivalent to Option 3 for direct dischargers range from $129.43
thousand to $1,807.0 thousand for capital investment and the annual costs
range from $71.75 to $921.1 thousand as presented in Table 4-4. Table 5-14
shows the impacts of treatment costs which for other CRTs range from $2.87
for a small plant (10,000 gpd) with a low output (i.e., 10 CRTs produced per
1,000 gpd) to $0.25 for a large plant (500,000 gpd) with high output (i.e.,
30 CRTs produced per 1,000 gpd) .
Using existing plants as a guide, the small plants are likely to be
associated exclusively with CRTs other than TV picture tubes and the average
unit value of these tubes in 1986 is forecast as $222.00 (1982$). The $2.87
cost per tube is about 1.3 percent of the average unit value which is the
maximum impact on the other CRT industry segment. Using an average output
(20 CRTs per 1,000 gpd) the small plants would experience an impact of $1.44
per tube which is 0.65 percent of the unit value. If a new facility has an
average tube value below $222, the impacts will be proportionately higher,
but are not expected to be significant.
For the other CRT industry segment the ratio of cost to sales value is
less than two percent. The value of production per tube includes plant
profits and therefore, the ratio of treatment cost to production cost would
be higher than two percent.
-------
5-3 4
Table 5-14. Case B
Impact of Treatment Cost on Other CRT Plants
Direct Dischargers
1
| 1986
1 Annual
1
I Annual
Annual
]Treatmen
1
CRTs
Annual Plant
Annual
| plant
Treatment
1 Cost
Plant /
Produced
Production
Treatment
l sales**
Cos t to
1 per
size |
per 1000
of CRTs
Cost *
I (Mill.
sales
1 Tube
(gpd) 1
gpd
(000)
($000)
1 1982$)
%
1 $
10,000
10
25
71.75
5.55
1.29
2.87
20
50
11.7 5
11.1
0.65
1.44
1
30
75
71.7 5
1 16*7
0.43
j 0.96
50 ,000
10
125
166.7
27.8
0. 61
1.35
20
250
168.7
55.5
0.30
0.67
1
30
375
168.7
i "-3 i
0.20
( 0.45
100,000
10
250
375.9
55.5
0.68
1.50
20
500
375.9
111.0
0. 34
0.75
1
30 1
750
375.9
(166•5
0.23
j 0.50
200,000
10
500
618.4
111.0
0.56
1.24
20
1,000
618.4
222.0
0.23
0.62
i
30 1
1,500 j
61B.4
|333.0 ]
0.13
1 0.41
500,000
10
1,250
921.1
277.5
0.33
0.74
20
2,500
921.1
5 55.0
0.17
0.37
1
30 !
3,750
921.1
,332.5 f
0-11
0.25
Note: Annual production is based on 2 50 days per year of plant operation.
* Treatment cost is total for Option 3 (i.e., not the increment between
Option 3 and option 2}.
** Based on an average unit price of $222 per CHT {1982 $).
-------
5-35
More efficient production processes are likely to be introduced in new
plants, as mentioned earlier, which would minimize treatment cost impacts.
In addition, the high product value ($222.00) associated with other CRTs
means that even the highest treatment cost per tube in Table 5-14 ($2.87) is
only 1.3 percent of the average unit value. These factors indicate that,
except for very small plants, treatment costs would not be barriers to entry
for new direct discharger CRT plants. These very small plants can rely on
contract hauling rather than capital investment in treatment technology and
therefore new source standards are unlikely to be entry barriers for them, as
well.
VI.3 New Luminescent Coatings Plants
As discussed in the Methodology, Section 3, the additional treatment costs
for new luminescent coatings plants, both direct and indirect dischargers, are
the total treatment costs of Option 2. The costs are shown in Section 4, Table
4-4 for the three plant sizes (10,000, 100,000 and 250,000 gpd); incremental
capital investment costs range from $100,500 to $1,180,100, and incremental
annual costs from $58,990 to $583,850.
Total annual treatment cost as a percent of plant sales is displayed in
Table 5-15. For the small model plants (10,000 gpd) the total annual
treatment cost is as high as 7.8 percent of plant sales and ranges down to
1.4 percent depending on the value selected for the sales-flow relationship.
Information concerning one existing small plant (U.S. Radium in Morristown,
NJ) suggests that a new small plant in the 10,000 gpd range would experience
an impact of treatment cost to sales of 1.0 to 1.5 percent. (This existing
plant with sales of $4.2 million according to the BIS data file, and 10,000
gpd wastewater flow, establishes the high end of the sales to flow
-------
5-36
Table 5-15.
Impact of Treatment Cost on New Luminescent Coatings Plants
1986
Annual
Annual
Sales
Plant
Annual
Treatment
Plant
per 1000
Sales
Treatment
Cost
Size
gal of flow
(1982
Cost
to Sales
(gpd)
($)
$000)
($000)
(%)
10,000
304
759
58.99
7.8
993
2,482
58.99
2.4
1,682
4,204
58.99
1.4
100,000
304
7,592
318.75
4.2
993
24,820
318.75
1.3
1,682
42,048
318.75
0.8
500,000
304
18.980
583.85
3.1
993
62,050
583.85
0.9
1,682
105,120
583.85
0.6
Note: Annual sales are based on 250 days per year of plant
operation.
relationship of $1,682 sales per 1,000 gallons.) This magnitude of treatment
cost impact is small enough so that manufacturing improvements incorporated
in a new plant design might well remove the apparent cost disadvantage
calculated above (however, the degree to which the existing U.S. Radium plant
utilizes up-to-date process technology and plant design is not known).
This simplified analysis does not consider the relationship of coatings
plants to downstream users of the product. At least four of the existing
five plants are owned by large firms (RCA, GE, Westinghouse, GTE) that
utilize the coatings in their CRT and lamp production; the amount of the new
coatings production used captively is unknown. It seems reasonable that if
new plants were built by one of these firms, or another large corporation,
the plants would be large (e.g., 100,000 gpd) and vertically integrated with
other plants owned by the firm. Thus treatment costs would be in the range
of 0.8 to 4.2 percent of the value of coatings output.
-------
5-37
The conclusion is that large integrated firms seeking new sources of
luminescent coatings will not face a cost burden from treatment requirements
sufficient to dissuade them from building new plants. For new, small coatings
plants that are not vertically integrated with CRT or lamp manufacturing,
treatment costs may possibly pose a barrier to entering the industry.
