# Ballast Manufacturer Impact Analysis

U.S. Department of Energy Office of Codes and Standards 1000 Independence Ave., SW Washington, DC

Date: April 21, 1999 

# Ballast Manufacturer Impact Analysis

U.S. Department of Energy Office of Codes and Standards 1000 Independence Ave., SW Washington, DC

Date: April 21, 1999

### Table of Contents

Executive Summary ........................................................................................................1 1.0 Manufacturer Impact Analysis Methodology ......................................................... 8 1.1. Phase 1: Industry Profile and Issue Identification ................................................ 8 1.2. Phase 2: "Strawman" Industry Cash Flow Analysis ............................................ 9 1.3. Phase 3: Sub-Group Impact Analysis ................................................................ 10 1.4. Phase 4: Industry Cash Flow ............................................................................ 10 2.0 MIA Results ........................................................................................................12 2.1. Industry Characterization..................................................................................12 2.1.1. Industry Shipments ..................................................................................... 12 2.1.2. Manufacturer Market Shares and Characteristics ........................................ 14 2.2. Cash Flow Impacts ...........................................................................................16 

### 2.2.1. Shipments
.................................................................................................. 16 2.2.2. Capital Investments
.................................................................................... 19 

### 2.2.3. Industry Cash Flow Submittal ..................................................................... 20 2.2.4. Industry Value of the Electronic Ballast Business ....................................... 23 

### 2.2.5. Cash Flow Impacts
..................................................................................... 26 2.3. Impacts on Manufacturing Capacity , Plant Closures and Loss of Capital Assets ..
............................................................................................................ 29 2.3.1. Summary .................................................................................................... 29 2.3.2. Introduction ................................................................................................ 29 2.3.3. Interview Results ........................................................................................ 30 2.3.4. Impact on Small Manufacturers .................................................................. 31 2.4. Employment Impacts ........................................................................................ 32 2.4.1. Employment Levels in 1998 ....................................................................... 33 2.4.2. Employment Levels in 2003 : Absent Standards .......................................... 33 2.4.3. Employment Impacts on the Industry .......................................................... 35 2.5. Other Impacts
................................................................................................... 35 2.5.1. Impact of the Decline in Magnetic Ballast Shipments on Sub-group 1........ 36 2.5.2. Differential Impacts on the Two Sub

-groups with Regards to their Ability to Compete in the Marketplace
....................................................... 36 2.5.3. Global Competition .................................................................................... 37 2.5.4. Cumulative Impact of Regulations .............................................................. 37 

### Table of Contents
Executive Summary ........................................................................................................ 1 1.0 Manufacturer Impact Analysis Methodology ......................................................... 8

1.1. Phase 1: Industry Profile and Issue Identification................................................ 8 1.2. Phase 2: "Strawman" Industry Cash FlowAnalysis ............................................ 9 1.3. Phase 3: Sub-Group Impact Analysis................................................................ 10 1.4. Phase 4: Industry Cash Flow ............................................................................ 10 2.0 MIA Results ........................................................................................................ 12 2.1. Industry Characterization.................................................................................. 12

2.1.1. Industry Shipments..................................................................................... 12 2.1.2. Manufacturer Market Shares and Characteristics ........................................ 14 2.2. Cash Flow Impacts ........................................................................................... 16

2.2.1. Shipments .................................................................................................. 16 2.2.2. Capital Investments .................................................................................... 19 2.2.3. Industry Cash Flow Submittal..................................................................... 20 2.2.4. Industry Value ofthe Electronic Ballast Business ....................................... 23 2.2.5. Cash Flow Impacts ..................................................................................... 26 2.3. Impacts on Manufacturing Capacity, Plant Closures and Loss ofCapital Assets .............................................................................................................. 29 2.3.1. Summary.................................................................................................... 29 2.3.2. Introduction................................................................................................ 29 2.3.3. Interview Results........................................................................................ 30 2.3.4. Impact on Small Manufacturers.................................................................. 31 2.4. Employment Impacts........................................................................................ 32

2.4.1. Employment Levels in 1998 ....................................................................... 33 2.4.2. Employment Levels in 2003: Absent Standards .......................................... 33 2.4.3. Employment Impacts on the Industry.......................................................... 35 2.5. Other Impacts................................................................................................... 35

2.5.1. Impact ofthe Decline in Magnetic Ballast Shipments on Sub-group 1........ 36 2.5.2. Differential Impacts onthe Two Sub-groups with Regards to their Ability to Compete in

### the Marketplace ....................................................... 36 2.5.3. Global Competition .................................................................................... 37 2.5.4. Cumulative Impact ofRegulations.............................................................. 37

### List of Tables

Table Si. Manufacturer sub-groups .................................................................................1 Table S2. Business scenarios ........................................................................................... 2 Table S3. Cash flow impacts of an electronic ballast standard under the 2015 (5%

decline) shipment scenario .............................................................................. 3 Table S4. Cash flow impacts of an electronic ballast standard under the 2027 (3%

decline) shipment scenario .............................................................................. 4 Table S5. Industry-wide employment impacts of an electronic ballast standard ............... 6 Table S6. Impacts on manufacturing capacity due to an electronic ballast standard ......... 6 Table 1. "Affected" magnetic ballasts and energy-efficient replacements ...................... 13 Table 2. Shipment and value of fluorescent lamp ballasts in 1997 ................................. 14 Table 3. List of lamp ballast manufacturers ................................................................... 15 Table 4. Number of manufacturers and market shares .................................................... 15 Table 5. Scenarios used to characterize variability and uncertainty in the cash

flow analysis ................................................................................................. 21 Table 6. Cash flow impacts resulting from an electronic ballast standard under the

5% shipment scenario .................................................................................... 22 Table 7. Cash flow impacts resulting from an electronic ballast standard under the

3% shipment scenario .................................................................................... 22 Table 8. Industry value of "unaffected" electronic ballast business under different

growth rate projections .................................................................................. 24 Table 9. Cash flow impacts under the 5% shipment scenario, assuming 2.1 %

annual growth in "unaffected" electronic ballast sales ................................... 24 Table 10. Cash flow impacts under the 3% shipment scenario, assuming 2.1 %



### annual growth in "unaffected" electronic ballast sales ................................... 25 Table 11. Short-term cash flow impacts resulting from an electronic ballast

standard on the business represented by all regulated ballast product classes ........................................................................................................... 26 Table 12. Direct employment levels for manufacturing "affected" magnetic

ballasts .......................................................................................................... 33 Table 13. Direct employment levels in 2002 .................................................................. 34 Table 14. Industry-wide employment impacts of an electronic ballast standard ............. 35 

### list ofTables Table SI. Manufacturer sub-groups................................................................................. 1 Table S2. Business scenarios ........................................................................................... 2 Table S3. Cash flow impacts ofan electronic ballast standard under the 2015 (5% decline) shipment scenario .............................................................................. 3 Table S4. Cash flow impacts ofanelectronic ballast standard under the 2027 (3% decline) shipment scenario ..............................................................................4 Table S5. Industry-wide employment impacts ofan electronic ballast standard ...**~**

### ........... 6 Table S6. Impacts onmanufacturing capacity due to an electronic ballast standard ......... 6 Table 1. "Affected" magnetic ballasts and energy-efficientreplacements ...................... 13 Table 2. Shipment and value offluorescent lamp ballasts in 

### 1997 ................................. 14 Table 3. List oflamp ballast manufacturers ................................................................... 15 Table 4. Number ofmanufacturers and market shares.................................................... 15 Table 5. Scenarios used to characterize variability and uncertainty in the cash flow analysis ...........**~**

### .........................................................:........................... 21 Table 6. Cash flow impacts resulting from an electronic ballast standard under the 5% shipment scenario.................................................................................... 22 Table 7. Cash flow impacts resulting from an electronic ballast standard under the 3% shipment scenario.................................................................................... 22 Table 8. Industry value of"unaffected" electronic ballast business under different growthrate projections .................................................................................. 24 Table 9. Cash flow impacts under the 5% shipment scenario, assuming 2.1% annual growth in "unaffected" electronic ballast sales ................................... 24 Table 10. Cash flow impacts under the 3% shipment scenario, assuming 2.1 % annual growth in "unaffected" electronic ballast sales ................................... 25 Table 11. Short-term cash flow impacts resulting from an electronic ballast standard onthe business represented by all regulated ballastproduct classes ........................................................................................................... 26 Table 12. Direct employment levels for manufacturing "affected" magnetic ballasts ................................................................,......................................... 33 Table 13. Direct employment levels in 

### 2002.................................................................. 34 Table 14. Industry-wide employment impacts ofan electronic ballast standard ............. 35

ii

### List of Figures

Figure Si . Estimated trend in direct U.S. employment levels in magnetic ballast

production
...................................................................................................... 5 

### Figure 1 . Historical trend in

-value of shipments of fluorescent lamp ballast

products .......................................................................................................13 Figure 2. Impact of January 1, 1990 energy

-efficiency standard on shipment of

magnetic ballasts
.......................................................................................... 18 Figure 3. Base Case and Standard Case shipments in the 5% shipment scenario :..........19 Figure 4. Base Case and Standard Case shipments in the 3% shipment scenario ........... 19 Figure 5. Timing and relative magnitude of capital conversion costs
............................. 20 Figure 6. Base Case and Standard Case cash flows for Sub

-group 1 in the

Manufacturer Submittal and 5% shipment scenario ...................................... 27 Figure 7. Base Case and Standard Case cash flows for Sub-group 2 in the

Manufacturer Submittal and 5% shipment scenario
...................................... 28 Figure 8. Base Case and Standard Case cash flows for the Industry in the

Manufacturer Submittal and 5% shipment scenario ...................................... 28

Irr 

### List of 

### Figures Figure S1. Estimated trend 

### indirect U.S. employment levels 

### in magnetic ballast production...................................................................................................... 5 Figure 1. Historical trend 

### in value ofshipments offluorescent lamp ballast products....................................................................................................... 13 Figure 2. Impact ofJanuary 1, 1990 energy-efficiency standard on shipment of magnetic ballasts.......................................................................................... 18 Figure 3. Base Case 

### and Standard Case 

### shipments in the 5% 

### shipment scenario ........... 19 Figure 4. Base Case 

### and Standard Case 

### shipments in the 3% shipment scenario ........... 19 Figure 5. Timing and relative magnitude ofcapital conversion costs ............................. 20 Figure 6. Base Case 

### and Standard Case 

### cash flows for Sub-group 1 

### inthe Manufacturer Submittal 

### and 5% 

### shipment scenario...................................... 27 Figure 7. Base Case 

### and Standard Case 

### cash flows for Sub-group 2 

### inthe Manufacturer Submittal 

### and 5% 

### shipment scenario...................................... 28 Figure 8. Base Case 

### and Standard Case 

### cash flows for the Industry inthe Manufacturer Submittal 

### and 5% 

### shipment scenario...................................... 28

iii

## List Exhibits

Exhibit 1. Base Case Industry Cash Flow-Manufacturer Submittal,

5% shipment scenario ................................................................................ A-1 Exhibit 2. Standard Case Industry Cash Flow-Manufacturer Submittal,

5% shipment scenario ................................................................................ A-3 Exhibit 3. Base Case Industry Cash Flow Manufacturer Submittal, 3% shipment scenario ............................................................................... A-4 Exhibit 4. Standard Case Industry Cash Flow-Manufacturer Submittal,

3% shipment scenario............................................................................... A-6 Exhibit 5. Base Case Industry Cash Flow-Existing Dynamics,

5% shipment scenario . ............................................................................... A-7 Exhibit 6. Standard Case Industry Cash Flow-Existing Dynamics,

5% shipment scenario ............................................................................... A-9 Exhibit 7. Base Case Industry Cash Flow-Existing Dynamics,

3% shipment scenario ............................................................................. A-10 Exhibit 8. Standard Case Industry Cash FlowExisting Dynamics,

3% shipment scenario ............................................................................ A-12 Exhibit 9. Base Case Industry Cash Flow-Manufacturer Submittal,



### 5% shipment scenario (all regulated product classes) .............................. A-13 Exhibit 1O.Standard Case Industry Cash Flow-Manufacturer Submittal,

5% shipment scenario (all regulated product classes) ............................... A-15

iv 

### List of Exhibits
Exhibit 1. 

### Base Case Industry Cash 

### Flow-ManufacturerSubmittal, 5% shipment scenario ................................................................................A-I Exhibit 2. 

### Standard Case Industry Cash 

### Flow-ManufacturerSubmittal, 5% shipment scenario ............................................:...................................A-3 Exhibit 3. 

### Base Case Industry Cash 

### Flow-ManufacturerSubmittal, 3% shipment scenario ...............................................................................A-4 Exhibit4. 

### Standard Case Industry Cash 

### Flow-ManufacturerSubmittal, 3% shipment scenario...............................................................................A-6 Exhibit S. 

### Base Case Industry Cash 

### Flow-ExistingDynamics, 5% shipment scenario ................................................................................A-7 Exhibit 6. 

### Standard Case Industry Cash 

### Flow-ExistingDynamics, 5% shipment scenario ...............................................................................A-9 Exhibit 7. 

### Base Case Industry Cash 

### Flow-ExistingDynamics, 3% shipment scenario ..........;.................................................................. A-IO Exhibit 8. 

### Standard Case Industry Cash 

### Flow-ExistingDynamics, 3% shipment scenario ............................................................................ A-I2 Exhibit 9. 

### Base Case Industry Cash 

### Flow-ManufacturerSubmittal, 5% shipment scenario (all regulated product classes) ..............................A-13 Exhibit 1

### O.Standard Case Industry Cash 

### Flow-ManufacturerSubmittal, 5% shipment scenario (all regulated product classes) ............................... A-IS

iv

### Executive Summary

In accordance with the Energy Policy and Conservation Act, the U. S. Department of Energy (DOE) is currently in the process of revising the minimum energy-efficiency levels for the fluorescent lamp ballast product category. DOE is analyzing minimum ballast standards at the cathode cutout ballast and electronic ballast performance levels. 

### This report assesses the financial and employment impacts of a potential new standard at the electronic ballast performance level only. Financial and employment impacts at the cathode cutout ballast performance level were not assessed due to insufficient information. Most manufacturers believe that cathode cutout ballasts are not viable as a mass market replacement for energy efficient magnetic ballasts and so did not provide separate data for this standard level. In the opinion of most manufacturers, requiring cathode cutout ballast performance levels would result in a de facto electronic ballast rule. In general, interviews confirmed that manufacturing capacities associated with "affected" magnetic ballast production would be negatively impacted. Also, most manufacturers reported that they would add additional electronic ballast capacity to meet a new standard. None of the manufacturers stated that they would leave the industry or go out of business as a result of an electronic ballast standard. Definition of Sub-groups Arthur D. Little conducted detailed interviews with seven ballast manufacturers that together supply more than 95% of the domestic magnetic and electronic ballast markets. The interviews provided valuable information used to evaluate the impacts of a new standard on manufacturers' cash flows, manufacturing capacities and employment levels.The ballast Manufacturer Impact Analysis (MIA) was performed on a company-bycompany basis. ADL elected to group manufacturers exhibiting similar product mix characteristics, as this represents the most comprehensive way of reporting the variation of impacts on different manufacturers while ensuring the confidentiality of individual manufacturers' positions. Based on information obtained from manufacturer interviews, ADL divided the manufacturers into two sub-groups: Table S1. Manufacturer sub-groups



### Sub-group 1 Sub

-group 2 Manufacturers of both magnetic and electronic Manufacturers that produce only electronic

ballasts ballasts • Advance Transformer Company ® Howard Industries ® MagneTek, Inc. ® Motorola Lighting, Inc. ® Robertson Worldwide ® Osram Sylvania Products Inc. ® SLi Lighting / PowerLi tin Products

I 

### Executive Summary 

### In accordance withthe Energy Policy and Conservation Act, the U.S. Department of Energy (DOE) is currently in the process ofrevising the minimum energy-efficiency levels for the fluorescent lamp ballastproduct category. DOE is analyzing minimum ballast standards at the cathode cutout ballast and electronic ballastperformance levels. This report assesses the fmancial and employment impacts ofa potential new standard at the electronic ballast performance level only. Financial and employment impacts at the cathode cutout ballast performance level were not assessed due to insufficient information. Most manufacturers believe that cathode cutout ballasts are not viable as a mass market replacement for energy efficient magnetic ballasts and so did not provide separate data for this standard level. In the opinion ofmost manufacturers, requiring cathode cutout ballastperformance levels would result in a 

### defacto electronic ballast rule. In general, interviews confIrmed that manufacturing capacities associated with "affected" magnetic ballast production would be negatively impacted. Also, most manufacturers reported that they would add additional electronic ballast capacity to meet a new standard. None ofthe manufacturers stated that they would leave the industry or go out of business as a result ofan electronic ballast standard. De:fmition ofSub-groups Arthur D. Little conducted detailed interviews with seven ballast manufacturers that together supply more than 95% ofthe domestic magnetic and electronic ballast markets. The interviews provided valuable information used to evaluate the impacts ofa new standard on manufacturers' cash flows, manufacturing capacities and employment levels. The ballast Manufacturer ImpactAnalysis (MIA) was performed on a company-bycompany basis. ADL elected to group manufacturers exhibiting similarproduct mix characteristics, as this represents the most comprehensive way ofreporting the variation ofimpacts on different manufacturers while ensuring the confIdentiality ofindividual manufacturers' positions. Based on information obtained from manufacturer interviews, ADL divided the manufacturers into two sub-groups: T bl 51 M fa tu b

a e 

## . anu c rer su -groups 

### Sub-group 1 Sub-group 2 Manufacturers ofboth magnetic and electronic Manufacturers that produce only electronic ballasts ballasts CD Advance Transformer Company 

# • Howard Industries 

## • MagneTek, Inc. 

# • Motorola Lighting, Inc. 

## • Robertson Worldwide 

# • Osram Sylvania Products Inc. 

## • SLi Lighting / PowerLigllting Products

1

### Impacts on the entire industry were obtained by aggregating the impacts on the two subgroups. Definition of Business Scenarios Financial impacts were evaluated using different scenarios to characterize uncertainty in future industry shipments and industry competitive dynamics (manufacturer market shares and manufacturer operating margins). The matrix of business scenarios is presented in Table S2. Future industry shipments are characterized using two scenarios: the 2015 and 2027 scenarios. The ballast industry, represented by its trade association NE believes that the 2015 scenario is the most likely. In the 2015 scenario, magnetic ballast shipments will reduce to 10% of 1997 levels by the year 2015. In the most conservative scenario, they envision the market share of magnetic ballasts will reduce to 10% of 1997 levels by the year 2027. Table S2. Business scenarios 

### Future Industry Shipment

Scenarios 2015 =- ---5% annual decline in shipments

2027 = -3% annual decline in shipments Competitive Dynamics Scenarios ® Manufacturer Submittal ® New Entrant ® Existing Dynamics ® Manufacturer Submittal ® New Entrant ® Existing Dynamics As summarized in Table S2, three cash flows were calculated for each shipment forecast. Manufacturers worked with ADL to develop their most likely cash flow impacts for both the 2015 and 2027 Industry shipment scenarios. These cash flows are identified by the name "Manufacturer Submittal." In developing cash flow estimates under the Manufacturer Submittal scenario it is assumed that manufacturers retain their 1997 shares of the electronic market in the new electronic market. The "New Entrant" scenario was devised in order to capture the likely cash flow impacts resulting from the redistribution of market shares among the existing manufacturers as a new entrant gains a 15% market share of the new electronic market. Finally, in order to evaluate how assumptions concerning future market dynamics contributed to the impacts reported in the Manufacturer Submittal scenario, ADL prepared a separate cash flow that assumes no change in electronic ballast profit margins before and after standard: the "Existing Dynamics" scenario. The three scenarios are summarized below. 

### ® Manufacturer Submittal: Cash flows and net present value (NPV) were calculated using manufacturer prices, manufacturing costs , operating margins, capital investment estimates, and other financial parameters as provided by the individual 2 

### Impacts onthe entire industry were obtained by aggregating the impacts onthe two subgroups. DefInition ofBusiness Scenarios Financial impacts were evaluated using different scenarios to characterize uncertainty in future industry shipments and industry competitive dynamics (manufacturer market shares and manufacturer operating margins). The matrix ofbusiness scenarios is presented in Table S2. Future industry shipments are characterized using two scenarios: the 2015 and 2027 scenarios. The ballast industry, represented by its trade associationNEMA-believes thatthe 2015 scenario is the most likely. Inthe 2015 scenario; magnetic ballast shipments will reduce to 10% of 1997 levels by the year 2015. Inthe most conservative scenario, they envision the market share ofmagnetic ballasts will reduce to 10% of 1997 levels by the year 2027. Table 82 Business scenarios 

### Future Industry Shipment Competitive Dynamics Scenarios Scenarios 2015 

### ==**~5%** 

### annual decline in 

# • Manufacturer Submittal shipments 

# • NewEntrant 

# • Existing Dynamics 2027 

### ==**~3%** 

### annual decline in 

# • Manufacturer Submittal shipments 

# • NewEntrant 

# • Existing Dynamics As summarized in Table S2, three cash flows were calculated for each shipment forecast. Manufacturers worked with ADL to develop their most likely cash flow impacts for both the 2015 and 2027 Industry shipment scenarios. These cash flows are identified by the name "Manufacturer Submittal." In developing cash flow estimates under the Manufacturer Submittal scenario it is assumed that manufacturers retain their 1997 shares ofthe electronic market in the new electronic market. The ''NewEntrant" scenario was devised in order to capture the likely cash flow impacts resulting from the redistribution ofmarket shares among the existing manufacturers as a new entrant gains a 15% market share ofthe new electronic market. Finally, in orderto evaluate how assumptions concerning future market dynamics contributed to the impacts reported inthe Manufacturer Submittal scenario, ADL prepared a separate cash flow that assumes no change in electronic ballastprofitmargins before and after standard: the "Existing Dynamics" scenario. The three scenarios are summarizedbelow.
• Manufacturer Submittal: Cash flows and netpresent value (NPV) were calculated using manufacturerprices, manufacturing costs, operating margins, capital investment estimates, and other fInancial parameters as provided by the individual 2

### manufacturers. This scenario reflects each manufacturer's expectation of its "most

likely" future profitability under new standards with the constraint that they assume that their electronic ballast market share remains at the 1997 level. e New Entrant: This scenario assumes that one or more new entrants will capture 15% of the new electronic ballast market. Manufacturer market shares in the 1997 electronic market are redistributed to accommodate the new market entrant(s). 

### ® Existing Dynamics: This scenario assumes that there will be no change in competitive dynamics when an electronic ballast standard comes into effect, and hence electronic ballast manufacturer market shares and profit margins in the case of a standard will remain similar to their values in the absence of a standard. Impacts on cash flowsTable S3 summarizes the financial impacts under the most likely shipment scenarioshipments reach 10% of their 1997 value by the year 2015. The impacts reported are the change in NPV and this change as a percentage of the industry value-the value of the industry represented by the cash flow generated by all (magnetic and electronic) ballast shipments in the regulated product classes. Table S4 summarizes the financial impacts for the 2027 scenario. Note that for the industry results, the New Entrant scenario is the same as the Manufacturer Submittal scenario because the new entrant(s) cash flow was modeled using shipment weighted average financial parameters of all existing electronic ballast manufacturers. Therefore industry-wide impacts in the 5% and 3% shipment scenarios are presented under the Manufacturer Submittal and Existing Dynamics scenarios only. Table S3. Cash flow impacts of an electronic ballast standard under the 2015 (5% decline) shipment

scenario Scenarios Base Case NPV ($mil Standard Case

NPV ($mil Change in

NPV ($mil % Change in

NPVCash flow impacts on business represented by all regulated product classesMagnetic and Electronic Sub-group 1 Manufacturer Submittal 288.9 198.9 -90.0 -31% New Entrant 288.9 199.1 -89.8 -31% Existing Dynamics 288.9 219.0 -69.9 -24% Sub-group 2 Manufacturer Submittal 131.7 152.0 20.3 15% New Entrant 131.7 145.8 14.1 11% Existing amics 131.7 141.0 9.3 7% Industry =Sub- rou 1 + Sub-group 2) 

### Manufacturer Submittal 420.6 350.9 -69.7 -17% Existing Dynamics

_ 420.6 359.9 -60.7_ 1 -14%

3 

### manufacturers. This scenario reflects each manufacturer's expectation ofits "most likely" future profitability under new standards with the constraint that they assume that their electronic ballast market share remains at the 1997 level. • New Entrant: 

### This scenario assumes that one ormore new entrants will capture 15% ofthe new electronic ballast market. Manufacturer market shares in the 1997 electronic market are redistributed to accommodate the newmarket entrant(s). • ExistingDynamics: 

### This scenario assumes that there will be no change in competitive dynamics when an electronic ballast standard comes into effect, and hence electronic ballast manufacturer market shares and profit margins in the case ofa standard will remain similar to their values in the absence ofa standard. Impacts on cash flows Table S3 summarizes the financial impacts under the most likely shipment scenario-. shipments reach 10% oftheir 1997 value by the year 2015. The impacts reported are the change in NPV and this change as a percentage ofthe industry value-the value ofthe industry represented bythe cash flow generated by all (magnetic and electronic) ballast shipments in the regulated product classes. Table S4 summarizes the financial impacts for the 2027 scenario. Note that for the industry results, the New Entrant 

### scenario is the same as the Manufacturer Submittal 

### scenario because the new entrant(s) cash flow was modeled using shipment weighted average financial parameters ofall existing electronic ballast manufacturers. Therefore industry-wide impacts in the 5% and 3% shipment scenarios are presented under the Manufacturer Submittal 

### and ExistingDynamics 

### scenarios only. Table 53. Cash flow impacts of an electronic ballast standard underthe 2015 (5% decline) shipment scenario Scenarios Base Case Standard Case Change in % Change in NPV NPV NPV NPV ($mil) ($mil) ($mil) Cash flow impacts on business represented by all regulated product classesMa2lletic and Electronic Sub-group 

### 1 Manufacturer Submittal 288.9 198.9 -90.0 -31% New Entrant 288.9 199.1 -89.8 -31% Existing Dynamics 288.9 219.0 -69.9 -24% Sub-2roup2 Manufacturer Submittal 131.7 152.0 20.3 15% New Entrant 131.7 145.8 14.1 11% Existing Dynamics 131.7 141.0 9.3 7% Industry (=Sub-group 1

### + Sub-group 2) Manufacturer Submittal 420.6 350.9 -69.7 -17% Existing Dynamics 420.6 359.9 -60.7 -14%

3Table S4. Cash flow impacts of an electronic ballast standard under the 2027 (3% decline) shipment scenario Scenarios Base Case Standard Case Change in % Change in NPV NPV NPV NPV ($mil ($mil ) ( $mil) Cash flow impacts on business represented by all regulated product classesMagnetic and Electronic 

### Manufacturer Submittal New Entrant Existing Dynamics 

### Manufacturer Submittal New Entrant Existing Dynamics 

### 318.3 318.3 318.3 123.0 123.0 123.0 Sub-group 1



### 204.6 204.9 224.7 Sub-group 2 

### 150.5 144.3 -113.7

-113.4 

### -93.6 27.5 21.3 -36%

-36% -29% 22% 17%


### Manufacturer Submittal Existing Dynamics Impacts on employment 139.5 Industry (=Sub-group 1 + Sub-group 2) 

### 441.3 441.3 355.1

364.2 16.5

-86.2 -77.1 13%

-20% -17%

Employment impacts are reported in two categories: ® Direct employment impacts: These impacts consider jobs directly involved with the production of "affected" magnetic or electronic ballasts. In facilities producing "affected" and other types of ballasts, only direct and overhead jobs related to "affected" ballasts are considered in this category. In situations where ballast companies own component manufacturing operations, such as capacitor plants or magnet wire operations, job impacts on these plants are reported within this category. Impacts on other component suppliers are presented in a separate section titled "Impact on Suppliers to the Fluorescent Lamp Ballast Industry." 

### ® Associated employment impacts: These impacts consider jobs impacted by business decisions driven by the "direct' 'employment impacts. For example, if in a manufacturing plant with 100 employees, 50 are producing "affected" magnetic ballasts and the remaining 50 are producing "unaffected" magnetic ballasts, then an electronic ballast standard would result in the loss of 50 direct jobs. Faced with this situation the company might decide to close operations in its plant due to the dramatically reduced capacity utilization. Such a decision would result in the loss of

4 Table 54. Cash flow impac1s ofan electronic ballast standard underthe 2027 (3% decline) shipment scenario 

### Scenarios Base Case Standard Case Change in % Change in NPV NPV NPV NPV ($mil) ($mil) ($mil) 

### Cash flow impacts on business represented by all regulated product classesMaf!D.etic and Electronic Sub-2roup 1 Manufacturer Submittal 318.3 204.6 -113.7 -36% NewEntrant 318.3 204.9 -113.4 -36% Existing Dynamics 318.3 224.7 -93.6 -29% 

### Sub-2l"OUp2 Manufacturer Submittal 123.0 150.5 27.5 22% New Entrant 123.0 144.3 21.3 17% Existing Dynamics 123.0 139.5 16.5 13% 

### Industry (=Sub-2roup 1

### + Sub-2roup 2) Manufacturer Submittal 441.3 355.1 -86.2 -20% Existing Dynamics 441.3 364.2 -77.1 -17% 

### Impacts on employment Employment impacts are reported intwo categories:

It 

### Direct employment impacts: These impacts considerjobs directly involved withthe production of"affected" magnetic or electronic ballasts. In facilities producing "affected" and other types ofballasts, only direct and overheadjobs related to "affected" ballasts are considered inthis category. In situations where ballast companies own component manufacturing operations, such as capacitorplants or magnetwire operations,job impacts onthese plants are reported within this category. Impacts on other component suppliers are presented in a separate section titled "Impact on Suppliers to the Fluorescent Lamp BallastIndustry."

It 

### Associated employment impacts: These impacts considerjobs impacted by business decisions driven by the "direct" employment impacts. For example, ifin a manufacturing plant with 100 employees, 50 are producing "affected" magnetic ballasts andthe remaining 50 are producing "unaffected" magnetic ballasts, then an electronic ballast standard would result inthe loss of50 directjobs. Faced withthis situation the company might decide to close operations in its plant due to the dramatically reduced capacity utilization. Such a decision would result inthe loss of

4

### the remaining 50 jobs. These 50 jobs would then be reported as "associated"

employment impacts. Manufacturers in Sub-group 1 anticipate that absent standards, direct employment associated with manufacturing "affected" magnetic ballasts will decrease approximately in the same proportion as shipments. Faced with this decline, manufacturers in Sub-group 1 intend to maintain high plant capacity utilization by replacing the loss in direct jobs with new associated jobs. These new associated jobs maybe the result of new product introductions, plant consolidations or decisions to make in-house, parts currently sourced from suppliers. Figure Si shows the trend in direct U.S. employment levels for magnetic ballast production assuming it tracts magnetic ballast shipments. Figure S1. Estimated trend in direct U.S. employment levels in magnetic ballast production

1000

700-1

400-1

100 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year 

### The uncertainty with regards to the timing of any plant closures in the base case - after the year 2003 - results from the difficulty in anticipating how many associated jobs can be maintained in the long run. Gains is associated jobs will not necessarily maintain plant capacity utilization in the long run and a threshold may be reached that requires the plant to be closed. For example, one manufacturer suggested that for its supplier plant a drop of 30% in capacity could lend to closure. Table S5 summarizes the employment impacts of an electronic ballast standard under the two shipment scenarios. The table assumes a standards effective date of 2003. 0 

### the remaining 50jobs. These 50jobs would then be reported as "associated" employment impacts. Manufacturers in Sub-group 1 anticipate that absent standards, direct employment associated with manufacturing "affected" magnetic ballasts will decrease approximately . in the same proportion as shipments. Faced with this decline, manufacturers in Sub-group 1 intend to maintain high plant capacity utilization by replacing the loss in directjobs with new associatedjobs. These new associatedjobs may be the result ofnew product introductions, plant consolidations or decisions to make in-house, parts currently sourced from suppliers. Figure Sl shows the trend in direct U.S. employment levels for magnetic ballast production assuming ittracts magnetic ballast shipments. Figure S1. Estimated trend in direct U.S. employment levels in magnetic ballast production
1000 900 800 700 II) .c 600 0 

## .., 

# - 0 

# ... 500 Q) .c E**~** 4f)() :z 300 200 100

0 

### -

rrrr

# Do
1997 1998 1999 2000 2001 2002 2003 2004 2005 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year


### The uncertainty with regards to the timing ofany plant closures inthe base case - after the year 2003
- results from the difficulty in anticipating how many associatedjobs can be maintained inthe long run. Gains is associatedjobs will not necessarily maintain plant capacity utilization in the long run and a threshold may be reached that requires the plantto be closed. For example, one manufacturer suggested that for its supplier plant a drop of30% in capacity could lend to closure. Table S5 summarizes the employment impacts ofan electronic ballast standard under the two shipment scenarios. The table assumes a standards effective date of2003. 5Table S5. Industry- ide employment impacts of an electronic ballast standard

Country o

### f Direct Jobs lost Associated Jobs Direct Jobs ' Net Direct Jobs 

### Manufacture in magnetic at risk in gained in 

### lost

ballast magnetic ballast electronic manufacturing 

### manufacturing ballast manufacturing 666 ' 2 U.S.A 

### 406 500 166

1570 190 700 

### 870 U.S.A 717 363 557 160 Mexico 1727 161 769 

### 958 1 Includes both factory and non-factory jobs supporting magnetic ballast production. 2 These "associated" jobs are assumed relocated to Mexico 3 These "associated" jobs will be relocated to other plants in Mexico or elsewhere 4 Includes jobs from Sub-groups 1 and 2 5 Does not include potential associated jobs added in these plants 

### Impacts on manufacturing cgpac 

### An electronic ballast standard would negatively impact magnetic ballast production capacity in the U.S. and Mexico. In all likelihood, an electronic ballast standard will result in the closure of one magnetic ballast production facility in the U.S., and in the partial closure of another in Mexico. Additionally two manufacturer-owned (captive) ballast supplier facilities would be impacted: a capacitor plant in Mexico would close and a magnet wire plant, located in the U.S., could also close. All manufacturers in Sub-group 1 suggested that in the absence of a standard they would continue to manufacture "affected" magnetic ballasts in their current manufacturing plants. They did not anticipate any plant closures or shifting of production of "affected" magnetic ballasts from one plant to another before the year 2010. 

