Ballast Manufacture r I mpact

Analysis April 28, 1998 U.S. Department of Energy Office of Energy Efficiency and Renewable Energy 1000 Independence Avenue, SW Washington, DC 20585 

### DOE Wo r kshop Ballast Manufacturer Impact Analysis DOE Workshop April 28, 1998 u.s. Department of Energy Office of Energy Efficiency and .Renewable Energy 1000 Independence Avenue, SW Washington, DC 20585B allast Manufacturer Impact Analysis Methodology 

### eneric Analyfta8 Fra mew Ballast Indus Profile Strawman Industry Cash Flow Ballast Industry Cash F 

### ®w Ballast Subgroup Impact Ana Next Steps U k



### ysis

April28, 1998 2 Ballast Manufacturer Impact Analysis Methodology

April 28. 1998 2



# -Generic Analytical Fra mework Legislative Requirements



### determ i n i ng econom i ca l ly Just i fied, requ i red cons i de r:

"The econo mic impact of the stand ard o n manufacturers an d o n the consumers of the products subject to such a standard."

"The impact of any lessening of c om petition, as dete rm ined in writing by the Attorney G eneral , that is likely to result from the i m positi o n of the standard®"

April 28, 1998 3 Generic Analytical Framework Legislative Requirements 

### In determining whether a standard is economically justified, DOE is required to consider: 

# J "The economic impact of the standard on manufacturers and on the consumers of the products subject to such a standard." 

# J "The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard."

April 28, 1998 3G en e ric Analytical Fra m ework Legislative Requirements



### In the July 1996 Process Rule, the Department comm itted deta il ed rev i ew manufacture r i mpact The new methodology must: P rovide for early stakeholder input. Utilize an annual cash flow approach deter m ine q uantitative i m pacts , including an assessment of s hort-term cost an d capital req uirements. D evelop estimates of critical variables (with input from interested parties ) d rawing on multiple sources , both quantitative and q ualitative. Re p ort the distribution of impacts on manufacturers. Use models that are easy to understan d and account for unc e rtainty. Consider the cumulative impacts of re g ulation. Consider the impacts on manufacturin g capacity, plant closure s, and loss of capital investment. April28, 1998 4 Generic Analytical Framework Legislative Requirements 

### In the July 1996 Process Rule, the Department committed to a detailed review of the manufacturer impact analyses methodologies. The new methodology must:

## ~, Provide for early stakeholder input. 

# :J Utilize an annual cash flow approach to determine quantitative impacts, including an assessment of**short~term** 

### cost and capital requirements.

## ~J Develop estimates of critical variables (with input from interested parties) drawing on multiple sources, both quantitative and qualitative. :, Report the distribution of impacts on manufacturers. 

## ,.j Use models that are easy to understand and account for uncertainty. lV: Consider the cumulative impacts of regulation.

, Consider the impacts on manufacturing capacity, plant closures, and loss of capital investment.
April 28, 1998 4G eneric A nalytical Fra m ework Generic Approach



### The manufacturing impact assessment framework includes financial, employment, competitive, and capacity impacts.

Sub-group #1 Sub-group #2 Sub-group #3 Prototypical Firm Financial

Impacts Employment

Impacts Competitive

Impacts Capacity

Impacts IMPACTS

April 28, 1998 5 Generic Analytical Framework Generic Approach 

### The manufacturing impact assessment framework includes financial, employment, competitive, and capacity impacts.

Sub-group #1 Sub-group #2 Sub-group #3 Prototypical Firm Financial Impacts Employment Impacts IMPACTS Competitive Impacts Capacity Impacts**~**

April 28, 1998 5G en e ric A nalytical F ra m ework Generic Approach



### Both qual itat ive quant itat ive i ncluded i n the analysis.
nputs 

### Outputs Qualitative Quantitative

Assessments Assessments Information Data 

## Who? What? hen? How Much? Where H ow? Why?
I

April 28, 1998 6 Generic Analytical Framework Generic Approach 

### Both qualitative and quantitative assessments are included in the analysis.
Information Who? What? When? Where

How? W 

### Data

How Much?

April 28, 1998 6Gene ric Analytical Fram ework Generic Approach 

### qual itative The Department intends to use fully documented quant itat i ve analyti cal methods. 4 ualitative assessments of impact s will d raw on multiple types of stakeholder inputs. Manufacturer inputs will be invite d through vo luntary interviews and facilities visits. S takeholders will be consulted though interviews , workshops, surveys, and other means to develop estimates of critical variables and identify possible impacts. A central core of analytical tools will b e develo ped, maintaine d , an d made available to all parties. The primary focus will be on the G overnment Re g ulatory I mp act M odel ( G RIM ) and possible enhancements.

April 28, 1998 7 Generic Analytical Framework Generic Approach 

### The Department intends to use fully 

### documented qualitative and quantitative analytical methods. 

# ;J Qualitative assessments of impacts will draw on multiple types of stakeholder inputs.

.. Manufacturer inputs will be invited through voluntary interviews and facilities visits.

.. Stakeholders will be consulted though interviews, workshops, surveys, and other means to develop estimates of critical variables and identify possible impacts. A central core of analytical tools will be developed, maintained, and made available to all parties.

.. The primary focus 

### w·iII be on the Government Regulatory Impact Model (GRIM) and possible enhancements.

April 28, 1998 7G eneric Analytical Framework Generic Approach



### The general approach to manufacture r impact analysis i ncludes basic elements: Developing an industry profile and defining key issues. Carrying out an industry cash flow analysis. S egmentin g the industry and analyzing sub-group impacts.

April 28, 1998 8 Generic Analytical Framework Generic Approach 

### The general approach to manufacturer impact analysis includes three basic elements: 

# J: Developing an industry profile and defining key issues. 

# ;J: Carrying out an industry cash flow analysis. 

# :J Segmenting the industry and analyzing sub-group impacts.

April 28, 1998 8Generic A nalytical Framework

merit.

Impacts on`the Enviror and°Enerny Security W§ laf^onal': Benefii acts on Cons Flow Diagram of Standards Analysis Manufacturer Impact Analyses PHASE 1: Industry Profile Industry Characterization Issue Identification PHASE 2: Industry Cash Clow Manufacturing Costs Price Forecasts Shipment Forecasts Estimate Industry Cash Flow PHASE 3: Subgroup Analysis Estimate Manufacturer Costs Estimate Prices and Shipments Cash Flow Analysis Impacts on Competition Impacts on Employment Impacts on Manufacturing Capacity
April 28, 1998 9 Generic Analytical Framework

Engineering**~naIM~is** " •

Inairect EmploMment Impacts Impacts on Utilities Impacts on the Environment ana EnergM SecuritM Flow Diagram of Standards Analysis Manufacturer Impact Analyses

Impacts on EmploMment Impacts on Manufacturing Capacity
April 28, 1998 9A nalytical Fra mewo rk



### The Ballast maanalysis w i l l be conducted i n fou r steps.

April 28, 1998 10 Analytical Framework 

### The Ballast manufacturer impact analysis will be conducted in four steps. Industry Profile "Strawman" Industry Cash Flow Manufacturer Subgroup Analyses 