However, even though the difference in costs to meet the regulatory
requirements between existing and new plants appears great, it should be noted
that most existing plants already have invested in some type of treatment
which is in place and are currently incurring annual costs. Thus, the
incremental differential between existing and new plants is not as large as it
might first appear.
VII. Small Business Analysis
Under the Regulatory Flexibility Act of 1980, the EPA and other regulatory
agencies are required to consider the effects of proposed regulations on small
companies. This section reviews the potential small business impacts of the
promulgated regulations for the color TV picture tubes, other CRTs and lumine-
scent coatings industries.
The Act relies on the Small Business Administration (SBA) for guidance in
defining a small firm. The Small Business Act, section three, defines a small
business as:
"...a small business concern shall be deemed to be one which
is independently owned and operated and which is not dominant
in its field or operation. In addition to the foregoing
criteria, the Administration (of the SBA), in making a
detailed definition may use these criteria, among others:
Number of employees and dollar volume of business."
In addition, the SBA published specific employee based guidelines for
various business activities including manufacturing. Companies classified in
-------
5-38
SICs 2831 and 2833 with not more than 250 employees are considered small;
this is the criterion used in this analysis. It should be noted that even
250 employees may be large, given that the Regulatory Flexibility Act is
concerned with firms with limited resources and is aimed at avoiding
regulatory barriers to entry into an industry.
This analysis is conducted to determine whether small firms bear dispro-
portionate impacts under the promulgated effluent guidelines. The firms in
the study are described in terms of their sales and employment. The distri-
bution of treatment costs incurred by plants belonging to the firms is
analyzed.
Six firms out of nineteen (one-third of the total) may be candidates for
the small business category based on employment of 250 or less as shown in
Table 5-16. (This determination cannot be made with certainty because
firm-level sales and employment figures are lacking for five of the smallest
companies.)
Table 5-17 compares annual treatment costs born by large and small firms
which have been grouped using the 250 employee criterion. As shown in this
table the thirteen firms designated as large incur 95.2 percent of the Option
2 annual treatment costs of $3,543/340. For Option 3, these thirteen large
firms incur 95.5 percent of the $3,922,700 annual treatment costs. All of
these firms have more than 250 employees.
Of the large firms, Clinton Electronics and Thomas Electronics are the
smallest (ranked twelfth and fourteenth based on sales in Table 5-16).
Clinton Electronics incurs costs of $162.1 thousand for Option 2 and $168.7
thousand for Option 3. These costs represent 4.57 and 4.30 percent of the
total industry costs for these options. Thomas Electronics is too large to
-------
5-3 9
Table 5-16.
Firm Ranking by 1982 Sales
1982 Sales I I 1981 I Annual Treatment Cost**
RanklFirm I Millions $ I Employment***I ($000)
Option
2
Option
3
1
General Electric
27,240.0
404,000
13.7
(2)
47.3
(1)
2
Westinghouse
9,367.5
147,841
231.04
(2)
168.7
(1)
3
RCA
8,004.8
119,000
840.0
(3)
995.1
(2)
4
Raytheon
5,636.2
79,500
351.4
(1)
375.9
(1)
5
Litton
4,942.8
76,500
69.35
(1)
71.75
(1)
6
Sony
3,864.1
38,550
0
(1)
56.0
(1)
7
Hewlett Packard
3,578.0
64,000
0
(1)
2.4
(1)
8
N.A. Philips
3,030.0
49,400
717.35
(4)
783.65
(3)
9
Zenith
1,275.2
28,000
780.0
(1)
8 61.0
(1)
10
Tektronix
1,061.8
24,028
0
(1)
0
(0)
11
Datagraphix
73.7
1,000
1.65
(1)
1.65
(1)
12
Clinton Electronics
41.2
500 ++
162.1
(1)
168.7
(1)
13
+*Dumont Electronics
13.5
230
162.1
(1)
168.7
(1)
14
Thomas Electronics
13.3
400
208.05
(3)
215.25
(3)
15
+U.S. Radium
12.0
190
0
(1)
0
(0)
16
+*Video Display Corp.
2.1
36
1.65
(1)
1.65
(1)
17
+*B-Scan Inc.
1.5
25
1.65
(1)
1.65
(1)
18
+Special Purpose Tech
NA
NA
1.65
(1)
1.65
(1)
19
+Tex-Video Man.
NA
NA
1.65
(1)
1.65
(1)
3,543.34(28) 3,922.70(22)
* Plant Sales and Employment are used as if they are firm-level data.
** Number of plants included in the study are shown in parentheses. Fewer
plants are counted under Option 3 than Option 2 because Option 3 does not
apply to lumninescent coatings plants.
*** Employment data are from EIS.
+ These firms have been selected as small businesses for the purposes of
this analysis.
++ Information provided by Clinton Electronics. 1982 employment level.
-------
5-40
qualify as a small business but is of concern because it is impacted by
treatment costs to a greater degree than other firms in this study. The three
Thomas Electronics plants incur 5.87 and 5.49 percent of the total industry
annual treatment costs under Options 2 and 3, respectively.
Table 5-17.
Comparison of Small and Large Firms
I Total Annual
Treatment Costs
I Option 2 |
Option 3
| $000 | Percent I
1 $000 | Percent
13 largest firms
3,374.64 95.2
3,747.4 95.5
6 small firms
168.7 4.8
175.3 4.5
As shown in Table 5-17 the six firms designated as small businesses incur
4.8 percent ($16 8,700) of the Option 2 annual treatment costs and 4.5 percent
($175,300) of the Option 3 annual treatment costs. Dumont Electronics is
the largest firm in this category (ranked thirteenth according to sales) and
incurs most of the small business annual treatment costs. Its costs are
$162.1 thousand for Option 2 and $168.7 thousand for Option 3, representing
4.57 and 4.30 percent, respectively, of the total industry costs for each
option.
U.S. Radium (ranked fifteenth in sales) is a small publicly held firm
with sales of $12 million and employment of 190 in 1981. As Table 5-16
shows, U.S. Radium does not incur treatment costs. All other small firms
incur annual treatment costs of $1,650 each for Options 2 and 3.
-------
5-41
As this comparison of large and small businesses shows, small firms do not
bear a disproportionate level of the total annual treatment costs for the
industry and, therefore, the selected options for promulgation are not
expected to have a significant impact on small facilities in this industry.
-------
5-42
Section 5
Selected References
1. Electronic Industries Assoc. (EIA), 1982 Edition Electronic Market
Data Book, Washington, D.C. 1982. ~
2. U.S. Bureau of the Census, Current Industrial Reports, M36D (1982)-6
and M36D (1983)-1.