### Table S6 summarizes the impact of a new electronic ballast standard on manufacturing plants in the U.S. and Mexico. Table S6. Impacts on manufacturing capacity due to an electronic ballast standard 

### Plant Location Description Action Plant 1 U.S.A. Magnetic ballast Closure Plant 2 U.S.A. Magnet Wire Possible Closure 

### Plant 3 Mexico Magnetic ballast 

### Partial Closure Plant 4 Mexico Capacitors Closure 

### Plant 5 U.S.A. Electronic ballast Expansion Plant 6 U.S.A. Electronic ballast Expansion 

### Plant 7 Mexico Electronic ballast Expansion Plant 8 Mexico Electronic ballast Expansion 2015 (-5% decline) shipment scenario 

### 2027 (-3% decline) shipment scenario Table 85. Industry
__

wide employment im**~acts** ofan electronic ballast standard 

### Country of DirectJobs lost Associated Jobs DirectJobs 'J,:> 

### Net DirectJobs Manufacture in magnetic atrisk in gained in lost ballast magnetic ballast electronic manufacturing manufacturing ballast**manufacturin~** 

# - o 

### ec me s Ipmen scenano 2015 ( 5% d I ) h 

### t U.S.A 666 1 406.l 500 

### 166 Mexico 1570 190'; 700 

### 870



# - o 

### ecme s Ipment scenano 2027 ( 3% d 1 ) h U.S.A 717 3632 557 

### 160 Mexico 1727 161'; . 769 

### 958 1

### Includes both factory and non-factoryJobs supportmg magnetIc ballast production. 2 These "associated"jobs are assumed relocated to Mexico 3 These "associated"jobs will be relocated to otherplants in Mexico orelsewhere 4 Includesjobs from Sub-groups 1 

### and 2 5 

### Does not include potential associatedjobs added in these plants Impacts onmanufacturing capacity 

### An electronic ballast standard would negatively impact magnetic ballastproduction capacity 

### inthe U.S. and Mexico. In all likelihood, an electronic ballast standard 

## win result 

### inthe closure ofone magnetic ballast production facility 

### inthe U.S., and inthe partial closure ofanother in Mexico. Additionally two manufacturer-owned (captive) ballast supplier facilities would be impacted: a capacitor plant in Mexico would close and a magnet wire plant, located in the U.S., could also close. All manufacturers 

### in Sub-group 1 suggestedthat inthe absence ofa standardthey would continue to manufacture "affected" magnetic ballasts 

### intheir current manufacturing plants. They did not anticipate any plant closures or shifting ofproduction of "affected" magnetic ballasts from one plantto another before the year 2010. Table S6 summarizes the impact ofa new electronic ballast standard on manufacturing plants 

### in the U.S. and Mexico. Table 56. Impacts on manufacturing capacity due to an electronic ballast standard



### Plant Location Description Action Plant 1 U.S.A. Magnetic ballast Closure Plant 2 U.S.A. MagnetWire Possible Closure Plant 3 Mexico Magnetic ballast Partial Closure Plant 

### 4 Mexico Capacitors Closure Plant 5 U.S.A. Electronic ballast Expansion Plant 6 U.S.A. Electronic ballast Expansion Plant 7 Mexico Electronic ballast Expansion Plant 8 Mexico Electronic ballast Expansion

6

### An electronic ballast standard would lead to increased electronic ballast manufacturing

capacity in the U.S. and Mexico. In order to meet increased sales resulting from a new electronic ballast standard, two of the four manufacturers in Sub-group 1 plan to develop additional electronic ballast manufacturing capacities in Mexico. The smaller manufacturers in sub-group 1 plan no major plant closures or expansions and willaccommodate the new product mix requirements within their existing facilities. In Subgroup 2, two manufacturers stated that they would add significant electronic ballast manufacturing capacity in the U.S. to meet the new standard. Impact on Small Manufacturers Two "small" manufacturers currently produce both "affected" magnetic and electronic ballasts. Both the "small" manufacturers had their respective electronic and magnetic ballast manufacturing operations in the same plants. It seemed to ADL that their smaller size and less automated operations provided them with the flexibility to adapt to a new electronic ballast standard without significant asset write-offs or plant closures. However the negative impacts on the "small" manufacturers' cash flows from operations were similar in proportion to those reported by the two large manufacturers in Sub-group 1. As a result, in the 5% scenario, ADL estimates that small manufacturers will experience a 16% loss in their NPV compared to a 34% loss in NPV for the two large manufacturers. 

### As with other sub-group 1 manufacturers neither of these manufacturers stated that an electronic ballast standard would force them to leave the industry or go out of business.

7 

### Anelectronic ballast standard would leadto increased electronic ballast manufacturing capacity inthe U.S. and Mexico. In orderto meet increased sales resulting from a new electronic ballast standard, two ofthe four manufacturers in Sub-group 1plan to develop additional electronic ballast manufacturing capacities in Mexico. The smaller manufacturers in sub-group 1plan no majorplant closures or expansions and will accommodate the newproduct mixrequirements within their existing facilities. In Subgroup 2, two manufacturers stated thatthey would add significant electronic ballast manufacturing capacity inthe U.S. to meet the new standard. Impact on Small Manufacturers Two "small" manufacturers currently produce both "affected" magnetic and electronic ballasts. Boththe "small"manufacturers had theirrespective electronic and magnetic ballast manufacturing operations inthe same plants. It seemed to ADL that their smaller size and less automated operations providedthem with the flexibility to adapt to a new electronic ballast standard without significant asset write-offs orplant closures. However the negative impacts on the "small" manufacturers' 

### cash flows from operations were similar inproportionto those reported by the two large manufacturers in Sub-group 1. As a result, inthe 5% scenario, ADL estimates that small manufacturers will experience a 16% loss intheirNPV compared to a 34% loss inNPV for the two large manufacturers. As with other sub-group 1 manufacturers neither ofthese manufacturers stated that an electronic ballast standard would force them to leave the industry or go out ofbusiness.

7

### 1. nufactrer Impact Analysis Methodology

In determining whether a standard is economically justified, the Secretary of Energy is statutorily required to consider "the economic impact of the standard on the manufacturers and on the consumers of the products subject to such a standard." The legislation also calls for an assessment of the impact of any lessening of competition as determined in writing by the Attorney General. The purpose of the Manufacturer Impact Analysis (MIA) is to provide information that can be used to evaluate these impacts. The MIA estimates the financial impact of standards on manufacturers and calculates impacts on employment and manufacturing capacity. 

### Prior to initiating the detailed MIA for the ballast rulemaking, the Department prepared an approach document titled "Ballast Manufacturer Impact Analysis Analytical Approach." This document was presented at a public workshop held on April 28, 1998. It was based on the general framework for the MIA presented by the Department at a workshop in March 1997 and was modified for its application to the ballast rule. The revised document outlined procedural steps and identified issues for consideration. As proposed in the approach document, the MIA was conducted in four phases. Phase 1, Industry Profile and Issue Definition, consisted of two activities, namely, preparation of an industry characterization and the conduct of an issue identification workshop. The second phase, "Strawman" Industry Cash Flow, had as its focus the larger industry. In this phase, the Government Regulatory Impact Model (GRIM) was used to prepare a "strawman" industry cash flow analysis. Here the Department used publicly available information developed in Phase 1 to adapt the GRIM structure to facilitate the analysis of new ballast standards. In the Phase 3, Sub-Group Impact Analysis, the strawman cash flow was used as a template from which individual company level cash flows were developed in cooperation with Arthur D. Little (ADL). Phase 3 also entailed documenting additional impacts on employment and manufacturing capacity through an interview process. Finally in Phase 4, Industry Cash Flow, ADL aggregated the individual cash flows into three groups; group 1 includes all manufacturers, group 2 includes full line manufacturers of magnetic and electronic ballasts, and group 3 includes manufacturers producing only electronic ballasts. 1.1. Phase 1: Industry Profile and Issue Identification Phase 1 of the MIA consisted of two activities, namely, preparation of an Industry Characterization, and the conduct of an issue analysis workshop. Prior to initiating the detailed impact studies, the Department received input on the present and past structure and market characteristics of the ballast industry. This activity involved both quantitative and qualitative efforts to assess the industry and products to be analyzed. Issues addressed included manufacturer market shares and characteristics, trends in number of
0 

### 1.0 Manufacturer Impact Analysis Methodology 

### In determining whether a standard is economicallyjustified, the Secretary ofEnergy is statutorily required to consider "the economic impact ofthe standard on the manufacturers and onthe consumers ofthe products subjectto such a standard." The legislation also calls for an assessment ofthe impact ofany lessening ofcompetition as determined in writing by the Attorney General. The purpose ofthe Manufacturer Impact Analysis (MIA) is to provide information that can be used to evaluate these impacts. The MIA estimates the financial impact ofstandards onmanufacturers and calculates impacts on employment and manufacturing capacity. Prior to initiating the detailed MIA for the ballast ruiemaking, the Department prepared an approach document titled "Ballast Manufacturer ImpactAnalysis Analytical Approach." This document was presented at a public workshop held on April 28, 1998. It was based onthe general framework for the MIApresented bythe Department at a workshop in March 1997 and was modified for its application to the ballastrule. The revised document outlinedprocedural steps and identified issues for consideration. As proposed in the approach document, the MIA was conducted infour phases. Phase 1, Industry Profile and Issue Definition, consisted oftwo activities, namely, preparation of an industry characterization and the conduct ofan issue identification workshop. The second phase, "Strawman" Industry Cash Flow, had as its focus the larger industry. In this phase, the Government Regulatory Impact Model (GRIM) was used to prepare a "strawman" industry cash flow analysis. Here the Department used publicly available information developed inPhase I to adapt the GRIM structure to facilitate the analysis of new ballast standards. In

### the Phase 3, Sub-Group Impact Analysis, the strawman cash flow was used as a template from which individual company level cash flows were developed in cooperation with Arthur D. Little (ADL). Phase 3 also entailed documenting additional impacts on employment and manufacturing capacity through an interviewprocess. Finally in Phase 4, Industry CashFlow, ADL aggregated the individual cash flows into three groups; group 1 includes 

### all manufacturers, group 2 includes full line manufacturers ofmagnetic and electronic ballasts, and group 3 includes manufacturers producing only electronic ballasts. 1.1. Phase 1: Industry Profile and Issue Identification 

### Phase 1 ofthe MIA consisted oftwo activities, namely, preparation ofanIndustry Characterization, and the conduct ofan issue analysis workshop. Priorto initiating the detailed impact studies, the Department received input onthe present and past structure and market characteristics ofthe ballast industry. This activity involved both quantitative and qualitative efforts to assess the industry and products to be analyzed. Issues addressed included manufacturer market shares and characteristics, trends in number of

### firms, the financial situation of manufacturers, and trends in ballast characteristics and

markets. Publicly available quantitative data published by U.S. Bureau of Census with regards to the ballast industry were presented at the April 28, 1998 workshop. These reports include such statistics as the number of companies, manufacturing establishments, employment, payroll, value added, cost of materials consumed, capital expenditures, product shipments, and concentration ratios. To further assist in performing the Industry Profile and to define key issues, the. Department conducted a series of interviews with ballast manufacturers in late 1996 and early 1997. Summaries of these interviews were distributed at the "Public Workshop on the Revised Life Cycle Cost and Engineering Analysis of Fluorescent Lamp Ballasts," held on March 18, 1997. The interviews and review of public literature suggested that the following guidelines be followed to assess the impacts of a new ballast standard. First, the MIA should be performed on a company

-by-company basis and the industry impact constructed from an aggregation of impacts on individual companies
. Second, the analysis should recognize the increasingly global nature of the ballast industry
. Gains or losses in U.S. sales will bestow consequences to manufacturers regardless of where their production facilities are located. Where possible, the analysis should be structured to assess impacts at U.S. national, North American, and Global levels. Finally, the MIA should include consideration of direct industry suppliers. 1.2. Phase 2: "Strawman" Industry Cash Flow Analysis Phase 2 of the MIA has as its focus the "larger" industry. The analytical tool used for calculating the financial impacts of standards on manufacturers is the Government Regulatory Impact Model (GRIM). In Phase 2, GRIM was used to perform a "strawman" industry cash flow analysis. Given the relatively small number of firms in the industry, the Department proposed to create an Industry Cash Flow Analysis using a "bottom-up" approach. Essentially, each manufacturer was asked to provide, or assist ADL in developing, its own cash flow analysis to be aggregated with all other manufacturer submittals. In order to facilitate individual manufacturer analysis, the Department prepared "strawman" scenarios using publicly available financial information. Individual cash flows were prepared by modifying relevant parameters in the strawman to meet their own situation (price, cost, financial, shipments, etc.). For the strawman, the Department prepared a list of financial values to be used in the GRIM industry analysis. These were calculated by studying publicly available financial statements of fluorescent lamp ballast manufacturers. A detailed definition of financial inputs and their values for a "prototypical" ballast manufacturer was presented in the 

### 0 fInns, the financial situation ofmanufacturers, and trends in ballast characteristics and markets. Publicly available quantitative datapublished by U.S. Bureau ofCensus with regards to the ballast industry were presented atthe April 28, 1998 workshop. These reports include such statistics as the number ofcompanies, manufacturing establishments, employment, payroll, value added, cost ofmaterials consumed, capital expenditures, product shipments, and concentration ratios. To further assist inperforming the Industry ProfIle and to defIne key issues, the Department conducted a series ofinterviews with ballast manufacturers in late 1996 and early 1997. Summaries ofthese interviews were distributed at the "Public Workshop on the Revised Life Cycle Cost and Engineering Analysis ofFluorescent Lamp Ballasts," held on March 18, 1997. The interviews and review ofpublic literature suggested that the following guidelines be followed to assess the impacts ofa newballast standard. First, the MIA should be perfonned on a company-by-company basis and the industry impact constructed from an aggregation ofimpacts on individual companies. Second, the analysis should recognize the increasingly global nature ofthe ballast industry. Gains or losses in U.S. sales will bestow consequences to manufacturers regardless ofwhere their production facilities are located. Where possible, the analysis should be structured to assess impacts at U.S. national, North American, and Global levels. Finally, the MIA should include consideration ofdirect industry suppliers. 1.2. Phase 2: "Strawman" Industry Cash FlowAnalysis 

### Phase 2 of the MIAhas as its focus the "larger" industry. The analytical tool used for calculating the fmancial impacts ofstandards on manufacturers is the Government Regulatory Impact Model (GRIM). In Phase 2, GRIM was used to perform a "strawman" industry cash flow analysis. Given the relatively small number offIrms in the industry, the Departmentproposed to create anIndustry Cash Flow Analysis using a "bottom-up" approach. Essentially, each manufacturer was asked to provide, or assist ADL in developing, its own cash flow analysis to be aggregated with all other manufacturer submittals. In order to facilitate individual manufacturer analysis, the Department prepared "strawman" scenarios using publicly available financial information. Individual cash flows were prepared by modifying relevant parameters in the strawman to meet their own situation (price, cost, financial, shipments, etc.). For the strawman, the Departmentprepared a list offmancial values to be used inthe GRIM industry analysis. These were calculated by studying publicly available fmancial statements offluorescent lamp ballast manufacturers. A detailed defmition offmancial inputs and their values for a "prototypical" ballast manufacturer was presented in the 9

### document entitled "Financial Inputs to GRIM for the Ballast Rulemaking Analysis." This

document was presented at the public workshop held on April 28, 1998. Strawman values for prices were derived from the Bureau of Census' Current Industrial Reports (CIRs). The dollar value of ballast shipments from factories is divided by the quantity of ballasts shipped to arrive at the per unit manufacturer price. In order to estimate manufacturing costs-labor, materials, depreciation/tooling, etc: from the average manufacturer prices obtained from CIRs, a typical ballast industry cost sc e was developed using publicly available information from the Census of Manufacturers (CMs) and from transformer industry statistics (SIC# 3612) obtained from Robert Morris Associates (RMA) reports. Finally, in preparing the "strawman" industry cash flow analysis, the Department used the same ballast shipment scenarios developed for the National Energy Savings (NES) spreadsheet. The strawman was used to provide a starting point which manufacturers could then use to come up with more recent and accurate inputs. The intent of the strawman was to use "placeholder" values in order to illustrate the working of the GRIM spreadsheet. Given the concerns raised over the accuracy of the strawman data, the Department does not intend to compare or refer back to these values. 1.3. Phase 3: Sub-Group Impact Analysis 

### The Department conducted detailed interviews with ballast manufacturers representing over 95% of domestic ballast sales to gain insight into the potential impacts of standards. During these interviews, the Department solicited the information necessary to evaluate cash flows and to assess employment and capacity impacts. The interview process played a key role in the MIA, since it provided an opportunity for manufacturers to privately express their views on important issues and provide confidential information needed to assess financial, employment and other business impacts. To support the development of company cash flows, an interview guide solicited information on the possible impacts of new standards on manufacturing costs, product prices, and sales. The evaluation of the possible impacts on direct employment and manufacturing assets also drew heavily on the information gathered during the interviews. The interview guide solicited both qualitative and quantitative information. Supporting information was requested whenever applicable. Interview participants were requested to identify all confidential information provided in writing or orally. Approximately two weeks following the interview, an interview summary was provided to give manufacturers the opportunity to confirm the accuracy and protect the confidentiality of all collected information. 1.4. Phase 4: Indust Cash Flow 

### As previously described, using the GRIM spreadsheet and an interview guide, the ballast MIA was performed on a company-by-company basis. This process has the benefit of 10 

### document entitled "Financial Inputs to GRIM for the BallastRulemaking Analysis." This document was presented atthe public workshop held onApril 28, 1998. Strawman values forprices were derived from the Bureau ofCensus' CurrentIndustrial Reports (CIRs). The dollar value ofballast shipments from factories is divided by the quantity ofballasts shipped to arrive atthe perunit manufacturerprice. In orderto estimate manufacturing costs-labor, materials, depreciation/tooling, etc.-from the average manufacturerprices obtained from CIRs, a typical ballast industry cost structure was developed using publicly available infonnation from the Census ofManufacturers (CMs) and from transformer industry statistics (SIC# 3612) obtained from Robert Morris Associates 

### (RMA) reports. Finally, inpreparing the "strawman" industry cash flow analysis, the Department used the same ballast shipment scenarios developed for the National Energy Savings (NBS) spreadsheet.

.The strawmanwas used to provide a starting point which manufacturers could then use to

come up with more recent and accurate inputs. The intent ofthe strawman was to use "placeholder" values inorderto illustrate the working ofthe GRIM spreadsheet. Given the concerns raised over the accuracy ofthe strawman data, the Department does not intend to compare orrefer back to these values. 1.3. Phase 3: Sub-Group ImpactAnalysis 

### The Department conducted detailed interviews withballast manufacturers representing over 95% ofdomestic ballast sales to gain insight into the potential impacts ofstandards. During these interviews, the Department solicited the information necessary to evaluate cash flows and to assess employment and capacity impacts. The interviewprocess played a key role in the MIA, since itprovided an opportunity for manufacturers to privately express their views on importantissues and provide confidential information needed to assess financial, employment and other business impacts. To support the development ofcompany cashflows, aninterview guide solicited information onthe possible impacts ofnew standards onmanufacturing costs, product prices, and sales. The evaluation ofthe possible impacts on direct employment and manufacturing assets also drew heavily onthe information gathered during the interviews. The interview guide solicited both qualitative and quantitative infonnation. Supporting information was requested whenever applicable. Interview participants were requested to identify all confidential informationprovided in writing or orally. Approximately two weeks following the interview, an interview summary was providedto give manufacturers the opportunity to confmnthe accuracy and protectthe confidentiality ofall collected information. 1.4. Phase 4: Industry Cash Flow 

### As previously described, using the GRIM spreadsheet and aninterview guide, the ballast MIA was perfonned on a company-by-company basis. This process has the benefit of 10

### allowing the impacts of standards to be evaluated at multiple levels of aggregation. The

total industry impact was constructed from an aggregation of impacts on individual companies. Manufacturers used their 1997 market shares in the 31.5 million "affected" magnetic ballast and the 36.5 million electronic ballast market to develop their shipments of the "affected" magnetic ballasts and their direct electronic replacements respectively. As the total market shares added to a number greater than 100% of the market, ADL scaled each manufacturer's market share in the same ratio to bring the total market share to a 100%. ADL found close agreement in total market share for magnetic ballasts and a slightly more significant over-reporting of electronic ballast shares. ADL aggregated the individual cash flows into three groups, the first grouping includes all manufacturers, the second includes full line manufacturers of magnetic and electronic ballasts only, and the third group includes manufacturers producing only electronic ballasts. This aggregation scheme was selected as being the most representative of the range of impacts on individual manufacturers compared to the industry aggregate values.

11 

### allowing the impacts ofstandards to be evaluated at multiple levels ofaggregation. The total industry impact was constructed from an aggregation ofimpacts on individual companies. Manufacturers used their 1997 market shares in the 31.5 million "affected" magnetic ballast and the 36.5 million electronic ballast market to develop their shipments ofthe "affected" magnetic ballasts and their direct electronic replacements respectively. As the total market shares added to a number greaterthan 100% ofthe market, ADL scaled each manufacturer's market share inthe same ratio to bring the total market share to a 100%. ADL found close agreement in total market share for magnetic ballasts and a slightly more significant over-reporting ofelectronic ballast shares. ADL aggregated the individual cash flows into three groups, the first grouping includes all manufacturers, the second includes full line manufacturers ofmagnetic and electronic ballasts only, and the third group includes manufacturers producing only electronic ballasts. This aggregation scheme was selected as being the most representative ofthe range ofimpacts on individual manufacturers compared to the industry aggregate values.

11

### 2.0 MIA Results

2.1. Indust Characterization ADL developed an initial industry characterization using information from relevant industry and market publications, industry trade organizations, company financial reports, and product literature. This industry characterization report helped L in developing the "stra an" industry cash flow analysis and also aided in the development of a detailed and focused interview guide to perform the MIA. Specifically, shipment information was obtained from publicly available Current Industrial Reports (CIRs) published by the U.S. Bureau of Census. Financial and cost information was obtained from the Census of Manufactures (another Bureau of Census publication), SEC 10-K statements, Dun & Bradstreet reports, Robert Morris Associates' reports, and Moody's Company reports. 

### 2.1.1. Industry Shipments Current Industrial Reports (CIRs), published by the U.S. Bureau of Census, provide detailed data on quantity and total value of U.S. shipments of fluorescent lamp ballast products. Census uses SIC code 36124 to describe the fluorescent lamp ballast industry. According to CIR data, 103.9 million fluorescent lamp ballasts, valued at $906 million, were shipped in 1997.Census groups all ballast products into three main categories: 1) uncorrected powerfactor magnetics, 2) corrected power-factor magnetics, and 3) electronics. In 1997, power-factor corrected (85% PF or above) magnetic ballasts accounted for 41% of the quantity and 38% of the value of shipments of all fluorescent lamp ballasts. In the same year, electronic ballasts made up 35% of the quantity and 54% of the value of shipments. 

### Figure 1 presents the trend in the dollar value of manufacturers' shipments of lamp ballasts over the period 1990 through 1997. It shows that the shipment value of the uncorrected power-factor magnetic segment has remained fairly steady over the past 8 years-it increased an average 12% a year from 1990 to 1992 and has remained flat since then. The shipment value of corrected power-factor magnetics has been coming down gradually, while that of electronics has been increasing as they have gained market share over corrected power-factor magnetics.

12 

### 2.0 MIA Results 2.1. Industry Characterization 

### ADL developed an initial industry characterization using infonnation from relevant industry and marketpublications, industry trade organizations, company financial reports, and product literature. This industry characterization report helped ADL in developing the "strawman" industry cash flow analysis and also aided in the development ofa detailed and focused interview guide to perfonn the MIA. Specifically, shipment infonnation was obtained from publicly available Current Industrial Reports (CIRs) publishedbythe U.S. Bureau ofCensus. Financial and cost information was obtained from the Census ofManufactures (another Bureau ofCensus pUblication), SEC 1O-K statements, Dun 

### & Bradstreetreports, Robert Morris Associates' reports, and Moody's Company reports. 2.1.1. Industry Shipments 

### Current Industrial Reports (CIRs), published by the U.S. Bureau ofCensus, provide detailed data on quantity and total value ofU.S. shipments offluorescent lamp ballast products. Census uses SIC code 36124 to describe the fluorescent lamp ballast industry. According to CIR data, 103.9 million fluorescent lamp ballasts, valued at $906 million, were shipped in 1997. Census groups all ballast products into three main categories: 1) uncorrected powerfactor magnetics, 2) correctedpower-factor magnetics, and 3) electronics. In 1997, . power-factor corrected (85% PF or above) magnetic ballasts accounted for 41% ofthe quantity and 38% ofthe value ofshipments ofall fluorescent lamp ballasts. Inthe same year, electronic ballasts made up 35% ofthe quantity and 54% ofthe value ofshipments. Figure 1 presents the trend in the dollar value ofmanufacturers' shipments oflamp ballasts overthe period 1990 through 1997. It 

### shows that the shipment value ofthe uncorrected power-factor magnetic segment has remained fairly steady overthe past 8 years-it increased an average 12% a year from 1990 to 1992 and has remained flat since then. The shipment value ofcorrected power-factor magnetics has been coming down gradually, while that ofelectronics has been increasing as they have gained market share over corrected power-factormagnetics.

12Figure 1 . Historical trend in value of shipments of fluorescent lamp ballast products Value of Manufacturers ' Shipments

800,000 1,200,000 1,000,000

600,000 400,000 200,000 All ballasts -e- Corrected PF Magnetic --4- Electronic -s- Uncorrected PF Magnetic



### Table 1 presents the lamp ballast products that would be impacted by a DOE standard. These will be referred to as "affected" magnetic ballasts in this MIA report. The table also lists the cathode cutout and electronic ballast product classes that might serve as energy-efficient replacements to meet potential DOE standards at the cathode cutout ballast performance level or at the electronic ballast performance level. Table 1. "Affected" magnetic ballasts and ene "Affected" magnetic ballasts Cathode cutout replacements Electronic replacements 1F40T12 1F40T12 1F40T12,3F40T12,1F32T8, 3F32T8 

### 2F40T12 2F40T12 2F40T12,3F40T12,4F40T12, 2F32T8, 3F32T8, 4F32T8 2F96T12 2F96T12 2F96T12H0 2F96T12HO 2F96T12HO 

### Most of the manufacturers interviewed believe that standard levels set at the cathode cutout ballast performance levels would not result in cathode cutout ballasts becoming a viable alternative as a mass market replacement for the "affected" magnetic ballasts. They reported that cathode cutout ballasts have been available in the marketplace for many years and have not achieved substantial market share, despite serious promotional efforts. In fact the sales of cathode cutout ballasts have declined over the past four years. The data submitted by the National Electrical Manufacturers Association (NEMA) to the Lawrence Berkeley National Lab (LBNL) show total industry shipments of cathode cutout ballasts as follows: 1993-580,000; 1994-614,000; 1995-460,000; 1996- 382,000; 1997-422,000. (Shipments for 1997 are annualized based on six months actual rgy-efficient replacements

13 Figure 1. Historical trend in value ofshipments offluorescent lamp ballast products Value of Manufacturers' Shipments
1,200,000 -,------------------,

_ 1,000,000 

### '" "CS C 

### '" gj 800,000 o :5**~ ~**  600,000


# .. E**~** 400,000 U) !'l 200,000**~ O+--r-~--r-~-~-r-~-~-~**  1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Year ____ All ballasts

__ Corrected PF Magnetic

- Electronic

__ Uncorrected PF Magnetic



### Table 1presents the lamp ballast products that would be impacted by a DOE standard. These will be referred to as "affected" magnetic ballasts inthis MIAreport. The table also lists the cathode cutout and electronic ballast product classes that might serve as energy-efficient replacements to meetpotential DOE standards at the cathode cutout ballast performance level or at the electronic ballast performance level.

a e . ec T bl 1 "Affi ted" magne c a as an tibll 

### ts d ffi' 

### t energy-e clen replacemen

### ts 

### "Affected" magnetic Cathode cutout Electronic replacements ballasts replacements 

### IF40T12 IF40T12 IF40T12,3F40T12,lF32T8, 3F32T8 2F40T12 2F40T12 2F40T12,3F40T12,4F40T12, 2F32T8,3F32T8,4F32T8 2F96T12 2F96T12 2F96T12HO 2F96T12HO 2F96T12HO Most ofthe manufacturers interviewed believe that standard levels set atthe cathode cutout ballastperformance levels would not result in cathode cutout ballasts becoming a viable alternative as a mass market replacement for the "affected" magnetic ballasts. They reported that cathode cutout ballasts have been available inthe marketplace for many years and have not achieved substantial market share, despite serious promotional efforts. In fact the sales ofcathode cutout ballasts have declined over the past four years. The data submitted by the National Electrical Manufacturers Association (NEMA) to the Lawrence Berkeley National Lab (LBNL) showtotal industry shipments ofcathode cutout ballasts as follows: 

### 1993-580,000; 1994-614,000; 1995-460,000; 1996- 382,000; 1997-422,000. (Shipments for 

### 1997 are annualized based on six months actual
13

### shipments). Manufacturers attributed this lack of success to both technical and

marketplace factors. Most manufacturers stated that a rule requiring ir cathode cutout ballast performance levels would just be a de facto electronic ballast rule. Manufacturers noted the downward trend in electronic ballast prices, which will thereby reduce the price advantage that cathode cutouts currently have over electronics. Additionally, not all magnetic ballast manufacturers produce cathode cutout ballasts. Those who did not manufacture cathode cutouts indicated that patented designs could lead to higher costs of manufacturing these ballasts. For these reasons, ADL was only able to collect data and assess the impacts of an electronic ballast performance level in this MIA report. In 1997, 31.5 million "affected" magnetic ballasts were sold in the United States. i They represent 73% of all power-factor corrected magnetic ballasts sold in 1997. Table 2 presents the value of shipments of "affected" magnetic ballasts, assuming that the average price of these "affected" magnetic ballasts ($8 per unit) is the same as that of all power-factor corrected magnetic ballasts. Table 2. Shipment and value of fluorescent lamp ballasts in 1997 Product 1997 Shipments mil 1997 Value of

Shipments (S mil) % of Revenues

of all ballasts Ave ge Price ,



### (S per unit) All Power-factor corrected magnetic ballasts 

### 42.9 343.9 37.9% 8.0 "Affected" magnetic ballasts 

### 31.5' 252.6 27.9% 8.02Uncorrected powerfactor ballasts 24.5 68.5 7.6% 2.8 Electronic ballasts 

### 36.5 494.0 54.5% 13.5 All ballasts 103.9 

### 906.5 100% 

### 8.7 1 A subset of "All Power

-factor corrected magnetic ballasts." Data provided by NEMA (all other information was obtained from CIRs) 2 Assumes price is the same as that of all PF corrected magnetics 

### Using this average price of $8, revenues from "affected" magnetic ballasts in 1997 constituted approximately 28% of all manufacturer revenues in the fluorescent lamp ballast industry. 

### 2.1.2. Manufacturer Market Shares and Characteristics Table 3 lists the major fluorescent lamp ballast manufacturers and their characteristics. ADL conducted manufacturer interviews and plant visits with all of them during the October to December 1998 time frame.