### IInase**~a** Industry Cash Flow Analyses

April 28, 1998 10Ball ast Manufacturer Impact A nalysis Methodology


### Generic Analytica Framework Ballast Industry Profile Strawman Industry Cash Flow Ballast Industry Cash F 

### ow Ballast Subgroup Impact Ana Next Steps 

### ysis

April28, 1998 11 Ballast Manufacturer Impact Analysis Methodology

April 28, 1998 11B allast Industry Profile Industry Characterization



### DOE has documented descr i pt ive stat i st i cs about the U.S. Ballast Industry '. 1977 1982 1907 1992 Fluorescent Lamp Ballasts Shipment value ($ millions) 210.7 312.1 414.5 537.7 Number of companies ° 9 12 9 15 Number of establishments 17 12 14 Corrected Power Factor Type Shipments (millions) 39.7 38.9 54.8 55.4 Shipment value ($ millions) 181.2 272 378.2 468.9 % Ship. value with Power Factor Correction 86% 87% 91% 87% No. of All Employees Fluorescent ballasts 6000 4400 5200 No. of Production Workers Fluorescent ballasts 5300 3800 4500 New Capital Expenditures ($ millions) Fluorescent ballasts 10.1 4.8 10.1 Manufacturing Facilities (Shipment: $ millions) Arkansas (NA) 33.1 Illinois 52.4 135.7 82.6 119 Indiana (NA) 2.4 Kentucky 20-50 6.6 Mississippi >50 73.7 New Jersey 20-50 26 Pennsylvania (NA) 5.4 Wisconsin 20-50 24.2

April 28, 1998 12 Ballast Industry Profile Industry Characterization 

### DOE has documented descriptive statistics about the U.S. Ballast Industry. Shipment value ($ millions) Number of companies ' Number of establishments Shipments (millions) Shipment value ($ millions) % Ship. value with Power Factor Correction No. of All Employees Fluorescent ballasts No. of Production Workers Fluorescent ballasts Fluorescent ballasts Manufacturing Facilities (Shipment: $ millions) Arkansas Illinois Indiana Kentucky Mississippi New Jersey Pennsylvania Wisconsin 210.7 312.1 414.5 537.7 9 12 9 15 17 12 14 39.7 38.9 54.8 55.4 181.2 272 378.2 468.9

86% 87% 91% 87% 6000 4400 5200 5300 3800 4500

10.1 4.8 10.1 (NA) 33.1 52.4 135.7 82.6 119 (NA) 2.4 20-50 6.6 >50 73.7 20-50 26

(NA) 5.4 20-50 24.2

April 28, 1998 12B allast Industry P rofile Industry Characterization



### Department representat i ves prel i m i nary f ive manufacturers and three othe r i nterested o rganizations. Co mpanies visite d were: Advance T ransfor m er C om pany at M onroe, W I H oward Industries , Inc., at Laurel, MagneTek, Inc., at N ashville, Motorola Lighting , Inc., at B uffalo G rove, IL - Power Lighting Products (Valmont E lectric) at El Paso, TX Others interviewed were: The Alliance to Save Energy at Washington, - The American Council for An E nergy- Efficient Economy at Washington, DC - The Natural Resources D efense C ouncil by telephone

April 28, 1998 13 Ballast Industry Profile Industry Characterization 

### Department representatives conducted preliminary interviews with five manufacturers .and three other interested organizations. 

# :.t Companies visited were:

- Advance Transformer Company at Monroe, WI

- Howard Industries, Inc., at Laurel, MS

- MagneTek, Inc., at Nashville, TN

- Motorola Lighting, Inc., at Buffalo Grove, IL

- Power Lighting Products (Valmont Electric) at EI Paso, TX 

## [.j Others interviewed were:**~** The Alliance to Save Energy at Washington, DC

- The American Council for An Energy.. Efficient Economy at Washington, DC

- The Natural Resources Defense Council by telephone

April 28, 1998 13B allast I nd ustry P rofile Industry Characterization



### Preliminary interviews in 1996/97 review public literature suggest that analysis guided in following: Th e manufacturer impact analysis shoul d b e pe rform ed on a company- by-company basis. The analysis should recognize the increasingly global nature of the industry. The analysis should consider direct industry suppliers as appropriate.

April28, 1998 14 Ballast Industry Profile Industry Characterization 

### Preliminary interviews held in 1996/97 

### and a review of public literature suggest that the analysis should be guided in part by the following: 

# :i/J The manufacturer impact analysis should be performed on a company-by-company basis. 

# :i/J The analysis should recognize the increasingly global nature of the industry. 

# :i/J The analysis should consider direct industry suppliers as appropriate.

April 28. 1998 14B all ast Manufacturer I m pact A nalysis Methodology


### eneric Analytical Fra Ballast Industry Profile trawmari hn i ewor k

Ballast Industry Cash Flow Ballast Subgroup Impact Ana Next Steps ISIS

April 28, 1998 15 Ballast Manufacturer Impact Analysis Methodology

April 28, 1998 15raw an In dustry Cash Flow GRIM Description



### The Department proposes to use the Government Regulatory Impact Model (GRIM) to conduct the Industry Cash Flow Analysis. GR I M is a tool that helps identify the financial i mpacts of efficiency an d other regulations on manufacturers. B ased on conventional analysi s of d iscounted cash flows C reates full computations of cash flow for both base case (as is) and standards case (with regulation) Computes Industry Values (NPV) for both scenarios 

### Offers numerical and graphical comparisons

April 28, 1998 16 Strawman Industry Cash Flow GRIM Description 

### The Department proposes to use the Government Regulatory Impact Model (GRIM) to conduct the Industry Cash Flow Analysis. 

# 'v: GRIM is a tool that helps identify the financial impacts of energy efficiency and other regulations on manufacturers.
• Based on conventional analysis of discounted cash flows • Creates full computations of cash flow for both base case (as is) and standards case (with regulation) • Computes Industry Values (NPV) for both



### . scenarios • Offers numerical and graphical comparisons

April 28, 1998 16rave an Industry C ash Fl ow GRIM Description



### GRIM uses manufact urer p r ices, sh i pments , and fi nanc i al i nformat i on fo r arrivi ng i ndust ry

M anufacturer P rices Manufaqturinq_^^osts Shipments Financial Informati o n

Cash Flow

April 28, 1998 17 Strawman Industry Cash Flow GRIM Description 

### GRIM uses manufacturer prices, manufacturing costs, shipments, and financial information to calculate cash flows used for arriving at the industry value.

Manufacturer Prices bJIt ----/----11 0IIII Manufacturing Costs Shipments

__ --+-___ 1\1 0IIII . Financial Information

Cash Flow

April 28, 1998 17S trawman In d ustry Cash Flow



### The Department has developed a "strawman" using industry-average prices, costs, shipments, financial information. Manufacturer prices were estimated from the Current Industrial Reports published by the Bureau of Census. Manufacturing cost data is "reverse-calculated" using above mentioned prices and manufacturer markups estimated from ballast industry cost structure.Ballast industry cost structure was developed from industryspecific information published in SEC 1O-K reports and Census of Manufactures (a Bureau of Census publication). Shipments are obtained from the "National Energy Savings Spreadsheet" developed by LB L. Financial information (e.g., tax rate, working capital, depreciation, etc.) is obtained from manufacturers' 10-K statements and other publicly available industry statistics (e. g., RobertMorris Associates).
April 28, 1998 18 Strawman Industry Cash Flow 

### The Department has developed a "strawman" cash flow using industry-average values for manufacturer prices, manufacturing costs, shipments, and financial information. 