3. Data Resources, Inc., U.S. Long-Term Review, Winter 1982-1983. 1983.
4. U.S. Department of Commerce, 1982 U.S. Industrial Outlook for 200
Industries with Projections for 1986, January 1982 and January 1983.
5. Electronics, January 13, 1982, (p.126 as reported in Predicasts,
Forecast Abstracts, p. B-242) and January 13, 1983.
6. U.S. Department of Commerce, Current Industrial Reports, Selected
Electronic and Associated Products, Including Telephone and Telegraph
Apparatus, MA-36N(80)-1, October 1981.
-------
Section 6
Limits of the Analyses
The results of the impact analysis depend on several major assumptions
underlying the methodology and on the accuracy of data used to carry out the
impact calculations.
I. Plants With Multiple Product Lines
There is a lack of information on product lines for individual plants,
particularly the sales value of product lines affected by additional waste-
water treatment. This data deficiency has resulted in the allocation of
treatment cost to total plant sales and therefore may underestimate impacts
on the specific product lines of color TV tubes, other CRTs, and luminescent
coatings which are the subjects of this study. For example, the Tektronix
Company makes various kinds of scientific instruments and many of these
incorporate cathode ray tubes which the firm produces for captive consump-
tion. If additional wastewater treatment is needed just for the CRT produc-
tion line, the impact of treatment costs estimated are low because the costs
are measured against total plant sales of the Beaverton, Oregon plant as
reported in the EIS data file. This problem of potential underestimation of
impacts seems particularly important for the CRT plants with relatively larqe
sales (such as Tektronix, Raytheon, and Hewlett Packard) because we suspect
that the CRT is only one of the product lines. However, these plants are
also qenerally those with the strongest financial positions, and are
certainly those with qreatest cash flow. Also, three color TV picture tube
plants and two luminescent coatings plants may each have several major
-------
6-2
product lines; this judqement is based on the wastewater flow associated with
the products addressed in this study compared to the flow reported for the
entire plant. Durinq the public comment period ficms did not clarify the
matter or submit additional data on product lines for individual plants.
II. Impact Measure Derivation
To develop plant level impact measures in addition to the treatment cost/
sales ratio, we have estimated manufacturing conversion costs, unadjusted
profit and annual plant investment. The derivations rest on aggregate rather
than plant-specific information and use data that are not up-to-date. The
aqqreqate data are at the 4-digit SIC level. Therefore, the method implic-
itly assumes each plant operates with the same average ratio of sales (a) to
conversion costs,
-------
6-3
For color TV picture tubes the 10 percent discount rate reduces the
annual treatment cost by five percent or less, and the 16 percent rate in-
creases the annual costs by five percent or less. The hiqhest impact ratio
of treatment cost to sales was computed to be 1.59 percent. With the alter-
native discount rates this value becomes 1.53 percent (for the 10 percent
rate) and 1.66 percent (for the 16 percent rate). Or, in absolute terms the
treatment cost to sales ratio is only altered by, at most, 0.07 percentage
points.
For other CRT plants, the 10 percent rate reduces annual treatment costs
by four percent or less, and at the 16 percent rate, the annual costs
increase by five percent or less. The hiqhest ratio of treatment cost to
sales usinq a 13 percent discount rate was computed to be 3.23 percent. With
the alternative discount rates, the ratio becomes 3.14 percent and 3.39
percent for 10 and 16 percent, respectively, in absolute terms the ratio
changes by no more than 0.16 percentaqe points.
The chanqes in the treatment cost to sales ratio for the alternative
discount rates are small. None of the conclusions would chanqe if the alter-
native discount rates had been used in annualizing the investment portion of
treatment cost.
IV. Small Companies
Small firms are likely to be privately owned and not required to provide
10-K Information. Therefore* financial ratios cannot be examined to help
determine whether or not the financial condition of small firms makes them
more vulnerable to adverse impacts of treatment costs.
-------
6-4
V. import Policies
If the production level of U.S. cathode ray tubes declines, the existinq
Plants may be more adversely affected than anticipated because treatment
costs will be spread over a smaller production base. If U.S. production
qrows over the next few years as anticipated, estimated impacts should be
less severe. There are, however, uncertainties. The anti-dumpinq regula-
tions imposed by the U.S. on Japanese-made TV receivers may or may not
continue. Also, other protectionist policies could be adopted that apply to
the foreiqn-made TV picture tubes that are imported and used in TV sets
manufactured in the U.S.
-------
Appendix A
Sensitivity Analysis
A. 1 Sensitivity to Sales Estimates
In this section, the impact measures for the individual plants have been
recalculated to test the strength of the conclusions drawn from the ratios
discussed in Section 5. This sensitivity analysis allows us to check the
results of the impact analysis by making allowances for error in our sales
projections. We will determine if a 10 percent change in our sales estimates
alters the impact measures enough to change our conclusions. Each of the
three tables (5-6, 5-7 and 5-8) have been recalculated twice. The first set
assumes a 10 percent increase in plant sales. The second set assumes a 10
percent decrease in plant sales.
A.1.1 TV Picture Tube Plants
The adjusted ratios for color television tube plants are shown in Tables
A-l and A-2. As these tables illustrate, none of these plants are
significantly affected by the changes in sales estimates. The ratios are
essentially of the same magnitude and no different conclusions could be made
about any one of the plants.
A.1.2 Other CRT Plants
The impact measures for the other CRT plants are shown in Tables A-3 and
A-4. As these tables reveal, the ratios for several plants change enough so
that the impacts for those plants must be reconsidered.
The very worst case occurs under Option 3 with the assumption of a 10
percent decrease in plant sales. This case is shown in Table A-4B. Two
-------
Table A-1A.
Color TV, Option 2, Assuming a 10 Percent Increase in Sales
1 Treatment
Cost |
Annual
1
Impact
Measures
(Percent)*
I Invest- |
1
Sales
| ATC
I ATC
I ATC
| ATC I
I TCC
Plant
1 ment |
Annual |
(Mill. $)
1 Sp
I MCC
I OP
1 NI |
I CAP
RCA, PA
0
0
126.3
0
0
0
0
0
Zenith, IL
1.5
.78
176.1
.443
.742
1.27
4.39
26.1
GE, NY
0
0
84.7
0
0
0
0
0
RCA, IN
1.578
.8263
291.1
.284
.476
.815
1.35
16.5
ECG Philips, OH
1.3488
.702
53.9
1.30
2.19
3.74
.594
76.5
ECG Philips, NY
0
0
40.4
0
0
0
0
0
Sony, CA
0
0
144.9
0
0
0
0
0
Total
( 4.4268
2.3083
! 917.3
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment,
TCC = Capital investment portion of treatment cost.
