APPENDI X J. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE AND

GOVERNMENT REGULATORY IMPACT MODEL

TABLE OF CONTENTS

J.1 MANUFACTURER IMPACT ANALYSI S INTERVIEW GUIDE............................... J-1

J.1.1.1 KEY ISSUES....................................................................................................... J-2

J.2 BOTTLER IMPACT ANALYSIS INTERVIEW GUIDE........................................... J-21

1 KEY ISSUES..................................................................................................... J-22

J.3 MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE FOR SMALL

BUSINESSES..................................................................................................................... ....... J-28

J.4 GOVERNMENT REGULATORY IMPACT MODEL ................................................ J-30

1 INTRODUCTION AND PURPOSE ................................................................. J-30

J-iJ-iiJ.1 MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE



## Refrigerated Beverag e Vending Machines Rulemaking Manufacturer Impact Anal ysis Interview Guide

September 17, 2008

J-1J.1.1.1 KEY ISSUES

The Departme nt of Energy (DOE) is currently revi ewing 8 efficiency levels for its refrigerated beverage vending machines (BVM) rulemaking anal yses. In responding to this questionnaire, please refer to the values for each equipment class described below.

Table J.1 BVMs Efficiency Levels

Equipment

Class Efficiency

Metric Baseline Efficienc y Level 1 Efficienc y Level 2 Efficienc y Level 3 Efficienc y Level 4 Efficienc y Level 5 Efficienc y Level 6 Efficienc y Level 7 Efficiency

Level 8

Small-Size

Class A DEC kWh/day 7.66 5.80 5.21 4.76 4.34 4.16 4.12 3.88 3.71

MediumSize Class A DEC kWh/day 8.23 6.36 5.76 5.30 4.86 4.63 4.59 4.32 4.14

Large-Size

Class A DEC kWh/day 8.69 6.72 6.11 5.60 5.16 4.91 4.86 4.53 4.34

Small-Size

Class B DEC kWh/day 10.36 5.49 4.55 4.18 3.93 3.48 3.28 3.26 3.21

MediumSize Class B DEC kWh/day 10.93 6.02 5.07 4.65 4.26 4.18 3.58 3.55 3.49

Large-Size

Class B DEC kWh/day 11.35 6.43 5.49 5.01 4.60 4.51 3.88 3.84 3.78

1.1 What are the key issues for your company regarding energy conser vation standards for BVMs and this rulemaking?

1.2 For the issues identified, how significant are they for each efficiency level?

1.3 How can we most effectively incorporate these issues in the Manufacturer Impact Analysis (MIA)?

J-22 COMPANY OVERVIEW AND ORG ANIZATIONAL CHARACTE RISTICS

DOE is interested in understan ding manufacturer impact at th e plant or profit center level directly pertinent to BVM producti on. However, the context within which the plant operates and the details of plant production and costs are not readily available from the published literature. Therefore, DOE invites you to provide these deta ils confidentially in yo ur own words to the extent possible and practical. Understanding the organizational setting around the BVM industry profit center will help DOE understand the probabl e future of the BVM manufacturing activity with and without energy conservation standards.

2.1 Do you have a parent company, and/or any s ubsidiaries relevant to the BVM industry?

2.2 Do you manufacture any equipment other than BVMs? If so, what other equipment do you

manufacture?

2.3 What percentage of your total manufacturing corresponds to BVMs?

J-32.4 Where are your production facili ties located, and what type of equipment is m anufactured at each location? Could you provide figures for your comp any’s manufacturing at each location by equipment type (BVMs or other) , size, and efficiency (i.e., provide the equipment mix for each location).

2.5 At a particular facility, woul d potential BVM redesigns be di fficult to implement? If so, would your company modify the existing facility or devel op a new facility?

2.6 What are your employment levels at each of these facilities?

2.7 What are your company’s total BVM production volumes (i.e., units per year) for the past 5 years?

J-42.8 What are your equipment lines, niches, a nd relative strengths in the BVM m arket?

2.9 The Small Business Association (SBA) denotes a small business in the BVM industry as having less than 500 employees. By this defi nition, is your company considered a small

business?

2.10 Are there any niche manufacturers, small bus inesses, and/or co mponent manufacturers (i.e., compressors) for which the adoption of ne w standards would have an impact? If so, would manufacturers of this equipment ha ve different incremental impacts from implemented energy conservation standards than from the rest of the industry?

3 FINANCIAL PARAMETERS

Navigant Consulting, Inc. (NCI) has develope d a “strawman” model of the BVM industry financial performance called the Government Re gulatory Impact Model (GRIM), using publicly

available data on BVM manufacturers. This se ction attempts to understand how your company’s

financial situation differs from our industry aggregate picture.