# iJ Manufacturer prices were estimated from the Current Industrial Reports published by the Bureau of Census. 

# :il Manufacturing cost data is "reverse-calculated" using above mentioned prices and manufacturer markups estimated from ballast industry cost structure .

.. Ballast industry cost structure was developed from industryspecific information published in SEC 10.. K reports and Census of Manufactures (a Bureau of Census publication) .



# . JJ Shipments are obtained from the "National Energy Savings Spreadsheet" developed by LBNL . •

## ~ Financial information (e.g., tax rate, working capital, depreciation, etc.) is obtained from manufacturers' 1O-K statements and other publicly available industry statistics (e.g., Robert-Morris Associates) . April 28, 1998 18Straw man Industry Cash Flow Strawman Estimate of Ballast Prices



### Current Industrial estimate prices. 2nd, 3rd & 4th Quarters 1997 (Quantity in 1,000 ballasts; Value in $1,000) Product description MAGNETIC TYPE ......................... Two-lamp 96T12 &.72T12 ...... Two lamp 40W/48T12/RS......* Two lamp 32W/48T8/RS .... Other rapid start. ... ...... .. ........ . ELECTRONIC TYPE ..................... Instant start : and 2 lamp 32W/48T8. . ..... I 3 and 4 lamp 32W/48T8........... GRIM Quantity Value ; Avg. Price Product Class 4,510 47,615 $10.56 2 F96T12 19,864 . 115,177 2 F40T12 1,721 ___ 12,489 $7.26 1 F40T12 3,786 55,032 $14.54 12 F96T12HO *

__ ,899 139,783 F$11.75 ^ 1 & 2 F32T8 9, 134, 600 $13.81 3 & 4 F32T8 472 7439 $15.76 2 F40T12 RS Quantityand Value represent combined values for One lamp 40W/48T12/RS and Two lamp 32W/48T8/RS to avoid disclosing data for individual companies. * Since shipments of 2F96T12HO represent a minor fraction of this CIR category, the,price estimate is not as reliable as for other ballast types. ^^^

April 28, 1998 19 Strawman Industry Cash Flow Strawman Estimate ofBallast Prices 

### Current Industrial Reports were used to estimate manufacturer prices. 2nd, 3rd & 4th Quarters 1997**~"'--~-~'-~"""--"""""'-"""~(Qucintifyin"T,** 000 hciHasts;'vaTueTn $1,**o6or'c"~-,~".~,, ",~,~~,.** ___**,~_~_.,.,.,c"_"_~**__ 

### ,_.!..**,,,,,_~,**

### ..**~__ -'~'~-~~-.** **·.~.r,~'.~,** 

## ........:",-, ...•**·~,**



## ....**·.~"** 

## __ .' ...**J.~'.-'.,'** ..**'.~,**

..**·,3~,** R.'i.M,· ...........................**_,_,~_,,"_,~** __**",_",",'.~_",'_,.,','c,'.,,_"_,_,_"""-"""""'1""** ••_,c•• "., .. ...• . .. 

### c., ,...... .... c".·C""" ., " ........ " ...'c ..·.· .................. Product description : Qu . Product Class**'''''_~,,.'''''~''''''''"'.,,·''''.,..W'''''~M«'W'*'''''''',,..'''''~'',.,'w,_''''·''''''·'··'''4****ww.,,""',,"'=_y'W'»"_4_'l'W&**..**w""''''·'w~_''¥' .~,.~"~~""-W~~"",,,~,,,,~,,·,~~,,,,,~W"**  '_''> MAGNETIC TyPE.......•••...........
.**-.-~,.-,**..**,-,-~--,~-,~.~~""~-".-,,..** ....., ... ,-..**-~"** Two-lamp 96T12 & 72T12 ....... Two lamp 40W/48T121RS .... .. 115,1**,,_,_c,!~?~~£~~('~!3T8/RS** ....... . 12,489 !**"'."~.""'<M«k."'""."'''''"'N~_-.-,M''~~'.7** ..**~~'''',''''...,..,,,, ~** **~,** __, ..**,_"2.!.~~~,,,~~Ei,~,~,!~c~···** ................ . 55,032

F40T12 RS * Quantity and Value represent combined values for One lamp 40W/48T12/RS and Two lamp

32W/48T8/RS to avoid disclos data for individual com

April 28, 1998 19Strawm an Indust C ash Flow Industry Cost Structure



### For " reverse-calculati ng " i ndustry manufacturing costs, ballast structure was developed using ava i lable i nformat i on. publ i cly
Profit before tax 6.3% SG&A 17.0% Depreciation 2.6% Overhead 9.3% Cost of Labor 11.2% Cost of Materials 53.7%

April 28, 1998 20 Strawman Industry Cash Flow Industry Cost Structure 

### For "reverse-calculating" manufacturing costs, ballast industry cost structure was developed using publicly available information.
Profit before tax 6.30/0 SG&A Depreciation 2.6% Ove 9.3% Cost of Materials

53.7%

April 28, 1998 20raw an I nd ustry C ash Flow Strawman Estimate ofManufacturing Costs



### Starting from the manufacturer prices, structure used to estimate disaggregated manufacturing Ballast C R Using Industry Cost Structure type 1997 Labor Material Tooling Overhead; Totaf 1 F40T12 OEM / Mfg . price 7.26; (Magnetic ) Mfg. cost 0.81 3.901 0.191 0.67 5.57, 2F40T12 OEM / Mfg . price 5.80; (Magnetic) Mfg. cost 0.651 3.111 0.15' 0.54E 4.451 2F96T12. OEM / Mfg. price 10.56; f f (Magnetic ) Mfg. cost 1.181 5.67 0.281 0.98' 8.11 2F96T12HO OEM / Mfg . price 14.541 (Magnetic ) Mfg. cost 1.631 7.81 0.38 ` 1.35; 11.16; 2F40T12 OEM / Mfg. price 15.761 j '• (Electronic ) Mfg. cost 1 1.76 8.47; 0.41; 1.46 12.1® 1 F32T8 OEM/ Mfg . price 11.75 (Electronic ) Mfg. cost _ _ _ 1.311 6.31 0.31 1.091 9.02 2F32T8 OEM / Mfg . price 11.751 F f (Electronic ) Mfg. cost 1.31! 6.31; 0.311 1.09! 9.021 3F32T8 OEM / Mfg . price ( 13.81 (Electronic) Mfg. cost 1.55; 7.421 0.36. 1.28 ^ 10.61 4F32T8 OEM / Mfg. price 13.811 (Electronic) Mfg. cost 1.55 7.421 0.36; 1.28: 10.61 i * Tooling costs are approximate ly equal to depreciation costs.

April28, 1998 21 Strawman Industry Cash Flow Strawman Estimate ofManufacturing Costs 

### Starting from the manufacturer prices, the industry cost structure was used to estimate disaggregated manufacturing costs.