1 Information provided by National Electrical Manufacturers Association (NEMA). 14 

### shipments). Manufacturers attributed this lack ofsuccess to both technical and marketplace factors. Most manufacturers stated that a rule requiring cathode cutout ballast performance levels wouldjustbe a 

### defacto electronic ballast rule. Manufacturers noted the downward trend in electronic ballastprices, which will thereby reduce the price advantage that cathode cutouts currently have over electronics. Additionally, not all magnetic ballast manufacturers produce cathode cutout ballasts. Those who did notmanufacture cathode cutouts indicated thatpatented designs could lead to higher costs ofmanufacturing these ballasts. Forthese reasons, ADL was only able to collect data and assess the impacts of an electronic ballast performance level inthis MIA report. In 1997, 31.5 million "affected" magnetic ballasts were sold in the United States. l 

### They represent 73% ofall power-factor corrected magnetic ballasts sold in 1997. Tabie 2 presents the value ofshipments of"affected" magnetic ballasts, assuming that the average price ofthese "affected" magnetic ballasts ($8 perunit) is the same as that ofall power-factor corrected magnetic ballasts. Table 2. Sh' Ipmentand I fft vauee b II uerescent lamp a asis in 1997 

### Product 1997 1997 Value of % ofRevenues Average Price Shipments Shipments ofaU ballasts (mil) ($ 

### mil) ($ 

### per unit) All Power-factor 42.9 343.9 37.9% 8.0 corrected magnetic ballasts "Affected" magnetic 

### 31S 252.6 27.9% 8.02 

### ballasts Uncorrected power- 24.5 68.5 7.6% 2.8 factor ballasts Electronic ballasts 36.5 494.0 54.5% 13.5 All ballasts 103.9 906.5 100% 8.7 1 A subset of"All Power-factor corrected magnetic ballasts." DataprOVided byNEMA (all otherinformatIOn was obtained from eIRs) 2 Assumes price is the same as that ofall PF corrected magnetics 

### Using this average price of$8, revenues from "affected" magnetic ballasts in 1997 constituted approximately 28% ofall manufacturer revenues in the fluorescent lamp ballast industry. 2.1.2. Manufacturer Market Shares and Characteristics 

### Table 3 lists the major fluorescent lamp ballastmanufacturers and their characteristics. ADL conducted manufacturer interviews and plant visits with all ofthem during the Octoberto December 1998 time frame.

1 Information provided by National Electrical Manufacturers Association (NEMA). 

### 14Table 3. List of lamp ballast manufacturers

Manufacturer Characteristics in "affected " categories 

### Advance Transformer Company Producer of magnetic and electronic ballasts with domestic, Mexican foreign facilities Howard Industries Producer of electronic ballasts with domestic production facilities MagneTek Producer of magnetic and electronic ballasts with domestic and Mexican production facilities Motorola Lighting Producer of electronic ballasts with domestic production facilities Osram Sylvania Producer of electronic ballasts with foreign production facilities Robertson Worldwide Producer of magnetic and electronic ballasts for specialty a pplications with domestic production facilities SLi Lighting/PLP Producer of electronic and magnetic ballasts with Mexican production facilities 

### The interviews conducted in 1996/1997 suggested that product mix, firm size, location of production facilities, and level of vertical integration were possible characteristics to be used in defining sub-group categories. After consultation with industry, ADL elected to group manufacturers exhibiting similar product mix characteristics for the MIA. This aggregation scheme was selected as it represents the most comprehensive way of reporting the variation of impacts on different manufacturers while ensuring confidentiality of individual manufacturers' positions. Based on information presented in Table 3, ADL divided the manufacturers into the following two sub-groups: Sub-group 1: Manufacturers of both magnetic and electronic ballasts (1) Advance Transformer Company (2) MagneTek, Inc. (3) Robertson Worldwide (4) SLi Lighting / PowerLighting Products Sub-group 2: Manufacturers that produce only electronic ballasts (1) Howard Industries (2) Motorola Lighting, Inc. 

### (3) Osram Sylvania Products Inc. The magnetic ballast industry has fewer manufacturers and, hence, is more concentrated than the electronic ballast industry. Table 4 provides an overview of the number of manufacturers and market shares.
Table 4. Number of manufacturers and market shares Number of major manufacturers Market share of the 4

largest manufacturers Market share of top 7 manufacturers 

### Magnetic 4 >95% >95% Electronic 7 >70% >95%

15 T bl 3 l· 

### t fl

a e • IS 0 b II t amp a as manufat curers 

### Manufacturer Characteristics in "affected" categories Advance Transformer Producer ofmagnetic and electronic ballasts with domestic, Mexican Company and foreign facilities Howard Industries Producer ofelectronic ballasts with domestic production facilities MagneTek Producer ofmagnetic and electronic ballasts with domestic and Mexican production facilities Motorola Lighting Producer ofelectronic ballasts with domesticproduction facilities Osram Sylvania Producer ofelectronic ballasts with foreign production facilities Robertson Worldwide Producer ofmagnetic and electronic baIlasts for specialty applications with domesticj>roduction facilities SLi Lighting/PLP Producer ofelectronic and magnetic ballasts with Mexican production facilities The interviews conducted in 

### 199611997 suggested that product 

### mix, ftrm size, location of production facilities, and level ofvertical integration were possible characteristics to be used in deftning sub-group categories. After consultationwith industry, ADL elected to group manufacturers exhibiting similarproduct mix characteristics for the MIA. This aggregation scheme was selected as itrepresents the most comprehensive way of reporting the variation ofimpacts on different manufacturers while ensuring conftdentiality ofindividual manufacturers' positions. Based on information presented in Table 3, ADL divided the manufacturers into the following two sub-groups: Sub-group 1: Manufacturers ofboth magnetic and electronic ballasts 

### (1) Advance Transformer Company (2) MagneTek, Inc. (3) Robertson Worldwide (4) SLi Lighting / PowerLighting Products Sub-group 2: Manufacturers thatproduce only electronic ballasts 

### (1) Howard Industries (2) MotorolaLighting, Inc. (3) Osram SylvaniaProducts Inc. The magnetic ballast industry has fewer manufacturers and, hence, is more concentrated than the electronic ballast industry. Table 4 provides an overview ofthe number of manufacturers and market shares. Table 4 Number ofmanufacturers and market shares 

### Number ofmajor Market share ofthe 4 Market share oftop 7

manufacturers largest manufacturers manufacturers Magnetic 4 

### >95% >95% Electronic 7 >70% >95%

15

### 2.2. Cash Flow Impacts

Manufacturers and L used the GRIM spreadsheet to evaluate the cash flow impacts of regulations on individual manufacturers . The GRIM spreadsheet calculates the change in net present value (NPV) for the manufacturer(s) following a regulation. Net present value (NPV) is defined, for the purposes of this analysis, as the present value of cash flows for the manufacturer(s) in question. The basic sc e of the GRIM is a standard annual cash flow analysis which uses price and shipment information as an input, builds on manufacturing cost information, and accepts a set of regulatory conditions as changes in costs, associated margins and investments. The model calculates actual cash flows by year and then determines the present value of these cash flows, both without regulations ( Base Case) and with regulations (Standard Case), using the appropriate discount rate. For the purpose of this analysis, the Base Case scenario represents the business scenario in the absence of a standard. In case an electronic ballast standard comes into effect, it will change the mix of ballast products being sold in the market and their associated prices, costs and shipments. Such a scenario is called the Standard Case scenario. Hence, Base Case NPV implies the present value of cash flows in the absence of a standard. Similarly, Standard Case NPV implies the present value of cash flows in the scenario where a standard comes into effect. To project future cash flows, this analysis assumes 2000 as the announcement year of the standard, and 2003 as the year when the standard will come into effect. 

### In cooperation with ADL, individual manufacturers' cash flows were developed. To do this, manufacturers estimated future industry price trends, manufacturing costs, and the value and timing of necessary capital investments, both in the Base Case and the Standard Case. In preparing the GRIM cash flows, manufacturers used their own current and future forecasts of product mix for the various magnetic and electronic ballast product classes identified in Table 1. Some of the important inputs required to develop cash flow estimates and NPV are industry shipments, market shares, manufacturer prices, profit margins and capital investments. These are discussed in the next sections. 2.2.1. Shipments Magnetic ballast shipments have decreased in the past decade as electronic ballasts have been gaining market share. Some industry observers believe that the rate of decrease of magnetic ballast shipments will decline in the future while others maintain that it will continue at similar rates in the future. There was a general sentiment, however, that magnetic ballast sales will continue to decline in the future. 

### In 1997, 31.5 million "affected" magnetic ballasts were sold in the product classes for which DOE proposes to amend the energy efficiency standard. Analysis conducted by LBNL suggests that these 31.5 million "affected" magnetic ballasts will be replaced by 23.6 million electronic ballasts. LBNL's analysis takes into account that, on average, 16 

### 2.2. Cash Flow Impacts 

### Manufacturers and ADL used the GRlM spreadsheet to evaluate the cash flow impacts of regulations on individual manufacturers. The GRlM spreadsheet calculates the change in netpresent value (NPV) for the manufacturer(s) following a regulation. Netpresent value (NPV) is defined, for the purposes ofthis analysis, as the present value ofcash flows for the manufacturer(s) in question. The basic structure ofthe GRIM is a standard annual cash flow analysis which uses price and shipment information as an input, builds on manufacturing cost information, and accepts a set ofregulatory conditions as changes in costs, associated margins and investments. The model calculates actual cash flows by year and then detennines the present value ofthese cash flows, both without regulations (Base Case) and withregulations (Standard Case), using the appropriate discount rate. Forthe purpose ofthis analysis, the Base Case scenario represents the business scenario inthe absence ofa standard. In case an electronic ballast standard comes into effect, it will change the mix ofballastproducts being sold in the market and their associated prices, costs and shipments. Such a scenario is called the Standard Case scenario. Hence, Base Case NPV implies the present value ofcash flows inthe absence ofa standard. Similarly, Standard Case NPV implies the present value ofcash flows inthe scenario where a standard comes into effect. To project future cash flows, this analysis assumes 2000 as the announcement year ofthe standard, and 2003 as the year when the standard will come into effect. In cooperation with ADL, individual manufacturers' cash flows were developed. To do this, manufacturers estimated future industry price trends, manufacturing costs, and the value and timing ofnecessary capital investments, bothinthe Base Case and the Standard Case. Inpreparing the GRlM cash flows, manufacturers used their own current and future forecasts ofproduct mix for the various magnetic and electronic ballast product classes identified in Table 1. Some ofthe important inputs required to develop cash flow estimates and NPV are industry shipments, market shares, manufacturerprices, profit margins and capital investments. These are discussed in the next sections. 2.2.1. Shipments 

### Magnetic ballast shipments have decreased in the past decade as electronic ballasts have been gaining market share. Some industry observers believe that the rate ofdecrease of magnetic ballast shipments will decline inthe future while others maintain that it will continue at similarrates inthe future. There was a general sentiment, however, that magnetic ballast sales will continue to decline inthe future. In 1997,31.5 million "affected" magnetic ballasts were sold inthe product classes for whichDOE proposes to amend the energy efficiency standard. Analysis conducted by LBNL suggests thatthese 31.5 million "affected" magnetic ballasts will be replaced by 23.6 million electronic ballasts. LBNL's analysis takes into account that, on average, 16

### electronic ballasts drive more lamps than magnetic ballasts. The National Energy Savings

(NES) spreadsheet developed by LBNL calculates the change in shipments of magnetic and electronic ballasts both in the Base Case and the Standard Case, by product categories, year-by-year. The GRIM spreadsheet uses shipment forecasts from the NES spreadsheet in conducting the cash flow analysis. 

### The fluorescent lamp ballast industry represented by its trade association (NEMA) and the Department of Energy (DOE) have agreed to consider two shipment scenarios that will bound the range of possible outcomes in future shipments. Scenario 1: In the absence of a DOE standard, "affected" magnetic ballast shipments will decrease linearly until 2015 when they reach 10% of the 1997 value. Beyond 2015, shipments will remain constant at 10% of their 1997 value. This assumption equates to shipments declining at the rate of 5% of 1997 shipments per year, until 2015. This scenario is referred to as the "5%" shipment scenario in this report. Scenario 2: In the absence of a DOE standard, "affected" magnetic ballast shipments will decrease linearly until 2027 when they reach 10% of the 1997 value. Beyond 2027, shipments will remain constant at 10% of their 1997 value. This assumption equates to shipments declining at the rate of 3% of 1997 shipments per year, until 2027. This scenario is referred to as the "3%" shipment scenario in this report. Most manufacturers in Sub-group 1 believe that an electronic ballast standard will result in stockpiling of "affected" magnetic ballasts in the year prior to the standard. This would then result in a corresponding drop in shipments of electronic ballasts in the year that the standard comes into effect. Manufacturers supported their argument by stating that the implementation of an energy-efficiency standard on Jan 1, 1990 stimulated stockpiling and a `Boom/Bust" cycle. The industry fears that a costly "boom/bust" cycle may occur again if the new energy-efficiency standard is applied without provisions to discourage stockpiling. ADL gathered quarterly shipment data to characterize the impact of the Jan 1, 1990 standard on shipments of magnetic ballasts. Figure 2 graphs the quarterly shipment data. Shipment data in the few quarters proceeding the effective date of the 1990 standard show a 15% increase in shipments. This increase in shipments was followed by a 26% drop in shipments in the two quarters following the effective date of the 1990 standard.

17 

### electronic ballasts drive more lamps than magnetic ballasts. The National Energy Savings (NES) spreadsheet developed by LBNL calculates the change in shipments ofmagnetic and electronic ballasts both in the Base Case 

### and the Standard Case, 

### by product categories, year-by-year. The GRIM spreadsheet uses shipment forecasts from the NES spreadsheet in conducting the cash flow analysis. The fluorescent lamp ballast industry represented by its trade association (NEMA) and the Department ofEnergy (DOE) have agreed to consider two shipment scenarios that will bound the range ofpossible outcomes in future shipments. Scenario 1: In

### the absence ofa DOE standard, "affected" magnetic ballast shipments will decrease linearly until 2015 when they reach 10% ofthe 1997 value. Beyond 2015, shipments will remain constant at 10% oftheir 1997 value. This assumption equates to shipments declining at the rate of5% of 1997 shipments peryear, until 2015. This scenario is referred to as the 

### "5%" shipment scenario in this report. Scenario 2: In the absence ofa DOE standard, "affected" magnetic ballast shipments will decrease linearly until 2027 when they reach 10% ofthe 1997 value. Beyond 2027, shipments will remain constant at 10% oftheir 1997 value. This assumption equates to shipments declining at the rate of3% of 1997 shipments peryear, until 2027. This scenario is referred to as the "3%" shipment scenario inthis report. Most manufacturers in Sub-group 1believe that an electronic ballast standard will result in stockpiling of"affected" magnetic ballasts in the yearpriorto the standard. This would thenresult in a corresponding drop in shipments ofelectronic ballasts in the year that the standard comes into effect. Manufacturers supported their argument by stating that the implementation ofan energy-efficiency standard onJan 1, 1990 stimulated stockpiling and a "BoomlBust" cycle. The industry fears that a costly "boomlbust" cycle may occur again ifthe new energy-efficiency standard is applied without provisions to discourage stockpiling. ADL gathered quarterly shipment data to characterize the impact ofthe Jan 1, 1990 standard on shipments ofmagnetic ballasts. Figure 2 graphs the quarterly shipment data. Shipment data inthe few quarters proceeding the effective date ofthe 1990 standard show a 15% increase in shipments. This increase in shipments was followed by a 26% drop in shipments inthe two quarters following the effective date of the 1990 standard.

17Figure 2. Impact of January 191990 energy-efficiency standard on shipment of magnetic ballasts



### ADL adapted the GRIM spreadsheet so that it could be used to analyze the impact of a shipment "spike," resulting from an electronic ballast standard. In conducting the MIA, ADL used a 15% shipment "spike" (increase in shipments by 15% in the year before the standard year, followed by a 15% decrease in shipments in the standard year) in modeling the impacts on cash flows. Figures 3 and 4 illustrate the 5% and the 3% shipment scenarios . Both of these scenarios include the 15% shipment "spike" assumption.

18 Figure 2. Impact ofJanuary 1,1990 energy-efficiency standard on shipment of magnetic ballasts 

### Quarterly Shipments of Magnetic Ballasts Peak 10.9 MM Q4 

### for48" lamps



## o o 

### '" '"**~** 

### ADL adapted the GRIM spreadsheet so that itcould**b~** 

### used to analyze the impact ofa shipment "spike," resulting from an electronic ballast standard. In conducting the MIA, ADL used a 15% shipment "spike" (increase in shipments by 15% inthe year before the standard year, followed by a 15% decrease in shipments in the standard year) in modeling the impacts on cash flows. Figures 3 and 4 illustrate the 5% and the 3% shipment scenarios. Both ofthese scenarios include the 15% shipment "spike" assumption.

18Figure 3. Base Case and Standard Case shipments in the 5% shipment scenario Base Case Shipments
35.00 30.00 25.00 . 20.00 15.00 Q .C 10.00 ca 5.00 0.00 35.00 30.00 E 25.00 Y! 20.00 E 15.00 = 10.00 U, 5.00 0.00 Standard Case Shipments

2030 -Magnetic -8- Electronic -Magnetic -Electronic
Figure 4. Base Case and Standard Case shipments in the 3% shipment scenario

Base Case Shipments
35.00 30.00 E 25.00 .3 20.00 E 15.00 CL . 10.00 U) 5.00 0.00 35.00 30.00 £ 25.00 e 20.00 E 15.00 e 10.00 W 5.00 0.00 Standard Case Shipments

2030 -+-Magnetic Electronic 

### 2.2.2. Capital Investments Magnetic --a- Electronic


### Manufacturers will have to increase their manufacturing capacities in order to meet the demand for additional electronic ballasts, both in the Base Case and the Standard Case. These one-time capital investments needed to increase manufacturing capacity are identified as capital conversion costs in the GRIM spreadsheet. Manufacturers provided capital conversion costs necessary to change over from "affected" magnetic to electronic ballasts. These costs are specified in dollars per electronic ballast. For example, a capital conversion cost of $2 per ballast means that a $2 million investment is needed to add manufacturing capacity to produce 1 million additional electronic ballasts annually. Interviews confirmed that manufacturers typically invest capital one year in advance in order to meet the increased demand for electronic ballasts. The GRIM spreadsheet uses 19 Figure 3. Base Case and Standard Case shipments in the 5% shipment scenario

35.00 30.00 :§. 25.00 J!l 20.00 c**~** 15.00 CI. :c 10.00 U) 5.00 0.00 Base Case Shipments

1995 2000 2005 2010 2015 2020 2025 2030 Year 

## 1- Magnetic -- Electronic I 

## =- 35.00 30.00 :§. 25.00 J!l 20.00 c**~** 15.00 CI. :c 10.00 U) 5.00 0.00 Standard Case Shipments

1995 2000 2005 2010 2015 2020 2025 2030 Year I- Magnetic -<.- Electronic I
Figure 4. Base Case and StandardCase shipments in the 3% shipmentscenario

35.00 30.00 :§. 25.00 J!l 20.00 c**~** 15.00 CI. :c 10.00 U) 5.00 0.00 . Base Case Shipments

1995 2000 2005 2010 2015 2020 2025 2030 Year I--Magnetic --ElectronicI 

### 2.2.2. Capital Investments 

## =- 35.00 30.00 :§. 25.00 

## 1l 20.00 G> E 15.00 CI.**~** 10.00 5.00 0.00 Standard Case Shipments

1995 2000 2005 2010 2015 2020 2025 2030 Year 

# 1-- Magnetic
.......... Electronic 

# I

Manufacturers will have to increase their manufacturing capacities in order to meet the demand for additional electronic ballasts, both in the Base Case 

### and the Standard Case. 

### These one-time capital investments needed to increase manufacturing capacity are identified as capital conversion costs in the GRIM spreadsheet. Manufacturers provided capital conversion costs necessary to change over from "affected" magnetic to electronic ballasts. These costs are specified 

### in dollars per electronic ballast. For example, a capital conversion cost of$2 per ballast means that a $2 million investment is needed to add manufacturing capacity to produce 1 million additional electronic ballasts annually. Interviews confirmed that manufacturers typically invest capital one year in advance in orderto meet the increased demand for electronic ballasts. The GRIM spreadsheet uses 19

### this assumption to model capital conversion costs both in the Base Case and the Standard

Case. Capital conversion costs are needed in the Base Case to meet the increasing demand for electronic ballasts as magnetic ballast shipments gradually decline. In the Standard Case, capital conversion costs are required to prepare for the gradual market conversion to electronic ballasts in the years before the standard year, and also to meet the large increase in electronic ballast shipments resulting from the standard. Figure 5 illustrates the timing and relative magnitude of capital conversion costs needed in the Base Case and the Standard Case. Figure 5. Timing and relative magnitude of capital conversion costs 

### Capital Invesen Base Case Shipments Base Case Investments of Magnetic Ballasts in Electronic Ballasts E E

Std. Year 

### Standards Case Shipments of Magnetic Ballasts

Std. Year 

### 2.2.3. Industry Cash Flow Submittal 

# If fft^fff tf Std. Year 

### Standards Case Investments in Electronic Ballasts

Std. Year



### Each manufacturer was asked to develop its Base Case and Standard Case cash flows based on its estimates of future prices, profit margins and capital expenditures. Manufacturers developed their "most likely" projections for future revenues and profit margins based on their views of the future industry structure and competition dynamics. This scenario is referred to as the Manufacturer Submittal scenario in this report. In developing cash flow estimates under the Manufacturer Submittal scenario it is assumed that manufacturers retain their 1997 shares of the existing electronic market in the new
20



### this assumption to model capital conversion costs both in the Base Case and the Standard Case. Capital conversion costs are needed in the Base Case to meetthe increasing demand for electronic ballasts as magnetic ballast shipments gradually decline. Inthe Standard Case, capital conversion costs are required to prepare for the gradual market conversion to electronic ballasts in the years before the standard year, and also to meet the large increase 

### inelectronic ballast shipments resulting from the standard. Figure 5 illustrates the timing and relative magnitude ofcapital conversion costs needed in the Base Case and the Standard Case. Figure 5. Timing and relative magnitude ofcapital conversion costs 

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

### E 

## g**~** 

# - s::: J2 CII c 

# .s CI> E en CII a. > :c .5 !I) Ii «I (.) Std. Year Std.Year Standards Case Shipments Standards Case Investments of Magnetic Ballasts in Electronic Ballasts 

# =- =- E 

## g**~** C J2 II> C 

# .s II> E en II> Q. > 

### :c .5 !I) Ii III (.) Std. Year Std. Year


### 2.2.3. Industry Cash Flow Submittal 

### Each manufacturer was asked to develop its Base Case and Standard Case cash flows based onits estimates offuture prices, profit margins and capital expenditures. Manufacturers developed their "most likely" projections for future revenues and profit margins based ontheirviews ofthe future industry structure and competition dynamics. This scenario is referred to as the Manufacturer Submittal scenario in this report. In developing cash flow estimates under the Manufacturer Submittal scenario 

### itis assumed that manufacturers retain their 1997 shares ofthe existing electronic market inthe new 20

### electronic market the market created as "affected" magnetic ballast shipments are

converted to electronic ballasts. 

### During interviews some manufacturers expressed their belief that a significant increase in the electronic ballast market resulting from an electronic ballast standard might encourage one or more new entrants into the U. S. market. They felt that this new entrant(s) might capture a significant portion of the new electronic market. To ensure that the MIA captured the potential impacts of a new entrant(s) in the ballast market, cash flows and NPVs were evaluated assuming that a new market entrant(s) will capture 15% of the new electronic market in 2003 . Manufacturer market shares in the 1997 electronic market are redistributed to accommodate the new market entrant(s). This scenario is referred to as the New Entrant scenario in this report. ADL used shipment weighted average financial parameters of all existing electronic ballast manufacturers (Sub-groups 1 and 2) to model the financial impact on the new entrant (s) in this scenario. From manufacturer interviews and cash flow submittals it was apparent that Sub-groups 1 and 2 had quite divergent views of the future industry competitiveness and corresponding electronic ballast profit margins. Most manufacturers in Sub-group 1 believed that there would be a squeeze in their margins in the Standard Case due to increased competitiveness and a potential new entrant. Sub-group 2, on the other hand, expected to gain efficiencies of scale from higher volumes and expressed the belief that their profit margins on this incremental part of their business would be equal to or higher than on their current electronic ballast business. To evaluate the impact of these divergent views, ADL created an alternative scenario that assumes that each manufacturer's Base Case electronic ballast profit margins and market shares are maintained in the Standard Case. This scenario is referred to as the Existing Dynamics scenario in this report. Table 5 summarizes the various scenarios that were considered in conducting the ballast MIA. Base Case and Standard Case cash flows and NPVs were calculated for each manufacturer under each scenario. Individual manufacturer cash flows were then aggregated to report impacts on the two sub-groups. In addition to maintaining confidentiality, this sub-group level aggregation approach has the benefit of capturing variability between manufacturers. Hence, by aggregating cash flows at the sub-group level using the three different scenarios, both uncertainty and variability are being captured in this analysis. Table 5. Scenarios used to characterize variability and uncertainty in the cash flow analysis Sub-group 1
Scenarios 5% and 3% shipment scenarios

® Manufacturer Submittal ® New Entrant ® Existing Dynamics Sub-group 2 5% and 3 % shipment scenarios ® Manufacturer Submittal ® New Entrant ® Existing Dynamics

21 

### electronic market-the market created as "affected" magnetic ballast shipments are converted to electronic ballasts. During interviews some manufacturers expressed their beliefthat a significant increase in the electronic ballast market resulting from an electronic ballast standard might encourage one ormore new entrants into the U.S. market. They felt that this new entrant(s) might capture a significant portion ofthe new electronic market. To ensure that the MIA captured the potential impacts ofa new entrant(s) in the ballast market, cash flows and NPVs were evaluated assuming that a new market entrant(s) will capture 15% ofthe new electronic market in 2003. Manufacturer market shares in the 1997 electronic market are redistributed to accommodate the newmarket entrant(s). This scenario is referred to as the New Entrant 

### scenario in this report. ADL used shipment weighted average fmancial parameters ofall existing electronic ballast manufacturers (Sub-groups 1 and 2) to model the financial impact onthe new entrant(s) in this scenario. From manufacturer interviews and cash flow submittals it was apparent that Sub-groups 1 and 2 had quite divergent views ofthe future industry competitiveness and corresponding electronic ballast profit margins. Mostmanufacturers in Sub-group 1 believed thatthere would be a squeeze intheir margins in the Standard Case 

### due to increased competitiveness and a potential new entrant. Sub-group 2, onthe other hand, expected to gain efficiencies ofscale from higher volumes and expressed the beliefthat theirprofit margins onthis incremental part oftheir business would be equal to or higher than on their current electronic ballast business. To evaluate the impact ofthese divergent views, ADL created an alternative scenario that assumes that each manufacturer's Base Case 

### electronic ballast profitmargins and market shares are maintained in the Standard Case. 

### This scenario is referred to as the ExistingDynamics 

### scenario in this report. Table 5 summarizes the various scenarios that were considered in conducting the ballast MIA. Base Case 

### and Standard Case 

### cashflows and NPVs were calculated for each manufacturer under each scenario. Individual manufacturer cash flows were then aggregated to report impacts onthe two sub-groups. In addition to maintaining confidentiality, this sub-group level aggregation approach has the benefit ofcapturing variability between manufacturers. Hence, by aggregating cash flows at the sub-group level using the three different scenarios, both uncertainty and variability are being captured in this analysis. Table 5. Scenarios used to characterize variability and uncertainty in the cash flow analysis 

### Sub-group 1 Sub-group 2 5% and 3% shipment scenarios 5% and 3% shipment scenarios Scenarios CD Manufacturer Submittal CD Manufacturer Submittal CD New Entrant CD New Entrant CD ExistingDynamics 

# • ExistingDynamics

21

### Industry-wide impacts were calculated by simply adding the cash flow impacts on the

two sub-groups that constitute the entire industry. For the industry, the New Entrant scenario is the same as the Manufacturer Submittal scenario because the new entrant(s) cash flow was modeled using shipment weighted average financial parameters of all existing electronic ballast manufacturers. Therefore industry-wide impacts in the 5% and 3% shipment scenarios are presented under the Manufacturer Submittal and Existing Dynamics scenarios only. Table 6 and 7 present the aggregated results of the cash flow analysis. Table 6. Cash flow impacts resulting from an electronic ballast standard under the 5% shipment

scenario 

### Scenarios Base Case Standard Case Change in % Change in NPV NPV NPV NPV $mil ($mil) $mil Cash flow impacts on the "affected " magnetic ballast business Sub-group 1 

### Manufacturer Submittal 181.3 91.3 -90.0 -50% New Entrant 181.3 91.6 -89.7 -50% Existing Dynamics 181.3 111.4 -69.9 -39% Sub-group 2 Manufacturer Submittal 

### 34.9 55.3 20.4 58% New Entrant 34.9 49.0 14.1 40% Existing Dynamics 

### 34.9 44.2 

### 9.3 27% Industry (=Sub-group 1+ Sub

-group 2) Manufacturer Submittal 216.3 146.6 -69.7 

### -32% Existing Dynamics 216.3 155.6 -60.7 

### -28%

Table 7. Cash flow impacts resulting from an electronic ballast standard under the 3% shipment

scenario 

### Scenarios Base Case Standard Case Change in % Change in NPV NPV NPV NPV $mil $mil $mil Cash flow impacts on the "affected" magnetic ballast business Sub-group 1 

### Manufacturer Submittal 210.7 97.1 -113.6 -54% New Entrant 210.7 97.4 -113.3 -54% Existing Dynamics 210.7 117.2 -93.5 -44% Sub-group 2 Manufacturer Submittal 26.2 53.7 27.5 105% New Entrant 

### 26.2 47.5 

### 21.3 81% Existing Dynamics 

### 26.2 42.7 16.5 63% 

### (=Sub-

### grou

Industry p 1 + Sub-group Manufacturer Submittal 237.0 150.8 

### -86.2 -36% Existing Dynamics 237.0 

### 159.9 -77.1 

### -33% 22 

### Industry-wide impacts were calculated by simply adding the cash flow impacts on the two sub-groups that constitute the entire industry. Forthe industry, the New Entrant 

### scenario isthe same as the Manufacturer Submittal 

### scenario because the new entrant(s) cash flow was modeled using shipment weighted average financial parameters ofall existing electronic ballast manufacturers. Therefore industry-wide impacts inthe 5% and 3% shipment scenarios are presented under the Manufacturer Submittal 

### and Existing Dynamics 

### scenarios only. Table 6 and 7 present the aggregated results ofthe cash flow analysis. Table 6. Cash flow impacts resulting from an electronic ballast standard underthe 5% shipment scenario 

### Scenarios Base Case Standard Case Change in % Change in 

### NPV NPV NPV NPV ($mil) ($mil) ($mil) Cash flow impacts on the "affected" ma2Detic ballast business Sub-2roup 1 Manufacturer Submittal 181.3 91.3 -90.0 -50% NewEntrant 181.3 91.6 -89.7 -50% Existing Dynamics 181.3 

### lIlA -69.9 -39% Sub-2roup 2 Manufacturer Submittal 34.9 55.3 

### 2004 58% NewEntrant 34.9 49.0 14.1 40% Existing Dynamics 34.9 44.2 9.3 27% Industry (:=Sub-2roup 1 

### + Sub-2roup 2) Manufacturer Submittal 216.3 146.6 -69.7 -32% Existing Dynamics 216.3 155.6 -60.7 -28%

Table 7. Cash flow impacts resulting from an electronic ballast standard underthe 3% shipment scenario 

### Scenarios Base Case Standard Case Change in % Change in 

### NPV NPV NPV NPV ($mil) ($mil) ($mil) Cash flow impacts on the "affected" magnetic ballast business Sub-2roup 1 Manufacturer Submittal 210.7 97.1 -113.6 -54% NewEntrant 210.7 

### 9704 -113.3 -54% Existing Dynamics 210.7 117.2 -93.5 -44% Sub-2roup 2 Manufacturer Submittal 26.2 53.7 27.5 105% NewEntrant 26.2 47.5 21.3 81% Existing Dynamics 26.2 42.7 16.5 63% Industry (=Sub-2roup 1 

### + Sub-group 2} Manufacturer Submittal 237.0 150.8 -86.2 -36% Existing Dynamics 237.0 159.9 -77.1 -33% 

### 22

### The cash flow results indicate that an electronic ballast standard will result in a loss in the

value (NPV) of the ballast industry. Industry's NPV loss ranges from $60.7 million to $69.7 million and $77.1 million to $86.2 million under the 5% and 3% shipment scenarios respectively. Detailed year-by-year Industry cash flows for the Base Case and the Standard Case under the Manufacturer Submittal and Business As Usual scenarios are presented in Attachment A. Both sub-groups will be disproportionately impacted when compared to the impacts on the entire industry. For Sub-group 1 NPV loss ranges from $69.9 to $90.0 and $93.5 to $113.6 under the 5% and 3% shipment scenarios respectively. Sub-group 2, on the other hand, shows an increase in NPV ranging from $9.3 to $20.4 and $16.5 to $27.5 under the 5% and 3% shipment scenarios respectively. Sub-group 1 will be negatively impacted because of the loss of its profitable "affected" magnetic ballast business. Interviews with Sub-group 1 indicated that, on average, their "affected" magnetic ballast business is significantly more profitable than their electronics business. Lower profitability in the electronic business combined with their reduced market shares in the electronic ballast market is responsible for the disproportionately large negative impacts on this sub-group. Additionally, restructuring costs associated with plant closures and changes in capacity utilization add to the loss in value. Any increase in electronic ballast sales represents an upside for Sub-group 2. Since this sub-group does not manufacture "affected" magnetic ballasts they experience no negative impacts. Hence, the overall impact of an electronic ballast standard on Sub-group 2 is positive. 2.2.4. Industry Value of the Electronic Ballast Business Tables 6 and 7 present the percentage change in industry value based on the value of the "affected" magnetic ballast segment in isolation. However, all of the manufacturers also produce electronic ballasts. In 1997, 36.5 million electronic ballasts were sold in the U.S. These sales generated $494 million in revenues for the industry (refer to Table 2). ADL conducted a cash flow analysis to develop the industry value (NPV) of the business represented by these "unaffected" electronic ballasts. Results are presented in Table 8. Annual cash flows and NPV of the "unaffected" electronic ballast business were estimated using shipment weighted average values of prices, costs, and financial parameters provided by the manufacturers currently in that business. A future industry growth rate of 2.1% was estimated based on forecasts of U.S. GDP growth for the years 1997 to 20202. Tables 8 presents the NPV calculated under two scenarios: 1) assuming 2 Source: Annual Energy Outlook, 1999, published by the Energy Information Administration, Department of Energy. Industry sources stated that average growth rates for ballast sales are approximately equal to increases in commercial floorspace, which in turn can be approximated as being equal to the increase in U.S. GDP. 23 

### The cash flow results indicate that an electronic ballast standard will result in a loss in the value (NPV) ofthe ballast industry. Industry's NPV loss ranges from $60.7 million to $69.7 million and $77.1 million to $86.2 million under the 5% and 3% shipment scenarios respectively. Detailed year-by-year Industry cash flows for the 

### Base Case and the 

### Standard Case under the 

### Manufacturer Submittal and 

### BusinessAs Usual scenarios are presented in Attachment A. Both sub-groups will be disproportionately impacted when comparedto the impacts on the entire industry. For Sub-group 1NPV loss ranges from $69.9 to $90.0 and $93.5 to $113.6 underthe 5% and 3% shipment scenarios respectively. Sub-group 2, onthe other hand, shows an increase in NPV ranging from $9.3 to $20.4 and $16.5 to $27.5 under the 5% and 3% shipment scenarios respectively. Sub-group 1 will be negatively impacted because ofthe loss ofits profitable "affected" magnetic ballastbusiness. Interviews with Sub-group 1 indicated that, on average, their "affected" magnetic ballast business is significantly more profitable than their electronics business. Lower profitability in the electronic business combined with their reduced market shares inthe electronic ballast market is responsible for the disproportionately large negative impacts onthis sub-group. Additionally, restructuring costs associated withplant closures and changes in capacity utilization add to the loss in value. Any increase in electronic ballast sales represents an upside for Sub-group 2. Since this sub-group does not manufacture "affected" magnetic ballasts they experience no negative impacts. Hence, the overall impact ofan electronic ballast standard on Sub-group 2 is positive. 2.2.4. Industry Value ofthe Electronic Ballast Business 

### Tables 6 and 7 presentthe percentage change in industry value based onthe value ofthe "affected" magnetic ballast segment in isolation. However, all ofthe manufacturers also produce electronic ballasts. In 1997, 36.5 million electronic ballasts were sold inthe 

### V.S. These sales generated $494 million inrevenues for the industry (refer to Table 2). ADL conducted a cash flow analysis to develop the industry value (NPV) ofthe business represented by these "unaffected" electronic ballasts. Results are presented in Table 8. Annual 

### cash flows and NPV ofthe "unaffected" electronic ballast business were estimated using shipment weighted average values ofprices, costs, and financial parameters provided by the manufacturers currently in that business. A future industry growth rate of2.1% 

### was estimated based onforecasts of

### V.S. GDP growth for the years 1997 to 20202• 

### Tables 8 presents the NPV calculated under two scenarios: 1) assuming

2 Source: Annual Energy Outlook, 1999, published by the Energy Infonnation Administration, Department ofEnergy. Industry sources stated that average growth rates for ballast sales are approximately equal to increases in commercial fioorspace, which in turn can be approximated as being equal to the increase in U.S. GDP. 