-------
Table A-IB
•
Color
TV, Option
2, Assuming a 10
Percent 1
Decrease in
Sales
1 Treatment
Cost |
Annual
1
Impact Measures
(Percent)*
I Invest- |
1
Sales
1 ATC
1 ATC
I ATC
I ATC
1 TCC
Plant
1 ment I
Annual |
(Mill. $)
1 Sp
1 MCC
1 UP
I NI
1 CAP
RCA, PA
0
0
103.3
0
0
0
0
0
Zenith, IL
1.5
.78
144.1
.54
.907
1.56
5.37
31.9
GE, NY
0
0
69.3
0
0
0
0
0
RCA, IN
1.578
.8263
238.1
.347
.581
.995
1.64
20.27
ECG Philips, OH
1.3488
.702
44.1
1.58
2.68
4.57
.725
93.6
ECG Philips, NY
0
0
33.0
0
0
0
0
0
Sony, CA
0
0
118.5
0
0
0
0
0
Total
( 4.4268 j
2.3083
652.4 j
1
1
1 1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment,
TCC = Capital investment portion of treatment cost.
-------
Table A—2A.
Color TV, Option 3, Assuming a 10 Percent Increase in Sales
I Treatment
Cost I
Annual I
1
Impact
Measures
(Percent)*
I Invest- |
1
Sales 1
1 ATC
1 ATC
1 ATC
1 ATC 1
1 TCC
Plant
I ment I
Annual I
(Mill. $)
1 Sp
I MCC
1 UP
1 NI !
I CAP
RCA, PA
.182
.074
126.3
.059
.099
.169
.121
4.4
Zenith, IL
1.698
.861
176.1
.489
.819
1.4
4.85
29.5
GE, NY
.1143
.0473
84.7
.057
.093
.16
.003
7.52
RCA, IN
1.8065
.9211
291.1
.319
.53
.91
1.42
18.9
ECG Philips, OH
1.542
.782
53.9
1.45
2.43
4.17
.842
87.5
ECG Philips, NY
0
0
40.4
0
0
0
0
0
Sony, CA
.14
.056
144.9
.039
.065
.111
.172
2.96
Total
( 5.4828 |
2.7414
! 917.3
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment,
TCC = Capital investment portion of treatment cost.
-------
Table A-2B.
Color TV, Option 3, Assuming a 10 Percent Decrease in Sales
Plant
1 Treatment
Cost |
Annual
Sales
(Mill. $)
1
Impact
Measures
(Percent)
*
I Invest- |
I ment |
1
Annual I
1 ATC
1 Sp
1 ATC
1 MCC
1 ATC
1 UP
1 ATC
I NI
1 TCC
1 CAP
RCA, PA
.182
.074
103.3
.072
.12
.206
.148
5.39
Zenith, IL
1.698
.861
144.1
.598
1.0
1.72
5.92
36.0
GE, NY
.1143
.0473
69.3
.068
.113
.197
.003
9.2
RCA, IN
1.8065
.9211
238.1
.387
.648
1.11
1.73
23.2
BCG Philips, OH
1.542
.782
44.1
1.77
2.98
5.1
1.03
107.0
ECG Philips, NY
0
0
33.0
0
0
0
0
0
Sony, CA
.14
.056
118.5
.048
.08
.137
.21
3.62
Total
j 5.4828
2.7414
652.4
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, NI = Company net income, CAP - Annual plant investment,
TCC « Capital investment portion of treatment cost.
-------
Table A-3A.
Other CRT Plants, Option 2, Assuming a 10 Percent Increase in Sales
1
Treatment
Cost |
1
1
(Mill.
$) 1
Annual
1
Impact
Measures
(Percent)*
1
Invest- |
1
Sales
I ATC
1 ATC
1 ATC
1 ATC I
TCC
Plant
1
ment |
Annual I
(Mill. $)
1 Sp
I MCC
1 UP
1 NI |
1 CAP
Raytheon, MA
.7013
.3514
136.5
.257
.398
.563
.075
14.3
Clinton Elec., IL
.2896
.1621
59.2
.274
.424
.598
NA
13.5
Thomas Elec., NY
.1236
.06935
3.4
2.01
3.11
4.39
NA
99.4
Thomas Elec., NJ
.1236
.06935
13.2
.525.
.815
1.15
NA
25.9
Thomas Elect., CA ^
.1236
.06935
2.4
2.84
4.39
6.20
NA
140 .2
Hewlett Packard, CO
2/
0
0
134.3
0
0
0
0
0
General Atronics, PA
0
.00165
6.5
.025
.04
.055
NA
0
Litton Ind., AZ
.1236
.06935
4.3
1.62
2.5
3.53
.02
79.8
Dumont Elect., NJ
.2896
.1621
19.4
.835
1.29
1.83
NA
41.4
B-Scan Inc., PA
0
.00165
2.2
.076
.118
.167
NA
0
Video Display Corp.,
GA
0
.00165
3.0
.055
.085
.120
NA
0
westinqhouse, NY
.2896
.1621
10 3.4
.156
.242
.343
.025
7.8
Special Purpose
Technoloqies, CA
0
.00165
NA
NA
NA
NA
NA
NA
Tektronix, OR
0
0
783.6
0
0
0
0
0
Tex-Video Man., TX
0
.00165
NA
NA
NA
NA
NA
NA
Dataqraphix, CA
0
.00165
10 5.8
.002
.002
.004
NA
0
Total
1
2.0645
1.125
! 1377.2
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. NA = Data not available.
^ Treatment costs assumed to be the same as for Thomas Electronics in Clyde, NY.
^ Owned by N.A. Philips.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturinq conversion cost, NI = Company net income, CAP = Annual plant investment,
TCC = Capital investment portion of treatment cost.
-------
Table A-3B.