* Tooling costs are approximately equal to depreciation costs.**".,~"""_"""_~."",,L,~",,** "."",,,
April 28, 1998 21S traw man In d ustry ash Flow Financial Information



### Publicly available estimate used to financial information alb Assumptions Page for Fluorescent Lamp Ballasts Scenario Description Base Year . . o^ Announcement Year

Standard SG&A Research and Development Ordina ryCapital Expenditures Beginning year foranalyticalpurposes Year in which the regulation announcement is made
D - The Dept. will seek additional information

evenue evenue Revenue

April28, 1998 22 Strawman Industry Cash Flow Financial Information 

### Publicly available sources (Sec 10.. Ks and Industry Composites) were used to estimate financial information GRJM:Assumptions Page for

Fluorescent LampBallasts \ !**.~w~~!!,~!i~_!?~~"cIiPl!~!!w._**..**w~,~.,_~**__**,,~**___**.~~_'"** Fluorescent Lamp Ballasts**"~.~~~**___**N~"'-"'~~~~NA~_"""V~_'** Base Year 1998**~~~,~.'!~~!'!!.X~a,.~£l!.~,~'!~!l.!~~"'!!l!}!'Et;!,~.~!"...".,,,** 'W ,**""~'wN)"""'.Mffi~""".",,o."""''''''~'''"ffi"'''''''"''''''=** NY',"""'-','>' Announcement Year 1999 Year in which the regulation announcement is made

. .---. , ,,, ' __**'~'~'**__**~""""~~=~''''''''''''''W~N**__**'''-'N''=NN'~'''"'**__**'~~'''''W**__**MW~'''''',~ww ~~~_,.y"""'~~'''~',=~"._~'.v~**  Standard Year**L-~2** Year in which**the.r~gulfl:~~t;!!!!akes,,!!l.f!.~t _."_,,_.~** ____**,,.~~_~** "**~~'~~~--'-"** 

### / '\

. ".. """",... Tax Rate V 37.2% 

### 1\ .-**~~""",~**__**.y",,"_""~~N''''''''.,v'''_N,_~w~'~m T~D**  - The Dept. Discount Rate for NPV 

### l TBD**~i?L~~~ k,.q~~~Hf2,!:!!:j"i,!:[qJ:!natio** n**,~,,~£~,~t ~P,~!~!_"'_"'**  __**"w''''w'~_''_''',"_''**__ M_'_''' __ 

## L I 16.4% o/fevenue , I**,,,,,,,,,,_~~~** _____**'=~H_"-W"'H""~~'~~.** ____ o**~'m >V,~y~~'A** __**~'** Standard SG&A 15.9% q[!. evenue**~esearch** and Development 1.8%**o!~** evenue**"'-~ ~'''''''-''''~-~~** **~~'~"N._"","_"",""",V=~Nww."<_~_'~~N~"""~'~~=~N·'N'~** __**~'~~_N~",·","""",'= ~,",",~~~~_"""",",,,**  \ 

### I**,Q!:!!,!!!~!Y}2~P!~~~!'!~'!!_AW""~**__**'~""A'W_''''.''_.''_''''''''~** 2.90% o/Revenue ,ordinary.9tpi!al**~~,!l:~it~es** I,**~** -3.40% II! Revenue**~ .""---"'.-'----~-""~~'-".--~-~~""-'----"~---'-""--"-'~~-** 

April 28, 1998 22 !Str w an I nd ustry C ash Flow Strawman Ballast Shipments



### Sh o ' p ment va l ues i n a r e Nat i onal Savings Spreadsheet (NESS) NESS uses shipment values to identify the national energy savings potential of ballast energy efficiency standards Using shipment values from NESS will ensure that the shipment inputs are consistent with other parts of the ballast regulatory impact analyses For the purpose of calculating the i m pact of stan dards, GR I M will only consider those ballasts that are i mpacted by stan dards C onsistent with the national benefits and life

- cycle-cost analyses, GR I M will use two different scenarios for s h ipments forecasts C onstant Shipments Scenario D eclining Shipments Scenario

April 28, 1998 23 Strawman Industry Cash Flow Strawman Ballast Shipments Shipment values used in GRIM are obtained from the National Energy Savings Spreadsheet (NESS) 

# i/J NESS uses shipment values to identify the national energy savings potential of ballast energy efficiency standards

## ~-.i Using shipment values from NESS will ensure that the shipment inputs are consistent with other parts of the ballast regulatory impact analyses 

# :iA For the purpose of calculating the impact of standards, GRIM will only consider those ballasts that are impacted by standards 

# lii Consistent with the national benefits and life-cycle-cost analyses,

. GRIM will use two different scenarios for shipments forecasts

- Constant Shipments Scenario

- Declining Shipments Scenario

April 28, 1998 23rave an Indust ash love Ballast Shipment Scenarios



### The impact of new ballast standards are dependent on assumptions about the " 

### base case "

c 

### 9

I I I 1 1997 2000 2003 2006 2009 2012 2015 2018

S td. Year
-.- Co nstant Shipments Scenario -A- eclinin i ents cenari

April 28, 1998 24 Strawman Industry Cash Flow . Ballast Shipment Scenarios 

### The impact of new ballast standards are dependent on assumptions about the "base case"

U) 

# - c: CD E c. 

### .-

1997 2000 2003 2006 2009 2012 2015 2018 Std. Year 

# 1-.- Constant Shipments Scenario -.- Declining Shipments Scenario 

# I

April 28, 1998 24Straw man Indust ash Flow Declining Shipments Scenario



### For the purpose of calculating the impact of standards, GRIM will only consider those ballasts that are impacted Baseline Case (Magnetic Ballast Sales)
-+-1 F40T12 - -2F40T12 -:-2F96T12 -2F96T12H0 35 30 25 20 15 0 Standards Case

(Magnetic Ballast Sales) Std. Year

5 _ s t 0 ^ ^ rte'--cr 1998 2000 2002 2004 2006 2008 2010 2012

Baseline Case (Electronic Ballast Sales) 35 30 25 20 15 10 5 01998 2000 2002 2004 2006 2008 2010 2012 1F40T12 2F40T12 3F40T12 4F40T12 0 1998 2000 2002 2004 2006 2008 2010 2012

Standards Case (Electronic Ballast Sales) 35 1 30-I 25 20 15 10 5 0 1998 2000 2002 2004 2006 2008 2010 2012

Std. Year -+-1 F40T12 2F40T12 -A-2F96T12 - --2F96T12HO

-+-1 F40T12 2F40T12 ---3F40T12 --x- 4F40T12

April28, 1998 25 Strawman Industry Cash Flow Declining Shipments Scenario 

### For the. purpose of calculating the impact of standards, GRIM will only consider those ballasts that are impacted by standards

25 20 15 10 5 o Baseline Case (Magnetic Ballast Sales)

--1F40T12 --2F40T12

___ 2F96T12 --*-2F96T12HO
1998 2000 2002 2004 2006 2008 2010 2012

Baseline Case (Electronic Ballast Sales) 35 30 25 1F40T12 2F40T12 20 3F40T12 15 4F40T12 10 5 0 1998 2000 2002 2004 2006 2008 2010 2012 35 30 25 20 15 10 5 o Standards Case (Magnetic Ballast Sales) Std. Year

1998 2000 2002 2004 2006 2008 2010 2012

35 30 25 20 15 10 5 o Standards Case (Electronic Ballast Sales) Std. Year

1998 2000 2002 2004 2006 2008 2010 2012 __ lF40T12

__2F40T12

___2F96T12 --*-2F96T12HO

__ lF40T12

__2F40T12

___ 3F40T12 --*-4F40T12

April 28, 1998 25raw an In d ustry Cash Flow Ballast Investments



### For each "base case" scenario timing investments estimated Constant Shipments Scenario

Base Case Shipments Base Case Investments of Magnetic Ballasts in Electronic Ballasts