3.1 Please compare your financial parameters to the GRIM parameters tabulated below.

J-5Table J.2 Financial Parameters fo r CRE Manufacturers GRIM Input Definition BVM GRIM

Estimated

Value Your Actual (if significantly

different from our estimate)

Income Tax Rate Corporate (average) effective income tax paid

(percentage of earnings before taxes, EBT) 31.3 %

Discount Rate Weighted average cost of capital (inflation-adjusted weighted average of corporate cost of debt and return on equity) 9.6 %

Working Capital Current assets less current liabilities (percentage of revenues) 14.0 %

SG&A Selling, general, and administrative expenses (percentage of revenues) 19.3 %

R&D Research and development expenses (percentage of revenues) 2.7 %

Depreciation Amortization of fixed assets (percentage of revenues) 3.8 %

Capital Expenditures Outlay of cash to acquire or improve capital assets (percentage of revenues, not including acquisition or sale of business units) 3.7 %

3.2 How would you expect new energy conservati on standards to impact your company’s financial parameters?

4 PRODUCTION COST BREAKDOWN

J-6DOE estima ted the full production costs of variou s BVM units of different efficiencies for all equipment classes. With the combined data, DOE calculated the industry average percentage of each cost in the full production cost.

4.1 Please compare your full production cost pe rcentages to the estimated GRIM full production cost percentages tabulated below. Are the different percentages of each cost representative of your company or the BVM industry? Please explain any differences.

Table 4.3 Breakdown by Percentage of Full Production Costs for Baseline BVM Components of Full

Production Costs Estimated % of Full

Production Cost Your Actual (if different from our estimate)

Materials 86.16 %

Labor 9.61 %

Overhead 2..83 % Depreciation 1.39 %

5 SHIPMENT PROJECTIONS AND MARKET SHARES A new energy conservation standard can cha nge overall shipments by changing equipment attributes, marketing approaches, equipment avai lability, and price. The GRIM bases revenue projections on shipment projec tions obtained from the Nationa l Energy Savings Spreadsheet

J-7(NES) prepared by the Pacific Northwest National Laboratory (PNNL). The NES includes shipm ent forecasts for the baseline (absent new standards) and new standards at each efficiency level being analyzed.

5.1 Please compare DOE’s projections of industry-wide shipments for BVMs with your company’s projections of industry-wide shipments?

Table 5.4 2012 Industry-Wide Shipment Proj ections for BVMs (Number of Units)

Equipment Class Baseline Shipments Comments or Your Company’s Projection

Small-Size Class A 7,700

Medium-Size Class A 7,700

Large-Size Class A 7,700

Small-Size Class B 77,600

Medium-Size Class B 77,600

Large-Size Class B 77,600

5.2 DOE assumed that total indus try shipments for 2012 would not be affected by increasing standard levels (i.e., total industry shipment s remain constant at the various analyzed standard levels in comparison to the base case). Is this consistent wi th your expectations for the industry? If possible, please provide explanation if your expe ctations are different.

5.3 What is your company’s approximate market share of the BVM industry?

5.4 Would you expect your market share to cha nge once higher energy c onservation standards

become effective?

J-86 EQUIPMENT MIX

Current differences in equipment m ix (distributi on of equipment sales by efficiency level) among

manufacturers can lead to different reactions to and impacts from new energy conservation

standards.

6.1 If your company offers multiple equipment lines with different efficiency levels, how does your mix of BVM sales by equipment efficien cy compare to our projected 2012 Industry Average distribution for the baseline case as shown in Table 6.1 - Table 6.5? If your company does not offer multiple equipment lines with different efficiency levels, are the projected distributions representative of the BVM industry? A ne w energy conservation standard affects the equipment mix by elim inating the sale of equipment below the minimum efficiency level. The NES forecasts the distribution of BVM sales by efficiency

level after standards. Are the NES forecasts described in the tables below for the year 2012 consistent with your own expectations fo r the industry? Do you expect any changes in your estimated profitability following the new energy cons ervation standard? If so, please explain why.