### 23

### there is no growth in electronic ballast sales, and 2) assuming a 2.1% annual growth rate

in electronic ballast sales. From the resulting NPV values it can be concluded that a small variation from the 2.1% growth assumption will not materially affect the results of the analysis. Table 8. industry value of "unaffected" electronic ballast business under different gro 

### Scenario 0% annual growth in electronic ballast sales 2.1 % annual growth in electronic ballast sales Tables 9 and 10 present the cash flow impacts of an electronic ballast standard on the ballast industry composed of all ballast product classes, both "affected" magnetic and electronic, considered under the DOE rulemaking. In 1997, the shipments of magnetic and electronic ballast product classes considered in the DOE rulemaking were 

### approximately 31.5 million and 36.5 million ballasts respectively. In developing these cash flow impacts, it is assumed that the "unaffected" electronics business, represented by 36.5 million electronic ballasts, will grow 2.1% annually.

projections V of "unaffected" electronics business ($mil) 

### 191.5 204.3

Table 9. Cash flow impacts under the 5% shipment scenario, assuming 2. 1% annual growth in

"unaffected" electronic ballast sales Scenarios 

### Base Case Standard Case Change in % Change in NPV NPV NPV ($mil) $mil 'V 

### ($mil) Sub-group 1 

### Manufacturer Submittal 288.9 198.9 -90.0 -31% New Entrant 

### 288.9 199.1 -89.8 -31% Existing Pynarnics 288.9 219.0 

### -69.9 -24% Sub-group 2 Manufacturer Submittal 131.7 

### 152.0 20.3 15% New Entrant 

### 131.7 145.8 14.1 11% Existing Dynamics 131.7 141.0 9.3 7% Industry (=Sub-group 1 + Sub-group 2) 

### Manufacturer Submittal 420.6 350.9 1 -69.7 -17% Existing Dynamics 

### 420.6 359.9 -60.7 -14%

Cash flow impacts on business represented by all regulated product classesMagnetic and Electronic

24 

### there is no growth in electronic ballast sales, and 2) assuming a 2.1% annual growthrate in electronic ballast sales. From the resulting NPV values it can be concluded that a small variation from the 2.1

### % growth assumption 

### win not materially affect the results ofthe analysis. Table 8. Industry**yal~e** of "unaffected" electronic ballast business under different growth rate projections 

### Scenario NPV of"unaffected" electronics business ($mil) 

### 0% annual growth in 

### electronic 191.5 ballast sales 2.1% annual growth in electronic 204.3 ballast sales Tables 9 and 10 present the cash flow impacts ofan electronic ballast standard onthe ballast industry composed ofall ballast product classes, both "affected" magnetic and electronic, considered under the DOErulemaking. In 1997, the shipments ofmagnetic and electronic ballastproduct classes considered inthe DOE rulemaking were approximately 31.5 million and 36.5 million ballasts respectively. In developing these cash flow impacts, itis assumed thatthe "unaffected" electronics business, represented by 36.5 million electronic ballasts, 

### win grow 2.1% annually. Table 9. Cash flow impacts underthe 5% shipmentscenario, assuming 2.1% annual growth in "unaffected" electronic ballast sales 

### Scenarios Base Case Standard Case Change in 

### % Change in NPV NPV NPV NPV 

### ($mil) ($mil) ($mil) Cash flow impacts on business represented by 

### all regulated product classesMa2netic and Electronic Sub-2roup 1 Manufacturer Submittal 288.9 198.9 -90.0 -31% New Entrant 288.9 199.1 -89.8 -31% Existing Dynamics 288.9 219.0 -69.9 -24% Sub-2!;roup 2 Manufacturer Submittal 131.7 152.0 20.3 15% New Entrant 131.7 145.8 14.1 11% Existing Dynamics 131.7 141.0 9.3 7% Industry (=Sub-2roup 1

### + Sub-2roup 2) Manufacturer Submittal 420.6 350.9 -69.7 -17% Existing Dynamics 420.6 359.9 -60.7 -14%

24Table 10. Cash flow impacts under the 3% shipment scenario, assuming 2.1% annual growth in "unaffected " electronic ballast sales Scenarios Base Case NPV ($mil Standard Case

NPV $mil Change in

NPV $mil % Change in

NPVCash flow impacts on business represented by all regulated product classesMagnetic and Electronic Sub-group 1 Manufacturer Submittal 

### 318.3 204.6 -113.7 

### -36% New Entrant 

### 318.3 204.9 -113.4 

### -36% Existing Dynamics 

### 318.3 224.7 

### -93.6 -29% Sub-group 2 Manufacturer Submittal 123.0 

### 150.5 27.5 22% New Entrant 123.0 144.3 21.3 17% Existing Dynamics 

### 123.0 139.5 16.5 

### 13% Industry (Sub-group 1 + Sub

-group 2) 

### Manufacturer Submittal 441.3 355.1 -86.2 -20% Existing Dynamics 

### 441.3 364.2 -77.1 

### -17% In order to arrive at the results in Tables 9 and 10, the NPV of each sub-group's "unaffected" electronic ballast business was added to both the Base Case and Standard Case NPVs associated with the "affected" magnetic ballast business (presented in Tables 6 and 7). This methodology is consistent with assumptions used by ballast manufacturers in developing their Manufacturer Submittal scenario. Cash flow impacts on the "affected" ballast business accounted for marginal effects on the entire electronics business. Sub-group 1 experiences a larger negative impact than the whole industry. In the Manufacturer Submittal scenario the NPV of Sub-group 1 will reduce from $288.9 million to $198.9 million in the 5% shipment scenario, representing an NPV loss of 31 %. The corresponding percentage loss in NPV in the 3% shipment scenario is 36%. Additionally, sub-group 1 manufacturers produce magnetic ballasts not included in the product classes considered by this rulemaking. If the NPV of non-regulated magnetic ballasts were included in the definition of industry NPV, the reductions in percentage NPV loss would be lower. For instance the NPV loss for Sub-group 1 could be reduced from 31% to between 24.5 and 27.5% for the 5% shipment scenario depending on the assumed profitability of the non-power-factor-corrected market segment.3

3 Assuming non-power-factor-corrected ballast profit margins are equal to power-factor-corrected ballastmargins the loss in industry value is estimated at 24.5%. Some manufacturers have commented that nonpower-factor ballast profit margins are lower than power-factor-corrected ballast margins. The value of 27.5% reduction in industry value is based on 50% lower margins for non-power-factor ballasts. 25 Table 10. Cash flow impacts underthe 3% shipmentscenario, assuming 2.1% annual growth in "unaffected" electronic ballast sales Scenarios Base Case Standard Case Change in % Change in NPV NPV NPV NPV ($mil) ($mil) ($mil) Cash flow impacts on business represented by all regulated product classesMa{!netic and Electronic Sub-{!roup 

### 1 Manufacturer Submittal 318.3 204.6 -113.7 -36% NewEntrant 318.3 204.9 -113.4 -36% Existing Dynamics 318.3 224.7 -93.6 -29% Sub-{!roup 2 Manufacturer Submittal 123.0 150.5 27.5 22% NewEntrant 123.0 144.3 21.3 17% Existing Dynamics 123.0 139.5 16.5 13% Industry (=Sub-group 

### 1 

### + Sub-group_

### 2) Manufacturer Submittal 441.3 355.1 -86.2 -20% Existing Dynamics 441.3 364.2 -77.1 -17% 

### In orderto arrive atthe results 

### in Tables 9 and 10, the NPV ofeach sub-group's "unaffected" electronic ballast business was added to both the Base Case 

### and Standard Case 

### NPVs associated withthe "affected" magnetic ballast business (presented in Tables 6 and 7). This methodology is consistent with assumptions used by ballast manufacturers in developing their Manufacturer Submittal 

### scenario. Cash flow impacts onthe "affected" ballast business accounted for marginal effects onthe entire electronics business. Sub-group 1 experiences a larger negative impactthanthe whole industry. Inthe Manufacturer Submittal 

### scenario the NPV ofSub-group 1 will reduce from $288.9 million to $198.9 million in the 5% shipment scenario, representing an NPV loss of31%. The corresponding percentage loss in NPV inthe 3% shipment scenario is 36%. Additionally, sub-group 1 manufacturers produce magnetic ballasts not included in the product classes considered by this rulemaking. Ifthe NPV ofnon-regulated magnetic ballasts were included inthe definition ofindustry NPV, the reductions inpercentage NPV loss would be lower. For instance the NPV loss for Sub-group 1 could be reduced from 31% to between 24.5 and 27.5% for the 5% shipment scenario depending onthe assumed profitability ofthe non-power-factor-corrected market segment.3

3 Assuming non-power-factor-corrected ballast profitmargins are equal to power-factor-corrected ballast margins the loss in industry value is estimated at 24.5%. Some manufacturers have commented that nonpower-factor ballastprofit margins are lowerthan power-factor-corrected ballast margins. The value of 27.5% reduction in industry value is based on 50% lower margins for non-power-factor ballasts. 25

### 2.2.5. Cash Flow Impacts

Tables 9 and 10 present the long-term cash flow impacts of a standard from theperspective of aggregate V. Since the GRIM spreadsheet calculates cash flows yearby-year it can be used to assess both long-term and short-term cash flow impacts from the perspective of annual cash flows. 

### Short-term cash flow impacts can help quantify the impact of a standard on capital investments and costs in years preceding the standard, and therefore provide valuable insights into the industry's ability to meet the standard. Results from a short-term impact assessment can also be useful to identify whether a standard will disproportionately burden any particular sub-group. Short-term negative cash flows can have negative business consequences. Due to the reduced availability of internally generated cash flows manufacturers may find it necessary to increase borrowing thereby adding to financial leverage. Diminished free cash flow may also make it difficult to meet obligations to current and new debt holders and/or payment of dividends to shareholders.ADL has quantified short-term impacts by summarizing the cash flow impacts on subgroups of manufacturers in the few years proceeding and following the electronic ballast standard. Table 11 presents these impacts. Table 11. Short-term cash flow impacts resulting from an electronic ballast standard on the business Scenario: Cash flows S taH) Years preceding the Electronic Years following the

"

### Manufacturer Ballast Standard Electronic Ballast 

### Submittal" Standard 2000 2001 2002 2003 2004 Base Case 38.3 38.1 36.1 34.9 33.1 Standard Case 38.1 35.3 1.5 9.1 12.8 Difference -0.2 -2.8 -34.6 -25.8 -20.3 Base Case 6.9 7.0 7.0 7.1 5.8 Standard Case 6.9 7.0 -0.3 1.4 10.2 Difference 0.0 0.0 -7 .3 -5.7 4.4 Base Case 45.2 45.1 43.1 42.0 38.9 Standard Case 45.0 42.3 1.2 10.5 23.0 Difference -0.2 -2.8 -41.9 -31.5 -15.9 Table 11 shows the differential negative cash flows due to an electronic ballast standard. This negative impact in the short-term has the following causes:

represented by all reg ulated ballast product classes

Sub-group 1

Sub-group 2

Indust

26 

### 2.2.5. Cash Flow Impacts 

### Tables 9 and 10 presentthe long-term cash flow impacts ofa standard from the perspective ofaggregate NPV. Since the GRIM spreadsheet calculates cash flows yearby-year it canbe used to assess both long-term and short-term cash flow impacts from the perspective ofannual cash flows. Short-term cash flow impacts canhelp quantify the impact ofa standard on capital investments and costs inyears preceding the standard, and therefore provide valuable insights into the industry's ability to meet the standard. Results from a short-term impact assessment can also be useful to identify whether a standard will disproportionately burden any particular sub-group. Short-term negative cash flows canhave negative business consequences. Due to the reduced availability ofinternally generated cash flows manufacturers may fInd it necessary to increase borrowing thereby adding to fmancial leverage. Diminished free cash flow may also make 

### it difficult to meet obligations to current and new debtholders andlorpayment ofdividends to shareholders.· ADL has quantified short-term impacts by summarizing the cash flow impacts on subgroups ofmanufacturers in the few years proceeding and following the electronic ballast standard. Table 11 presents these impacts. Table 11. Short-tenn cash flow impacts resulting from an electronic ballaststandard on the business represented II I db!! t d tl bya regu ate a as pro uc c asse.s 

### Scenario: Cash flows ($ 

### mil) Years precedingthe Electronic Years following the 

### "Manufacturer Ballast Standard Electronic Ballast 

### Submittal" Standard 2000 

## I 2001 

## I 2002 2003 

## I 2004 u**-~** roup 

### S b 1 Base Case 38.3 38.1 36.1 34.9 33.1 Standard Case 38.1 35.3 1.5 9.1 12.8 Difference -0.2 -2.8 -34.6 -25.8 -20.3 u**-~** roup S b 2 Base Case 

### 6.9 7.0 7.0 7.1 5.8 StandardCase 

### 6.9 7.0 -0.3 1.4 10.2 Difference 0.0 0.0 -7.3 -5.7 4.4 I d t

n ustry Base Case 45.2 45.1 43.1 42.0 38.9 StandardCase 45.0 42.3 1.2 10.5 23.0 Difference -0.2 -2.8 -41.9 -31.5 -15.9


### Table 11 shows the differential negative cash flows due to an electronic ballast standard. This negative impact inthe short-term has the following causes:

26

### In years preceding the electronic ballast standard:

a capital investments required to build manufacturing capacity to meet the new standard; 

### In years following the electronic ballast standard: ® restructuring costs associated with plant closures and reduced capacity utilization, and ® reduced profitability of electronic ballasts in comparison to the magnetic ballast business. Figures 6, 7 and 8 describe the short-term and long-term cash flows for Sub-group 1, Sub-group 2 and the whole industry. Figure 6. Base Case and Standard Case cash flows for Sub-group I in the Manufacturer Submittal

and 5% shipment scenario

-.0-Base -a- Standard



### For Sub-group 1 it is seen that the large initial dip in cash flow, in the Standard Case, is not fully recuperated even by 2014. Sub-group 2, however, experiences a large increase in cash flow following the initial cash drain required to build new manufacturing capacity.

27 

### Inyears preceding the electronic ballast standard: CD 

### capital investments required to build manufacturing capacity to meet the new standard; Inyears following the electronic ballast standard: CD 

### restructuring costs associated with plant closures and reduced capacity utilization, and CD 

### reduced profitability ofelectronic ballasts in comparisonto the magnetic ballast business. Figures 6, 7 and 8 describe the short-term and long-term cash flows for Sub-group 1, Sub-group 2 and the whole industry. Figure 6. Base Case and Standard Case cash flows for Sub-group 1 in the ManufacturerSubmittal and 5% shipmentscenario CASH FLOW TOTALS· SUBGROUP 1

FluorescentLomp Ba1Josts: EkcJronicBa1JostStmtdard 60

50

40

\ 30 

### \ \ \ \ \ 

### \ 20 

### \ \ 

### \ 

### , \ 

# / lIi iii III iii \ 10 \ \ \ \ \ \ \**OL-----------------------------------------------~** 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 .......-Base -III- Standard



### For Sub-group 1 it

### is seen that the large initial dip in cash flow, inthe Standard Case, is not fully recuperated even by 2014. Sub-group 2, however, experiences a large increase in cash flow following the initial cash drain 

### required to build new manufacturing capacity.

27Figure 7. Base Case and Standard Case cash flows for Sub-group 2 in the Manufacturer Submittal and 5% shipment scenario

CASH FLOW TOTALS - SUBGROUP 2 Fluorescent Lamp Ballasts: Ekctronic Ballast Standard 60.0

50.0

40.0

e 30.0 E

20.0

10.0

0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -1 -Base Standard

Figure 8. Base Case and Standard Case cash flows for the Industry in the Manufacturer Submittal

and 5% shipment scenario

60.0

50.0

40.0

e 30.0 E

20.0

10.0

0.0 i Base -a- Standard

28 Figure 1. Base Case and StandardCase cash flows for Sub-group 2 in the ManufacturerSubmittal and 5% shipment scenario CASH FLOW TOTALS - SUBGROUP 2

FluorescentLampBallasts: ElectronicBallastSlImdsrd 60.0

50.0

40.0 15 

# I -f-Base 

# I 5 30.0 Ii! -lIJ-- Standard 

# .. 20.0

10.0 

# ..

0.0 .

# '\**~**

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 8. Base Case and Standard Case cash flows forthe Industry in the ManufacturerSubmittal and 5% shipmentscenario
CASH FLOW TOTALS - INDUSTRY Fluo,escenJLampBallasts: Electronic BollastStandard**~.O ~---------------------------------------------------------,** 
50.0

40.0

30.0

20.0

10.0 

# \ 

# \ ,--y



# \/ III



# V 0.0 -'---------------"--------------------------------------------'

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -f-Base -til- Standard

28

### 2.3. Impacts on Manufacturing Capacity, Plant Closures and Loss of Capital Assets 2.3.1. Summary As reported in Section 2.2, the GRIM spreadsheet was used to assess the impact of plant closures on cash flows, through increased investment needs, one-time restructuring costs and asset write-offs. In this section more a qualitative description of impacts on manufacturing capacity, plant closures and loss of capital assets is given based on manufacturer interviews. 

### An electronic ballast standard would negatively impact magnetic ballast production capacity in the U.S. and Mexico. In all likelihood, an electronic ballast standard will result in the closure of two magnetic ballast production facilities, one plant in the U.S. and part of another in Mexico. Additionally two manufacturer-owned (captive) ballast supplier facilities would be impacted: a capacitor plant in Mexico would close and a magnet wire plant, located in the U.S., could also close. Large manufacturers of "affected" magnetic ballasts have greater automation in their plants, with large sections dedicated to manufacturing "affected" magnetic ballasts. Hence, a new standard would impact their manufacturing operations more severely than those of smaller, less automated, manufacturers. An electronic ballast standard would lead to increased electronic ballast manufacturing capacity in the U.S. and Mexico. In order to meet increased sales resulting from a new electronic ballast standard, three of the four manufacturers in Sub-group 1 plan to develop additional electronic ballast manufacturing capacities in Mexico. In Sub-group 2, two manufacturers stated that they would add electronic ballast manufacturing capacity in the U.S. to meet the new standard. 2.3.2. Introduction One of the significant outcomes of new standards can be the consequential obsolescence of existing manufacturing assets, including tooling and investment. ADL revised the GRIM spreadsheet in order to add features that explicitly provide the capability to include one-time charges such as plant closures and asset write-offs. Manufacturers incorporated their estimates for any one-time restructuring and other charges, when applicable, in developing their cash flows. The cash flow results presented in Tables 6 through 11 incorporate one-time charges resulting from plant closures, restructuring or consolidation to improve capacity utilization. The Manufacturer Interview Guide used a series of questions to identify impacts on manufacturing capacity. These questions were developed to understand the impact of an electronic ballast standard on: 29 

### 2.3. Impacts on Manufacturing Capacity, Plant Closures and loss of Capital Assets 2.3.1. Summary 

### As reported in Section 2.2, the GRIM spreadsheet was used to assess the impact ofplant closures on cash flows, through increased investment needs, one-time restructuring costs and asset write-offs. Inthis section more a qualitative description ofimpacts on manufacturing capacity, plant closures and loss ofcapital assets is given based on manufacturer interviews. 

### An electronic ballast standard would negatively impact magnetic ballast production capacity in the U.S. and Mexico. Inall likelihood, an electronic ballast standard will result inthe closure oftwo magnetic ballastproduction facilities, one plant in the U.S. and part ofanother in Mexico. Additionally two manufacturer-owned (captive) ballast supplier facilities would be impacted: a capacitor plant in Mexico would close and a magnet wire plant, located in the U.S., could also close. Large manufacturers of"affected" magnetic ballasts have greater automation intheir plants, with large sections dedicated to manufacturing "affected" magnetic ballasts. Hence, a new standard would impacttheir manufacturing operations more severely than those ofsmaller, less automated, manufacturers. 

### An electronic ballast standard would lead to increased electronic ballast manufacturing capacity inthe U.S. and Mexico. In orderto meet increased sales resulting from a new electronic ballast standard, three ofthe four manufacturers in Sub-group 1 planto develop additional electronic ballast manufacturing capacities in Mexico. In Sub-group 2, two manufacturers stated that they would add electronic ballast manufacturing capacity in the U.S. to meet the new standard. 2.3.2. Introduction 

### One ofthe significant outcomes ofnew standards canbe the consequential obsolescence ofexisting manufacturing assets, including tooling and investment. ADL revised the GRIM spreadsheet in orderto add features that explicitly provide the capability to include one-time charges such as plant closures and asset write-offs. Manufacturers incorporated their estimates for anyone-time restructuring and other charges, when applicable, in developing their cash flows. The cash flow results presented in Tables 6 through 11 incorporate one-time charges resulting from plant closures, restructuring or consolidation to improve capacity utilization. The Manufacturer Interview Guide 

### used a series ofquestions to identify impacts on manufacturing capacity. These questions were developed to understand the impact ofan electronic ballast standard on: 29

### ® U.S. and North American manufacturing capacity associated with the production of

magnetic and electronic ballasts ® Capacity utilization and plant location decisions in the U.S. and North America both with and without standards 

### ® The ability of manufacturers to upgrade or remodel existing facilities to accommodate a new product mix ® The nature and value of stranded assets, if any 2.3.3. Interview Results In general, interviews confirmed that manufacturing capacities associated with "affected" magnetic ballast production would be negatively impacted. Also, most manufacturers reported that they would add additional electronic ballast capacity to meet a new standard. None of the manufacturers stated that they would leave the industry or go out of business as a result of an electronic ballast standard. Some manufacturers in Sub-group 1 stated they would close plants within 6 to 24 months after the effective date of a standard. In all four plants could be impacted. Of these, two are in the U.S. and two are in Mexico. 

### US. Plants: ® A first plant manufactures both "affected" and other types (referred to as "unaffected") of magnetic ballasts. A new standard resulting in the loss of "affected" magnetic ballast sales will significantly reduce the capacity utilization of this plant and hence the viability of its operation. The manufacturer plans to close this plant and consolidate manufacturing of its "unaffected" ballasts in its Mexican manufacturing facility that currently produces a mix of "affected" and "unaffected" magnetic ballasts. ® A second plant manufactures materials used in the production of "affected" magnetic ballasts. Approximately one-third of the plant's output is associated with the manufacture of "affected" magnetic ballasts: The manufacturer believes that this loss could be sufficiently large to render unviable its component manufacturing business and thus cause the plant to be closed. Mexican Plants: ® One manufacturer reported that it would have to close part of its magnetic ballast manufacturing plant in order to continue operating at profitable levels. This is possible since the plant is modular in its design, manufacturing operations and construction. 

### • Another plant manufactures components used in the production of "affected" magnetic ballasts. Although this plant produces components for both "affected" and other types of ballasts, a new standard will dramatically reduce its capacity utilization thereby likely resulting in its closure. 30 

### • U.S. and North American manufacturing capacity associated with the production of magnetic and electronic ballasts • Capacity utilization and plant location decisions in the U.S. and North America both with and without standards • The ability ofmanufacturers to upgrade or remodel existing facilities to accommodate a newproduct mix • The nature and value ofstranded assets, ifany 2.3.3. Interview Results 

### In general, interviews conftrmed that manufacturing capacities associated with "affected" magnetic ballastproduction would be negatively impacted. Also, most manufacturers reported thatthey would add additional electronic ballast capacity to meet a new standard. None ofthe manufacturers stated that they would leave the industry or go out of business as a result ofan electronic ballast standard. Some manufacturers in Sub-group 1 statedthey would close plants within 6 to 24 months after the effective date ofa stanq.ard. In all four plants could be impacted. Ofthese, two are inthe U.S. and two are inMexico. 

### US. Plants: • A first plantmanufactures both "affected" and othertypes (referred to as "unaffected") ofmagnetic ballasts. A new standard resulting in the loss of"affected" magnetic ballast sales will significantly reduce the capacity utilization ofthis plant and hence the viability ofits operation. The manufacturerplans to close this plant and consolidate manufacturing ofits ''unaffected'' ballasts in its Mexicanmanufacturing facility that currently produces a mix of"affected" and "unaffected" magnetic ballasts. • A secondplantmanufactures materials used inthe production of"affected" magnetic ballasts. Approximately one-third ofthe plant's output is associated withthe manufacture of"affected" magnetic ballasts·. The manufacturer believes that this loss could be sufficiently large to render unviable its component manufacturing business andthus cause the plantto be closed. 

### Mexican Plants: • One manufacturerreported that itwould have to close part ofits magnetic ballast manufacturing plant inorder to continue operating atprofitable levels. This is possible since the plant is modular in its design, manufacturing operations and construction. • Another plant manufactures components used in the production of"affected" magnetic ballasts. Although this plantproduces components for both "affected" and othertypes ofballasts, a new standard will dramatically reduce its capacity utilization thereby likely resulting in its closure. 30

### From interviews and plant tours, it was generally observed that larger manufacturers in

Sub-group 1 produced their electronic and magnetic ballasts in separate plants. Their large market shares favored facilities with high levels of automation, thereby reducing their ability to change over from magnetic to electronic ballast production. As a result they reported disproportionately greater negative impacts on their manufacturing capacities than smaller manufacturers. Manufacturers in Sub-group 2 reported that they would add additional electronic ballast capacity in their current plants to meet the new standard. Most reported that a three-year lead-time would provide them with sufficient time to expand manufacturing capacities. Since none of the manufacturers in this sub-group produce magnetic ballasts, they will not have any stranded assets. In addition, most plan to augment capacity in their current plants and hence did not report any significant restructuring costs resulting from plant consolidation or movement of manufacturing to other locations. 2.3.4. Impact on Small Manufacturers 

### Among the manufacturers in Sub-group 1 that would be negatively impacted by an electronic ballast standard, two are smaller in size than the others. From the manufacturer interviews ADL gained an understanding of their current business operations, product mix, scale of revenues associated with the sales of "affected" magnetic ballasts, and the negative impact on their profits and capital assets resulting from a standard. Particular emphasis was placed on understanding their ability to raise capital, if needed, to meet the new standard. The two "small" manufacturers currently produce both "affected" magnetic and electronic ballasts. Both the "small" manufacturers had their respective electronic and magnetic ballast manufacturing operations in the same plants. It seemed that their smaller size and less automated operations provided them with the flexibility to adapt to a new electronic ballast standard without significant asset write-offs or plant closures. In addition, neither of these manufacturers stated that an electronic ballast standard would force them to leave the industry or go out of business. All four manufacturers in Sub-group 1 viewed the electronic ballast business as less profitable than their magnetic ballast business. Hence the negative impacts on the "small" manufacturers' cash flows from operations were similar in proportion to those reported by the two large manufacturers in Sub-group 1. However, unlike the two large manufacturers, the "small" manufacturers did not report any significant one-time plant closure costs that would worsen the negative impact on their cash flows. Hence, the negative cash flow impacts on the overall business represented by all regulated products, appear disproportionately smaller on "small" manufacturers when compared to the two large manufacturers-in the 5% scenario, ADL estimates that small manufacturers will experience a 16% loss in their NPV compared to a 31 % loss in NPV for all of Subgroup 1.