Std. Year Std. Year Standards Case Shipments Standards Case Investments of Magnetic Ballasts in Electronic Ballasts

Std. Year Std. Year April 28, 1998 26 Strawman Industry Cash Flow Ballast Investments 

### For each "base case" scenario the timing of new investments must be estimated Constant Shipments Scenario Base Case Shipments of Magnetic Ballasts

Std. Year Standards Case Shipments of Magnetic Ballasts

Std. Year Base Case Investments in Electronic Ballasts

Std. Year Standards Case Investments in Electronic Ballasts

Std. Year April 28, 1998 26·raw an In d ustry ash Flow Ballast Investments



### For each "base case" scenario timing estimated Dec linin a Sh O ments Scena ri o

Base Case Shipments Base Case Investments of Magnetic Ballasts in Electronic Ballasts

I t A t A ttt Std. Year Std. Year Standards Case Shipments Standards Case Investments of Magnetic Ballasts in Electronic Ballasts

Std. Year Std. Year April 28, 1998 27 Strawman Industry Cash Flow Ballast Investments 

### For each "base case" scenario the timing of new investments must be estimated Declining Shipments Scenario Base Case Shipments of Magnetic Ballasts

Std. Year Standards Case Shipments of Magnetic Ballasts

Std. Year Base Case Investments in Electronic Ballasts

Std. Year Standards Case Investments in Electronic Ballasts

Std. Year April 28, 1998 27raw an I nd ustry Cash Flow Strawman Inputs-Constant Shipments Scenario



### "Strawman" manufacturing shipments various ballast types will using shipment weighted before input "Strawman" BASE CASE SCENARIO ^^ udic 13;mlh t TleOrunic Ballasts Shipment 1998 Default 'Value 1F,40T12 214(17'12 2MT12 2F96T12H0 Default Value 1F40T12 2140472 3F40'17.12 4Ti+40'T1 2 m;eightedawv. Price/Unit ($) (from CIR) 7.26 5.80 10.56 14.54 (fnnnCOR) 15,76 15.76 15.76 15.76 $6.89 Unit Sales (millions ) (from NESS)* 2.20 23.00 6.00 0.30 (from NESS) 0.00 0.00 0.00 0.00 31.50 Unit Sales (millions ) (Manufacturer) Cost o Sales ($) (% Of Pri e/ Unit ) (% Of Pnee/Unit) Labor /Unit 11.19% 0.81 0.65 1.18 1.63 11.20% 1.77 1.77 1.77 1.77 $0.77 Material/Unit 53.72% 3.90 3.12 5.67 7.81 53.70% 8.46 8.46 8.46 8.46 $3.70 Overhead/Unit 9 .27% 0.67 0.54 0.98 1.35 _ 9.30% 1.47 1.47 1.47 1.47 $0.64 NESS: National Energy Savings Spreadsheet (developed by LBNL) - NESS is under development. These values are preliminary" Inputs-Base Case

Unit Sales Revenues Cost of Sales Fluorescent Lamp B al las is

Income Staten V11

Matenal Overhead De reciatton Base Case Cash Flow I Base Year 1998~M 1999 6.89 31.50
24.3 116.6 20.1 6.89

31.50 6.89

116.6 6.891 6.89

31.501 31.50 6.89 31.50

20.1 20.1 l 20.1 6. 3 .>, ,. 6.3 217.1 24.3 116.6 20.1 6.3
April 28, 1998 28 Strawman Industry Cash Flow Strawman Inputs-Constant Shipments Scenario 

### "Strawman" manufacturing costs, prices and shipments for various ballast types will be aggregated using shipment weighted averages before input to the "Strawman" GRIM spreadsheet

II IIIIIDIII a

IIlIamllll

111111111111 20.1 6.3

April 28, 1998 28B allast M anufacturer I m pact Analysis Methodology


### Generic Analytical Framework Ballast Industry Profile Strawman Industry Cash Fle 4 Ballast IndUstry Cash Floirif j Ballast Subgroup Impact

ext Steps analysis

April28, 1998 29 Ballast Manufacturer Impact Analysis Methodology

April 28, 1998 29B allast In d ustry cash Flow Aggregation Approach



### The Department proposes to develop the industry " bottom-up" app roach. The G overnment Regulatory I m pact Model (GR I M ) will b e us ed to encourage all parties to use a common annual cash flow analysis un der current vs. new energy
- efficiency stan dards scenarios. The D epartment will provide stakehold e rs with the "strawman" cash flow using publicly available valu es for price , cost, ship m ents, and financial information. The Department has prepared a list of financial values for input to the GRIM as a starting point for discussion at the workshop . Each manufacturer will provide its own cash flow analysis to be aggregated with others to build the industry picture .

April28, 1998 30 Ballast Industry Cash Flow Aggregation Approach 

### The Department proposes to develop the industry cash flow using a "bottom-up" approach. 

# VJ The Government Regulatory Impact Model (GRIM) will be used to encourage aJI parties to use a common annual cash flow analysis under current vs. new energy-efficiency standards scenarios. 

# [Ii The Department will provide stakeholders with the "strawman" cash flow using publicly available values for price, cost, shipments, and financial information.

## ~i/J The Department has prepared a list of financial values for input to the GRIM as a starting point for discussion at the workshop. 

# [iA Each manufacturer will provide"its own cash flow analysis to be aggregated with others to build the industry picture.

April 28, 1998 30B allast I nd ustry ash Flow Rolling Up Manufacturer Cash Flows to Industry Level



### The "Strawman " wi l l serve as a starting po i nt and benchmark from which individual manufacturers' cash flows can be created.

Manufacturer A
"Strawman" Industry Cash Flow Manufacturer B Industry Cash Flow

Manufacturer C Eh

April 28, 1998 31 Ballast Industry Cash Flow Rolling Up Manufacturer Cash Flows to Industry Level 

### The "Strawman" will serve as a starting point and benchmark from which individual manufacturers' cash flows can be created.

"Strawman" Industry Cash Flow Manufacturer A

I!!!I-----...e-! Manufactu rer B
Manufacturer C Industry Cash Flow

April 28, 1998 31B allast I nd ustry C ash Flow Aggregation Process



### Ind ividual manufacture r' s w ill ag gregated ar ri ve d i sclosure the Industry Cash Flow (and to prevent f i rm-spec ifi c information).

I ndust ry Cash F l ow 

## RIM

April 28, 1998 32 Ballast Industry Cash Flow Aggregation Process 

### Individual manufacturer's cash flows will be aggregated to arrive at the Industry Cash Flow (and to prevent disclosure of firm-specific information). Manufacturer 1: Cash Flow 1------+ GRIM +----11 Industry Cash Flow

Manufacturer 2: Cash Flow 1------+ GRIM +----11

III II II III III II III III III III III III III III III III III III Manufacturer n: Cash Flow 1----+ GRIM +---_lI!

April 28. 1998 32B allast Industry C ash Flog Public Record



### For the public record the i nformation summary sheet of the i ndustry P ro prietary infor m ation will not be d i scl os ed : S hip m ents by ballast type P rices by ballast type Manufacturing costs by ballast type M an financial informati o n (tax rate, worki ng capital, etc.)

April 28, 1998 33 Ballast Industry Cash Flow Public Record 

### For the public record the information that will be presented is only the summary sheet of the industry cash flow for each scenario.