Table 6.1 Percentage of Total Shipments by Ef ficiency Level for Small-Size Class A BVMs

in 2012
Analysis Efficiency

Level (DEC - kWh/day) Baseline (7.66) Efficienc y Level 1 (5.80) Efficienc y Level 2 (5.21) Efficiency

Level 3 (4.76) Efficienc y Level 4 (4.34) Efficiency

Level 5 (4.16) Efficienc y Level 6 (4.12) Efficienc y Level 7 (3.88) Efficienc y Level 8 (3.71)

Baseline

(7.66) 0.0% 26.6% 14.1% 13.9% 13.2% 12.1% 11.6% 7.1% 1.3%

Level 1 (5.80) 26.6% 14.1% 13.9% 13.2% 12.1% 11.6% 7.1% 1.3%

Level 2 (5.21) 40.8% 13.9% 13.2% 12.1% 11.6% 7.1% 1.3%

Level 3 (4.76) 54.6% 13.2% 12.1% 11.6% 7.1% 1.3%

Level 4 (4.34) 67.8% 12.1% 11.6% 7.1% 1.3%

Level 5 (4.16) 79.9% 11.6% 7.1% 1.3%

Level 6 (4.12) 91.6% 7.1% 1.3%

Level 7 (3.88) 98.7% 1.3%

Level 8 (3.71) 100%

J-9Table 6.2 Percentage of Total Shipments by Efficiency Level for Medium-Size Class A

BVMs in 2012

Analysis Efficiency

Level (DEC - kWh/day) Baseline (8.23) Efficienc y Level 1 (6.36) Efficienc y Level 2 (5.76) Efficiency

Level 3 (5.30) Efficienc y Level 4 (4.86) Efficiency

Level 5 (4.63) Efficienc y Level 6 (4.59) Efficienc y Level 7 (4.32) Efficienc y Level 8 (4.14)

Baseline

(8.23) 0.0% 26.7% 14.2% 13.8% 13.2% 12.1% 11.7% 7.3% 1.1%

Level 1 (6.36) 26.7% 14.2% 13.8% 13.2% 12.1% 11.7% 7.3% 1.1%

Level 2 (5.76) 40.8% 13.8% 13.2% 12.1% 11.7% 7.3% 1.1%

Level 3 (5.30) 54.6% 13.2% 12.1% 11.7% 7.3% 1.1%

Level 4 (4.86) 67.8% 12.1% 11.7% 7.3% 1.1%

Level 5 (4.63) 79.9% 11.7% 7.3% 1.1%

Level 6 (4.59) 91.6% 7.3% 1.1%

Level 7 (4.32) 98.9% 1.1%

Level 8 (4.14) 100%

Table 6.3 Percentage of Total Shipments by Efficiency Level for Large-Size Class A BVMs

in 2012

Analysis Efficiency

Level (DEC - kWh/day) Baseline (8.69) Efficienc y Level 1 (6.72) Efficienc y Level 2 (6.11) Efficiency

Level 3 (5.60) Efficienc y Level 4

(5.16) Efficiency

Level 5 (4.91) Efficienc y Level 6 (4.86) Efficienc y Level 7 (4.53) Efficienc y Level 8 (4.34)

Baseline

(8.69) 0.0% 26.6% 14.1% 13.8% 13.3% 12.3% 11.9% 7.0% 1.1%

Level 1 (8.72) 26.6% 14.1% 13.8% 13.3% 12.3% 11.9% 7.0% 1.1%

Level 2 (6.11) 40.6% 13.8% 13.3% 12.3% 11.9% 7.0% 1.1%

Level 3 (5.60) 54.4% 13.3% 12.3% 11.9% 7.0% 1.1%

Level 4 (5.16) 67.7% 12.3% 11.9% 7.0% 1.1%

Level 5 (4.91) 80.0% 11.9% 7.0% 1.1%

Level 6 (4.86) 91.9% 7.0% 1.1%

Level 7 (4.53) 98.9% 1.1%

Level 8 (4.34) 100%

J-10Table 6.4 Percentage of Total Shipments by Ef ficiency Level for Small-Size Class B BVMs

in 2012

Analysis Efficiency

Level (DEC - kWh/day) Baseline (10.36) Efficienc y Level 1 (5.49) Efficienc y Level 2 (4.55) Efficienc y Level 3 (4.18) Efficienc y Level 4

(3.93) Efficiency

Level 5 (3.48) Efficienc y Level 6 (3.28) Efficienc y Level 7 (3.26) Efficienc y Level 8 (3.21)

Baseline (10.36) 0.0% 26.4% 16.7% 15.6% 14.3% 10.0% 8.2% 7.8% 0.9%

Level 1 (5.49) 26.4% 16.7% 15.6% 14.3% 10.0% 8.2% 7.8% 0.9%

Level 2 (4.55) 43.1% 15.6% 14.3% 10.0% 8.2% 7.8% 0.9%

Level 3 (4.18) 58.8% 14.3% 10.0% 8.2% 7.8% 0.9%

Level 4 (3.93) 73.0% 10.0% 8.2% 7.8% 0.9%

Level 5 (3.48) 83.1% 8.2% 7.8% 0.9%

Level 6 (3.28) 91.3% 7.8% 0.9%

Level 7 (3.26) 99.1% 0.9%

Level 8 (3.21) 100%

Table 6.5 Percentage of Total Shipments by Efficiency Level for Medium-Size Class B