31 

### From interviews and plant tours, 

### itwas generally observed that larger manufacturers in Sub-group 1 produced their electronic and magnetic ballasts in separate plants. Their large market shares favored facilities with high levels ofautomation, thereby reducing their ability to change over from magnetic to electronic ballast production. As a result they reported disproportionately greater negative impacts ontheir manufacturing capacities than smaller manufacturers. Manufacturers in Sub-group 2 reported thatthey would add additional electronic ballast capacity intheir currentplants to meetthe new standard. Most reported that a three-year lead-time would provide them with sufficient time to expand manufacturing capacities. Since none ofthe manufacturers inthis sub-group produce magnetic ballasts, they will nothave any stranded assets. In addition, mostplanto augment capacity intheir current plants and hence did notreport any significant restructuring costs resulting from plant consolidation ormovement ofmanufacturing to other locations. 2.3.4. Impact on Small Manufacturers 

### Among the manufacturers in Sub-group 1 that would be negatively impacted by an electronic ballast standard, two are smaller in size thanthe others. Fromthe manufacturer interviews ADL gained an understanding oftheir currentbusiness operations, product mix, scale ofrevenues associated withthe sales of"affected" magnetic ballasts, and the negative impact on theirprofits and capital assets resulting from a standard. Particular emphasis was placed onunderstanding their ability to raise capital, ifneeded, to meetthe new standard. The two "small" manufacturers currently produce both "affected" magnetic and electronic ballasts. Boththe "small" manufacturers had their respective electronic and magnetic ballast manufacturing operations inthe same plants. It seemed that their smaller size and less automated operations provided them withthe flexibility to adapt to a new electronic ballast standard without significant asset write-off's orplant closures. In addition, neither ofthese manufacturers stated that an electronic ballast standard would force themto leave the industry or go out ofbusiness. All four manufacturers in Sub-group 1 viewed the electronic ballast business as less profitable thantheir magnetic ballast business. Hence the negative impacts onthe "small" manufacturers' 

### cash flowsfrom operations were similar inproportion to those reported by the two large manufacturers in Sub-group 1. However, unlike the two large manufacturers, the "small" manufacturers did notreport any significant one-time plant closure costs that would worsenthe negative impact ontheir cash flows. Hence, the negative cash flow impacts onthe overall business represented by all regulated products, appear disproportionately smaller on "small" manufacturers when compared to the two large manufacturers-inthe 5% scenario, ADL estimates that small manufacturers will experience a 16% loss intheir NPV compared to a 31% loss in NPV for all ofSubgroup 

### 1.
31

### 2.4. Employment Impacts

In order to assess employment impacts due to an electronic ballast standard, the Manufacturer Interview Guide was used to explore current trends in ballast production employment and solicit manufacturer views on changes in employment patterns resulting from new energy efficiency standards. The employment impacts section of the interview guide was used to understand: ® Current employment levels associated with ballast manufacturing at each production facility ® Expected future employment levels both with and without an electronic ballast standard 

### ® Differences in workforce skills, and issues related to retraining of employees In order to maintain confidentiality employment impacts were aggregated and reported at the industry level. In this section, employment impacts are reported using two categories: Direct employment impacts : These impacts considerjobs directly involved with the production of "affected" magnetic or electronic ballasts. In facilities producing "aff ected" and other types of ballasts, only direct and overhead jobs related to "affected" ballasts are considered in this category. In situations where ballast companies own component manufacturing operations, such as capacitor plants or magnet wire operations,job impacts on these plants are reported within this category. Impacts on other component suppliers are presented in a separate section titled "Impact on Suppliers to the Fluorescent Lamp Ballast Industry." Associated employment impacts: These impacts consider jobs impacted by business decisions driven by the "direct" employment impacts. For example, if in a manufacturing plant with 100 employees, 50 are producing "affected" magnetic ballasts and the remaining 50 are producing "unaffected" magnetic ballasts, then an electronic ballast standard would result in the loss of 50 direct jobs. Faced with this situation the company might decide to close operations in its plant due to the dramatically reduced capacity utilization. Such a decision would result in the loss of the remaining 50 jobs. These 50 jobs would then be reported as "associated" employment impacts.

32 

### 2.4. Employment Impacts 

### In order to assess employment impacts due to an electronic ballast standard, the 

### Manufacturer Interview Guide was used to explore current trends inballast production employment and solicit manufacturer views on changes in employmentpatterns resulting from newenergy efficiency standards. The employment impacts section ofthe interview guide was used to understand: • Current employment levels associated with ballast manufacturing at eachproduction facility • Expected future employment levels both with and without an electronic ballast standard • Differences inworkforce skills, and issues related to retraining ofemployees In orderto maintain confidentiality employment impacts were aggregated and reported at the industry level. Inthis section, employment impacts are reported using two categories: • Direct employment impacts: These impacts considerjobs directly involved with the production of"affected" magnetic or electronic ballasts. In facilities producing "affected" and other types ofballasts, only direct and overheadjobs related to "affected" ballasts are considered inthis category. In situations where ballast companies own component manufacturing operations, such as capacitorplants or magnetwire operations,job impacts onthese plants are reported within this category. Impacts on other component suppliers are presented in a separate section titled "Impact on Suppliers to the Fluorescent Lamp BallastIndustry." • Associated employment impacts: These impacts considerjobs impacted by business decisions driven bythe "direct" employment impacts. For example, ifin a manufacturing plant with 1 00 employees, 50 are producing "affected" magnetic ballasts and the remaining 50 are producing "unaffected" magnetic ballasts, then an electronic ballast standard would result inthe loss of50 directjobs. Faced with this situation the company might decide to close operations in its plant due to the dramatically reduced capacity utilization. Such a decision would result in the loss of the remaining 50jobs. These 50jobs would thenbe reported as "associated" employment impacts.

32

### 2.4.1. Employment Levels in 1998

Based on the manufacturer interviews, approximately one-third of the "affected" magnetic ballasts sold in the U.S. market are manufactured domestically, while the remaining two-thirds are manufactured in Mexico. Table 12 provides the direct employment levels associated with the production of "affected" magnetic ballasts in the year 1998. To obtain these numbers, ADL aggregated the information manufacturers provided on employment levels at each of their production facilities. Table 12. Direct em to ment levels for manufacturing "affected " magnetic ballasts Country of manufacture Direct employment levels in 1998 

### U.S.A 738 Mexico 2945 2.4.2. Employment Levels in 2003: Absent Standards All manufacturers in Sub-group 1 suggested that in the absence of a standard they would continue to manufacture "affected" magnetic ballasts in their current manufacturing plants. They did not anticipate any plant closures or shifting of production of "affected" magnetic ballasts from one plant to another before the year 2010. However, all agreed that the demand for "affected" magnetic ballasts in the U.S. will continue to decrease at a rate of 3% to 5% a year until it reaches 10% of 1997 shipments. Manufacturers in Sub-group 1 anticipate that direct employment associated with manufacturing "affected" magnetic ballasts will decrease approximately in the same proportion as shipments. Based on this information, in the year 2002 direct employment levels in "affected" magnetic ballast manufacturing will be 80% of the 1998 employment levels for the 5% scenario and 88% for the 3% scenario. This analysis assumes that there will be no loss in direct employment levels in 2002 as additional people will be needed to serve the likely surge in demand during the last two quarters. Hence direct employment levels in the year 2003 are assumed equal to 2002 levels. 

### Despite reduced production of "affected" magnetic ballasts, manufacturers plan to maintain their total (direct + associated) employment levels in 2003 at the 1998 levels by implementing the following actions: ® In small manufacturer plants where both magnetic and electronic ballasts are currently manufactured, manufacturers plan to maintain employment by moving "lost" jobs towards the production of products for other growing businesses. • In large manufacturer plants where only magnetic ballasts are currently produced, manufacturers plan to continually consolidate their operations by increasing the production of other magnetic ballast product lines and by moving materials processing activities from other plants.

33 

### 2.4.1. Employment levels in 1998 

### Based onthe manufacturer interviews, approximately one-third ofthe "affected" magnetic ballasts sold inthe u.s. market are manufactured domestically, while the remaining two-thirds are manufactured inMexico. Table 12 provides the direct employment levels associated with the production of"affected" magnetic ballasts in the year 1998. To obtainthese numbers, ADL aggregated the information manufacturers provided on employment levels at each oftheir production facilities. T bl 12 O· t

a e lrec employmen eve s or manu c un tl I f fa 

### t ·ng "affected" magnetic ballasts 

### Country of Direct employment manufacture levels in 1998 U.S.A 

### 738 

### Mexico 2945


### 2.4.2. Employment levels in 2003: Absent Standards 

### All manufacturers in Sub-group 1 suggested that inthe absence ofa standard they would continue to manufacture "affected" magnetic ballasts in their current manufacturing plants. They did not anticipate any plant closures or shifting ofproduction of"affected" magnetic ballasts from one plant to another before the year 2010. However, all agreed that the demand for "affected" magnetic ballasts in the u.S. will continue to decrease at a rate of3 % to 5% a year until itreaches 10% of 1997 shipments. Manufacturers in Sub-group 1 anticipate that direct employment associated with manufacturing "affected" magnetic ballasts will decrease approximately inthe same proportion as shipments. Based onthis information, in the year 2002 direct employment levels in "affected" magnetic ballast manufacturing will be 80% ofthe 1998 employment levels for the 5%

### scenario and 88% for the 3%

### scenario. This analysis assumes that there will be no loss in direct employment levels in 2002 as additional people will be needed to serve the likely surge in demand during the last two quarters. Hence direct employment levels inthe year 2003 are assumed equal to 2002 levels. Despite reduced production of"affected" magnetic ballasts, manufacturers plan to maintain their total (direct

## + associated) employment levels in 2003 at the 1998 levels by implementing the following actions:

CD 

### In small manufacturer plants where both magnetic and electronic ballasts are currently manufactured, manufacturers planto maintain employment by moving "lost"jobstowards the production ofproducts for other growing businesses. • In large manufacturer plants where only magnetic ballasts are currently produced, manufacturers planto continually consolidate their operations by increasing the production ofother magnetic ballast product lines and by moving materials processing activities from other plants.
33

### One of the manufacturers interviewed suggested a possible, but less likely, scenario

where it might close one of its U.S. plants sometime after 2010 in the 5% shipment scenario. The uncertainty with regards to the timing of any plant closures in the base case - after the year 2003 - results from the difficulty in anticipating how many associated jobs can be maintained in the long run. Gains is associated jobs will not necessarily maintain plant capacity utilization in the long run and a threshold may be reached that requires the plant to be closed. 

### Table 13 provides the employment levels directly associated with the production of "affected" magnetic ballasts (and their components) in the year 2002. Table 13. Direct employment levels in 2002 

### Country of Direct employment Direct employment manufacture levels in 2002 levels in 2002 5% scenari

o 3% scenario 

### U.S.A 611 662 Mexico 2356 2591 

### Transition Plans: Manufacturers in Sub-group I described their transition plans as their manufacturing capacities are converted to electronic ballast production only. It was observed that individual manufacturers' transition plans were primarily driven by their scale of operation. 

### Large manufacturers with separate dedicated plants for manufacturing magnetic and electronic ballasts: For these manufacturers, the loss of "affected" magnetic ballasts would greatly reduce capacity utilization in plants dedicated to manufacturing magnetic ballasts. ® One manufacturer anticipated closing its domestic magnetic ballast manufacturing plant and consolidating its magnetic ballast production in its Mexican plant. Such a scenario would result in loss of both "direct" and "associated" jobs. The "associated" jobs lost would, however, be added in the Mexican plant where the manufacturer plans to consolidate its "unaffected" ballast operations. ® Another large manufacturer reported that it would have to close a section(s) of its Mexican plant in order to continue operating at.profitable levels. This is possible since the plant is modular in its design, manufacturing operations and construction. Smaller manufacturers making both magnetic and electronic ballasts in the same plant: For this group of manufacturers an electronic ballast standard will result in the loss of "direct" jobs involved in manufacturing "affected" magnetic ballasts. One smaller manufacturer stated that it would be able to shift lost jobs to manufacturing electronic or other types of ballasts in the same plant. 

### Sub-group 2 consists of three major manufacturers that produce only electronic ballasts. Two of them have manufacturing plants in the U.S and the third manufacturer produces its electronic ballasts in China. In the absence of a standard, these manufacturers reported 34 

### One ofthe manufacturers interviewed suggested a possible, but less likely, scenario where it might close one ofits V.S. plants sometime after 2010 in the 5%

### shipment scenario. The uncertainty with regards to the timing ofany plant closures in the base case - afterthe year 2003
- results from the difficulty in anticipating howmany associated jobs canbe maintained inthe long run. Gains is associatedjobs will not necessarily maintainplant capacity utilization 

### inthe long run and a threshold may be reached that requires the plantto be closed. Table 13 provides the employment levels directly associated withthe production of "affected" magnetic ballasts (and their components) in the year 2002. Table 13. lfect employment levels in 2002

Country of Direct employment Direct employment manufacture levels in 2002 levels in 2002 5% 

### scenario 3% 

### scenario U.S.A 

### 611 662 Mexico 

### 2356 2591 Transition Plans: Manufacturers in Sub-group 1 described their transition plans as their manufacturing capacities are converted to electronic ballast production only. It

### was observed that individual manufacturers' transition plans were primarily driven by their scale ofoperation. Large manufacturers with separate dedicated plants for manufacturing magnetic and electronic ballasts: Forthese manufacturers, the loss of"affected" magnetic ballasts would greatly reduce capacity utilization inplants dedicated to manufacturing magnetic ballasts. • One manufacturer anticipated closing its domestic magnetic ballast manufacturing plant and consolidating its magnetic ballast production in its Mexicanplant. Such a scenario would result in loss ofboth "direct" and "associated"jobs. The "associated" jobs lost would, however, be added inthe Mexican plant where the manufacturer plans to consolidate its "unaffected" ballast operations. • Another large manufacturer reported that 

### itwould have to close a section(s) ofits Mexican plant 

### in order to continue operating atprofitable levels. This is possible since the plant is modular in its design, manufacturing operations and construction. Smaller manufacturers making both magnetic and electronic ballasts inthe same plant: Forthis group ofmanufacturers an electronic ballast standard will result in the loss of "direct"jobs involved in manufacturing "affected" magnetic ballasts. One smaller manufacturer stated that it would be able to shift lostjobsto manufacturing electronic or other types ofballasts inthe same plant. Sub-group 2 consists ofthree major manufacturers thatproduce only electronic ballasts. Two ofthem have manufacturing plants inthe 

### V.S and the third manufacturerproduces its electronic ballasts in China. Inthe absence ofa standard, these manufacturers reported 34

### a gradual increase in their employment levels as electronic ballasts gain market share

over magnetic ballasts. An electronic ballast standard in the year 2003 will create a large additional market for electronic ballasts. Manufacturers in Sub-group 2 provided estimates of the additional direct jobs that would result. 2.4.3. Employment Impacts on the Industry Employment impacts on the entire industry are obtained by aggregating the impacts on all seven manufacturers. Three of the seven manufacturers produce their electronic ballasts in the U.S., while the remaining produce them in Mexico or overseas. Table 14 summarizes the employment impacts of an electronic ballast standard on the entire industry. Table 14. Indus
-wide employment im acts of an electronic ballast standard Country of Direct Jobs lost Associated Jobs Direct Jobs ' Net Direct Jobs Manufacture in magnetic at risk in 

### gained in lost

ballast magnetic ballast electronic manufacturing 

### manufacturing manufacturing

2015 (-'5% decline) shipment scenario 

### U.S.A 666 406 500 

### 166 d Mexico 

### 1570 190 700 

### 870 ^^ 2027 (-3% decline) shipment scenario U.S.A 717 

### 363 557 

### 160 Mexico 

### 1727 161 

### 769 

### 958 1 Includes both factory and non-factory jobs supporting magnetic ballast production. 2 These "associated" jobs are assumed relocated to Mexico 3 These "associated" jobs will be relocated to other plants in Mexico or elsewhere 4 Includes jobs from Sub-groups 1 and 2 5 Does not include potential associated jobs added in these plants 

### 2.5. Other Impacts 

### During the manufacturer interviews additional relevant industry issues were discussed: ® Impact of the decline in magnetic ballast shipments on Sub-group 1 • Differential impacts on the two sub-groups with regards to their ability to compete in the marketplace, after an electronic ballast standard is implemented • Global competition ® Cumulative impacts of regulations 

### Each of these issues is discussed in greater detail in the following sections.

35 

### a gradual increase in their employment levels as electronic ballasts gain market share over magnetic ballasts. An electronic ballast standard inthe year 2003 will create a large additional market for electronic ballasts. Manufacturers in Sub-group 2 provided estimates ofthe additional directjobsthat would result. 2.4.3. Employment Impacts on the Industry 

### Employment impacts onthe entire industry are obtained by aggregating the impacts on all seven manufacturers. Three ofthe seven manufacturers produce their electronic ballasts inthe U.S., while the remaining produce them inMexico or overseas. Table 14 summarizes the employment impacts ofan electronic ballast standard onthe entire industry. Table 14. Industry-wide employment impacts ofan electronic ballaststandard 

### Country of DirectJobs lost Associated Jobs DirectJobs 4,5 

### Net DirectJobs Manufacture in magnetic at riskin gained in lost ballast magnetic ballast electronic manufacturing manufacturing ballast manufacturing**~** o ec me s Ipmen scenano 2015 ( 5% d 

## r ) h· 

### t U.S.A 666 1 406:l 500 

### 166 Mexico 1570 190'; 700 

### 870**~** o ec me s Ipmen scenano 2027 ( 3% d I ) h t U.S.A 717 363:l 557 

### 160 Mexico 1727 161'; 769 

### 958 1 Includes both factory and non-factoryJobs supportmg magnetIC ballast productIOn. 2 These "associated"jobs are assumed relocated to Mexico 3 These "associated"jobs will be relocated to other plants in Mexico orelsewhere 4 Includesjobs from Sub-groups 1 and 2 5 Does not include potential associatedjobs added in these plants 

### 2.5. Other Impacts 

### During the manufacturer interviews additional relevant industry issues were discussed:

ED 

### Impact ofthe decline in magnetic ballast shipments on Sub-group 1 ED 

### Differential impacts on the two sub-groups with regards to their ability to compete in the marketplace, after an electronic ballast standard is implemented CD 

### Global competition • Cumulative impacts ofregulations Each ofthese issues is discussed in greater detail inthe following sections.

35

### 2.5.1. Impact of the Decline in Magnetic Ballast Shipments on Sub-group I

The decline in shipments of magnetic ballasts in the past decade has negatively impacted all the magnetic ballast manufacturers represented in Sub-group 1. Manufacturers have adopted different strategies to remain profitable in the marketplace. ® Some have aggressively pursued cost savings to remain competitive, including continual product redesigns and stronger business management controls 

### ® Some have aggressively tried to maintain or increase market share to minimize or offset the impact of the overall market decline ® Some have closed plants in the U.S. and moved production to lower labor cost facilities in Mexico in order to maintain cost leadership and market position ® Some manufacturers have closed down one (or more) of their plants and consolidated operations in order to increase capacity utilization Most manufacturers indicated that they continually re-adjust to optimize the production mix between their current plants in order to remain cost competitive. In addition, all manufacturers in Sub-group 1 plan to continue producing magnetic ballasts until the electronic ballast standard comes into effect. 2.5.2. Diff

erential Impacts on the Two Sub
-groups with Regards to their Ability to Compete in the Marketplace Manufacturer interviews revealed that ballast producers that offer both magnetic and electronic products have an advantage over manufacturers offering a limited product line.It was frequently stated that OEMs and distributors prefer "one-stop" shopping with fullline manufacturers as it reduces their transaction and order processing costs. The inability to provide a full-line of ballasts acts as a barrier for new entrants with only an electronic ballast product offering. Manufacturers in both the sub-groups seemed to agree with thisargument. Industry sources stated that, partly for this reason, one manufacturer in Subgroup 2 intends to begin production of magnetic ballasts. This could potentially exert downward pressure on magnetic ballast margins, pushing them to levels lower than currently factored in the base case cashflow projections If an electronic ballast standard comes into effect, having both magnetic and electronic ballasts would no longer be an advantage in the marketplace, making market entry more attractive for firms not currently participating in magnetic ballast production. Some manufacturer(s) in Sub-group 2 stated that an electronic ballast standard would increase their ability to compete in the marketplace. Manufacturers in Sub-group 1 perceive this as a loss of competitive position. These changes in competitive environment were captured by the manufacturer cash flow projections.

36 

### 2.5.1. Impact ofthe Decline in Magnetic Ballast Shipments on Sub-group 1 

### The decline in shipments ofmagnetic ballasts inthe past decade has negatively impacted all the magnetic ballastmanufacturers represented in Sub-group 1. Manufacturers have adopted different strategies to remain profitable inthe marketplace.

CD 

### Some have aggressively pursued cost savings to remain competitive, including continual product redesigns and stronger business management controls CD 

### Some have aggressively tried to maintain or increase market share to minimize or offsetthe impact ofthe overall market decline CD 

### Some have closedplants in the U.S. and moved production to lower labor cost facilities in Mexico inorderto maintain cost leadership and marketposition CD 

### Some manufacturers have closed down one (ormore) oftheirplants and consolidated operations in orderto increase capacity utilization Most manufacturers indicated that they continually re-adjust to optimize the production mixbetweentheir currentplants in order to remain cost competitive. In addition, all manufacturers in Sub-group 1plan to continue producing magnetic ballasts until the electronic ballast standard comes into effect. 2.5.2. Differential Impacts on the Two Sub-groups with Regards to theirAbility to Compete in the Marketplace 

### Manufacturer interviews revealed thatballastproducers that offerbothmagnetic and electronic products have an advantage over manufacturers offering a limitedproduct line. It was frequently stated that OEMs and distributors prefer "one-stop" shopping with fullline manufacturers as it reduces theirtransaction and order processing costs. The inability to provide a full-line ofballasts acts as a barrier for new entrants with only an electronic ballast product offering. Manufacturers inboth the sub-groups seemedto agree with this argument. Industry sources stated that, partly for this reason, one manufacturer in Subgroup 2 intends to begin production ofmagnetic ballasts. This could potentially exert downward pressure on magnetic ballast margins, pushing them to levels lower than currently factored inthe base case cashflowprojections Ifan electronic ballast standard comes into effect, having both magnetic and electronic ballasts would no longer be an advantage in the marketplace, making market entry more attractive for firms not currently participating inmagnetic ballast production. Some manufacturer(s) in Sub-group 2 stated that an electronic ballast standard would increase their ability to compete inthe marketplace. Manufacturers in Sub-group 1 perceive this as a loss ofcompetitiveposition. These changes in competitive environment were captured by the manufacturer cash flow projections.

36

### 2.5.3. Global Competition



### Most manufacturers recognize that a major portion of magnetic ballast manufacturing has moved just south of the Mexican border in the past decade. Lower labor costs in Mexico have helped them remain cost competitive. When asked about the possibility of new entrants in the magnetic ballast market, some manufacturers in Sub-groups 1 and 2 anticipated one or more new entrants in the absence of a standard, while others did not. Manufacturers differed on the likelihood of successful new entrants in the electronic ballast market. Most manufacturers in Sub-group 1 expected one or more major new players once an electronic ballast standard is announced. Manufacturers in Sub-group 2 had differing opinions-some believed that there would be new entrants while others believed that there would be no new entrants in the "affected" electronic ballasts classes, only in specialty niches. The latter group emphasized that a lot of new entrants have come and gone in the last eight years without gaining' any significant market share. They believe that the current manufacturers are in a better position to gain share in the market created by the additional electronic ballasts. They highlighted the importance of existing relations with OEMs and distributors as a barrier to new market entrants seeking to gain a large market share. The potential impacts of a new market entrant were captured in the "new entrant" scenario. 2.5.4. Cumulative Impact of Regulations 

### Most manufacturers, except one, reported that they did not face any burden resulting from the imposition of cumulative regulations. One manufacturer, however, commented that the imposition of energy efficiency standards on small motors would limit the availability of capital for both its ballast and motor businesses.

37 

### 2.5.3. Global Competition 

### Most manufacturers recognize that a major portion ofmagnetic ballast manufacturing has movedjust south ofthe Mexican border in the past decade. Lower labor costs 

### inMexico have helped them remain cost competitive. When asked about the possibility ofnew entrants inthe magnetic ballast market, some manufacturers 

### in Sub-groups 1 and 2 anticipated one or more new entrants 

### inthe absence ofa standard, while others did not. Manufacturers differed onthe likelihood ofsuccessful new entrants inthe electronic ballast market. Most manufacturers in Sub-group I expected one or more majornew players once an electronic ballast standard is announced. Manufacturers 

### in Sub-group 2 had differing opinions-somebelieved that there would be new entrants while others believed thatthere would be no new entrants inthe "affected" electronic ballasts classes, only in specialty niches. The latter group emphasized that a lot ofnew entrants have come and gone in the last eight years without gaining'any significant market share. They believe that the current manufacturers are in a better position to gain share inthe market created by the additional electronic ballasts. They highlighted the importance ofexisting relations with OEMs and distributors as a barrierto new market entrants seeking to gain a large market share. The potential impacts ofa newmarket entrant were captured in the "newentrant" scenario. 2.5.4. Cumulative Impact of Regulations 

### Most manufacturers, except one, reported thatthey did not face any burden resulting from the imposition ofcumulative regulations. One manufacturer, however, commented that the imposition ofenergy efficiency standards on small motors would limit the availability ofcapital for both its ballast and motor businesses.

37

## Attachment A Cash 

# i Attachment A Cash Flow Outputsuor'escent La m a asb: Electronic est tan a
BASE CASE SCENARIO Base Year 1998 Unit Sales (

Total in millions) 31.41 Magnetic 30.23 Cathode Cutout 0.00 Electronic 1.18 Revenues 236.39 Production Costs + S13&A (excl. Depreciation) (Production Costs=Labor+Material+Overhead) 185.9 Depreciation 4.5

Product Conversion Expense (CC) - Product Conversion Expense (Elec) One 75me Charges -

Restructuring Cost (Plant Closure) - Asset Write Off Profit Before Tax 46.0 Taxes 16.3 Net Income Before Financing 29.7

Cash Flow smw" qr Net Income 29.7 Depreciation Asset Write Off Change in Working Capital 4.5 Cash Flows from Operations 34.2

Ordinary Capital Expenditures Conversion Capital Exp. (CC) (4.8) Conversion Capital Exp . (Elec) (2.0) Cash Used In Investment (6.8) Net Cash Flow Terminal Value Present Value Factor 27.3
Discounted Cash Flow 27 3 Industry Value (Net Present Value) S 216.3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31.00 30.59 30.18 29.77 29.36 28.95 28.55 28.14 27.73 27.32 26.91 26.50 26.09 25.69 25.28 24.87 24.46 28.63 27.04 25.45 23.86 22.27 20.68 19.09 17.50 15.91 14.32 12.73 11.14 9.55 7.95 6.36 4.77 3.18 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 2.36 3.35 4.73 5.91 7.09 8.27 9.46 10. 64 11. 82 13. 00 14.18 15.37 16.55 17.73 18. 91 20 . 09 21.28 244.31 246.41 246.67 246.22 244.54 243.87 244.74 245.59 246.41 247.21 247.99 248.79 249. 58 250.36 251.11 251.86 252.59 194.5 197.8 199.4 200.3 200.2 200.9 203.1 205.3 207. 5 209.7 211.9 214. 1 216.3 218.6 220.8 223.0 225.2 4.6 4.7 4.8 4.9 4.9 5.0 5.0 5.1 5.2 5.3 5.4 5.5 5.5 5.6 5.7 5.8 5.9

- - - - - - -

- - - - - - - - 0.5 - - - - - 0.8 0.2 0.3 - - - - - - (0.4) 44.3 43.9 42.5 41.0 39.5 38.0 35.8 35.4 33.7 32.2 30.7 29.2 27.7 26.2 24.7 23.1 21.6 15.7 15.6 15.1 14.6 14.0 13.5 12.7 12.6 12.0 11.5 10.9 10.4 9.9 9.3 8.8 8.3 7.7 28.6 28.3 27.4 26.5 25.5 24.5 23.1 22.8 21.7 20.7 19.8 18.8 17.8 16.8 15.8 14.8 13.8 28.6 28.3 27.4 26.5 25.5 24.5 23.1 22.8 21.7 20.7 19.8 18.8 17.8 16. 8 15.8 14.8 13.8 4.6 4.7 4.8 4.9 4.9 5.0 5.0 5.1 5.2 5.3 5.4 5.5 5.5 5.6 5.7 5.8 5.9 (1.2) (0.3) (0.1) 0.1 0.2 0.1 (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) 32.0 32.7 32.2 31.4 30.6 29.5 27.9 27.7 26.7 25.9 25.0 24.1 23.2 22.3 21.4 20.5 19.5 (5.0) (5.1) (5.2) (5.2) (5.3) (5.4) (5.4) (5.5) (5.6) (5.7) (5.8) (5.9) (6.0) (6.1) (6.2) (6.2) (6.3) (2.0) (2.0) (2.0) (2.0) (2.0) (2.1) (4.3) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (0.3) (7.0) (7.1) (7.2) (7.3) (7.3) (7.5) (9.8) (7.5) (7.6) (7.7) (7.8) (7.9) ( 8.0) (8.1) (8 .2) (8.3) (6.6) 25.0 25.6 25.0 24.1 23.3 22.1 18.2 20.2 19.1 18.1 17.2 16.2 15.2 14.2 13.2 12.2 12.9
22.2 20.1 17.5 15.0 12.9 10.9 8.2 8.0 6.9 5.9 5.1 4.4 3.8 3.3 2.9 2.5 2.5

Exhibit 1: Base Case Industry Cash flow--Manufacturer Submittal, 5% Shipment Scenario

A-1 Wiuoresc:entLamp Bauasts: Rlectronic: BallastStandaf!d BASE CASE SCENARIO**1!*Jl03:Jt)54#$$:*l?l\!t~~ilie~~t%1:J$t~'1;\¥t'$1f1ij?201** Unit Sales (fotal in millions) Magnetic Cathode CutOlll Electronic Revenues Production Costs +SG&A (excl. Depreciation) (PrOduclion Costs=Labor+MaterialtOvemead) Depreciation Product Conversion Expense (CC) Product Conversion Expense (Elec) Olle TIme Charges Restructuring Cost (Plant Closure) Asset Write Off Profit Before Tax Taxes Net Income Before Financing**1~'0¥\_$'~i$Y!411ti$lMi¥fl0~~~iiti\W\?·411 ,'q~**  '"**'Netl~~~e"** nN",y"",vnl" Depreciation Asset Write Off Change in Working Capital Cash Flo,"", from Operations Ordinary Capital Expendilures Conversion Capital Exp. (CC) Conversion Capital Exp. (Blec) Cash Used In Investment Net Cash Flow Tenninal Value Present Value Factor Discounted Cash Flow InduslIy Value (Net Present Value) 216.3 Base Year 1998

31.41 30.23 0.00 /.18 236.39 185.9

4.5

46.0 16.3 29.7 29.7 4.5 34.2 (4.8) (2.0) (6.8) 27.3 27.3 1999 31.00 28.63 0.00 2.36 244.31 194.5

4.6

0.5 0.3 44.3 15.7 28.6 28.6 4.6 (1.2) 32.0 (5.0) (2.0) (7.0) 25.0 22.2 2000 30.59 27.04 0.00 3.55 246.41 197.8

4.7

43.9 15.6 28.3 28.3 4.7 (0.3) 32.7 (5.1) (2.0) (7.1) 25.6 20.1 2001 30.18 25.45 0.00 4.73 246.67 199.4

4.8

42.5 15.1 27.4 27.4 4.8 (0.1) 32.2 (5.2) (2.0) (7.2) 25.0 17.5 2002 29.77 23.86 0.00 5.91 246.22 200.3

4.9

41.0 14.6 26.5 26.5 4.9 0.1 31.4 (5.2) (2.0) (7.3) 24.1 15.0 2003 29.36 22.27 0.00 7.09 244.54 200.2

4.9

39.5 14.0 25.5 25.5 4.9 0.2 30.6 (5.3) (2.0) (7.3) 23.3 12.9 2004 28.95 2D.68 0.00 8.27 243.87 200.9

5.0

38.0 13.5 24.5 24.5 5.0 0.1 29.5 (SA) (2.1) (7.5) 22.1 10.9 2005 28.55 19.09 0.00 9,46 244.74 203.1

5.0

0.8 35.8 12.7 23.1 23.1 5.0 (0.2) 27.9 (SA) (4.3) (9.8) 18.2 8.2 2006 28.14 17.50 0.00 10.M 245.59 205.3

5.1

0.2 (0.4) 35.4 12.6 22.8
22.8 5.1 (0.2) 27.7 (5.5) (2.0) (7.5) 20.2 8.0

Exhibit 1: Sase Case Industry Cash f1ow--ManufacturerSubmittal, 5% Shipment Scenario 2007 27.73 15.91 0.00 ll.82 246.41 207.5

5.2

33.7 12.0 21.7 21.7 5.2 (0.2) 26.7 (5.6) (2.0) (7.6) 19.1 6.9 2008 27.32 1M2 0.00 13.00 247.21 209.7

5.3

32.2 11.5 20.7 20.7 5.3 (0.2) 25.9 (5.7) (2.0) (7.7) 18.1 5.9 2009 26.91 12.73 0.00 14./8 247.99 211.9

5.4

30.7 10.9 19.8 19.8 5.4 (0.2) 25.0 (5.8) (2.0) (7.8) 17.2 5.1 2010 26.50 ll.U 0.00 /5.37 248.79 214.1

5.5

29.2 10.4 18.8 18.8 5.5 (0.2) 24.1 (5.9) (2.0) (7.9) 16.2 4.4 2011 26.09 9.55 0.00 /6.55 249.58 216.3

5.5

27.7 9.9 17.8 17.8 5.5 (0.2) 23.2 (6.0) (2.0) (8.0) 15.2 3.8 2012 25.69 7.95 0.00 /7.73 250.36 218.6