Other CRT Plants, Option 2, Assuming a 10 Percent Decrease in Sales
I Treatment Cost I Annual I Impact Measures (Percent)*
I Invest- | I Sales I ATC I ATC i ATC I ATC I TCC
Plant | ment | Annual I (Mill. $) I Sp I MCC I UP I NI I CAP
Raytheon, MA
.7013
.3514
111.7
.314
.487
.688
.092
17.4
Clinton Elec., IL
.2896
.1621
48.4
.334
.518
.731
NA
16.6
Thomas Elec., NY
.1236
.06935
2.8
2.46
3.8
5.37
NA
121.4
Thomas Elec., NJ ^
.1236
.06935
10 .8
.641
.996
1.40
NA
31.7
Thomas Elect., CA ^
.1236
.06935
2.0
3.47
5.37
7.58
NA
171.3
Hewlett Packard, CO
2/
0
0
109.9
0
0
0
0
0
General Atronics, PA
0
.00165
5.3
.031
.049
.068
NA
0
Litton Ind., AZ
.1236
.06935
3.5
1.98
3.06
4.31
.024
97.6
Dumont Elect., NJ
.2896
.1621
15.8
1.02
1.58
2.23
NA
50 .6
B-Scan Inc., PA
0
.00165
1.8
.093
.144
.204
NA
0
Video Display Corp.,
GA
0
.00165
2.4
.067
.10 3
.147
NA
0
Westinqhouse, NY
.2896
.1621
84.6
.191
.296
.419
.03
9.5
Special Purpose
Technologies, CA
0
.00165
NA
NA
NA
NA
NA
NA
Tektronix, OR
0
0
641.2
0
0
0
0
0
Tex-Video Man., TX
0
.00165
NA
NA
NA
NA
NA
NA
Dataqraphix, CA
0
.00165
86.6
.002
.003
.004
NA
0
Total
2.0645
1.125
1126.8
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. NA = Data not available.
^ Treatment costs assumed to be the same as for Thomas Electronics in Clyde, NY.
^ Owned by N.A. philips.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment,
TCC = Capital investment portion of treatment cost.
-------
Table A-4A.
Other CRT Plants, Option 3, Assuming a 10 Percent Increase in Sales
I Treatment Cost I I
I (Mill. $) | Annual I
I Invest- I I Sales I
Plant 1 ment I Annual | (Mill. $) |
Raytheont MA
.7604
.3759
136.5
.275
.426
.602
.081
15.5
Clinton Elec., IL
.30 54
.1687
59.2
.285
.441
.623
NA
14.3
Thomas Elec., NY
.12943
.07175
3 .4
2.08
3.22
4.55
NA
10 4.0
Thomas Elec., NJ ^
.12943
.07175
13.2
.543
.843
1.18
NA
27.1
Thomas Elect., CA ^
.12943
.07175
2.4
2.94
4.54
6.42
NA
146.8
Hewlett Packard, CO
2/
.00583
.0024
134.3
.002
.004
.005
.001
.12
General Atronics, PA
0
.00165
6.5
.0 25
.04
.0 55
NA
0
Litton Ind., hZ
.30 54
.07171
4.3
1.67
2.58
3.65
.021
83.5
Dumont Elect., NJ
.3054
.1687
19.4
.87
1.35
1.9
NA
43.6
B-Scan Inc., PA
0
.00165
2.2
.075
.118
.167
NA
0
Video Display Corp.,
GA
0
.00165
3.0
.055
.085
.12
NA
0
Westinqhouse, NY
.30 54
.1587
103.4
.163
.252
.356
.026
8.2
Special Purpose
Technoloqies, CA
0
.00165
NA
NA
NA
NA
NA
NA
Tektronix, OR
0
0
783.6
0
0
0
0
0
Tex-Video Man., TX
0
.00165
NA
NA
NA
NA
NA
NA
Dataqraphix, CA
0
.00165
10 5.8
.002
.002
.003
NA
0
Total
1
2.20015
11.1813 j
1377.2
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. NA = Data not available.
^ Treatment costs assumed to be the same as for Thomas Electronics in Clyde, NY.
^ Owned by N.A. Philips.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment,
TCC = Capital Investment portion of treatment cost.
Impact Measures (Percent)*
ATC I ATC I ATC I ATC I TCC
Sp | MCC i UP I NI | CAP
-------
Table A-4Q.
Other CRT Plants, Option 3, Assuming a ID Percent Decrease in Sales
1
Treatment
Cost 1
1
1
(Hill.
$1 1
Annual
I
impact
Measures
(Percent)*
1
Invest- f
1
Sales
I ATC
1 ATC
1 ATC
j ATC
I TCC
Plant
1
ment J
Annual f
{Mill. $)
t Sp
1 MCC
1 DP
] NI
I CAP
Raytheon, MA
.7604
.3759
111.7
.337
.521
.736
.099
18.9
Clinton Elec., il
.30 54
.1687
46.4
.34S
.539
.761
m
17.4
Thomas Elec., NY
.12943
.0 7175
2.G
2.54
3.93
5.56
MA
127.1
Thomas Elec., NJ ^
.12943
.07175
10 .8
.663
1.03
1.44
NA
33.1
Thomas Elect., CA ^
.12943
.07175
2.0
3.59
5.54
7.84
NA
179.4
Hewlett Packardr CO
y
.00533
.0024
109.9
.002
.003
.005
.001
.14
General Atronics, PA
0
.00165
5.3
.031
.049
.0 5$
NA
0
Litton Int}., AZ
.12943
.07175
3.5
2.04
3.16
4.47
.026
102 .1
Dumont Elect., >tf
.3054
.1687
I5.fi
1.06
1.64
2.32
NA
53.3
B-Scan Inc.* PA
0
.00165
1.8
.092
.144
.204
NA
0
Video Display Corp.,
GA
0
.00165
2.4
.067
.103
.147
NA
0
Westinqhotise, NY
.3054
.1687
64.6
.199
.308
.436
.032
10.0
Special Purpose
Technologies, CA
0
.00165
HA
NA
m
NA
NA
NA
Tektronix, OS
0 0
641.2
0
0
0
0
0
Tex-Video Man., TX
0
.00165
NA
NA
MA
NA
MA
NA
Qataqrachix, CA
0
.00165
86.6
.002
.003
.004
NA
0
Total
2.20015 1
1 1
.1813
1
1126.8
1
1
1
1 i
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. fiA = Data not available.
Treatment costs assumed to be the same as for Tt«mas Electronics in Clyde, NY.
Owned by H.A. Philips.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant Sales,
MCC = Manufacturing conversion cost, SI ¦ Company net income* CAP = Annual plant investment,
TCC = Capital investment portion of treatment cost.
-------
A-10
plants have significantly different ratios. They are Litton and Dumont. For
the Litton plant, the annual treatment cost to sales ratio is ever 2 percent
and the measure of investment treatment cost to total plant investment is over
100 percent. However, the ATC/NI ratio is still much less than one percent.