BVMs in 2012

Analysis Efficiency

Level (DEC - kWh/day) Baseline (10.93) Efficienc y Level 1 (6.02) Efficienc y Level 2 (5.07) Efficiency

Level 3 (4.65) Efficienc y Level 4

(4.26) Efficiency

Level 5 (4.18) Efficienc y Level 6 (3.58) Efficienc y Level 7 (3.55) Efficienc y Level 8 (3.49)

Baseline (10.93) 0.0% 25.8% 16.2% 15.5% 14.4% 10.5% 8.6% 8.2% 0.8%

Level 1 (6.02) 25.8% 16.2% 15.5% 14.4% 10.5% 8.6% 8.2% 0.8%

Level 2 (5.07) 42.1% 15.5% 14.4% 10.5% 8.6% 8.2% 0.8%

Level 3 (4.65) 57.6% 14.4% 10.5% 8.6% 8.2% 0.8%

Level 4 (4.26) 71.9% 10.5% 8.6% 8.2% 0.8%

J-11Level 5 (4.18) 82.4% 8.6% 8.2% 0.8%

Level 6 (3.58) 91.0% 8.2% 0.8%

Level 7 (3.55) 99.2% 0.8%

Level 8 (3.49) 100%

Table 6.6 Percentage of Total Shipments by Efficiency Level for Large-Size Class B BVMs

in 2012

Analysis Efficiency

Level (DEC - kWh/day) Baseline (11.35) Efficienc y Level 1 (6.43) Efficienc y Level 2 (5.49) Efficiency

Level 3 (5.01) Efficienc y Level 4

(4.60) Efficiency

Level 5 (4.51) Efficienc y Level 6 (3.88) Efficienc y Level 7 (3.84) Efficienc y Level 8 (3.78)

Baseline (11.35) 0.0% 25.7% 16.0% 15.5% 14.4% 10.6% 8.8% 8.4% 0.7%

Level 1 (6.43) 25.7% 16.0% 15.5% 14.4% 10.6% 8.8% 8.4% 0.7%

Level 2 (5.49) 41.7% 15.5% 14.4% 10.6% 8.8% 8.4% 0.7%

Level 3 (5.01) 57.2% 14.4% 10.6% 8.8% 8.4% 0.7%

Level 4 (4.60) 71.6% 10.6% 8.8% 8.4% 0.7%

Level 5 (4.51) 82.2% 8.8% 8.4% 0.7%

Level 6 (3.88) 90.9% 8.4% 0.7%

Level 7 (3.84) 99.3% 0.7%

Level 8 (3.78) 100%

6.2 Do you expect the equipment mix to change over time absent any new energy conservation standards? If so, please e xplain how it will change.

7 CONVERSION COSTS

An increase in energy conserva tion standards may cause your company to incur one-time capital and equipment conversion costs. DOE calls these conversion costs because they are the costs of changing your business to comply with new energy conservation standards.

7.1 What level of conversion costs do you anticipat e incurring under the different efficiency levels? What portion of your capital convers ion expenditures do you expect to go towards replacing existing assets, which would become obsolete under a new energy conservation

J-12standard? Refer to the tables below to provi de your company’s estim ates. Please provide additional qualitative information to help DOE understand the nature of your investments.

J-13J-14 Table 7.5 Class A BVM Conversion Costs

Small-Size Class A Eff Capita Conv. Exp. a iciency

Level (EL) l Product Stranded

Conv. Exp. b Assets

Baseline

EL 1

EL 2

EL 3

EL 4

EL 5

EL 6

EL 7

EL 8

Medium-Size Class A

Baseline

EL 1

EL 2

EL 3

EL 4

EL 5

EL 6

EL 7

EL 8 Large-Size Class A

Baseline

EL 1

EL 2

EL 3

EL 4

EL 5

EL 6

EL 7

EL 8

a Capital Conversion Expenditures - One- time investments in plant, property, and equipment (PPE) necessitated by an energy conservation standard. These may be completely incremental to existing PPE or they could involve replacement of existing PPE.

b Product Conversion Expenditures - One-time expenses in research, product development, testing, and marketing necessi ted by an appliance energy conservation standard. taJ-15 B BVM Conversion Costs