5.6

26.2 9.3 16.8 16.8 5.6 (0.2) 22.3 (6.1) (2.0) (8.1) 14.2 3.3 2013 25.28 6.36 0.00 18.91 251.11 220.8

5.7

24.7 8.8 15.8 15.8 5.7 (0.2) 21.4 (6.2) (2.0) (8.2) 13.2 2.9 2014 24.87 4.77 0.00 20.09 251.86 223.0

5.8

23.1 8.3 14.8 14.8 5.8 (0.2) 20.5 (6.2) (2.0) (8.3) 12.2 2.5 2015 24.46 3.18 0.00 21.28 252.59 225.2

5.9

21.6 7.7 13.8 13.8 5.9 (0.2) 19.5 (6.3) (0.3) (6.6) 12.9 2.5

A-1E7uor6uont LAmp HaII Otec Eleclro ilc lSall t Staltilai'd BASE CASE SCENARIO cWtinued 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24,46 24.46 24,46 24.46 24.46 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 0.00 0

. 00 0.00 0.00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 252.59 252, 59 252,59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9

21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 7.7 7.7 7.7 7.7 7,7 7,7 7.7 7.7 7.7 7,7 7,7 7.7 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 118 13.8 13,8 13.8 13. 8 13.8 13.8 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 (6.3) (63) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3)

(0.3)

- (0.3) (0.3)
- - (0,3) (0,3) (6.3) (6.6) (6.3) (6.6) (6.3) (6.6) (6.3) (6.3) (6.6) (63) (6.3) (6,6) 13.4 13.1 13.4 13.1 13.4 13.1 13.4 13.4 13.1 13.4 13.4 13,1 140.4 2.5 2.2 2.1 1.9 1.8 1.6 1.5 1.4 1.3 1.2 1.1 18.1

Exhibit 1: Base Case Industry Cashflow--Manufacturer Submittal, 5% Shipment Scenario IFluoresuntLa",!! BalJiI!lhlt EledronlcBaJ,lISfSiilndard BASE CASE SCENARIO
.......cooUnued

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 0.011 0.00 0.00 0.011 0.011 0.011 0.011 0.00 0.011 0.011 0.011 0.011 21.28 21.28 2/.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2

5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9

21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (0.3) (0.3) (0.3) (0.3) (0.3) (6.3) (6.6) (6.3) (6.6) (6.3) (6.6) (6.3) (6.3) (6.6) (6.3) (6.3) (6.6) 13.4 13.1 13.4 13.1 13.4 13.1 13.4 13.4 13.1 13.4 13.4 13.1 140.4 2.5 2.2 2.1 1.9 1.8 1.6 1.5 1.4 1.3 1.2 1.I 18.1

Exhibit 1: Base Case Industry Cash flow··ManufacturerSubmittal, 5% ShipmentScenario

A-250testent ramp,oaten et on a est tan STANDARD CASE SCENARIO Base Year 1998 Unit Sales (Total in millions) 31.41

Magnetic 30.23 Cathode Cutout 0.00 Electronic 1.18 Revenues 236.39 Production Costs +SG&A (excl. Depreciation) (Production Costs=Labor+Meterial+Overhead) 185.9 Depreciation 4.5

Product Conversion Expense (CC) - Product Conversion Expense (Elec) One 77me Charges

Restructuring Cost (Plant Closure) Asset Write Off -

Profit Before Tax 46.0 Taxes 16.3 Net Income Before Financing 29.7

Ce^di ; lea-btntcnrtnt Net Income 29.7 Depreciation Asset Write Off Change in Working Capital 4.5 Cash Flows from Operations 34.2

Ordinary Capital Expenditures Conversion Capital Exp. (CC) (4.8) Conversion Capital Exp. (Elec) (2.0) Cash Used In Investment (6.8) Net Cash Flow Terminal Value Present Value Factor 27.3 Discounted Cash Flow Industry Value (Net Present Value) S 146.6 27.3 Announce Year 1999 2000 2001 2002 Standard Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31.00 30.59 30.18 33.93 21.11 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 28.63 27.04 25.43 28. 02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0. 00 0.00 0 . 00 0.00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 2.36 3.55 4.73 5.91 21.11 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 244.31 246.41 246.68 277.07 227.64 249,69 249.46 249.23 249.00 248.78 248.55 248.40 248.25 248.10 247.95 247.80 247.65 194.1 197.5 199.2 224.1 207.8 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.4
43 4.9 5.0 5.6 6.0 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7

- - - - - 0.1 0.7 1.4 1.8 0.1 0.5 4.1 37.5 1.0 0.3 6.6 (0.4) (0.2)
- - - - - - - - - - 44.6 43.4 41.1 41.5 (30.3) 14.9 15.5 15.0 14.8 14.6 14.4 14.3 14.1 14.0 13.8 13.7 13.5 15.8 15.4 14.6 14.7 (10.7) 5.4 5.6 5.4 5.3 5.3 5.2 5.1 5.1 5.0 5.0 4.9 4.9 28.8 28.0 26. 5 26.8 (19.6) 9.5 9.9 9.6 9.5 9.4 9.2 9.1 9.0 8.9 8.8 8.8 8.7

28.8 28 .0 26.5 26.8 (19.6) 9.5 9.9 9.6 9.5 9.4 9.2 9.1 9.0 8.9 8.8 8.8 8.7 4.7 4.9 5.0 5.6 6.0 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7

- - - 6.7 - (1.2) (0.3) (0.1) (5.3) 8.0 (4.1) - 0.0 (0.0) (0.0) 32.3 32.6 31.5 27.1 1.1 12.0 16.6 16.3 16.2 16.0 15.9 15.8 15.7 15.6 15.5 15.4 15.3 (5.0) (5.1) (5.2) (5.8) (5.3) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9) (5.9) (5.9) (5.9) (5.9) (7.1) (2.0) (2.0) (4.1) (39.0) (4.1) - 0.0 (0.0) - - (0.0) (0.0) (0.0) 0.0 (7.0) (7.1) (9.3) (44.8) (9.4) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9) (5.9) (5.9) (5.9) (5.9) (7.1) 25.3 25.4 22. 2 (17.8) (8 .2) 6.2 10.7 10.4 10.3 10.1 1.1 9.9 9.8 9.7 9.6 9.5 8.2 108.3 22.4 20.0 15.5 (11.5) (4.9) 3.7 5.7 5.1 4.7 4.2 1.7 3.5 3.3 3.0 2.7 2.5 37.1

Exhibit 2: Standard Case Industry Cash flow --ManufacturerSubmittal , 5% Shipment Scenario IFluorescentUrnp,dauasta: kiectronleJFailastStandard Announce STANDARD CASE SCENARIO Base Vear Vear 1998 1999**Ilk"'1Ifij,All!1i~** Unit Sales (fatal in millions) 31.41 31.00 Magnetic 30.23 28.63 Cathode CU/Olll 0.00 0.00 Electronic 1.18 2.36 Revenues 236.39 244.31 Production Costs +SG&A (excl. Depreciation) 185.9 194.1 (Production Costs=Labor+Materialt<Jverhead) Depreciation 4.5 4.7 Product Conversion Expense (CC) Product Conversion Expense (Elec) One Time Charges Restructuring Cost (plant Closure) Assel Write Off Profit BeforeTax Taxes Net Income Before Financing**1~4_-'*i'!1** Net Income Depreciation Asset Wrile Off Change in Working Capital Cash Flows from Operations OrdinaJY Capilal Expenditures Conversion Capilal Exp. (CC) Conve"ion Capital Exp. (Eloc) Cash UsedIn Investment Net Cash Flow Terminal Value Present Value Faclor Discounted Cash Flow Induslly Value (Net Present Value) 146.6 46.0 16.3 29.7
29.7 4.5 34.2 (4.8) (2.0) (6.8) 27.3 27.3 0.1 0.5 0.3 44.6 15.8 28.8
28.8 4.7 (1.2) 32.3 (5.0) (2.0) (7.0) 25.3
22.4 2000 30.59 27.04 0.00 3.55 246.41 197.5

4.9 0.7

43.4 15.4 28.0
28.0 4.9 (0.3) 32.6 (5.1) (2.0) (7.1) 25.4 20.0 2001 30.18 25.45 0.00 4.73 246.68 199.2

5.0 1.4

41.1 14.6 26.5 26.5 5.0 (0.1) 31.5 (5.2) (4.1) (9.3) 22.2 15.5 Standard Year 2002 2003

33.93 21.11 28.02 0.00 0.00 0.00 5.91 21.11 277.07 227.64 224.1 207.8

5.6 6.0 1.8 4.1 41.5 14.7 26.8
26.8 5.6 (5.3) 27.1 (5.8) (39.0) (44.8) (17.8) (11.5) 0.1 37.5 6.6 (30.3) (10.7) (19.6) (19.6)

6.0 6.7 8.0 1.1 (5.3) (4.1) (9.4) (8.2) (4.9) 2004 23.64 0.00 0.00 23.64 249.69 227.5

6.7

1.0 (0.4) 14.9 5.4 9.5
9.5 6.7 (4.1) 12.0 (5.9) (5.9) 6.2 3.7 2005 23.64 0.00 0.00 23.64 249.46 227.5

6.7

(0.2) 15.5 5.6 9.9
9.9 6.7 16.6 (5.9) 0.0 (5.9) 10.7 5.7 2006 23.64 0.00 0.00 23.64 249.23 227.5

6.7

15.0 5.4 9.6
9.6 6.7 0.0 16.3 (5.9) (0.0) (5.9) 10.4 5.1 2007 23.64 0.00 0.00 23.64 249.00 227.5

6.7

14.8 5.3 9.5
9.5 6.7 (0.0) 16.2 (5.9) (5.9) 10.3
4.7

Exhibit 2: Standard Case Industry Cash flow--Manufacturer Submittal, 5% Shipment Scenario 2008 23.64 0.00 0.00 23.64 248.78 227.5

6.7

14.6 5.3 9.4
9.4 6.7 16.0 (5.9) (5.9) 10.1
4.2 2009 23.64 0.00 0.00 23.64 248.55 227.5

6.7

14.4 5.2 9.2
9.2 6.7 15.9 (14.8) (14.8)

l.l
1.7 2010 23.64 0.00 0.00 23.64 248.40 227.5

6.7

14.3 5.1 9.1
9.1 6.7 15.8 (5.9) (5.9) 9.9 3.5 2011 23.64 0.00 0.00 23.64 248.25 227.5

6.7

14.1 5.1 9.0
9.0 6.7 15.7 (5.9) (5.9) 9.8 3.3 2012 23.64 0.00 0.00 23.64 248.10 227.5

6.7

14.0 5.0 8.9
8.9 6.7 15.6 (5.9) (0.0) (5.9) 9.7 3.0 2013 23.64 0.00 0.00 23.64 247.95 227.5

6.7

13.8 5.0 8.8
8.8 6.7 15.5 (5.9) (0.0) (5.9) 9.6 2.7 2014 23.64 0.00 0.00 23.64 247.80 227.5

6.7

13.7 4.9 8.8
8.8 6.7 15.4 (5.9) (0.0) (5.9) 9.5 2.5 2015 23.64 0.00 0.00 23.64 247.65 227.4

6.7

13.5 4.9 8.7
8.7 6.7 (0.0) 15.3 (7.1) 0.0 (7.1) 8.2 108.3 37.1

A-3Fluorescent Laro BaUnsla ; ElectronicazagastStandard BASE CASE SCENARIO Base Year 1998 Unit Sales (Total in millions) 31.57

Magnetic 30.86 Cathode Cutout 0.00 Electronic 0.71 Revenues 236.69 Production Costs + SG&A (excl . Depreciation) (Production Costs=Labor+Material+Overhead) 185.7 Depreciation Product Conversion Expense (CC)

Product Conversion Expense (Elec) 4.4 One 77nie Charges

Restructuring Cost (Plant Closure) Asset Write Off Profit Before Tax 46.5 Taxes 16.5 Net Income Before Financing 30.0

h ionv5 menr Net Income 30.0 Depreciation Asset Write Off Change in Working Capital 4.4 Cash Flows from Operations 34.5

Ordinary Capital Expenditures Conversion Capital Exp, (CC) (4.8) Conversion Capital Exp. (Elec) (1.2) Cash Used In Investment (6.0) Net Cash Flow Terminal Value Present Value Factor 28.5 Discounted Cash Flow 28.5 Industry Value (Net Present Value) S 237.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31 .33 31 .08 30.84 30.59 30
.34 30
. 10 29.85 29.61 29.36 29.12 28.87 28.63 28.38 28. 14 27.89 27.65 27.40 29 . 91 28

. 95 28

. 00 27

. 04 26

. 09 25
. 13 24. 18 23. 23 22. 27 21.32 20.36 19 . 41 18. 45 17 . 50 16.54 15. 59 14.64 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.42 2.13 1.84 3.55 4.26 4.96 5.67 6.38 7 . 09 7.80 8.51 9.22 9.93 10. 64 11. 35 12. 06 1277 241 .44 242.69 242.85 242.59 241 .57 241 . 17. 241.69 242.20 242.70 243.18 243.64 244.13 244.60 245
.06 245
.52 245
.97 246.40 190.9 192.8 193.8 194.4 194.3 194.7 196.0 197.4 198.7 200.0 201 .3 202.7 204.0 205
.3 206.6 208.0 209.3 4.5 4.6 4.6 4.7 4.7 4.7 4.8 4.8 4.9 4.9 5.0 5.0 5.1 5.1 5 . 2 5.2 5.3

0.5 - 0.8 0.2 0.3 - - (0.4) 45.2 45.3 44.4 43.5 42.6 41.7 40.1 40.2 39.1 38.2 37.3 36.4 35.5 34.6 33.7 32.8 31.9 16.0 16.1 15.8 15.5 15.1 14.8 14.2 14.3 13.9 13.6 13.3 13.0 12.6 12.3 12.0 11.7 11.3 29.2 29.2 28.7 28. 27.5 26.9 25.8 25.9 25.2 24.7 24.1 23.5 22.9 223 21.7 21.1 20.5 29.2 29,2 28.7 28.1 27.5 26.9 25.8 25.9 25.2 24.7 24. 1 ...... 23.5 22. 9 22.3 21.7 21.1 20 5 4.5 4.6 4.6 4.7 4.7 4.7 4.8 4.8 4.9 4.9 5.0 5
.0 5.1 5.1 5.2 5.2 . 5.3 (0.7) (0.2) (0.0) 0.0 0.1 0.0 (0.1) (0. 1) (0.1) (0.1) (0.1) (0.1) (0. 1) (0.1) (0.1) (0.1) (0 1) 33.0 33.6 33.3 32.8 32.3 31.7 30.5 30.7 30.0 29.5 28.9 28.4 27.9 27.3 26.8 26.2 . 25.7 (4.9) (5.0) (5.0) (5.0) (5.1) (5
. 1) (5.2) (5.2) (5.3) (5.3) (5.4) (5.4) (5.5 ) (5.5) (5.6) (5.6) (5.7) (1.2) (1.2) (1.2) ( 1.2) (1.2) (1.3) (3. 5) (1.2) (1.2) ( 1.2) (1.2) (1.2) (1.2) ( 1.2) (1.2) (1.2) (1.2) (6.1) (6.2) (6.2) (6
.2) (6.3) (6
.4) (8.7) (6
.4) (6.5) (6
.5) (6.6) (6.6) (6.7) (6.7) (6.8) (6.8) (6.9) 26.9 27.4 27. 1 26.6 26. 1 25.3 21 .9 24.3 23.5 23.0 22.4 21.8 21.2 20.6 20.0 19.4 18.8 23.8 21.6 18.9 16.5 14.4 12.4 9.7 9.5 8.3 7.2 6,3
. 5.5 4.9 4.3 3.8 3.3 2.9

Exhibit 3: Base Case Industry Cash flow--Manufacturer Su mittal, 3% Shipment Scenario

ABASE CASE SCENARIO Base Year 1998**!~iljl.'~"!** Unit Sales (Total in millions) 31.57 Magnetic 30.86 Cathode CutOlit 0.00 Electronic 0.71 Revenues 236.69 Production Costs+SG&A (excl. Depreciation) 185.7 (Production Costs=LalxJrtMalerialt{)verhead) Depreciation 4.4 Product Conversion Expense (CC) Product Conversion Expense (Blec) Olle Time Charges Restructuring Cost (plant Closure) Asset Write Off ProfitBeforeTax Taxes Net Income Before Financing IlI{it#lj:'i
...**~t-!4** NetIncome Depreciation Asset Write Off Change in Working Capital Cash Flows from Operations Ordinruy Capital Expenditures Conversion Capital Exp. (CC) Conversion Capital Exp. (Bloc) CashUsed In Investment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow IndustlY Value (Net Present Value) S 237.0 46.5 16.5 30.0
30.0 4.4 34.5 (4.8) (1.2) (6.0) 28.5 28.5 1999 2000 2001 31.33 31.08 30.84 29.91 28.95 28.00 0.00 0.00 0.00 1.42 2.13 2.84 241.44 242.69 242.85 190.9 192.8 193.8

4.5 4.6 4.6

0.5 0.3 45.2 16.0 29.2
29.2 4.5 (0.7) 33.0 (4.9) (1.2) (6.1) 26.9 23.8 45.3 16.1 29.2
29.2 4.6 (0.2) 33.6 (5.0) (1.2) (6.2) 27.4 21.6 44.4 15.8 28.7
28.7 4.6 (0.0) 33.3 (5.0) (1.2) (6.2) 27.1 18.9 2002 30.59 27.04 0.00 3.55 242.59 194.4

4.7

43.5 15.5 28.1
28.1 4.7 0.0 32.8 (5.0) (1.2) (6.2) 26.6 16.5 2003 30.34 26.09 0.00 4.26 241.57 194.3

4.7

42.6 15.1 27.5
27.5 4.7 0.1 32.3 (5.1) (1.2) (6.3) 26.1 14.4 2004 2005 30.10 29.85 25.13 U.18 0.00 0.00 4.96 5.67 241.17. 241.69 194.7 196.0

4.7 4.8

41.7 14.8 26.9
26.9 4.7 0.0 31.7 (5.1) (1.3) (6.4) 25.3 12.4 0.8 40.1 14.2 25.8
25.8 4.8 (0.1) 30.5 (5.2) (3.5) (8.7) 21.9 9.7 2006 29.61 23.23 0.00 6.38 242.20 197.4

4.8

0.2 (0.4) 40.2 14.3 25.9 25.9 4.8 (0.1) 30.7 (5.2) (1.2) (6.4) 24.3 9.5

Exhibit 3: Base Case Industry Cash flow--Manufacturer Submittal, 3% ShipmentScenario 2007 29.36 22.27 0.00 7.09 242.70 198.7

4.9

39.1 13.9 25.2
25.2 4.9 (0.1) 30.0 (5.3) (1.2) (6.5) 23.5 8.3 2008 29.12 21.32 0.00 7.80 243.18 200.0

4.9

38.2 13.6 24.7
24.7 4.9 (0.1) 29.5 (5.3) (1.2) (6.5) 23.0 7.2 2009 2010 2011 28.87 28.63 28.38 20.36 19.41 18.45 0.00 0.00 0.00 8.51 9.22 9.93 243.64 244.13 244.60 201.3 202.7 204.0

5.0 5.0 5.1

37.3 13.3 24.1
24.1 5.0 (0.1) 28.9 (5.4) (1.2) (6.6) 22.4 6.3 36.4 13.0 23.5
23.5 5.0 (0.1) 28.4 (5.4) (1.2) (6.6) 21.8 5.5 35.5 12.6 22.9
22.9 5.1 (0.1) 27.9 (5.5) (1.2) (6.7) 21.2 4.9 2012 28.14 17.50 0.00 10.64 245.06 205.3

5.1

34.6 12.3 22.3
22.3 5.1 (0.1) 27.3 (5.5) (1.2) (6.7) 20.6 4.3 2013 27.89 16.54 0.00 Jl.35 245.52 206.6

5.2

33.7 12.0 21.7
21.7 5.2 (0.1) 26.8 (5.6) (1.2) (6.8) 20.0 3.8 2014 27.65 /5.59 0.00 12.06 245.97 208.0

5.2

32.8 11.7 21.1
21.1 5.2 (0.1) 26.2 (5.6) (1.2) (6.8) 19.4 3.3 2015 27.40 /4.64 0.00 /2.77 246.40 209.3

5.3

31.9 11.3 20.5
20.5 5.3 (0.1) 25.7 (5.7) (1.2) (6.9) 18.8 2.9

A-4lluorettent Gamic BaUaatsi Electronic Ballast Standard` BASE CASE SCENARIO wndnwd 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 27.16 26.91 26.67 26.42 26.18 25.93 25.69 25.44 25.19 24.95 24.70 24.46 13.68 12.73 11.77 10.82 9.86 8.91 7.95 7. 00 6.05 5. 09 4.14 3.18 0.00 0

. 00 0.00 0. 00 0.00 0. 00 0,00 0 . 00 0.00 0 . 00 0.00 0.00 13.48 14.18 14. 89 15. 60 16 .31 17. 02 17 .73 18.44 19.15 19. 86 20 .57 21.28 246.92 247.43 247. 95 248.46 248 .98 249.49 250.01 250.53 251.04 251.56 252.07 252.59 210.6 211.9 213.3 214.6 215.9 217.2 218.6 219.9 221.2 222.5 223.9 225.2
5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9

31.0 30.1 29.3 28.4 27.6 26.7 25.8 25.0 24.1 23.3 22.4 21.6 11.0 10.7 10.4 10.1 9.8 9.5 9.2 8.9 8.6 8.3 8.0 7.7 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9 (0.1) (0.1) (0.1) (0 .1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) 25.2 24.7 24.2 23.7 23.2 22.6 22.1 21.6 21.1 20.6 20.1 19.6 (5.7) (5.8) (5.9) (5.9) (6.0) (6.0) (6.1) (6.1) (6.2) (6.2) (6.3) (6.3) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (0.3) (7.0) (7.0) (7.1) (7.2) (7.2) (7.3) (7.3) (7.3) (7.4) (7.4) (7.5) (6.6) 18.2 17.6 17.1 16.5 16.0 15.4 14.9 14.3 13.7 13.2 12.6 13.0 136.9 2.6 2.3 2.1 1.9 1.7 1.5 1.4 1.3 1.2 1.1 1.0 17.1

Exhibit 3: Base Case Industry Cashflow--Manufacturer Submittal, 3% Shipment Scenario

A-5 IFluorescentLam!! Ballasts: EleetrqnlcBallastStandard BASE CASE SCENARIO
.......condnued

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

27.16 26.91 26.67 26.42 26.18 25.93 25.69 25.44 25.19 24.95 24.70 24.46 13.68 12.73 11.77 /0.82 9.86 8.91 7.95 7.00 6.05 5.09 4.14 3.18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.48 14.18 14.89 15.60 16.31 17.02 17.73 18.44 19.15 19.86 20.57 21.28 246.92 247.43 247.95 248.46 248.98 249.49 250.01 250.53 251.04 251.56 252,07 252.59 210.6 211.9 213.3 214.6 215.9 217.2 218.6 219.9 221.2 222.5 223.9 225.2

5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9

31.0 30.1 29.3 28.4 27.6 26.7 25.8 25.0 24.1 23.3 22.4 21.6 11.0 10.7 10.4 10.1 9.8 9.5 9.2 8.9 8.6 8.3 8.0 7.7 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8
20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9 (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) 25.2 24.7 24.2 23.7 23.2 22.6 22.1 21.6 21.1 20.6 20.1 19.6 (5.7) (5.8) (5.9) (5.9) (6.0) (6.0) (6.1) (6.1) (6.2) (6.2) (6.3) (6.3) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (0.3) (7.0) (7.0) (7.1) (7.2) (7.2) (7.3) (7.3) (7.3) (7.4) (7.4) (7.5) (6.6) 18.2 17.6 17.1 16.5 16.0 15.4 14.9 14.3 13.7 13.2 12.6 13.0 136.9 2.6 2.3 2.1 1.9 1.7 1.5 1.4 1.3 1.2 1.1 1.0 17.1

Exhibit 3: Base Case Industry Cash flow--Manufacturer Submittal, 3% Shipment Scenario

A-5Fluoreseent l4ir BaBastei Electronic Ballast Strs dord
STANDARD CASE SCENARIO at Unit Sales (Total in millions)

Magnetic Cathode Cutout Electronic Revenues Announce Standard Base Year Year Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31.57 31.33 31.08 30. 84 34.84 20 .82 23.64 23.64 23.64 23.64 23.64 23.64 23.64 30.86 29.91 28.95 28.00 31. 29 0.00 0
. 00 0.00 0 1 00 0.00 0
. 00 0.00 0.00 0.00 0

. 00 0.00 0 . 00 0.00 0
. 00 0.00 0
. 00 0.00 0
. 00 0.00 0
. 00 0.00 0.71 1.42 2.13 '2.84 3.SS 20.82 23.64 23.64 23.64 23.64 23.64 23.64 23.64 236.69 241.44 242.70 242.86 274.13 224.33 249,69 249.46 249.23 249.00 248. 78 248 .55 248.40 Production Costs +SG&A (excl. Depreciation) 185.7 190.3 192.3 193.4 218.5 204.9 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.5 227.4 (Production Costs=LatwrtMaterial+Overhead) Depreciation 4.4 4.6 4.7 4.7 5.4 5.9 63 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7

Product Conversion Expense (CC) - - - - - - Product Conversion Expense ( Elec) - 0
. 1 0.7 1.4 1.8 0.1 One nine Charges

Restructuring Cost (Plant Closure) Asset Write Off Profit Before Tax Taxes Net Income Before Financing .,""". F;SS1i :rsw Star: n•,¢at

Net income Depreciation Asset Write Off Change in Working Capital Cash Flows from Operations

Ordinary Capital Expenditures Conversion Capital Exp. (CC) Conversion Capital Exp. (Elec) Cash Used in investment 0.5 - - 0.3 - - 46.5 45.7 45.0 43.3 16.5 4.1 44.4 15.8 37.5 1.0 -

6.6 (0.4) (0.2) (30.7) 14.9 15.5 15.0 14.8 14 .6 14.4 14. 3 14.1 14.0 13.8 (10.8) 5.4 5.6 5.4 5.3 5.2 30.0 29. 5 29.1 28
.0 28.7 ( 19.8) 9.5 9 .9_... 9.6 9.5 9.4 9.2
30.0 4.4 9.9 6.7 - (0.7) (0.2) (0.0) (5.5) 8.3 (4.8) - 34.5 33.3 33.5 32.7 28.5 1.1 11.4 16.6 9.6 6.7 0.0 16.3 9.5

6.7 (0.0) 5.3

9.4 6.7 16.2 16.0 9.2 6.7 5.1 23.64 23.64 23.64 23.64 23.64 0.00 0.00 0.00 0

. 00 0.00 0.00 0

. 00 0.00 0.00 0.00 23.64 23.64 23.64 23.64 23.64 248.25 248 .10 247.95 247.80 247.65

5.1 5.0 5.0 9.1 9.0 8.9 8.8 8.8 8.7

9.1 6.7 9.0

6.7 8.9

6.7 15.9 15.8 15.7 15.6 8.8 6.7 13.7 13.5

4.9

8.8 6.7 4.9

8.7 6.7 15.5 15.4 15.3 (4.8) (4.9 ) (5.0) (5.0) (5.7) (5.2) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9) (5.9) (5.9) (5.9) (5.9) (7.1) (1.2) (1.2) (1 .2) (3.4) (41.6) (4.7) - 0. 0 (0.0) (6.0) (6.1) (6 .2) (8.4) (47. 2) (9.8) (5 .9) (5.9) (5.9) (5.9) (5. 9) (14.8) (5 .9) (5.9) (5.9) (5.9) (5.9) (7.1)

16.2

29.5 29 . 1 28.0 28 . 7 (19.8) 9.5 4.6 4.7 4.7 5.4 5.9 6.7

- - 6.7 - 16.0 15.4

Net Cash Flow 28.5 27.2 27.4 24 .2 (18.8) (8 .7) 5.5 10.7 10.4 10.3 10.1 1.1 9.9 9.8 9.7 9.6 9.5 8.2 Terminal Value Present Value Factor 108'3 Discounted Cash Flow 28.5 24.2 21.5 17.0 (12.3) (5.4) 3.4 5.7 5.1 4.7 4.2 1.7 3.5 3.3 3.0 2.7 2.5 37.1 Industry Value (Net Present Value) S 150.8

Exhibit 4: Standard Case Industry Cash flow--Manufacturer Submittal, 3% Shipment Scenario

A-6 STANDARD CASE SCENARIO 

# '5. ____ -,\11, Unit Sales (Total in millions) Magnelic Calhode CIIIOIII Eleclronic Revenues Production Costs +SG&A (exc!. Depreciation) (Production Costs=LabortMaterialtOverhead) Depreciation Product Conve",ion Expense (CC) Product Conversion Expenso (Bloc) Olle TIme Charges Restructuring Cost (Plant Closure) Asset Wrile Off Profit BeforeTax Taxes Net Income BeforeFinancing Depreciation Asset Write Off Change in Working Capilal Cash Flows from Operations Ordinwy Capital Expenditures Conversion Capital Exp. (CC) Conversion Capital Exp. (Bloc) Cash UsedIn Inveslment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow Industly Value (Net Present Value)**~** Announce Base Year Year

1998

31.57 30.86 0.00 0.71 236.69 185.7

4.4

46.5 16.5 30.0 30.0 4.4 34.5 (4.8) (1.2) (6.0) 28.5 28.5 1999 31.33 29.91 0.00 /.42 241.44

190.3

4.6 0.1 0.5 0.3 45.7 16.2 29.5 29.5 4.6 (0.7) 33.3 (4.9) (1.2) (6.1) 27.2 24.2 2000 31.08 28.95 0.00 2./3 242.70

192.3

4.7 0.7

45.0 16.0 29.1 29.1 4.7 (0.2) 33.5 (5.0) (1.2) (6.2) 27.4 21.5 2001 30.84 28.00 0.00

.**2.8~** 242.86 193.4

4.7 1.4

43.3 15.4 28.0 28.0 4.7 (0.0) 32.7 (5.0) (3.4) (8.4) 24.2 17.0 2002 34.84 31.29 0.00 3.55 274.13 218.5

5.4

4.1 44.4 15.8 28.7 28.7 5.4 (5.5) 28.5 (5.7) (41.6) (47.2) (18.8) (12.3) Standard Year 2003

20.82 0.00 0.00 2Q.82 224.33 204.9

5.9 0.1 37.5 6.6 (30.7) (10.8) (i9.8) (19.8)

5.9 6.7 8.3 J.l (5.2) (4.7) (9.8) (8.7) (5.4) 2004 23.64 0.00 0.00 23.64 249.69 227.5

6.7

1.0 (0.4) 14.9 5.4 9.5 9.5 6.7 (4.8) 11.4 (5.9) (5.9) 5.5 2005 23.64 0.00 0.00 23.64 249.46 227.5

6.7

(0.2) 15.5 5.6 9.9 9.9 6.7 16.6 (5.9) 0.0 (5.9) 10.7 5.7 2006 23.64 0.00 0.00 23.64 249.23 227.5

6.7

15.0
9.6 9.6 6.7 0.0 16.3 (5.9) (0.0) (5.9) 10.4 5.1 2007 23.64 0.00 0.00 23.64 249.00 227.5

6.7

14.8 5.3 9.5 9.5 6.7 (0.0) 16.2 (5.9) (5.9) 10.3 4.7

Exhibit4: Standard Case Industry Cash flow--Manufacturer Submittal, 3% Shipment Scenario 2008 23.64 0.00 0.00 23.64 248.78 227.5

6.7

14.6 5.3 9.4 9.4 6.7 16.0 (5.9) (5.9) 10.1 4.2 2009 23.64 0.00 0.00 23.64 248.55 227.5

6.7

14.4 5.2 9.2 9.2 6.7 15.9 (14.8) (14.8)

l.l 1.7 2010 23.64 0.00 0.00 23.64 248.40 227.5

6.7

14.3 5.1 9.1 9.1 6.7 15.8 (5.9) (5.9) 9.9 3.5 2011 23.64 0.00 0.00 23.64 248.25 227.5

6.7

14.1
9.0 9.0 6.7 15.7 (5.9) (5.9) 9.8 3.3 2012 23.64 0.00 0.00 23.64 248.10 227.5

6.7

14.0 5.0 8.9 8.9 6.7 15.6 (5.9)

9.7 3.0 2013 23.64 0.00 0.00 23.64 247.95 227.5

6.7

13.8 5.0 8.8 8.8 6.7 15.5 (5.9) (5.9) 9.6 2.7 2014 23.64 0.00 0.00 23.64 247.80 227.5

6.7

13.7 4.9 8.8 8.8 6.7 15.4 (5.9) (5.9) 9.5 2.5 2015 23.64 0.00 0.00 23.64 247.65 227.4