Thus while it appears that the firm can easily absorb the treatment costs, the
plant would potentially suffer a severe impact.
The Dumont plant in this case has an annual treatment cost to sales ratio
of just over one percent and a TCC/CAP ratio of over 50 percent. Since this
plant is privately owned, no information about company net income is
available. Thus, the impact on this small plant could be severe.
The "best" case occurs with Option 2 and a 10 percent increase in plant
sales. For this case, one plant's status might change. This is the Thomas
Electronics plant in New York. Its annual treatment cost to sales ratio is
about 2 percent and the TCC/CAP ratio is under 100 percent. While these
ratios appear high, the impact would be lessened if production from the
California plant were moved to the New York location. Also, the New Jersey
plant has relatively small ratios, easing the burden of the treatment costs to
the firm as a whole.
A.1.3 Luminescent Coatings
The sensitivity analysis of the impact measures for the luminescent
coatings plants is shown in Tables A-5A and A-5B. It is obvious that no
plants are significantly affected by either a 10% increase or decrease in
sales. All but one of the ratios are less than one percent.
-------
Table A-5A.
Impact
Estimates:
Luminescent Coatinqs Assuming a
Option 2
10 Percent
Increase in Sales
1 1
I Treatment Cost I
1984 1
Annual I
Impact Measures
(Percent)*
Plant
1 (Mill.
I invest-
I ment
1982 $) I
1 1
I Annual I
Sales I
(Mill. | ATC |
1982 $) I Sp |
ATC I
MCC 1
ATC
UP
1 ATC I
1 NI |
TCC
CAP
RCA, Lancaster, PA
.0025
.0137
129.0 .010
.015
.033
.0 21
.032
GTE, Towanda, PA
.0025
.0137
238.6 .005
.008
.018
.014
.017
GE, Cleveland, OH
.0025
.0137
14.4 .086
.136
.302
.001
.289
U.S. Radium,
Morristown, NJ
0
0
4.0 0
0
0
0
0
Westinqhouse,
Bloorafield, NJ
.1156
.06894
115.2 .0 54
.085
.140
.013
1.67
Total, Option 2
! .1231
( .11004
501.2 , ,
1
1 1
Notes: Annual Sales are from KIS data tile; except one plant where sales
are derived from employment; 1982 $, adjusted to 1984.
*A11 the impact measures are shown as percents. ATC = Annual treatment
cost, Sp = Plant Sales, MCC = Manufacturing conversion cost, NI = Company net
income, CAP * Annual plant investment, TCC = Capital investment portion of
treatment cost.
-------
Table A-5B.
Impact
Estimates:
Luminescent Coatings Assuming a
Option 2
10 Percent
Decrease
in Sales
1 1
I Treatment Cost |
1984 |
Annual I
Impact Measures (Percent)*
Plant
1 (Mill.
I invest-
| ment
1982 $) |
1 1
| Annual I
Sales I
(Mill. I
1982 $) 1
ATC |
Sp |
ATC |
MCC |
ATC I
UP |
ATC |
NI |
TCC
CAP
RCA, Lancaster, PA
.0025
.0137
129.0
.012
.019
.041
.026
.039
GTE, Towanda, PA
.0025
.0137
238.6
.006
.01
.022
.017
.021
GE, Cleveland, OH
.0025
.0137
14.4
.106
.168
.373
.001
.357
U.S. Radium,
Morristown, NJ
0
0
4.0
0
0
0
0
0
Westinghouse,
Bloomfield, MJ
.1156
.06894
115.2
.067
.104
.173
.016
2.05
Total, Option 2
.1231
1
.11004
1 1
501.2
1
1
1
1
1
Notes: Annual Sales are from EIS data file; except one plant where sales
are derived from employment; 1982 $, adjusted to 1984.
* All the impact measures are shown as percents. ATC = Annual treatment
cost, Sp = Plant Sales, MCC = Manufacturing conversion cost, NI = Company net
income, CAP = Annual plant investment, 7CC = Capital investment portion of
treatment cost.
-------
A-13
A.2 Sensitivity to Costs
Throughout the analysis, a general inflation rate of from five to six
percent is assumed. However, the costs of the raw materials for CRTs might be
increasing at a rate greater than inflation. This possible increase in costs
would be reflected in a decrease in profit. For this case, the ratios of
annual treatment cost to unadjusted profit and annual treatment cost to net
income have been recalculated assuming a 10 percent decrease in profit (caused
by the increase in input costs). These measures are shown in Table A-6 for
color TV tube plants and in Table A-7 for the other CRT plants.
Table A-6. Impact Measures - Assuming an Increase in Costs
Resulting in a 10 Percent Decrease in Profit:
Color TV Tubes
1984 I Impact Measures (Percent)
1
1
Plant I
1 Annual
1 Sales
1 (1982$)
1 Option
I ATC I
1 UP |
2 1
ATC 1
NI |
Option
ATC 1
UP 1
3
ATC
NI
RCA, PA
114.8
0
0
.206
.148
Zenith, IL
160.1
1.56
5.37
1.72
5.92
GE, NY
77.0
0
0
.197
.003
RCA, IN
264.6
.997
1.64
1.11
1.73
Philips, OH
49.0
4.57
.726
5.1
1.03
Philips, NY
36.7
0
0
0
0
Sony, CA
131.7
1
0
1 1
0
1
.137
1
.21
-------
A-14
Table A-7.
Impact Measures - Assuming an Increase in Costs
Resulting in a 10 Percent Decrease in Pro£it:
Other CRTs
1984
Impact Measures (Percent)
1
1
Plant |
Annual
Sales
(1982$)
I Option
I ATC |
1 UP |
2 I
ATC |
NI |
Option
ATC 1
UP |
3
ATC
NI
Raytheon, MA
124.1
.688
.092
.736
.098
Clinton Elec.
53.8
.731
NA
.761
NA
Thomas Elec., NY
3.1
5.37
NA
5.56
NA
Thomas Elec., NJ
12.0
1.4
NA
1.44
NA
Thomas Elec., CA
2.2
7.58
NA
7.84
NA
Hewlett Packard
122.1
0
0
.005
.001
Genera Atronics
5.9
.068
NA
.068
NA
Litton Ind.
3.9
4.31
.024
4.47
.026
Dumont Elec.
17.6
2.23
NA
2.32
NA
B-Scan, Inc.
2.0
.204
NA
.204
NA
Video Display Corp.
2.7
.147
NA
.147
NA
Westinghouse
94.0
.419
.0303
.436
.032
Special Purpose Tech
NA
NA
NA
NA
NA
Tektronix
712.4
0
0
0
0
Tex-Video Man.