Small-Si ze Class B T able 7.6 Class Efficiency

Level (EL) Capital Conv. Exp. Product Conv. Exp. Stranded

Assets

Baseline

EL 1

EL 2

EL 3

EL 4

EL 5

EL 6

EL 7

EL 8

Medium-Size Class B

Baseline

EL 1

EL 2

EL 3

EL 4

EL 5

EL 6

EL 7

EL 8 Large-Size Class B

Baseline

EL 1

EL 2

EL 3

EL 4

EL 5

EL 6

EL 7

EL 8

7.2 What is your depreciation period for the cap ital expenditures (build ing, equipment, and tooling)?

8 MARKUPS AND PROFITABILITYJ-16 ne of the primary objectives of the MIA is to as sess the im pact of efficiency levels on industry rofitability. In this sect ion, DOE would like your assist ance in understanding how the rkups and profitability.

hy not?

.2 Based on publicly available information, DOE calculated a 1.36 manufacturer markup c for BVM manufacturing. DOE is aware that the manufacturer markup calculated using public information is based on companies that may manufacture other equipment in addition to BVM. Does this figure seem accu rate, or is it too high or low?

8.3 Do you expect changes in your estimated profitability following the new energy O

p

e fficiency levels would impact your company’s m a

8.1 Do profit levels vary by equipment class? Do profit levels vary by efficiency level? Please explain why or w

8

conservation standard? If so, please explain why.

e manufacturer markup is a multiplier that converts manufacturer production cost (MPC) to manufacture selling

rice. The manufacture markup is a fixed percentage applied to MPCs to cover standard SG&A expenses; standard

where: Gross Margin = (Revenues - Cost of Goods Sold) / (Revenues) c Th

p

re sear ch and development expenses; interest; and profit. It is calculated using the following formula: Manufacturer Markup = 1 / (1 - Gross Margin)9 CUM ULATIVE REGULATORY BURDEN

J-17 umu lative regulatory burden refers to the burden that industry faces from overlapping effects of ew or revised DOE standards, voluntary standards, and/or other regulatory actions affecting the me equipment or industry.

.1 Are there other recent or impending regulati ons, excluding refrigerant phase-out, that

BVM manufacturers face (from DOE or otherwise)? What level of expense are you

r ability to compete?

.2 Under what circumstances would you be able to coordinate any e xpenditures related to

0 EXPORTS/FOREIGN COMPETITION/ OUTSOURCING

Disparity between domestic and foreign energy conservation standards could impact exports or imports. Labor content and material ch anges, resulting from energy conservation

0.1 What percentage of your company’s BVM sa les is domestic? Absent standards, are production facilities being relocated to fore ign countries? Would new energy conservation standards impact your domestic vs. foreign manufacturing decision?

10 t? What C

n

sa

9

expe cting to incur as a result of these regulations? How woul d new standards affect you

9

thes e other regulations thereby lessening the cumulative burden?

1

stan dards, may impact sourcing decisions.

1

.2 If applicable, to what foreign countries or regions do you export your equipmen percentage of sales can be attributed to each?10.3 Would a new standard be expected to affect your export sales? W hat would the resulting impact be, if any, on your manufact uring operations and profitability?

J-18 ation standards in other countries?

for the future operati on of your com pany and the BVM industry with regards to exports?

The impact of new energy conservation st andards on employment is an important consideration in the rulemaking pr ocess. This section of the in terview guide seeks to explore current trends in BVM production employment and solicit manufacturer views on how domestic employment patterns might be aff ected by new energy conservation standards. 10.4 Are your foreign exports affected by energy conserv

10.5 What percentage of the U.S. market for BV Ms has been captured by foreign competition? Would standards have an impact on foreign competition?

10 .6 What is your outlook

11 D IRECT EMPLOYMENT IMPACTJ-19 W w s? If so, please explain how they would change.

nservation s tandards require extensive retraining or replacement of employees?

11.3 Would mandating higher efficiency levels result in larger sized equipment to compensate for larger, more efficient components? Have you found direct labor costs to be proportional to material costs?

12 CONSOLIDATION

New energy conservation standards can alter the competitive dynamics of the market. This can include prompting companies to enter or exit the market, or to merge. DOE and the Department

of Justice are both interested in any potential reduction in comp etition that would result from a new energy conservation standard.

12.1 Please comment on industry consolidation and related trends over the last 5 years. 11.1 ould your domestic employment levels be expected to change significantly under ne energy conservation standard

11.2 Would the workforce skills necessary under new energy coJ-20 12.2 In the absence of new standards, do you e xpect any further industry consolidation?