6.7

13.5 4.9 8.7 8.7 6.7 15.3 (7.1) (7.1) 8.2 108.3 37.1

A-Stluoteseent Lamp: S.aBastel Electronic Ballast Standard BASE CASE SCENARIO Base Year 1998 lneomcstn:^ I Unit Sales (Total in millions) 31.41

Magnetic 30.23 Cathode Crrronr 0.00 Electronic 1.18 Revenues 236.39 Production Costs +SG&A (excl. Depreciation) 185.9 (Production Costs=LaborlMateriat+Overhead) Depreciation 4.5

Product Conversion Expense (CC) - Product Conversion Expense (Elec) One lime Charges

Restructuring Cost (Plant Closure) - Asset Write Off - Profit Before Tax 46.0
Taxes 16.3 Net Income Before Financing 29.7

Cash Net Income 29.7 Depreciation 4.5 Asset Write Off Change in Working Capital Cash Flows from Operations 34.2

Ordinary Capital Expenditures (4.8) Conversion Capital Exp. (CC) - Conversion Capital Exp. (Elec) (2.0) Cash Used In Investment (6.8) Net Cash Flow 27.3 Terminal Value Present Value Factor Discounted Cash Flow 27.3 Industry Value (Net Present Value) S 216.3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31.00 30.59 30.18 29.77 29.36 28.95 28.55 28.14 27.73 27.32 26.91 26.50 26.09 25.69 25.28 24.87 24.46 28.63 27.04 25.45 23.86 22.27 20.68 19.09 17.50 15.91 14.32 12.73 11.14 9.55 7.95 6.36 4.77 3.18 0.00 0.00 0. 00 0.00 0 .00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.36 3.55 4.73 5.91 7.09 8.27 9.46 10.64 11.82 13.00 14.18 15.37 16.55 17.73 18.91 20.09 21.28 244.31 246.41 246.67 246.22 244.54 243.87 244.74 245.59 246.41 247.21 247.99 248.79 249.58 250.36 251.11 251.86 252.59 194.5 197.8 199.4 200.3 200.2 200.9 203.1 205.3 207.5 209.7 211.9 214.1 216.3 218.6 220.8 223.0 225.2 4.6 4.7 4.8 4.9 4.9 5.0 5.0 5.1 5.2 5.3 5.4 5.5 5,5 5.6 5.7 5.8 5.9

- - - - - - - -
0.5 - - - - - 0.8 0.2 0.3 - - - - - - (0.4) 44.3 43.9 42.5 41.0 39.5 38.0 35.8 35.4 33.7 32.2 30.7 29.2 27.7 26.2 24.7 23.1 21.6 15.7 15.6 15.1 14.6 14.0 13.5 12.7 12.6 12.0 11.5 10.9 10.4 9.9 9.3 8.8 8.3 7.7 28.6 28.3 27.4 26.5 25.5 24.5 23.1 22.8 21.7 20.7 19.8 18.8 17.8 16.8 15.8 14.8 13.8
28.6 28.3 27.4 26.5 25.5 24.5 23.1 22.8 21.7 20.7 19.8 18.8 17.8 16.8 15.8 14.8 13.8 4.6 4.7 4.8 4.9 4.9 5.0 5.0 5.1 5.2 5.3 5.4 5.5 5.5 5.6 5.7 5.8 5.9 (1.2) (0.3) (0.1) 0.1 0.2 0.1 (0.2) (02) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) 32.0 32.7 32.2 31.4 30.6 29.5 27.9 27.7 26.7 25.9 25.0 24.1 23.2 22.3 21.4 20.5 19.5 (5.0) (5.1) (5.2) (5.2) (5.3) (5.4) (5.4) (5.5) (5.6) (5.7) (5.8) (5.9) (6.0) (6.1) (6.2) (6.2) (6.3)

- - - - - - - - - - - - - - - - - (2.0) (2.0) (2.0) (2.0) (2.0) (2.1) (4.3) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (0.3) (7.0) (7.1) (7.2) (7.3) (7.3) (7.5) (9.8) (7.5) (7.6) (7.7) (7.8) (7.9) (8.0) (8.1) (8.2) (8.3) (6.6) 25.0 25.6 25.0 24.1 23.3 22.1 18.2 20.2 19.1 18.1 17.2 16.2 15.2 14.2 13.2 12.2 12.9 22.2 20.1 17.5 15.0 12.9 10.9 8.2 8.0 6.9 5.9 5.1 4.4 3.8 3.3 2.9 2.5 2.5

Exhibit 5: Base Case Industry Cash flow--Existing Dynamics, 5% Shipment Scenario

A-7 IFluoreScentLamp BaIIaslal EleelNnlcBallastStllndard BASE CASE SCENARIO 

# If
........ .,.,1

Unit Sales (Total in millions) Magne/lc Ca/hode Cutout Electronic Revenues Production Costs +SG&A (excl. Depreciation) (Production Costs=LabortMalerial-l{}verhead) Depreciation Product Conversion Expense (CC) Product Conversion Expense (Blec) One Time Charges Restructuring Cost (plant Closure) Asset Wrile Off Profit BeforeTax Taxes Net Income Before Financing**1'.~~.~i\t{I!\l~~il** Net Income Depreciation AssetWrite Off Change in Working Capital Cash Flows from Operations Ordinary Capital Expenditures Conversion Capilal Exp. (CC) Conversion Capital Exp. (Blec) Cash Used In Inveslment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow Industty Value (Net Present Value) S 216.3 Base Vear 1998

31.41 30.23 0.00 1./8 236.39 185.9

4.5

46.0 16.3 29.7 29.7 4.5 34.2 (4.8) (2.0) (6.8) 27.3 27.3 1999 31.00 28.63 0.00 2.36 244.31 194.5

4.6

0.5 0.3 44.3 15.7 28.6 28.6 4.6 (1.2) 32.0 (5.0) (2.0) (7.0) 25.0 22.2 2000 30.59 27.04 0.00 3.55 246.41 197.8

4.7

43.9 15.6 28.3 28.3 4.7 (0.3) 32.7 (5.1) (2.0) (7.1) 25.6 20.1 2001 30.18 25.45 0.00 4.73 246.67 199.4

4.8

42.5 15.1 27.4 27.4 4.8 (0.1) 32.2 (5.2) (2.0) (7.2) 25.0 17.5 2002 29.77 23.86 0.00 5.9/ 246.22 200.3

4.9

41.0 14.6 26.5 26.5 4.9 0.1 31.4 (5.2) (2.0) (7.3) 24.1 15.0 2003 29.36 22.27 0.00 7.09 244.54 200.2

4.9

39.5 14.0 25.5 25.5 4.9 0.2 30.6 (5.3) (2.0) (7.3) 23.3 12.9 2004 28.95 20.68 0.00 8.27 243.87 200.9

5.0

38.0 13.5 24.5 24.5 5.0 0.1 29.5 (5.4) (2.1) (1.5) 22.1 10.9 2005 28.55 /9.09 0.00 9.46 244.74 203.1

5.0

0.8 35.8 12.7 23.1 23.1 5.0 (0.2) 27.9 (5.4) (4.3) (9.8) 18.2 8.2 2006 28.14 /7.50 0.00 /0.64 245.59 205.3

5.1

0.2 (0.4) 35.4 12.6 22.8 22.8 5.1 (0.2) 27.7 (5.5) (2.0) (7.5) 20.2 8.0

Exhibit 5: Base Case Industry Cash flow--Existing Dynamics, 5% Shipment Scenario 2007 27.73 /5.9/ 0.00 11.82 246.41 207.5

5.2

33.7 12.0 21.7 21.7 5.2 (0.2) 26.7 (5.6) (2.0) (7.6) 19.1 6.9 2008 27.32 14.32 0.00 13.00 247.21 209.7

5.3

32.2 1l.5 20.7 20.7 5.3 (0.2) 25.9 (5.7) (2.0) (7.7) 18.1 5.9 2009 26.91 /2.73 0.00 14./8 247.99 211.9

5.4

30.7 10.9 19.8 19.8 5.4 (0.2) 25.0 (5.8) (2.0) (1.8) 17.2 5.1 2010 26.50 1l.14 0.00 /5.37 248.79 214.1

5.5

29.2 10.4 18.8 18.8 5.5 (0.2) 24.1 (5.9) (2.0) (7.9) 16.2 4.4 2011 26.09 9.55 0.00 /6.55 249.58 216.3

5.5

27.7 9.9 17.8 17.8 5.5 (0.2) 23.2 (6.0) (2.0) (8.0) 15.2 3.8 2012 25.69 7.95 0.00 /7.73 250.36 218.6

5.6

26.2 9.3 16.8 16.8 5.6 (0.2) 22.3 (6.1) (2.0) (S.I) 14.2 3.3 2013 25.28 6.36 0.00 /8.9/ 251.11 220.8

5.7

24.7 8.8 15.8 15.8 5.7 (0.2) 21.4 (6.2) (2.0) (8.2) 13.2 2.9 2014 24.87 4.77 0.00 20.09 251.86 223.0

5.8

23.1 8.3 14.8 14.S 5.8 (0.2) 20.5 (6.2) (2.0) (S.3) 12.2 2.5 2015 24.46 3./8 0.00 2/.28 252.59 225.2

5.9

21.6 7.7 13.8 13.8 5.9 (0.2) 19.5 (6.3) (0.3) (6.6) 12.9 2.5

A-7E1uanEseeat Lamp BSUasls: EIeslronlC Ballast Standard BASE CASE SCENARIO contInued 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 0.00 0

. 00 0.00 0. 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 23.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 21.28 252.59 252.59 252.59 252.59 252. 59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2
5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5,9 5.9 5.9 5.9

21.6 21 .6 21.6 21 .6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13,8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3)

- (0.3) - (0.3) - (0.3) - - (0.3) - - (0.3) (6.3) (6.6) (6.3) (6.6) (6.3) (6.6) (6.3) (6.3) (6.6) (6.3) (6.3) (6.6) 13.4 13.1 13.4 13.1 13.4 13.1 13.4 13.4 13.1 13.4 13.4 13.1 140.4 2.5 2.2 2.1 1.9 1.8 1.6 1.5 1.4 1.3 1.2 18.1

Exhibit 5: Base Case Industry Cash flow--Existing Dynamics, 5% Shipment Scenario



### A-8 IFluorescentLame BaUIl!iIs: EI«m.nlcBldlllSlSlftndai'd' 

### I BASE CASE SCENARIO
.......conUnued

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 24.46 3./8 3./8 3./8 3./8 3./8 3./8 3./8 3./8 3./8 3./8 3./8 3./8 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2/.28 2/.28 2/.28 2/.28 2/.28 2/.28 21.28 2/.28 2/.28 2/.28 2/.28 2/.28 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 252.59 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2 225.2

5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9

21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 21.6 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 13.B 13.8 13.8 13.8 13.B 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 19.7 (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (6.3) (0.3) (0.3) (0.3) (0.3) (0.3) (6.3) (6.6) (6.3) (6.6) (6.3) (6.6) (6.3) (6.3) (6.6) (6.3) (6.3) (6.6) 13.4 13.1 13.4 13.1 13.4 13.1 13.4 13.4 13.1 13.4 13.4 13.1 140.4 2.5 2.2 2.1 1.9 1.8 1.6 I.S 1.4 1.3 1.2 1.1 IB.I

Exhibit 5: Base Case Industry Cash flow·-Existing Dynamics, 5% Shipment Scenario



### A-S[Fluorescent Lamp Ballaatst Electronic Ballast Standard
STANDARD CASE SCENARIO Base Year 1998 Unit Sales (Total in millions) 31.41

Magnetic 30.23 Cathode Cutout 0.00 Electronic 1.18 Revenues 236.39 Production Costs+SG&A (excl. Depreciation) (Production Costs=Labor+Material+Overhead) 185.9 Depreciation 4.5

Product Conversion Expense (CC) - Product Conversion Expense (Elec) One Date Charges

Restructuring Cost (Plant Closure) Asset Write Oft' -

Profit Before Tax 46.0 Taxes 16.3 Net Income Before Financing 29.7 :.^h loa Siv,ie c;uie Net Incunlu 29.7 Depreciation Asset Write Off Change in Working Capital 4.5 Cash Flows from Operations 34.2

Ordinary Capital Expenditures Conversion Capital Exp. (CC) (4.8) Conversion Capital Exp. (Elec) (2.0) Cash Used In Investment (6.8) Net Cash Flow Terminal Value Present Value Factor 27.3 Discounted Cash Flow 27.3 Industry Value (Net Present Value) S 155.6 Announce Year 1999 2000 2001 2002 Standard Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31.00 30.59 30. 18 33.93 21 .11 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 28.63 27.04 25.45 28. 02 0.00 0 . 00 0.00 0 . 00 0.00 0.00 0.00 0 . 00 0.00 0.00 0 . 00 0.00 0.00 0. 00 0.00 0. 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 . 00 0.00 0.00 2.36 3.55 4.73 5.91 21.11 23.64 23.64 23.64 23.64 23.64 23.64 2164 23.64 23.64 23.64 23.64 23.64 244.31 246.41 246.68 277.07 229,55 251. 81 251.58 251 .34 251 .11 250.88 250.64 250.49 250.33 250.18 250.03 249.87 24932 194.1 197.5 199.2 224.1 205.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 4.7 4.9 5.0 5.6 6.0 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7

- - - - - 0.1 0.7 1.4 1.8 0.1
0.5 4.1 37.5 1.0 0.3 6.6 (0.4) (0.2)
- - - - - - - - - 44.6 43.4 41.1 41.5 (26.6) 18.6 19.2 18.7 18.5 18.3 18.0 17.9 17.7 17.6 t7.4 17.3 17.1 15.8 15.4 14.6 14.7 (9.4) 6.7 6.9 6.7 6.7 6.6 6.5 6.4 6.4 6.3 6.3 6.2 6.2 28.8 28.0 26.5 26.8 (17.2) 11.9 12.3 12.0 11.9 11.7 1 1.6 11.5 11.4 11.3 11.2 11.1 11.0
28.8 28 .0 26.5 26.8 (17.2) 11.9 12.3 12.0 11.9 11.7 11.6 11.5 11.4 11.3 11.2 11.1 11.0 4.7 4.9 5.0 5.6 6.0 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 . (1.2) (0.3) (0.1) (5.3) 8.0 (4.1) - 0.0 (0.0) - (0.0) 32.3 32.6 31.5 27.1 3.5 14.4 18.9 18.7 18.5 18.4 18.2 18.1 18.0 17.9 17.8 17.7 17.6 (5.0) (5.1) (5.2) (5.8) (5.3) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9 ) (5.9) (5.9) (5.9) (5.9) (7.1) (2.0) (2.0) (4.1) (39.0) (4.1) - 0.0 (0.0) (0.0) (0.0) (0.0) 0.0 (7.0) (7.1) (9.3) (44.8) (9.4) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9) (5.9) (5.9) (5.9) (5.9) (7.1) 25.3 25.4 22.2 (17.8) (5.8) 8.6 13.1 12.8 12.6 12.5 3.5 12.2 12.1 12.0 110 11.9 10.5 123.8 22.4 20.0 15.5 (11.5) (3.7) 4.8 6.7 6.0 5.4 4.9 2.2 4.0 3.7 3.3 3.0 2.8 38.3

Exhibit 6: Standard Case Industry Cash flow

--Existing Dynamics, 5% Shipment Scenario IFlUOrelltentLamp Ball.. l ..Eletlronlc BallastStandard STANDARD CASE SCENARIO**I~** Unit Sales (fotal in millions) Magnetic Cathode CutOlJt Electronic Revenues Production Costs +SG&A (excl. Depreciation) (Production CoslS='LabortMaterial+Overhead) Depreciation Product Conversion Expense (CC) Product Conversion Expense (Elec) One 1'ime Charges Restructuring Cost (plant Closure) Asset Write Off Profit Before Tax Taxes Net Income Before Financing**1!I\\jt~.ijl** NetIncome Depreciation Asset Write Off Change in Working Capital Cash Flow.; from Operations Ordinary Capital Expenditures Conversion Capital Exp. (CC) Conversion Capital Exp. (Elee) Cash Used In Investment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow Industl}' Value (Nel Present Value) S 155.6 Announce Base Vear Vear

1998 1999

31.41 30.23 0.00 U8 236.39 185.9

4.5

46.0 16.3 29.7 29.7 4.5 34.2 (4.8) (2.0) (6.8) 27.3 27.3 31.00 28.63 0.00 2.36 244.31 194.1

4.7 0.1 0.5 0.3 44.6 15.8 28.8 28.8 4.7 (1.2) 32.3 (5.0) (2.0) (7.0) 25.3 22.4 2000 30.59 27.04 0.00 3.55 246.41 197.5

4.9 0.7

43.4 15.4 28.0 28.0 4.9 (0.3) 32.6 (5.1) (2.0) (7.1) 25.4 20.0 2001 30.18 25.45 0.00 4.73 246.68 199.2

5.0 1.4

41.1 14.6 26.5 26.5 5.0 (0.1) 31.5 (5.2) (4.1) (9.3) 22.2 15.5 2002 33.93 28.02 0.00 5.91 277.07 224.1

5.6 1.8 4.1 41.5 14.7 26.8 26.8 5.6 (5.3) 27.1 (5.8) (39.0) (44.8) (17.8) (ILS) Standard Vear 2003

21.11 0.00 0.00 21.11 229.55 205.9

6.0 0.1 37.5 6.6 (26.6) (9.4) (17.2) (17.2)

6.0 6.7 8.0 3.5 (5.3) (4.1) (9.4) (5.8) (3.7) 2004 23.64 0.00 0.00 23.64 251.81 225.9

6.7

1.0 (0.4) 18.6 6.7 11.9 11.9 6.7 (4.1) 14.4 (5.9) (5.9) 8.6 4.8 2005 23.64 0.00 0.00 23.64 25LS8 225.9

6.7

(0.2) 19.2 6.9 12.3 12.3 6.7 18.9 (5.9) 0.0 (5.9) 13.1 6.7 2006 23.64 0.00 0.00 23.64 251.34 225.9

6.7

IB.7 6.7 12.0 12.0 6.7 0.0 18.7 (5.9) (0.0) (5.9) 12.8 6.0

Exhibit 6: Standard Case Industry Cash flow--Existing Dynamics, 5% Shipment Scenario 2007 23.64 0.00 0.00 23.64 251.11 225.9

6.7

IB.5 6.7 11.9 11.9 6.7 (0.0) 18.5 (5.9) (5.9) 12.6 5.4 2008 23.64 0.00 0.00 23.64 250.88 225.9

6.7

IB.3 6.6 11.7 11.7 6.7 18.4 (5.9) (5.9) 12.5 4.9 2009 23.64 0.00 0.00 23.64 250.64 225.9

6.7

18.0 6.5 11.6 11.6 6.7 18.2 (14.8) (14.8)

3.5 2.2 2010 23.64 0.00 0.00 23.64 250.49 225.9

6.7

17.9 6.4 11.5 11.5 6.7 18.1 (5.9) (5.9) 12.2 4.0 2011 23.64 0.00 0.00 23.64 250.33 225.9

6.7

17.7 6.4 11.4 11.4 6.7 18.0 (5.9) (5.9) 12.1 3.7 2012 23.64 0.00 0.00 23.64 250.18 225.9

6.7

17.6 6.3 11.3 11.3 6.7 17.9 (5.9) (0.0) (5.9) 12.0 3.3 2013 23.64 0.00 0.00 23.64 250.03 225.9

6.7

17.4 6.3 11.2 11.2 6.7 17.8 (5.9) (0.0) (5.9) 12.0 3.0 2014 23.64 0.00 0.00 23.64 249.87 225.9

6.7

17.3 6.2 11.1 11.1 6.7 17.7 (5.9) (0.0) (5.9) 11.9 2.8 2015 23.64 0.00 0.00 23.64 249.72 225.9

6.7

17.1 6.2 11.0 11.0 6.7 (0.0) 17.6 (7.1) 0.0 (7.1) 10.5 123.8 38.3

A-9Fluorescentlatu Ballasts:ElectronicBallast Stnndard'.';: BASE CASE SCENARIO Base Year 1998 Unit Sales (fotal in millions) 31.57

Magnetic 30.86 Cathode Cutout 0.00 Electronic 0.71 Revenues 236.69 Production Costs + SG&A (excl. Depreciation) (Production Costs=Labor+Material+Overhead) 185.7 Depreciation 4.4

Product Conversion Expense (CC) - Product Conversion Expense (Elec) - One Time Charges

Restructuring Cost (Plant Closure) - Asset Write Off - Profit Before Tax 46.5 Taxes 16.5 Net Income Before Financing 30.0

Net Income 30.0 Depreciation Asset Write Off 4.4 Change in Working Capital

- Cash Flows from Operations 34.5

Ordinary Capital Expenditures Conversion Capital Exp. (CC) (4.8) Conversion Capital Exp. (Bloc) (1.2) Cash Used In Investment (6.0) Net Cash Flow 28.5 Terminal Value Present Value Factor Discounted Cash Flow 28.5 Industry Value (Net Present Value) $ 237.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31 .33 29 91 31.08

28 95 30.84 30.59 30.34 30. 10 29.85 29.61 29.36 29. 12 28.87 28.63 28.38 28.14 27.89 27.65 27.40

. . 28 . 00 27.04 26. 09 25.13 24. 18 23 .23 22.27 21
. 32 20
. 36 19 . 41 18.45 17.50 /6.54 15. 59 14.64 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00. 0.00 0 . 00 0.00 0.00 0.00 0.00 0 . 00 0.00 0.00 1
. 42 2.13 2
. 84 3.55 4.26 4.96 5
. 67 6.38 7 . 09 7.80 8.51 9.22 9.93 10.64 11. 35 12
. 06 12.77 241 .44 242
.69 242. 85 242.59 241 .57 241 . 17 241.69 242. 20 242. 70 243 . 18 243 .64 244. 13 244.60 245.06 245
. 52 245 .97 246.40 190
.9 192.8 193. 8 194.4 194.3 194.7 196.0 197
.4 198.7 200.0 201.3 202.7 204.0 205.3 206
.6 208
.0 209.3 4.5 4.6 4.6 4.7 4.7 4.7 4.8 4.8 4.9 4.9 5.0 5
.0 5.1 5.1 5
.2 5.2 5.3

- -

- - 0.5 - 0.8 0.2 0.3 - - (0.4) 45.2 45.3 44.4 43.5 42.6 41,7 40.1 40.2 39,1 38.2 37.3 36.4 35.5 34.6 33.7 32.8 31.9 16.0 16.1 15.8 15.5 15.1 14.8 14.2 14.3 13.9 13.6 13.3 13.0 12.6 12.3 12.0 11.7 11.3 29.2 29.2 28.7 28. 1 27.5 26.9 25.8 25
.9 25.2 24
.7 24. 1 23.5 H-9 22 3 21.7 21.1 20 5
29.2 29.2 28.7 28.1 27.5 26.9 25
.8 25.9 25.2 24.7 24. 1 23.5 22.9 22.3 21.7 21 1 . 20 5 4.5 4.6 4.6 4.7 4.7 4.7 4.8 4.8 4.9 4.9 5.0 5
.0 5.1 5.1 5.2 . 5.2 .

5.3 (0.7) (0.2) (0.0) 0.0 0.1 0.0 (0.1) (0
. 1) (0.1) (0.1) (0
. 1) (0.1) (0.1) (0.1) (0 1) (0 1) (0 1) 33.0 33.6 33.3 32.8 32.3 31.7 30.5 30.7 30.0 29.5 28.9 28.4 27.9 27.3 . 26.8 .

26.2 .

25.7 (4.9) (5.0) (5.0) (5.0) (5.!) (5
. 1) (5.2) (5.2) (5.3) (5.3) (5.4) (5.4) (5.5) (5.5) (5.6) (5.6) (5.7) ( 1.2) (1.2) (1.2) (1.2) ( 1.2) (1.3) (3.5 ) ( 1.2) (1.2) (1.2) (1.2) ( 1.2) (1.2) (1.2) (1 .2) (1 2) (1 2) (6.1) (6
.2) (6.2) (6
.2) (6.3) (6.4) (8.7) (6,4) (6.5 (6.5) (6.6) (6.6) (6.7) (6.7) (6.8) . (6.8) .

(6.9) 26.9 27.4 27. 1 26.6 26. 1 25.3 21 .9 24.3 23.5 23.0 22.4 21.8 21.2 20.6 20.0 19.4 18.8 23.8 21 .6 18.9 16.5 14.4 12.4 9.7 9.5 8.3 7.2 63 5.5 4.9 4.3 3.8 3.3 2.9

Exhibit 7: Base Case Industry Cash flow--Existing Dynamics, 3% Shipment Scenario

A-10 lliIifQrOsteiltLamp BaUasls: EkttronleBallilslStilndard, ' BASE CASE SCENARIO Base Yea, 1998



### .......... MIII!Il Unit Sales (fotal in millions) 31.57 Magnetic 30.86 Cathode Cutout 0.00 Electronic 0.71 Revenues 236.69 Production Costs+SG&A(excl. Depreciation) 185.7 (ProduClion Costs=LabortMaterialf()verhead) Depreciation 4.4 Product Conversion Expense (CC) Product Conversion Expense (Elec) One Time Charges Restructuring Cost (plant Closure) Asset Wrile Off ProfitBeforeTax Taxes NetIncomeBeforeFinancing Depreciation Asset Write Off Change in Working Capital Cash Flows from Operations Ordinary Capital Expenditures Conversion Capital Exp. (CC) Conversion Capital Rxp. (Elec) Cash Used In Inveslment Net Cilsh Flow Terminal Value PresentValue Factor DiscountedCash Flow Industry Value (Net Present Value) 237.0 46.5 16.5 30.0
30.0 4.4 34.5 (4.8) (1.2) (6.0) 28.5 28.S 1999 31.33 29.91 0.00 1.42 241.44 190.9

4.5

0.5 0.3 45.2 16.0 29.2
29.2 4.5 (0.7) 33.0 (4.9) (1.2) (6.1) 26.9 23.8 2000 31.08 28.95 0.00 2.13 242.69

192.8

4.6

45.3 16.1 29.2
29.2 4.6 (0.2) 33.6 (5.0) (1.2) (6.2) 27.4 21.6 2001 30.84 28.00 0.00 2.84 242.85 193.8

4.6

44.4 15.8 28.7
28.7 4.6 (0.0) 33.3 (5.0) (1.2) (6.2) 27.1 18.9 2002 2003 2004 200S 30.59 30.34 30.10 29.85 27.04 26.09 25./3 24.18 0.00 0.00 0.00 0.00 3.55 4.26 4.96 5.67 242.59 241.57 241.17 241.69 194.4 194.3 194.7 196.0

4.7 4.7 4.7 4.8

43.5 15.5 28.1
28.1 4.7 0.0 32.8 (S.O) (1.2) (6.2) 26.6 16.5 42.6 15.1 27.5
27.5 4.7 0.1 32.3 (5.1) (1.2) (6.3) 26.1 14.4 41.7 14.8 26.9
26.9 4.7 0.0 31.7 (5.1) (1.3) (6.4) 25.3 12.4 0.8 40.1 14.2 25.8
25.8 4.8 (0.1) 30.5 (5.2) (3.5) (8.7) 21.9 9.7 2006 29.61 23.23 0.00 6.38 242.20 197.4

4.8

0.2 (0.4) 40.2 14.3 25.9
25.9 4.8 (0.1) 30.7 (5.2) (1.2) (6.4) 24.3 9.5

Exhibit 7: Base Case Industry Cash flow--Existing Dynamics, 3% Shipment Scenario 2007 29.36 22.27 0.00 7.09 242.70 198.7

4.9

39.1 13.9 25.2
25.2 4.9 (0.1) 30.0 (5.3) (1.2) (6.5) 23.5 8.3 2008 29.12 21.32 0.00 7.80 243.18 200.0

4.9

38.2 13.6 24.7
24.7 4.9 (0.1) 29.5 (5.3) (1.2) (6.5) 23.0 7.2 2009 28.87 20.36 0.00 8.51 243.64 201.3

5.0

37.3 13.3 24.1
24.1 5.0 (0.1) 28.9 (5.4) (1.2) (6.6) 22.4 6.3 2010 28.63 19.41 0.00 9.22 244.13 202.7

36.4 13.0 23.5
23.5 5.0 (0.1) 28.4 (5.4) (1.2) (6.6) 21.8 5.5 2011 28.38 18.45 0.00 9.93 244.60 204.0

5.1

35.5 12.6 22.9
22.9 5.1 (0.1) 27.9 (5.5) (1.2) (6.7) 21.2 4.9 2012 28.14 17.50 0.00 /0.64 245.06 205.3

5.1

34.6 12.3 22.3
22.3 5.1 (0.1) 27.3 (5.5) (1.2) (6.7) 20.6 4.3 2013 27.89 16.54 0.00 11.35 245.52 206.6

5.2

33.7 12.0 21.7
21.7 5.2 (0.1) 26.8 (5.6) (1.2) (6.8) 20.0 3.8 2014 27.65 15.59 0.00 12.06 245.97 208.0

5.2

32.8 11.7 21.1
21.1 5.2 (0.1) 26.2 (5.6) (1.2) (6.8) 19.4 3.3 2015 27.40 14.64 0.00 12.77 246.40 209.3

5.3

31.9 11.3 20.5
20.5 5.3 (0.1) 25.7 (5.7) (1.2) (6.9) 18.8 2.9

A-10Fluorescent Lamp Bafastst Electronic Ballast Standard BASE CASE SCENARIO continmd 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 27.16 26.91 26.67 26.42 26.18 25.93 25.69 25.44 25.19 24.95 24.70 24.46 13.68 12.73 11.77 10.82 9.86 8.91 7.95 7.00 6.05 5.09 4.14 3.18 0.00 0. 00 0.00 0 . 00 0.00 0 . 00 0.00 0. 00 0.00 0 . 00 0.00 0.00 13.48 14.18 14.89 15.60 16 .31 17.02 17.73 18.44 19.15 19. 86 20.57 21.28 246.92 247.43 247.95 248.46 248.98 249.49 250.01 250.53 251.04 251.56 252.07 252.59 210.6 211.9 213.3 214.6 215.9 217.2 218.6 219.9 221.2 222.5 223.9 225.2 5.3 5,4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9

31.0 30.1 29.3 28.4 27.6 26.7 25.8 25.0 24.1 23.3 22.4 21.6 11.0 10.7 10.4 10.1 9.8 9.5 9.2 8.9 8.6 8.3 8.0 7.7 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9 (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) 25.2 24.7 24.2 23.7 23.2 22.6 22,1 21.6 21.1 20.6 20.1 19.6 (5.7) (5.8) (5.9) (5.9) (6.0) (6.0) (6.1) (6.1) (6.2) (6.2) (6.3) (6.3) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (0.3) (7.0) (7.0) (7.1) (7.2) (7.2) (7.3) (7.3) (7.3) (7.4) (7.4) (7.5) (6.6) 18.2 17.6 17.1 16.5 16.0 15.4 14.9 14.3 13.7 13.2 12.6 13.0 136.9 2.6 2.3 2.1 1.9 1.7 1.5 1.4 1.3 1.2 1.1 1.0 17.1

Exhibit 7: Base Case Industry Cash flow--Existing Dynamics, 3% Shipment Scenario

A-11 IFlno,.....,n! Lain!! BallllSlS: Electronle BalllISl**IltJUt~ard** BASE CASE SCENARIO
.......conUnued

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

27.16 26.91 26.67 26.42 26.18 25.93 25.69 25.44 25.19 24.95 24.70 24.46 13.68 12.73 11.77 10.82 9.86 8.91 7.95 7.00 6.05 5.09 4.14 3.18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.48 J4.18 /4.89 15.60 16.31 17.02 17.73 18.44 19.15 19.86 20.57 21.28 246.92 247.43 247.95 248.46 248.98 249.49 250.01 250.53 251.04 251.56 252.07 252.59 210.6 211.9 213.3 214.6 215.9 217.2 218.6 219.9 221.2 222.5 223.9 225.2

5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9

31.0 30.1 29.3 28.4 27.6 26.7 25.8 25.0 24.1 23.3 22.4 21.6 11.0 10.7 10.4 10.1 9.8 9.5 9.2 8.9 8.6 8.3 8.0 7.7 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 20.0 19.4 18.8 18.3 17.7 17.2 16.6 16.1 15.5 14.9 14.4 13.8 5.3 5.4 5.4 5.5 5.5 5.6 5.6 5.7 5.7 5.8 5.8 5.9 (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) 25.2 24.7 24.2 23.7 23.2 22.6 22.1 21.6 21.1 20.6 20.1 19.6 (5.7) (5.8) (5.9) (5.9) (6.0) (6.0) (6.1) (6.1) (6.2) (6.2) (6.3) (6.3) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (\.2) (1.2) (1.2) (0.3) (7.0) (7.0) (7.1) (7.2) (7.2) (7.3) (7.3) (7.3) (7.4) (7.4) (7.5) (6.6) 18.2 17.6 17.1 16.5 16.0 15.4 14.9 14.3 13.7 13.2 12.6 13.0 136.9 2.6 2.3 2.1 1.9 1.7 1.5 1.4 1.3 1.2 1.1 1.0 17.1