NA
NA
NA
NA
NA
Datagraphix
1
96.2
.004
1 1
NA
I
.004
1
NA
NA = Data not available.
-------
A-15
As these tables illustrate, a substantial increase in costs does not
severely affect the impact measures, nor does it change any conclusions based
on these measures. The four most affected plants are the Zenith, IL and
Philip, OH color TV tube facilities and the two Thomas Electronics CRT
plants. The impacts on all of these plants have been considered earlier in
Section 5 II.3.1 and II.3.2.
A.3 Solvency Analysis Sensitivity
The conclusions drawn from the solvency analysis in Section 5 are
unaffected by either of the sensitivity analyses discussed above, concerning
decreases in sales estimates or increases in input costs. The resulting
changes are small and have only a slight impact on the comparison of cash flow
to salvage value for the plants included in the solvency analysis.
-------
Appendix B
Total Toxic Organics(TTO) Compliance Costs
EPA has determined that the incremental costs associated with improved
solvent management techniques tend to be offset by resale of the solvents.
Consequently, EPA did not cost out those small costs for the purposes of the
impact analysis. Some facilities have contended that they may have to haul
away their solvents under the requirements of the Resource Conservation and
Recovery Act (RCRA). Therefore, this analysis addresses these "worst case"
costs for RCRA hauling for all plants not currently meeting the TTO
limitation being promulgated because EPA cannot determine which plants, if
any, will fall under these requirements. These costs are not considered to
be ordinary or average costs of compliance for facilities in this industry.
EPA is examining the incremental cost to comply with the TTO limitation,
not the total cost of a solvent management program. Information on existing
plants shows that all plants currently have a solvent management program in-
place, and that compliance would involve improving the current program.
The impact measures have been recalculated with treatment costs that
include TTO compliance costs. The TTO compliance costs for the CRT
subcategory have been estimated by EPA to be $1,200 per year for each plant
not currently meeting the regulations. Because there is no data available on
the actual compliance of most of the plants in the CRT subcategory with the
TTO limitation, the TTO compliance costs are estimated based on a
hypothetical plant which has an average discharge flow (135,500 gpd) and
which exceeds the TTO limit by 1 mg/1 (i.e. an effluent flow of 2.54 mg/1).
The worst case compliance costs for this hypothetical facility would occur if
-------
B-2
the incremental solvent waste were sent to a hazardous waste disposal site
under the requirements of RCRA. The amount of waste for disposal would be:
(1 mg/1) (135,500 gpd) (3.78 1/gal) (1 x 10~6 kg/mg) = 0.51 kg/day
This is approximately equivalent to 0.15 gallons per day or 13.5 gallons
every 90 days. The cost for the disposal of one 55 gallon drum of hazardous
waste every 90 days is about $300 (including transportation). Thus the
annual TTO compliance cost for this hypothetical plant would be $1200. Since
only 13.5 gallons of the drum's 55 gallon capacity is utilized in this
example, the same compliance costs would be applicable for a plant with a
flow four times that of the hypothetical plant or over 540,000 gpd, which is
larger than any plant in the CRT subcategory. In the same way, the
compliance costs would be the same for a facility of average flow with a
discharge of TTO exceeding the limit by 4.0 mg/1. Obviously, these costs are
significantly overstated for facilities that can dispose of partially filled
55 gallon drums at less than the disposal cost for full drums; e.g., at
treatment or disposal facilities that charge on a per-gallon basis, rather
than on a per-drum basis.
The $1,200 annual cost was applied to all plants that EPA did not know to
be currently in compliance. EPA's data show that all plants with sampling
data comply with the promulgated TTO limitation. Therefore, the plants for
which EPA has no data are the ones to which the incremental costs are
applied. It should be noted that TTO limitations do not apply to the
Luminescent Coatings Subcategory.
-------
B-3
B.l TV Picture Tube Plants
The results for Color TV picture tube plants appear in Tables B-l and
B-2. Only one Color TV picture tube plant might incur TTO costs, the Philips
plant in Ohio. The other plants already meet the TTO discharge limitation.
The changes in the impact measures for this plant are almost imperceptible
(from 0 to .01%), not enough to change any conclusions about the estimated
impact on the plant.
B.2 Other CRT Plants
The impact measures of treatment costs with TTO removal for other CRT
plants are shown in Tables B-3 and B-4 for Options 2 and 3. These are
applied to all the Other CRT plants. The additional cost for TTO removal is
so small that the changes in the impact ratios are also very small. The
largest change occurs in the ATC/UP ratio for the Thomas Electronics plant in
California. The ratio increases from 7.06 to 7.24 percent. This difference
is not enough to change any conclusions about this plant and the differences
are equally insignificant for all of the other plants.
-------
Table B-l
impact Measures: Color TV Picture Tube Plants
Option 2 (Level 1) Plus TTO
1
Treatment
Cost |
1
Impact
Measures
(Percent)*
1
(Mill.
$) 1
Annual
1
1
Invest- |
1
Sales
I ATC
I ATC
I ATC
I ATC
I TCC
Plant
1
ment |
Annual |
(Mill. $)
1 Sp
1 MCC
I UP
I NI
I CAP
BCA, PA**
0
0
114.8
0
0
0
0
0
Zenith, IL**
1.5
.78
160 .1
0.487
0.816
1.4
4.83
28.7
GE, NY**
0
0
77.0
0
0
0
0
0
BCA, IN**
1.578
.8263
264.6
0.312
0.524
0.897
1.48
18.2
(ECG) Philips,
OH
1.3488
.7032
49.0
1.44
2.41
4.12
.654
84.2
(ECG) Philips,
NY**
0
0
36.7
0
0
0
0
0
Sony, CA**
0
0
131.7
0
0
0
0
0
Total, Option 3 j
4.4268 (
2.3095
! 833.9
1
1
1
1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984.
* All impact measures are shown as percents. ATC - Annual treatment cost, Sp = Plant sales, MCC
Manufacturing conversion cost, NI = Company net income, CAP = Annual plant investment, TCC = Capital
investment portion of treatment cost.
** These plants currently comply with the TTO limitation and therefore no incremental cost was
included in the impact measures.
-------
Table a-2
Impact Measures: Color TV Picture Tube Plants
Option 3 {Level 2) Plus TTO
[
Tr-eatment Cost
1
(
rspsct
JSea sures
[Feroeat]
¦
1
(Hill.