12.2 How would new standards affect your ability to compete? Ple ase describe your expectations.J-21 J.2 BOTTLER IMPACT ANALY SIS INTERVI EW GUIDE



## Refrigerated Beverag e Vending Machines Rulemaking Manufacturer Impact Analysis (Bottler Interview Guide)

Sep tember 17, 2008J-22 E) is currently undertaking a rulem aking for refrigerated everage vending machines (BVM). As part of the rulemaking process, DOE requests formation from all stakeholders regardi ng possible impacts from energy conservation andards. Although the questions are intended for bottlers and not ma nufacturers, all the formation provided will be valuable to help complete the Manufacturer Impact Analysis. All l only be reported in aggregate cross the industry.

KEY ISSUES

.1 What are the key issues for your company regarding energy conser vation standards for BVMs and this rulemaking?

.2 How can we most effectively incorporate these issues in the Manufacturer Impact Analysis (MIA) and this rulemaking in general?

BOTTLER COMPANY CHARACTERISTICS

.1 Could you briefly explain how the bottler indust ry is organized and operates? Are there

several distribution chains? Who owns the machines at each stage in the distribution

chain?

.2 Do you consider the bottling industry fragmented or concentrated?

.3 How many distributors/bottlers doe s your company associate with?

.4 Do bottlers fill and/or service their own BVMs or do they rely on third-party vending operators to perform this service? INT RODUCTION The Departme nt of Energy (DO

b

in

st
in

of the information gathered is completely confidential and wil

a

1

1

1

2

2

2

2

2J-23 .5 Does your company purchase or lease BVMs? If owned, does your company lease the

BVM

2.6 est ven i ng operators you work with?

.7 What are some example host sites you service?

3.1 hat are the key factors influenc ing your BVM purchasing decisions?

provide ype of BVM.

.4 Could you provide projected purchases of BVMs for 2012 for your company? 2 s to third-parties?

Who are the larg d

2

3 BV M PURCHASING

W

3.2 Approximately how many vending machines do you own and or operate? Please figures by t

3.3 How many new BVMs do you purchase each year?

3J-24 Table 3.7 Purchase Projections for BVMs in 2012 (Number of Units)

Equipment Class Purchase Comments or Your Company’s Projection (Num ber of Units)

Small-Size Class A

Medium-Size Class A
Large-Size Class A

Small-Size Class B

Medi um-Size Class B

Large-Size Class B

3.5 O ver the past 5 years has the number of new BV M purchases per year changed? If so, how and why has it changed?

ses per year changed? If so, how and why has it changed?

s do

the placement of BVMs in new locations vers us the removal of BVMs from existing

locations?

.8 Which manufacturers do you purchase BVMs fr om? What percentage of your total

.9 Are there significant switching costs associated with moving from one manufacturer to

another? Are there manufacturer-s pecific investments you must make?

.10 Does purchasing quantities of BV Ms affect the price per unit? 3.6 O ver the past 5 years has the equipment mix of new BVM purcha

3.7 H ow many new BVMs do you place in new loca tions each year? How many BVM you remove from existing locations each year? Have you noticed any trends related to

3

pur chases does each manufacturer represent?

3

3J-25 .11 Does your company have any purchasing pr eference for ENERGY STAR or other energy

.12 What is the price premium for Energy Star Ti er II compared to Energy Star Tier I? Compared to other non-Energy Star models?

.13 Does the energy efficiency of BVMs significan tly affect the price of the equipment from a purchaser point of view?

3.14 ing/parts/wa rranties from manufacturers?

.15 What are the types of refrigerants that ar e used in the BVMs you purchase (e.g., R-134a)? What alternate refrigerants are used (e.g., R-744, CO2 refrigerant) and what is the prevalence of such machines? What is your long term plan for refrigerants in BVMs?

REFURBISHMENT AND RE PLACEMENT OF BVM

.1 How often is a typical BVM refurbished (assuming no vandalism or other exceptionally harsh conditions) during its life?

.2 Is the refurbishment cycle affected at all by the relo cation of a BVM? 3

eff icient BVMs? If so, why?

3

3

D o you require servic

3

4

4

4J-26 replacem ent and refurbishment made by your company?

4.4 In your best estimation, what percentage of your units are refurbished each year? What percentage of your units are replaced each year?

4.5 What percentage of your BVMs are:

Less than five years old? Five to 10 years old? Ten to 15 years old? More than 15 years old?

4.6 Upon replacement, do your machines have any salvage value?

5 CONSOLIDATION

New energy conservation standards can alter the competitive dynamics of the market. This can include prompting companies to enter or exit the market, or to merge. DOE and the Department 4.3 How is the decision betweenJ-27 of Justice are both interested in any potential reduction in comp etition that would result from a

mer of the BVM industry, please co mm ent on industry consolidation and related trends over the last 5 years.