Proprietary information will not be disclosed:

## :~ Shipments by ballast type ,I 

### tvj Prices by ballast type Manufacturing costs by ballast type

## l~**[~** Manufacturer-specific financial information (tax rate, working capital, etc.)

April 28, 1998 33

### The Industry Cash Flow will be presented both with

and without standards (Baseline

Taxes [ Net Income Before Financing _34 - 5 11 34.5 34.5 1 34.5 34.5 38 38 .. _...... 38... 38 a 3 . 8 2000

11.4 11.4 11.4 i 4.3

7 . 2 72t 72 72 72 72'1 63 63 631 63t 63 63 13 . 5 13 . 5 13 . 5 135 135 13.5 1

(7.4 ) (7 4) (7.4)1 (7 4),............ (7 4)1 (7.4) (7.4)1 (7.4) 61 6 . 1 61 10000 0 9259 0 8573 0 7938 0.7350 0.6806 6t 56 52 48 4.5, 4.2

----- ------- ------

2001 2002 2003 Ballast Industry ash love

Unit Sales Revenues Cost ofS ales Labor

Material

................................................... Overhead
Standard SG&A R&D iProduct C onversion t. es( (Electronic Ballast) Profit Before Tax

Ca.h 1loH Rtatimcnt Net Income _ Depreciatio q L jChane m W orking Capital Cash Flows from Operations

Ordinary Capital Expenditures

.......... Conversion Capital Expenditures Cash Used In Investment

Depreciation d Administrative

Net Cash Flow Terminal Value €Present Value Factor Discounted Cash Flow 6.89 31.50 6.89

31.50 6.89

31.50 6.89

31.50 6.89 31.50 217.1 217.1 6.89 31.50 Output for Public Review

6.89 31.50

6 . 1 76.2 0 3405 , 28.0 _April 26,_t 938 34' Ballast Industry Cash Flow Output for Public Review 

### The Industry Cash Flow will be presented both with (Standards Case) and without standards (Baseline Case)

1111111111111111

1111111111111

111111111111111

IID1I1I8.

11111111111111

.DIIIIIIII

IIBIIIIIIII 

## I ···w •.**~~}** I !**I·····-~·-~···!** i 2012 I**I~~:::~=:~==j** 

## I**31~5~1** i 217.1 :

# t-~~~ i 116.6 i ijQ:ll f 6.3 I f····· ·····1 

# ! .....**··~4.5J** I 3.8 i f _,**I·~·--·--j f~**  '<N,mN**,,".,.~,,.'w",,,,~·~~l** l 11.4 .**r····-·········~··\** ! "4.3\ i 1 7.2 :B allast Manufacturer Impact A nalysis Metho dology


### Generic Analytica Framework Ballast Industry Profile Strawman Industry Cash Flow Ballast Industry Cash Flow Ballast Subgroup Impact Ana Next Steps ysis

April28, 1998 35 Ballast Manufacturer Impact Analysis Methodology

April 28, 1998 35B allast S ubgroup I m pact Analysis



### The subgroup impact analysis consists of 5 tasks:

3. Estimate Employment Impacts
4. E sti m ate Impact on M anufacturin g, Capacity 1. M anufacturer C as h -Flow A nalysis Qmt{acts 2. E sUmate Co mpetitive

5. Summarize Q uantitative an d Q ualitative Findin g s

April28, 1998 36 Ballast Subgroup Impact Analysis 

### The subgroup impact analysis consists of 5 tasks:

1. Manufacturer Cash-Flow Analysis
2. Estimate Competitive Impacts 3. Estimate Employment Impacts
4. Estimate Impact on Manufacturing, Capacity
5. Summarize Quantitative and Qualitative Findings

April 28, 1998 36B allast Subgroup Impact Analysis Manufacturer Cash Flow



### Average i ndustry manufactu ri ng 111 not be used to assess the i mpacts Preliminary interviews and other information strongly suggest that coststructures and cash flow descriptions be developed on a company-bycompany basis.

Vj

### , M anufacturers will be asked to pe rform cash flow analyses usin g th e GR I M spreadsheet and their own values for co mpany-specific in p uts. - L will assist as needed in adapting the GRIM procedure to individual manufacturer situations. - Important variances from the strawman o r in d ustry norms will b e discussed and documented. 

### Cash flow reports will be prepared with and without new ener gy efficiency standards.

April28, 1998 37 Ballast Subgroup Impact Analysis Manufacturer Cash Flow 

### Average industry manufacturing costs will not be used to assess the impacts for subgroups of manufacturers.

### ~J Preliminary interviews and other information strongly suggest that cost structures and cash flow descriptions be developed on a company-bycompany basis .



# . i/ Manufacturers will be asked to perform cash flow analyses using the GRIM spreadsheet and their own values for company..specific inputs.

- ADL will assist as needed in adapting the GRIM procedure to individual manufacturer situations.

- Important variances from the strawman or industry norms will be discussed and documented .

. ; Cash flow reports will be prepared with and without new energy efficiency standards.

April 28, 1998 37B allast S ub g roup I mp act Analysis Estimate Competitive Impacts



### DOE it solicit early i in structuring the competitive Impact assessment. Competitive Analysis will focus on assessing the impacts to smaller, significant manufacturers. J has offered to participate in drafting questions to be used in manufacturer interviews. Questions will pertain to an assessment of the likeliness of increased concentration levels and other market conditions that could lead to non-competitive pricing behavior. -Asymmetrical cost increases to some manufacturers -Increased proportion of fixed costs potentially increasing business risk 

### -Barriers to market entry (proprietary technologies, etc.)

April 28, 1998 38 Ballast Subgroup Impact Analysis Estimate Competitive Impacts 

### DOE will solicit early involvement of the Department of Justice in structuring the competitive impact assessment**l~** Competitive Analysis will focus on assessing the impacts to smaller, significant manufacturers. 

# r.A DOJ has offered to participate in drafting questions to be used in manufacturer interviews. 

# ,.j Questions will pertain to an assessment of the likeliness of increased concentration levels and other market conditions that could lead to non-competitive pricing behavior. -Asymmetrical cost increases to some manufacturers -Increased proportion of fixed costs potentially increasing business risk -Barriers to market entry (proprietary technologies, etc.)

April 28, 1998 38B allast S ubgroup I m pact Analysis Estimate Employment Impacts



### DOE wi l l review trends i n manufactu r ing d iffe rent fluorescen t lamp ballasts i n supplement th i s i nformat i on re r-supp li ed data. DOE will use interviews with each major ballast manufacturer to gather employment levels at existing plants , particularly those that serve the US market . Existing data and manufacturer intervi ews will b e use d to esti mate em ployment level differences between different standards levels. Interviews will be used to establish d ifferences in workforce skills required under different levels of energy-efficiency standards. DOE interviews with manufacturers will establish likely impact of new energy-efficiency standards on product mix and employment levels
.

April 28, 1998 39 Ballast Subgroup Impact Analysis Estimate Employment Impacts 

### DOE will review trends in employment levels for manufacturing different types of fluorescent lamp ballasts in the US, and will supplement this information with manufacturer-supplied data. 

# V DOE will use interviews with each major ballast manufacturer to gather ..' employment levels at existing plants, particularly those that serve the US market. 