$>
1
Annual
1
1
Invest- 1
[
Sales
J
ATC
! ATC
1 ATC
1 ATC
i TCC
Plant f
ment I
Annual
1
(Mill, t)
t
SP
I MCC
1 UP
S si
1 CAP
PA
.182
.0 74
114.6
.0-644
.108
.185
.133
4.35
Zenith, IL
1.698
.861
160.1
.538
.901
.155
5.33
32.4
GE, NX
.1143
.0473
77.0
.0614
.102
.177
.003
3.28
RCA, IN
1.8065
.9211
264.6
-346
.583
1.0
1.56
20.9
<0CGJ Philip®, OH
1.542
.7832
49.0
1.6
2.68
¦4.6
.927
96.3
(BCG) Philips, NY
0
0
36.?
0
0
0
0
0
Sony, CA
.140
.0 56
131.7
.043
.072
.123
.189
3.26
Total, Option 3 j
5.4358
2.7426
1
831.-9
1
1
1
1
t
Notes: annual Sales are from EI& data file; 1982 $t adjusted to 1984.
* All impact measures are shown as percents. ATC = Annual treatment cost, Sp = Plant sales, MCC
Manufacturing conversion cost, NI =* Company net incoae, CAP = Annual plant investment, TCC = Capital
investment portion ot treatment cost.
-------
Table B-3
Impact Measures: Other CRT Plants
Option 2 (Level 1) Plus TTO
I Treatment
Cost |
1
Impact
Measures
(Percent)*
I (Mill.
$) 1
Annual
1
1
I Invest- |
1
Sales
1 ATC
1 ATC
1 ATC
1 ATC
1 TCC
Plant
| ment I
Annual I
(Mill. $)
1 Sp
1 MCC
1 UP
1 NI j
I CAP
Raytheon, MA
.7013
.3526
124.1
.284
.439
.62
.083
15.7
Clinton Elec, IL
.2896
.1633
53.8
.304
.469
.663
NA
14.9
Thomas Elec, NY
.1236
.07055
3.1
2.28
3.52
4.97
NA
109.3
Thomas Elec. NJ 1/
.1236
.07055
12.0
.588
.909
1.28
NA
28.5
Thomas Elec.,CA V
.1236
.07055
2.2
3.21
4.96
7.0
NA
154.2
Hewlett
Packard, 00 2/
0
.0012
122.1
.001
.002
.002
.0004
0
Gen. Atronics, PA 2J
0
.00285
5.9
.048
.075
.10 5
NA
0
Litton Ind. AZ
.1236
.07055
3.9
1.81
2.8
3.95
.022
87.8
Duraont
Electronics, NJ
.2896
.1633
17.6
.928
1.43
2.03
NA
45.5
B-Scan Inc, PA
0
.00285
2.0
.143
.22
.311
NA
0
Video Display, GA
0
.00285
2.7
.106
.163
.23
NA
0
Westinqhouse, NY
.2896
.1633
94
.174
.269
.379
.0275
8.53
Special Purpose
Technoloq ies, CA
0
.00285
NA
NA
NA
NA
NA
NA
Tektronix, OR
0
.0012
712.4
0
0
0
.002
0
Tex-Video Man, TX
0
.00285
NA
NA
NA
NA
NA
NA
Dataqraphix,
0
.00285
96.2
.003
.005
.006
NA
0
Total, Option 3
! 2.0645
1.1442
1252.0
1
1
1
1 1
1
Notes: Annual Sales are from EIS data file; 1982 $, adjusted to 1984. NA
= Data not available.
•i/ Treatment cost assumed to be the same as for Thomas Electronics in
Clyde, NY
2/ Owned by N.A. Philips.
*A11 impact measures are shown as percents. ATC = Annual treatment cost,
Sp » Plant sales, MCC = Manufacturing conversion cost, NI = Company net
income, CAP = Annual plant investment, TCC = Capital investment portion of
treatment cost.
-------
Table B-4
Impact Measures: Other CRT Plants
Option 3 (Level 2) Plus TTO
«•
C
Z
S
m
3
3
Z
3
H
a
I
i
§
g
1
I Treatment
Cost |
1
Impact
Measures
(Percent)*
I (Mill.
$) 1
Annual
1
1 Invest- I
1
Sales
1 ATC
1 ATC
I ATC
1 ATC
1 TCC
Plant
i ment |
Annual I
(Mill. $)
1 Sp
1 MCC
1 UP
1 NI
1 CAP
Raytheon, MA
.7604
.3771
124 .1
.304
.47
.663
.089
17.0
Clinton Elec, IL
.3054
.1699
53.8
.316
.488
.69
NA
15.7
Thomas Elec, NY
.12943
.07295
3.1
2.35
3.64
5.14
NA
114.4
Thomas Elec. MJ 2/
.12943
.07295
12.0
.608
.94
1.33
NA
29.8
Thomas Elec.,CA 2/
.12943
.07295
2.2
3.32
5.13
7.24
NA
161.5
Hewlett
Packard, CO */
.00583
.0036
122.1
.003
.005
.006
.001
.13
Gen. Atronics, PA 1/
0
.00285
5.9
.048
.075
.10 5
NA
0
Litton Ind. AZ
.12943
.07295
3.9
1.87
2.89
4.08
.023
91.9
Dumont
Electronics, NJ
.3054
.1699
17.6
.965
1.49
2.11
NA
48.0
B-Scan inc, PA
0
.00285
2.0
.143
.22
.311
NA
0
Video Display, GA
0
.00285
2.7
.106
.163
.23
NA
0
Westinqhouse, NY
.3054
.1699
94
.181
.279
.395
.029
9.0
Special Purpose
Technologies, CA
0
.00285
NA
NA
NA
NA
NA
NA
Tektronix, OR
0
.0012
712.4
0
0
0
.002
0
Tex-video Man, TX
0
.00285
NA
NA
NA
NA
NA
NA
Datagraphix,
0
.00285
96.2
.003
.005
.006
NA
0
CO
I
-J
Total, Option 3
2.20015 , 1.2005 . 1252.0
Notes: Annual Sales are from EIS data £ile; 1982 $, adjusted to 1984. NA
= Data not available.
2/ Treatment cost assumed to be the same as for Thomas Electronics in
Clyde, NY
2/ Owned by N.A. Philips.
~All impact measures are shown as percents. ATC = Annual treatment cost,
Sp = Plant sales, MCC = Manufacturing conversion cost, NI = Company net
income, CAP = Annual plant investment, TOC = Capital investment portion of
treatment cost.
------- |