5.2 In the absence of new standards, do you expect any further industry c onsolidation? Please new energy conservation standard.

5.1 As a custo

describe your expectations.J-28 J.3



### ds

pact Analysis Int erview Guide for Small Businesses

m ail database for updates relating to this

3. What are the key issues f or your company regarding energy conser vation standards for frigerated beverage vending m achines and this rulemaking?

4. DOE would like to understand the small-busin ess beverage vending machine industry in general and your company in particular. Could you please provide information on the following:

 Is your company a domestic or international company?

 What types of refrigerated beverage vending machines do you manufacture? Do you

manufacture Class A or Class B refrigerated bevera ge vending machines, or both? e,f
What sizes of refrigerated beverage vending machines do you manufacture, measured in vendible capacity and/or refrigerated volume? Could you provide energy efficiency figures for those identif ied models? Does your equipment meet ENERGY STAR Tier I, Tier II, or any le vel above those energy efficiency levels? g,h M ANUFACTURER IMPACT ANALYSIS IN TERVIEW GUIDE FOR SMALL

B USINESSES



### Refrigerated Beverage Vending Mach ines Energy Conservation Standar Rulemaking

Manufacturer Im

1. Are you aware of the US Department of Energy’s (DOE’s) ongoing rulemaking to establish national minimum energy conservation standards for refrigerated beverage vending

d ould you like to be added to DOE’s e machines? W making? rule

2. We are assessing the impact s of a potential energy c onservation standard on small businesses. Is your company a small business (d efined as less than 500 employees by the US Small Business Administration (SBA), including all subsidiaries and parent companies, and employees in all countries where you operate)?

re

d For information on DOE’s efficiency standards rulemaking for beverage vending machines, visit the following

website: http://www1.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html

e “Class A” refers to a beverage vending machine that c ools the entire internal volume . Class A machines are also referred to as “fully-cooled” machines.

f “Class B” refers to any beverage vending machine not considered to be Class A. Class B machines are often “zone-cooled” machines, in that they typically cool only a fraction of the volume of the machine.

g Tier I: Energy Consumption ≤ 0.55 [8.66 + (0.009 x Vendible Capacity)]J-29  Do manufacture equipment other than refr igerated beverage vending machines? Do d beverage vending machines that do not easily fall in the categ ories from the previous question?

ou serve in the refrigerated beverage vending

5.

6. DOE would like to understand your com pany’ s employment impacts as a result of

standar

tic

re there any reasons that a small business such as your s might be at a disadvantage relative to a larger business unde

where DOE will request

etailed information about your business and possible impacts due to energy conservation

andards? you ma nufacture any niche or specialty type refrigerate

 What are the types of customers y

machine market?

Would a new energy conservation standard fo r refrigerated beverage vending machines (whereby all your competitors are also required to meet the same minimum level of energy consumption for their machines) cause any burde ns on your business? If so, please explain. Please consider costs such as new designs, capita l investment, prototype testing, and marketing that might be required.

ds. Would your company consider relocating manufacturing to outside the United States as a result of new energy conser vation standards? If not, woul d standards cause your domes employment level to change (increase or decrease)?

7. A r mandatory energy conservation st andards? Please consider such factors as technical expertis e, access to capital, bulk purchasi ng power for materials, etc. If so, would you be willing to par ticipate in a full manufacturer interview

d

st

i II: Energy Consumption ≤ 0. 45 [8.66 + (0.009 x Vendible Capacity)] h T erJ.4 GOVERNMENT REGULATORY IMPACT MODEL

J-30 e impacts of energy conservation standards and ot her regulations on manufacturers. The basic wing

s taking effect over a pe riod of time, and of multiple regulations on the

ent value is defined, for the purpose of this analysis, as the discounted

hout case) and under different trial standard levels

ION

eters

g profit after ta xes. The cash flow ca lculation converts net

s.

ents for the indus try were obtained from the National 1 I NTRODUCTION AND PURPOSE

The purpose of the Government Regulatory Imp act Model (GRIM) is to help quantify th

mod e of analysis is to estimate the change in value of the industry or manufacturers(s) follo a regulation or a series of regulations. The mode l structure also allows an analysis of multiple products with regulation

sam e products.

Industry net pres

sum of industry free cash flows plus a discounted terminal valu e. The model calculates the actual cash flows by year and then determines the present value of those cash flows both wit an energy conservation standard (i.e., the base (TSL s).

Output from the model consists of summary fi nancial metrics, graphs of major variables, and, when appropriate, access to th e complete cash flow calculation.