# V Existing data and manufacturer interviews will be used to estimate employment level differences between different standards levels. Interviews will be used to establish differences in workforce skills required 

# J under different levels of energy-efficiency standards. DOE interviews with manufacturers will establish likely impact of new 

# tV energy-efficiency standards on product mix and employment levels.

April 28, 1998 39Ballast S ub g roup I m pact Analysis Estimate Impact on Manufacturing Capacity



### DOE will revi ew t rends manufactur i ng fo r fluorescent lamp ballasts in the US, and w il l supplement this information with r® l led data. Interviews will be used to supplement existing public information on differences in capital equipment required for electronic vs
. magnetic ballast manufacture . DOE interviews with manufacturers will establish likely impact of new energy- efficiency standards on product m ix and production capacity. Manufacturers will be questioned about the value of any strande d ass ets associated with new energy
- efficiency standards.

April28, 1998 40

Ballast Subgroup Impact Analysis Estimate Impact on Manufacturing Capacity 

### DOE will review trends 

### in manufacturing capacity levels for fluorescent lamp ballasts in the US, and will supplement this information with manufacturer-supplied data. 

# if: Interviews will be used to supplement existing public information on , differences in capital equipment required for electronic vs. magnetic ballast manufacture.

### [~ DOE interviews with manufacturers will establish likely impact of new energy-efficiency standards on product mix and production capacity. Manufacturers will be questioned about the value of any stranded US assets associated with new energy..efficiency standards.

April 28, 1998 40B allast Sub grou p I mp act Analysis Interview Guide



### The Department i

will conduct manufacturer interviews manufacturer-specific views important The Department has developed a questionnaire to guide the interviews and invites comments and suggestions on its content from all interested parties. The purpose of the interviews is to gain understanding and ensure confidence in the results of the manufacturer impact analysis. ® Some questions will be irrelevant to some manufacturers, and some manufacturers or suppliers may want to provide information in addition to that requested. Arth ur D . Little is assisting the D epartment in car ing out the interviews and in providing third-party confidentiality for proprietary information.

April28, 1998 41 Ballast Subgroup Impact Analysis Interview Guide 

### The Department will conduct manufacturer interviews to gather manufacturer-specific data and views on important issues. 

# rJ The Department has developed a questionnaire to guide the interviews and invites comments and suggestions on its content from all interested parties .



# . i/ The purpose of the interviews is to gain understanding and ensure confidence in the results of the manufacturer impact analysis.

- Some questions will be irrelevant to some manufacturers, and some manufacturers or suppliers may want to provide information in addition to that requested. 

# ;J, Arthur D. Little is assisting the Department in carrying out the interviews and in providing third-party confidentiality for proprietary information.

April 28. 1998 41Interview G ui d e



### interviews The will cover a range of topics. Current Organizational Characteristics Industry Infrastructure Global Competition Manufacturer Cash Flow Analysis Competitive Impacts Assessment Employment Impacts Assessment Manufacturing Impacts Assessment Topics Covered

April 28, 1998 42 Interview Guide 

### The interviews will cover a range of topics.



# . j 

# .J

.. , : "
.. ; 

# '.; 

# ,." .t(.l

..

# -./
.............•. 1 !**~** . j



# .....JJ .... ! ! '- .J

...... i.. 'VI Current Organizational Characteristics Industry Infrastructure Global Competition Manufacturer Cash 

### Flow Analysis Competitive Impacts Assessment Employment Impacts Assessment Manufacturing Impacts Assessment Topics Covered

April 28, 1998 42Interview G ui de Organizational Characteristics



### DOE i in better understanding current organizational characteristics The Department's interest is focused toward the plant or profit center directly concerned with ballast production. - The details of production levels, product mix, costs, and other variables are not generally public information at the plant level, so the Department invites manufacturers t discuss these and other characteristics confidentially to the extent practical. The organizational setting within which the plant operates is important toround out the Department's understanding of the impact that new energyefficiency standards might have on future ballast manufacturing.

April 28, 1998 43 Interview Guide Organizational Characteristics 

### DOE is interested in better understanding the current organizational characteristics of each manufacturer. .; The Department's interest is focused toward the plant or profit center directly concerned with ballast production.

- The details of production levels, product mix, costs, and other variables are not generally public information at the plant level, so the Department invites manufacturers to discuss these and other characteristics confidentially to lhe extent practical. ,./ The organizational setting within which the plant operates is important to round out the Department's understanding of the impact that new energyefficiency standards might have on future ballast manufacturing.

April 28. 1998 43Interview Guide Industry Infrastructure



### DOE i i nterested i n better cu r rent i nfrastructure i t eff i ciency standards. DOE is especially interested in tw o g en e ral se gm ents of the in du st ry infrastructure.

- M ajor customer types , an d the d istri b ution channels thro u gh which ballasts reach the end user.

- M ajor suppliers, the trade allies which would be most stron g ly affected by new energy efficiency stan dards. The indust ry infrastructure on the supply si de can be affected directly by significant changes in manufacturer ' s product m ix or location of p roduction.

- DOE representatives will be available t o m eet with suppliers to discuss these secondary impacts.

April 28, 1998 44 Interview Guide Industry Infrastructure 

### DOE is interested in better understanding the current industry infrastructure and how it would be affected by new energy efficiency standards. 

# 'J, DOE is especially interested in two general segments of the industry infrastructure.

- Major customer types, and the distribution channels through which ballasts reach the end user.

- Major suppliers, the trade allies which would be most strongly affected by new energy efficiency standards. ,.; The industry infrastructure on the supply side can be affected directly by significant changes in manufacturer's product mix or location of production.

- DOE representatives will be available to meet with suppliers to discuss these secondary impacts.

April 28, 1998 44Interview G ui d e Global Competition



### Ballasts are easily sh i pped and can be manufactured in a w i de variety of locations . The Department is interested in learning how ballast manufacturers view current trends in the global nature of the lamp ballast industry and how these trends are affecting m arketing and plant siting strategies. D epartment representatives also woul d like to g et manufacture r views on how energy
- efficiency standards m ight affect p rod uction an d marketing decisions in a global enviro nment.

April28, 1998 45 Interview Guide Global Competition 

### Ballasts are easily shipped and can be manufactured in a wide variety of locations. 

# J The Department is interested in learning how ballast manufacturers view current trends in the global nature of the lamp ballast industry and how these trends are affecting marketing and plant siting strategies. 

# ;.j: Department representatives also would like to get manufacturer views on how energy-efficiency standards might affect production and marketing decisions in a global environment.

April 28, 1998 45Inte rview Guide Manufacturer Cash Flow Analysis



### Cash flow analys i s i be i ng impact of standards on the ballast i ndust ry, and the Department wi shes d i scuss fu ll y results w ith manufacturer . Each manufacturer will be given the GR I M spreadsheet and a s amp le worked
- out "strawman " industry cash flow to facilitate underst and in g among manufacturers about the mo del and how it works. Each manufacturer can then input its own data an d assu mptions to develop its own expected cash flow. ® This cash flow output shoul d exhibit a format and content si m ilar to the strawman example provided.

April 28, 1998 46 Interview Guide Manufacturer Cash Flow Analysis 

### Cash flow analysis is a key procedure being used to measure the impact of standards on the ballast industry, and the Department wishes to discuss fully the results with each manufacturer. 

# J Each manufacturer 

### will be given the GRIM spreadsheet and a sample worked..out "strawman" industry cash flow to facilitate understanding among manufacturers about the model and how it works.