2 MOD EL DESCRIPT

The b asic structure of the GRIM is a standa rd annual cash flow analysis that uses manufacturer selling prices, manu facturing costs, a shipments forecast, and financial param

as in puts and accepts a set of regulatory conditions as changes in costs and investments. The cash flow analysis is separated into two majo r blocks: income and cash flow. The income calculation determines net operatin

oper ating profit after taxes into an annual cash fl ow by including investment and non-cash item Below are definitions of listed items on the printout of the output sheet (see Section 3).

(1) Unit Sales: Total annual shipm

Ener gy Savings Spreadsheet;

(2) R evenues: Annual revenues - computed by multiplying unit costs at each efficiency level by the appropriate manufacturer markup;

(3) L abor: The portion of cost of goods sold (COGS) that includes direct labor, commissions, dismissal pay, bonuses, vacation, sick leave, so cial security contributions, fringe, and assembly labor up-time;

(4) M aterial: The portion of COGS that includes materials;J-31 in overhead, the depreciation is shown as a separate line item;

puted as a percentage

of COGS. While inclu ded in overhead, the deprecia tion is shown as a separate line item;

stranded assets (i.e., plant, pr operty, and equipment rendered obsolete due to the standard)

(8) Standard SG&A: Selling, general, and administrative costs are computed as a percentage

(9) R&D: GRIM separately accounts for ordinary research and development (R&D) as a

(10) Equipment Conversion Costs: Equipment conversion costs are one-time investments in

(11) Earnings Before Interest and Taxes (EBIT): Includes profits before deductions for interest paid and taxes;

(12) EBIT as a Percentage of Sales (EBIT/Revenues): GRIM calculates EBIT as a percentage of sales to compare with the industry’s av erage reported in financial statements;

(13) Taxes: Taxes on EBIT (11) are calculated by multiplying the tax rate contained in Major Assumptions by EBIT (11)

.

(14) Net Operating Profits After Taxes (NOPAT): Computed by subtracting Cost of Goods Sold ((3) to (6))

, SG&A (8)

, R&D (9)

, Equipment Conversion Costs (10) , and Taxes (13)

from Revenues (2)

.

(15) NOPAT repeated : NOPAT is repeated in the Statement of Cash Flows;

(16) Depreciation repeated : Depreciation and Stra nded Assets are added back in the Statement of Cash Flows because they are non -cash expenses;

(17) Change in Working Capital : Change in cash tied up in accounts receivable, inventory, and other cash investments necessary to suppor t operations is calculated by multiplying working capital (as a percenta ge of revenues) by the cha nge in annual revenues.

(18) Cash Flow From Operations : Calculated by taking NOPAT (15) , adding back non-cash

items such as a Depreciation (16) , and subtracting out Change in Working Capital (17) ; (5) O verhead: The portion of COGS that includes indirect labor, indi rect material, en ergy use, maintenance, depreciation, property taxes, and insurance related to assets. While included

(6) D epreciation: The portion of overhead that includes an allowance for the total amount of fixed assets used to produce that one unit. Annual depreciation com

(7) S tranded Assets: In the year the standard become s effective, a one time write-off of

is ac counted for;

of R evenues (2) ;

perc entage of Revenues (2) ;

rese arch, development, testing, and marketi ng focused on making products designs comply with the new energy conservation standard. GRIM allocates these costs over the period

betw een the standard’s announcem ent and effective dates;J-32 (19) Ordinary Capital Expenditures: Ordinary investments in pr operty, plant, and equipment to maintain and replace existing production assets, computed as a percentage of Revenues (2) ;

(20) Capital Conversion Costs: Capital conversion costs are one-time investments in property, plant, and equipment to adapt or change exis ting production facilities so that new product designs can be fabricated and a ssembled under the new regulation;

(21) Capital Investment: Total investments in property, plant, and equipment are computed by adding Ordinary Capital Expenditures (19) and Conversion Capital Expenditures (20) ;

(22) Free Cash Flow: Annual cash flow from operations and investments; computed by subtracting Capital Investment (21) from Cash Flow from Operations (18) ;

(23) Terminal Value: Estimate of the continuing value of the industry after 2042. Computed by growing the Free Cash Flow in year 2042 at a constant rate in perpetuity;

(24) Present Value Factor: Factor used to calculate an es timate of the present value of an amount to be received in the future;

(25) Discounted Cash Flow: Free Cash Flows (22) multiplied by the Present Value Factor (24) . For 2042 the discounted cas h flow includes the discounted Terminal Value (23) ; and

(26) Industry Value thru 2042: The sum of Discounted Cash Flows (25)

.J-13DETAILED CASH FLOW EXAMPLE