### '~ Each manufacturer can then input its own data and assumptions to develop its own expected cash flow.

- This cash flow output should exhibit a format and content similar to the strawman example provided.

April 28, 1998 46Interview Guide



### The Strawman Flow guide each manufacturer cash flow.

BASE CASESCENAFIIO l Base Year

Income Statement

82.3__. 24.3 116.6

11.4

7.2 72. 721 72 6.3 63 6 . 3 63

1.0000 24.3 24 . 3 24.3

116 6 116.6 116.6 20 1 20.1 20.1 6.3 ( 6.3 6.3 34 5 34 S ,.. ..,..... 34.5 1 38!____. 38 3 . 8 11.4 j 11.4 tt 11.4 43 [ 4.3 43 t i 7.2 7.2 7.2

135 135 13.5 (7.4) (7.4)... (7.4) I I (7.4)1 (7.4) (7•4);

31.50 31.50 217.1 217.1

6 1 6.1 0.8573 31.50
24.3 1 16.6 20.1 6.3 34.5

0.7938 ° 0.7350 3150 217.1

1.4 4.3

7.2 6.3 Material Overhead De elation P Selling General and Administrative

Standard SG&A R&D Product Conversion Ex ense

' -(Electronic Profit Before Tax Taxes Net Income Befoi

..... ........... 1....... ..._. Net Income Depreciation Change m Working Capital Ordinary Capital Expe nditures f Conversion Capital Expenditures Cash Used In Investment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow Industry Value (Net Present Value) Manufacturer Cash Flow Analysis

6.89 museum

MURDER

a'EEaa

OREEaa 6.89 31.50

Apri128, 1998 47 Interview Guide Manufacturer Cash Flow Analysis 

### The Strawman Industry Cash Flow can be used as a guide to develop each manufacturer cash flow.

11111111111111

amalliiS

1IIlIIIIII1B

11l1li111118.

11111111111111

IIDIIIIIIIIII

1111111111111 

### I

### "=~~:=~:~:=~:j I 7.2 J I....**~·** .... · ........ "..**~**.. · .... ! 1 6.3 I 1**"~'~N""** .**·~w ~,~.**  """1**1:::::~::lt~l** I ............ (7.4)1

.. , i7.4) I

.. '''''·'1

6.1 i L ........... i§jJ L ....Q:?1Q5....j

### f::::::::=:8~=j

.... ..!\pril..2 ..1l,

......1!:l

..**~8** 47. Interview Guide Manufacturer Cash Flow Analysis 

### analys is Cash flow i s p rocedure be i ng measu re impact of standa r ds Depa rtment wishes to d i scuss An important goal of each interview is to fully d iscuss the result s of this cash flow analysis under each scenario. - The cash flow analyses prepared before the intervi ew are fo r discussion purposes only. - P roblems and/or unique circumstances affectin g the cash flow results can be discussed and resolved during the interview. Each interview should include an informal review of a draft cash flow analysis for the manufacturer.

- The draft can then be revised after the discussion for sub m issi o n to third
- party review and inclusion in the industry rollup.

April 28, 1998 48 .Interview Guide Manufacturer Cash Flow Analysis



### Cash flow analysis is a key procedure being used to measure the impact of standards on the ballast industry, and the Department wishes to discuss fully the results with each manufacturer. :..; An important goal of each interview is to fully discuss the results of this cash flow analysis under each scenario.

- The cash flow analyses prepared before the interview are for discussion purposes only.

- Problems and/or unique circumstances affecting the cash flow results can be discussed and resolved during the interview. 

# J Each interview should include an informal review of a draft cash flow analysis for the manufacturer.

- The draft can then be revised after the discussion for submission to third-party review and inclusion in the industry rollup.

April 28, 1998 48Interview G uide Competitive Impacts



### DOE i s i nterested i n v i ewpoints wh i ch ene rgy. new eff i c i ency standards would i ncrease ma r ket powe r and thereby lessen compe ti t i on w i th i n the ba l last industry. Discussion topics will be prepared with Department of Justice input.

April28, 1998 49 Interview Guide Competitive Impacts 

### DOE is interested in manufacturer viewpoints on the extent to which new energy efficiency standards would increase market power and thereby lessen competition within the ballast industry. 

# r./ Discussion topics will be prepared with Department of Justice input.

April 28, 1998 49Interview G uide Employment Impacts



### The employment i mpacts i s an important cons i derat i on i n the ru l emaking process. DOE seeks to explore current trends in ballast p roduction e m ploym ent and solicit manufacturer views on how e m ploym ent patterns m i ght b e affected by new energy efficiency stan dards. DOE is also interested in the extent to which the workforc e at 

### facilities might need extensive retrainin g or replacement? e 

### S econdary employment impacts of new ener gy efficiency standards could occur particularly for important suppliers, and this is a topic for discussion as well.

April28, 1998 50 Interview Guide Employment Impacts 

### The employment impacts of new energy efficiency standards is an important consideration in the rulemaking process. ,.; DOE seeks to explore current trends in ballast production employment and solicit manufacturer views on how employment patterns might be affected by new energy efficiency standards.

- DOE is also interested in the extent to which the workforce at US facilities might need extensive retraining or replacement? 

# lV: Secondary employment impacts of new energy efficiency standards could occur particularly for important suppliers, and this is a topic for discussion as well.

April 28, 1998 50Interview Guide Manufacturing Capacity Impacts



### An energy effi c i ency ut ili zat i on fo r the ballast i ndustry i n numbe r of ways. Energy-efficiency standards could brin g abo ut manufacturin g capacity impacts that can be best antici pated by the manufacturers.

is interested in manufacturer views on this issue.

April28, 1998 51 Interview Guide Manufacturing Capacity Impacts 

### An energy efficiency standard could change capacity utilization for the ballast industry in a number of ways. 

# it! Energy-efficiency standards could bring about manufacturing capacity impacts that can be best anticipated by the manufacturers. 

### -DOE is interested in manufacturer views on this issue.

April 28, 1998 51B allast Manufacturer Impact Analysis Methodology


### Generic Analytical Framewo Ballast Industry Profile Strawman Industry Cash Flo Ballast Industry Cash F ow Ballast Subgroup Impact Analysis 

### Next Steps k

w

Apra 28, 1998 52 Ballast Manufacturer Impact Analysis Methodology

April 28, 1998 52Next Ste ps



### Draft Schedule for Ballast Manufactur i ng I mpact Analys i s. V C omplete draft methodology for MI A workshop V H old MI A approach workshop 

### End workshop comment perio d C omplete GR I M strawman C omplete interview questionnaire B egin interviews Complete d raft M I A document H old M IA draft results workshop April 7, April 28, 1998 M ay 28 , 1 998 June 11, 1 998 June-11,1 998 July 1,1998 Late S e pte mb er Late Octo ber

April 28, 1998 53 Next Steps 

### Draft Schedule for Ballast Manufacturing Impact Analysis.**~** Complete draft methodology for MIA workshop**~** Hold MIA approach workshop • End workshop comment period • Complete GRIM strawman • Complete interview questionnaire • Begin interviews • Complete draft MIA document • Hold MIA draft results workshop April 

### 7, 1998 April28, 1998 May 28, 1998 June 11, 1998 June 11, 1998 July 1,1998 Late September Late October

April 28. 1998 53