Exhibit 7: Base Case Industry Cash flow--Existing Dynamics, 3% Shipment Scenario

A-11Fluoresecnt Lam BaUasles Electronic Ballast Stunderd STANDARD CASE SCENARIO Base Year 1998 _ iu^r.,.:. ctatr Unit Sales (Total in millions) 31.57

Magnetic 30.86 Cathode Cutout 0.00 Electronic 0.71 Revenues 236.69 Production Costs + SG&A (excl. Depreciation) (Production Costs=Labor+Material+Overhead) 185.7 Depreciation 4.4

Product Conversion Expense (CC) - Product Conversion Expense (Elec) One Thne Charges

Restructuring Cost (Plant Closure) Asset Write Off -

Profit Before Tax 46.5 Taxes 16.5 Net Income Before Financing 30.0

Net Income 30.0 Depreciation Asset Write Off Change in Working Capital 4.4 Cash Flows from Operations 34.5

Ordinary Capital Expenditures Conversion Capital Exp. (CC) (4.8) Conversion Capital Exp. (Flee) (1.2) Cash Used In Investment (6.0) Net Cash Flow Terminal Value Present Value Factor 28.5 Discounted Cash Flow 28.5 Industry Value (Net Present Value) S 159.8 Announce Year 1999 2000 2001 2002 Standard Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 31.33 31. 08 30. 84 34.84 20.82 23 .64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 23,64 23.64 23.64 29.91 28.95 28. 00 31
. 19 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 0 . 00 0.00 0.00 0.00 0

. 00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0
. 00 0.00 0 . 00 0.00 0.00 0 . 00 0.00 0.00 1.42 2.13 2.84 3.55 20.82 23.64 23.64 23.64 23.64 23,64 23.64 23.64 23.64 23.64 23.64 23.64 23.64 241.44 242.70 242.86 274.13 226. 20 251.81 251.58 251 .34 251. 11 250.88 250.64 250.49 250.33 250.18 250.03 249.87 249.72 190.3 192.3 193.4 218.5 203.0 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 225.9 4.6 4.7 4.7 5.4 5.9 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7

- - - - - 0.1 0.7 1.4 1.8 0.1 0.5 4.1 37.5 1.0

- - - - - - 0.3 6.6 (0.4) (0.2)

- - - - - 45.7 45.0 43.3 44.4 (26.9) 18.6 19.2 18.7 18.5 18.3 18.0 17.9 17.7 17.6 17.4 17.3 17.1 16.2 16.0 15.4 15.8 (9.5) 6.7 6.9 6.7 6.7 6.6 6.5 6.4 6.4 6.3 6.3 6.2 6.2 29. 5 29.1 28 .0 28.7 (17.4 119 12.3 12 .0 11.9 11.7 11.6 11.5 1.4 11.3 11.2 11.1 11.0 29.5. 29.1 28.0 28.7 (17.4) 11.9 12.3 12.0 11.9 11.7 11.6 11.5 11.4 11.3 11.2 11.1 0 11 4.6 4.7 4.7 5.4 5.9 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 . 6 7 6.7 - . (0.7) (0.2) (0.0) (5.5) 8.3 (4.8) 0.0 (0.0)

- - - 33.3 33.5 32.7 28.5 3.5 13.8 18.9 18.7 18.5 18.4 18.2 18.1 18.0 17.9 17.8 17.7 17.6 (4.9) (5.0) (5.0) (5.7) (5.2) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9) (5.9) (5.9) (5.9) (5.9) (7.1) (1.2) (1.2) (3.4) (41.6) (4.7) - 0.0 (0.0) (6.1) (6.2) (8.4) (47.2) (9.8) (5.9) (5.9) (5.9) (5.9) (5.9) (14.8) (5.9) (5.9) (5.9) (5.9) (5.9) (7.1) 27.2 27.4 24. 2 (18.8) (6.3) 7.9 13.1 12.8 12.6 12.5 3.5 12.2 12.1 12.0 12.0 11.9 10.5 123'8 24.2 21.5 17.0 (12.3) (4.1) 4.5 6.7 6.0 5.4 4.9 2.2 4.0 3.7 3.3 3.0 2.8 38.3

Exhibit 8: Standard Case Industry Cash flow--Existing Dynamics, 3% Shipment Scenario

A-12 !FluomUllt Lamp Bi\IIlIJllSt EIe.lronlcBallastStandard:.,. Announce Standard STANDARD CASE SCENARIO Base Vear Vear Year 1998 1999 2000 200I 2002 2003 2004 2005 2006 2007 2008 2009



### ............. 1 Unit Sales (fotal in millions) 31.57 31.33 31.08 30.84 34.84 20.82 23.64 23.64 23.64 23.64 23.64 23.64**~~** 

# - 

# - - -**~ ~ ~ ~** **~ ~** **~ ~**  Cathode Clllollt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Electronic Revenues Production Cosls +SG&A (excl. Depreciation) (production Costs=Labor+Materialt<lverhead) Depre<:iation Product Conversion Expense (CC) Product Conversion Expense (Elec) Olle Time Charges Restructuring Cosl (plant Closure) Asset Write Off Profit BeforeTax Taxes NetIncome Before Financing 

# __ , NetIncome Depreciation AssetWrite Off Change in Working Capital Cash Flows from Operations Ordinary Capital Expenditures Conversion Capital Exp. (cq Convemion Capital Exp. (Elec) Cash Used In Investment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow Induslly Value (Net Present Value) S 159.8 0.71 236.69 185.7

4.4

46.5 16.5 30.0 30.0 4.4 34.5 (4.8) (1.2) (6.0) 28.5 28.5 1.42 241.44 190.3

4.6 0.1 0.5 0.3 45.7 16.2 29.5 29.5 4.6 (0.7) 33.3 (4.9) (1.2) (6.1) 27.2 24.2 2.13 242.70 192.3

4.7 0.7

45.0 16.0 29.1 29.1 4.7 (0.2) 33.5 (5.0) (1.2) (6.2) 27.4 21.5**2.8~** 242.86 193.4

4.7 1.4

43.3 15.4 28.0 28.0 4.7 (0.0) 32.7 (5.0) (3.4) (SA) 24.2 17.0 3.55 274.13 218.5

SA 1.8 4.1 44.4 15.8 28.7 28.7 5.4 (5.5) 28.5 (5.7) (41.6) (47.2) (lS.8) (12.3) 20.82 226.20 203.0

5.9 0.1 37.5 6.6 (26.9) (9.5) (1704) (17.4)

5.9 6.7 8.3 3.5 (5.2) (4.7) (9.8) (6.3) (4.1) 23.64 251.81 225.9

6.7

1.0 (004) 18.6 6.7 11.9 11.9 6.7 (4.8) 13.8 (5.9) (5.9) 7.9 4.5 23.64 251.58 225.9

6.7

(0.2) 19.2 6.9 12.3 12.3 6.7 18.9 (5.9) 0.0 (5.9) 13.1 6.7 23.64 251.34 225.9

6.7

18.7 6.7 12.0 12.0 6.7 0.0 18.7 (5.9) (0.0) (5.9) 12.8 6.0

Exhibit 8: StandardCase Industry Cash fJow--Ex;sting Dynamics, 3% Shipment Scenario 23.64 251.11 225.9

6.7

18.5 6.7 11.9 11.9 6.7 (0.0) IS.5 (5.9) (5.9) 12.6 5.4 23.64 250.88 225.9

6.7

18.3 6.6 11.7 11.7 6.7 18.4 (5.9) (5.9) 12.5 4.9 23.64 250.64 225.9

6.7

18.0 6.5 11.6 11.6 6.7 18.2 (14.8) (14.S)

3.5 2.2 2010 2011 2012 2013 23.64 23.64 23.64 23.64 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 23.64 250049 225.9

6.7

17.9 6.4 11.5 11.5 6.7 18.1 (5.9) (5.9) 12.2 4.0 23.64 250.33 225.9

6.7

17.7 604 1104 11.4 6.7 18.0 (5.9) (5.9) 12.1 3.7 23.64 250.18 225.9

6.7

17.6 6.3 11.3 11.3 6.7 17.9 (5.9) (5.9) 12.0 3.3 23.64 250.03 225.9

6.7

1704 6.3 11.2 11.2 6.7 I7.S (5.9) (5.9) 12.0 3.0 2014 23.64 0.00 0.00 23.64 249.87 225.9

6.7

17.3 6.2 11.1 11.1 6.7 17.7 (5.9) (5.9) 11.9 2.8 2015 23.64 0.00 0.00 23.64 249.72 225.9

6.7

17.1 6.2 11.0 11.0 6.7 17.6 (7.1) (1.\) 10.5 123.S 38.3

A-12Fluorescent Lamp BaBaatat Electronic BollestStandard BASE CASE SCENARIO Base Year 1998 Stet Unit Sales (Total in millions) 68.30

Magnetic 30.23 Cathode Cutout 0.00 Electronic 38.08 Revenues 737.91 Production Costs +SG&A (excl. Depreciation) 641.7 (Production Costs=Labor+Materiat+Overhead) Depreciation 15.8

Product Conversion Expense (CC) Product Conversion Expense (Elec) One Time Charges

Restructuring Cost (Plant Closure) - Asset Write Off - Profit Before Tax 80.4 Taxes 28.7 Net Income Before Financing 51.7

l;e^Ir blur ';tur Net Income 51.7 Depreciation 15.8 Asset Write Off

- Change in Working Capital Cash Flows from Operations 67.5

Ordinary Capital Expenditures (17.0) Conversion Capital Exp. (CC) Conversion Capital Exp.(Elec) (3.3) Cash Used In Investment (20.3) Net Cash Flow 47.2 Terminal Value Present Value Factor Discounted Cash Flow 47.2 Industry Value (Net Present Value) S 420.6 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 68.67 69.05 69.45 69.87 70.30 70.75 71.22 71.71 72.21 72.74 73.28 73.85 74.43 75.04 75.67 76.32 76.99 28.64 27.05 25.46 23.87 22.27 20.68. 19.09 17.50 /5.91 14.32 12.73 11.14 9.55 7.96 6.36 4.77 3.18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 40.03 42.01 44.00 46.00 48.03 50.07 52.13 54.21 56.30 58.42 60.55 62.71 64.89 67.08 69.30 71.54 73.80 736.70 732.97 719.99 710.28 698.11 697.26 707.23 717.35 727.63 738.09 748.71 759.71 770.91 782.31 793.90 805.71 817.72 642.1 640.3 629.7 622.4 612.5 613.0 623.9 634.9 646.2 657.6 669.2 681.0 693.0 705.2 717.7 730.3 743.2 15.8 15.8 15.6 15.5 15.4 15.6 15.9 16.2 16.6 16.9 17.2 17.5 17.9 18.2 18.6 18.9 19.3

0.5 - - - - - 0.8 0.2 0.3 - - - - - - (0.4) 78.0 76.9 74.6 72.4 70.1 68.6 66.6 66.4 64.9 63.6 62.3 61.2 60.0 58.9 57.7 56.5 55.3 27.8 27.4 26.6 25.8 25.1 24.5 23.8 23.7 23.2 22.8 22.3 21.9 21.5 21.1 20,7 20.3 19.9 50.1 49.4 48.0 46.5 45.1 44.1 42.8 42.6 41.7 40.9 40.0 39.3 38.5 37.8 37.0 36.2 35.4 50.1 49.4 48.0 46.5 45.1 44.1 42.8 42.6 41.7 40.9 40.0 39.3 38.5 37.8 37.0 36.2 35.4 15.8 15.8 15.6 15.5 15,4 15.6 15.9 16.2 16.6 16.9 17.2 17.5 17.9 18.2 18.6 18.9 19.3

- - - - - - - - - - - - - - - - - (0.0) 0.4 1.7 1.2 1.6 (0.2) (1.9) (1.9) (1.9) (2.0) (2.0) (2.0) (2,1) (2.1) (2.2) (2.2) (2.2) 65.9 65.6 65.4 63.3 62.1 59.5 56.9 57.0 56.3 55.8 55.2 54,8 54.3 53.9 53.4 52.9 52.5 (17.0) (17.0) (16.9) (16.8) (16.7) (16.9) (17.2) (17.6) (17.9) (18.2) (18.6) (19.0) (19.3) (19.7) (20.1) (20.4) (20.8) (3.4) (3.4) (3.4) (3.5) (3.5) (3.7) (5.9) (3.6) (3.6) (3.6) (3.7) (3.7) (3.7) (3.8) (3.8) (3.9) (2.1) (20.4) (20.4) (20.3) (20.2) (20.1) (20.6) (23.2) (21.1) (21.5) (21.9) (22.3) (22.7) (23.1) (23.5) (23.9) (24.3) (22.9) 45.5 45.2 45.1 43.1 42.0 38.9 33.7 35.9 34.8 33.9 32.9 32.1 31.3 30.4 29.5 28.6 29.6
40.7 36.2 32.3 27.7 24.3 20.1 15.9 15.1 13.3 11.8 10.5 9.3 8.3 7.5 6.7 6.1 5.8

Exhibit 9 : Base Case Industry Cash flow--Manufacturer Submittal, 5% Shipment Scenario, includes "unaffected " electronic ballasts

A-13 !Fluofesteol Lamp Ballaala: Eleelrotile BallastStandAtd .I BASE CASE SCENARIO
Unit Sales (fatal in millions) Magnetic Cathode Cutout Electronic Revenues Production Costs +SG&A (excI. Depreciation) (Production Cosls=Labor+Material+Overhead) Depreciation Product Conversion Expense (CC) Product Conversion Expense (Etec) One Time Charges Restructuring Cost (plant Closure) Asset Write Off Profit Before Tax Taxes Net Income Before Financing**~** Net Income Depreciation Asset Write Off Change in Working Cepital Cash Flows from Operations Ordinary Cepital Expenditures Conversion Capital Exp. (CC) Conversion Cepital Exp. (Elec) Cash Used In Investment Net Cash Flow Tenninal Value Present Value Factor Discounted Cash Flow Industl)' Value (Net Present Value) S 420.6 Base Year 1998

68.30 30.23 0.00 38.08 737.91 641.7 15.8

80.4 28.7 51.7 51.7 15.8 67.5 (17.0) (3.3) (20.3) 47.2 47.2 1999 68.67 28.61 0.00 40.03 736.70 642.1 15.8

0.5 0.3 78.0 27.S 50.1 50.1 15.8 (0.0) 65.9 (17.0) (3.4) (20.4) 45.5 40.7 2000 69.05 27.05 0.00 42.01 732.97 640.3 15.8

76.9 27.4 49.4 49.4 15.8 0.4 65.6 (17.0) (3.4) (20.4) 45.2 36.2 2001 69.45 25.46 0.00 44.00 719.99 629.7 15.6

74.6 26.6 48.0 48.0 15.6 1.1 65.4 (16.9) (3.4) (20.3) 45.1 32.3 2002 69.S7 23.87 0.00 46.00 710.28 622.4 15.5

72.4 25.8 46.5 46.5 15.5 1.2 63.3 (16.8) (3.5) (20.2) 43.1 27.7 2003 70.30 22.27 0.00 48.03 698.11 612.5 15.4

70.1 25.1 45.1 45.1 15.4 1.6 62.1 (16.7) (3.5) (20.1) 42.0 24.3 2004 70.75 20,68 0.00 50.07 697.2.6 613.0 15.6

68.6 24.5 44.1 44.1 15.6 (0.2) 59.5 (16.9) (3.7) (20.6) 38.9 20.1 2005 71.22 19.09 0.00 52.13 707.23 623.9 15.9

0.8 66.6 23.8 42.8 42.8 15.9 (1.9) 56.9 (17.2) (5.9) (23.2) 33.7 15.9 2006 71.71 17.50 0.00 54.21 717.35 634.9 16.2

0.2 (0.4) 66.4 23.7 42.6 42.6 16.2 (1.9) 57.0 (17.6) (3.6) (21.1) 35.9 15.1 2007 72.21 15.91 0.00 56.30 727.63 646.2 16.6

64.9 23.2 41.7 41.7 16.6 (1.9) 56.3 (17.9) (3.6) (21.5) 34.8 13.3 2008 72.74 14.32 0.00 58.42 738,09 657.6 16.9

63.6 22.8 40.9 40.9 16.9 (2.0) 55.8 (IS.2) (3.6) (21.9) 33.9 11.8 2009 73.28 12.73 0.00 60.55 748.71 669.2 17.2

62.3 22.3 40.0 40.0 17.2 (2.0) 55.2 (18.6) (3.7) (22.3) 32.9 10.5 2010 73.85 11.14 0.00 62.71 759.71 681.0 17.5

61.2 21.9 39.3 39.3 17.5 (2.0) 54.8 (19.0) (3.7) (22.7) 32.1 9.3 2011 74.43 9.55 0.00 64.89 770.91 693.0 17.9

60.0 21.5 38.5 38.5 17.9 (2.1) 54.3 (19.3) (3.7) (23.1) 31.3 8.3 2012 75.04 7.96 0.00 67.08 782.31 705.2 IS.2

5S.9 21.1 37.8
37.S 18.2 (2.1) 53.9 (19.7) (3.8) (23.5) 30.4 7.5 2013 75.67 6.36 0.00 69.30 793.90 717.7 18.6

57.7 20.7 37.0
37.0 18.6 (2.2) 53.4 (20.1) (3.S) (23.9) 29.5 6.7

Exhibit 9: Base Case Industry Cash flow··Manufacturer Submittal, 5% Shipment Scenario, includes "unaffected" electronic ballasts 2014 76.32 4.77 0.00 71.54 S05.71 730.3 18.9

56.5 20.3 36.2 36.2 18.9 (2.2) 52.9 (20.4) (3.9) (24.3) 28.6 6.1 2015 76.99 3.18 0.00 73.80 S17.72 743.2 19.3

55.3 19.9 35.4 35.4 19.3 (2.2) 52.5 (20.8) (2.1) (22.9) 29.6 5.S

A-13k7udresceaft Lamp:B8lls8ta: Eleetroh a UalastStandard BASE CASE SCENARIO Wntinued 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 78.09 79.22 80.37 81.54 82.74 83.96 85
.21 86.49 87.79 89. 12 90.48 91.87 3.18 3
. 18 3.18 3. 18 3.18 3.18 3.18 3 . 18 3.18 3
. 18 3.18 3.18 0.00 0

. 00 0.00 0 . 00 0.00 0 . 00 0.00 0
. 00 0.00 0 . 00 0.00 0.00 74.91 76

.03 77

. 18 78

.36 79

.56 80

. 78 82.03 83
.31 84.61 85
.94 87 .30 88.68 829.59 841 .71 854
.08 866.71 879.61 892.77 906.22 919.94 933.96 948.27 962.88 977.79 754.0 765 .! 776.5 788. 1 799.9 811 .9 824.3 836.8 849.7 862.8 876.2 889.9 19.6 19.8 20. 1 20.4 20.7 21.1 21.4 21 . 7 22.0 22.4 22.7 23.1

56.0 56 . 7 57.5 58 . 2 59.0 59 .8 60.6 61 . 4 62.2 63 . 1 64.0 64.9 20.1 20.4 20.6 20.9 21.2 21.5 21.8 22.1 22.4 22.7 23.0 23.3 35.9 36.4 36.8 37.3 37.8 38.3 38.8 39.4 39.9 40.4 41.0 41.6 35.9 36.4 36.8 37.3 37.8 38.3 38.8 39.4 39.9 40.4 41.0 41.6 19.6 19.8 20.1 20.4 20.7 21 . 1 21.4 21 .7 22.0 22
.4 22.7 23.1 (2.1) (2.2) (2.2) (2.3) (2.3) (2.4) (2.4) (2.5) (2.5) (2.6) (2.6) (2.7) 53.3 54.0 54.8 55. 5 56.2 57.0 57.8 58 .6 59.4 60. 2 61.1 62.0 (21.1) (21.4) (21.8) (22.1 ) (22.4) (22.8) (23.!) (23
.4) (23.8) (242) (24
.6) (24.9) (0.4) (0.6 ) (0.4) (0.6 ) ( 0.5) (0.6) (0.5) (0.5 ) ( 0.6) (0.5 ) ( 0.5) (0.6) (21.6) (22.0) (22.2 ) (22.7) (22.9) (23.4) (23.6) (23.9) (24.4) (24.7) (25 . 1) (25.5) 31.8 32.0 32.6 32.8 33.4 33 .7 34.2 34.7 35.0 35
.6 36.0 36.4 374.6 5.8 5.3 5
.0 4.6 4.3 4.0 3.7 3.4 3.2 3.0 2.8 36.9

Exhibit 9: Base Case Industry Cashflow

--Manufacturer Submittal , 5% Shipment Scenario, includes "unaffected" electronic ballasts

A-14 IFluotemijlLame,111111l1li18: EletlrobicBillII$lSWidiU'd., BASE CASE SCENARIO
.......conUnued

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

78.09 79.22 80.37 81.54 82.74 83.96 85.21 86.49 87.79 89.12 90.48 91.87 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 3.18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 74.91 76.03 77.18 78.36 79.56 80.78 82.03 83.31 84.61 85.94 87.30 88.68 829.59 841.71 854.08 866.71 879.61 892.77 906.22 919.94 933.96 948.27 962.88 977.79 754.0 765.1 776.5 788.1 799.9 811.9 824.3 836.8 849.7 862.8 876.2 889.9 19.6 19.8 20.1 20.4 20.7 21.1 21.4 21.7 22.0 22.4 22.7 23.1

56.0 56.7 57.5 58.2 59.0 59.8 60.6 61.4 62.2 63.1 64.0 64.9 20.1 20.4 20.6 20.9 21.2 21.5 21.8 22.1 22.4 22.7 23.0 23.3 35.9 36.4 36.8 37.3 37.8 38.3 38.8 39.4 39.9 40.4 41.0 41.6
35.9 36.4 36.8 37.3 37.8 38.3 38.8 39.4 39.9 40.4 41.0 41.6 19.6 19.8 20.1 20.4 20.7 21.1 21.4 21.7 22.0 22.4 22.7 23.1 (2.1) (2.2) (2.2) (2.3) (2.3) (2.4) (2.4) (2.5) (2.5) (2.6) (2.6) (2.7) 53.3 54.0 54.8 55.5 56.2 57.0 57.8 58.6 59.4 60.2 61.1 62.0 (21.1) (21.4) (21.8) (22.1) (22.4) (22.8) (23.1) (23.4) (23.8) (24.2) (24.6) (24.9) (0.4) (0.6) (0.4) (0.6) (0.5) (0.6) (0.5) (0.5) (0.6) (0.5) (0.5) (0.6) (21.6) (22.0) (22.2) (22.7) (22.9) (23.4) (23.6) (23.9) (24.4) (24.7) (25.1) (25.5) 31.8 32.0 32.6 32.8 33.4 33.7 34.2 34.7 35.0 35.6 36.0 36.4 374.6 5.8 5.3 5.0 4.6 4.3 4.0 3.7 3.4 3.2 3.0 2.8 36.9

Exhibit 9: Base Case Industry Cash flow--Manufacturer Submittal, 5% ShipmentScenario, includes "unaffected" electronic ballasts

A-14Floorcseent Lamp Ballasbt Electronic BallastStandard
STANDARD CASE SCENARIO Base Year 1998 Unit Sales (Total in millions) 68.30

Magnetic 30.23 Cathode Cutout 0.00 Electronic 38.08 Revenues 737.91 Production Costs + SG&A (excl. Depreciation) (Production Costs-Labor+Material+Overhead) 641.7 Depreciation 15.8

Product Conversion Expense (CC) - Product Conversion Expense (Elec) One Time Charges -

Restructuring Cost (Plant Closure)
- Asset Write Off - Profit Before Tax 80.4 Taxes 28.7 Net Income Before Financing 51.7 -^---l aach F'I.i . glees: inc^Et

Net Income 51.7 Depreciation Asset Write Off 15.8 Change in Working Capital

- Cash Flows from Operations 67.5

Ordinary Capital Expenditures Conversion Capital Exp. (CC) (17.0) Conversion Capital Exp. (Elec) (3.3) Cash Used In Investment (20.3) Net Cash Flow Terminal Value Present Value Factor 47.2 Discounted Cash Flow 47.2 Industry Value (Net Present Value) S 350.9 Announce Year 1999 2000 2001 2002 Standard Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 68.67 69.05 69.45 74.03 62.05 65.44 66.32 67.21 68.13 69.06 70.01 70.99 71.98 73.00 74.03 75.09 76.17 28.64 27.05 25.46 28. 02 0.00 0.00 0.00 0 . 00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 0.00 0.00 0.00 0. 00 0.00 0 .00 0.00 0. 00 0.00 0 . 00 0.00 0.00 0.00 0 . 00 0.00 0 . 00 0.00 0.00 0.00 0.00 40.03 41.01 44. 00 46.00 62.05 65.44 66.31 67.21 68.12 69.06 70.01 70.99 71.98 72.99 74.03 75.09 76.17 736.70 732.97 719,99 741.12 681.21 703.08 711.95 721.00 730.23 739.65 749.27 759.32 769.58 780.05 790.74 801.65 812.79 641.7 640.0 629.5 646.1 620.2 6393 648,3 657.1 666.2 675.4 684.8 694.3 704.1 714.1 724.4 734.8 745.4 15.9 15.9 15.8 16.3 16.6 17.3 17.6 17.8 18.0 18 .3 18.5 18.8 19.0 193 19.5 19.8 20.1

- - - - - 0.1 0.7 1.4 1.8 0.1 0.5
- - 4.1 37.5 1.0

- - - - - - - - 0.3 - - - 6.6 (0.4) (0.2)

- - - - - - - - - 78.3 76.4 73.2 72.9 0.3 45.5 46.3 46.1 46.0 46.0 46.0 46.2 46.4 46.6 46.9 47.1 47.3 27.9 27.3 26.1 26.0 0.3 16.4 16.6 16.6 16.6 16.6 16.6 16.6 16.7 16.8 16.9 16.9 17.0 50.3 49.1 47.1 46.9 (0.0) 29.1 29.6 29.5 29.5 29.5 29.5 29.6 29.7 29.9 30.0 30.1 30.3 50.3 49.1 47.1 46.9 (0.0) 29.1 29.6 29.5 29.5 29.5 29.5 29.6 29.7 29.9 30.0 30.1 30.3 15.9 15.9 15.8 16.3 16.6 17.3 17.6 17.8 18.0 18.3 18.5 18.8 19.0 19.3 19.5 19.8 20.1

- - - - 6.7

- - - - - - - - - - - (0.0) 0.4 1.7 (4.1) 9.4 (4.4) (1.7) (1.7) ( 1.8) (1.8) (1.8) (1.9) (1.9) (2.0) (2.0) (2.0) (2.1) 66.2 65.4 64.6 59.0 32.7 42.0 45.5 45.5 45.7 45.9 46.1 46.5 46.8 47.2 47.5 47.9 48.3 (17.0) (17.0) (16.9) (17.4) (16.6) (17.4) (17.6) (17.9) (18.1) (18.4) (27.6) (18.9) (19.2) (19.5) (19.8) (20.1) (21.6) (3.4) (3.4) (5.5) ( 40.5) (5 .6) (1.6) (1.6) (1.6) (1.6) (1.6) (1.7) (1.7) (1.7) (1.8) (1.8) ( 1.8) (1.8) (20.4) (20.4) (22.4) (57.8) (22.2) (19.0) (19.3) (19.5) (19.7) (20.0) (29.2) (20.6) (20.9) (21.3) (21.6) (21.9) (23.4) 45.8 45.0 42.3 1.2 10.5 23.0 26.2 26.1 26.0 25.9 16.9 25.8 25.9 25.9 26.0 26.0 24.9 228.1 41.0 36.0 30.4 1.2 6.4 12.9 13.4 12.2 11.1 10.1 7.0 8.5 7.8 7.2 6.6 6.1 85.8

Exhibit 10: Standard Case Industry Cash flow--Manufacturer Submittal, 5% Shipment Scenario, includes "unaffected" electronic ballasts

A-15 IFluoreSWlt Lamp Ballas!!: I!lettronieBallastStandard STANDARD CASE SCENARIO 

# .............. Unit Sales (Total in millions) Magtretic Cathode Cutout Electronic Revenues Production Costs+SG&A (excl. Depreciation) (Production Costs=Labor+Material+Overhead) Depreciation Product Conversion Expense (CC) Product Conversion Expense (Elec) Olle 1ime Charges Restructuring Cost (plant Closure) Asset Write Off Profit BeforeTax Taxes NetIncome Before Financing 

### INllWtJiiIlMi;t!4M'_' Net Income Depreciation Asset Write Off Change in Working Capital Cash Flows from Operations Ordinary Capital Expenditures Conversion Capital Exp. (CC) Convelllion Capital Exp. (Eloc) Cash Used In Investment Net Cash Flow Terminal Value Present Value Factor Discounted Cash Flow Industry Value (Net Present Value) S 350.9 Announce Base Year Year

1998 1999

68.30 30.23 0.00 38.08 737.91 641.7 15.8

80.4 28.7 51.7
51.7 15.8 67.5 (17.0) (3.3) (20.3) 47.2
47.2 68.67 28.64 0.00 40.03 736.70 641.7 15.9 0.1 0.5 0.3 78.3 27.9 50.3
50.3 15.9 (0.0) 66.2 (17.0) (3.4) (20.4) 45.8
41.0 2000 69.05 27.05 0.00 42.01 732.97 640.0 15.9 0.7

76.4 27.3 49.1
49.1 15.9 0.4 65.4 (17.0) (3.4) (20.4) 45.0
36.0 2001 69.45 25.46 0.00 44.00 719.99 629.5 15.8 1.4

73.2 26.1 47.1
47.1 15.8 1.7 64.6 (16.9) (5.5) (22.4) 42.3
30.4 2002 74.03 28.02 0.00 46.00 741.12 646.1 16.3 1.8 4.1 72.9 26.0 46.9
46.9 16.3 (4.1) 59.0 (17.4) (40.5) (57.8)

1.2 1.2 Standard Year 2003

62.05 0.00 0.00 62.05 681.21 620.2 16.6 0.1 37.5 6.6 0.3 0.3 (0.0) (0.0) 16.6 6.7 9.4 32.7 (16.6) (5.6) (22.2) 10.5 6.4 2004 65.44 0.00 0.00 65.44 703.08 639.7 17.3

1.0 (0.4) 45.5 16.4 29.1
29.1 17.3 (4.4) 42.0 (17.4) (1.6) (19.0) 23.0 12.9 2005 66.32 0.00 0.00 66.31 711.95 648.3 17.6

(0.2) 46.3 16.6 29.6
29.6 17.6 (1.7) 45.5 (17.6) (1.6) (19.3) 26.2 13.4 2006 67.21 0.00 0.00 67.21 721.00 657.1 17.8

46.1 16.6 29.5
29.5 17.8 (1.7) 45.5 (17.9) (1.6) (19.5) 26.1 12.2 2007 68.13 0.00 0.00 68.12 730.23 666.2 18.0

46.0 16.6 29.5
29.5 18.0 (1.8) 45.7 (18.1) (1.6) (19.7) 26.0 ILl 2008 69.06 0.00 0.00 69.06 739.65 675.4 18.3

46.0 16.6 29.5
29.5 18.3 (1.8) 45.9 (18.4) (1.6) (20.0) 25.9 10.1 2009 70.01 0.00 0.00 70.01 749.27 684.8 18.5

46.0 16.6 29.5
29.5 18.5 (1.8) 46.1 (27.6) (1.7) (29.2) 16.9 7.0 2010 70.99 0.00 0.00 70.99 759.32 694.3 18.8

46.2 16.6 29.6
29.6 18.8 (1.9) 46.5 (18.9) (1.7) (20,6) 25.8 8.5 2011 71.98 0.00 0.00 71.98 769.58 704.1 19.0

46.4 16.7 29.7
29.7 19.0 (1.9) 46.8 (19.2) (1.7) (20.9) 25.9
7.8 2012 73.00 0.00 0.00 72.99 780.05 714.1 19.3

46.6 16.8 29.9
29.9 19.3 (2.0) 47.2 (19.5) (1.8) (21.3) 25.9 7.2 2013 74.03 0.00 0.00 74.03 790.74 724.4 19.5

46.9 16.9 30.0
30.0 19.5 (2.0) 47.5 (19.8) (1.8) (21.6) 26.0
6.6

Exhibit 10: Standard Case Industry Cash flow--Manufacturer Submittal, 5% Shipment Scenario, includes "unaffected" electronic ballasts 2014 75.09 0.00 0.00 75.09 801.65 734.8 19.8

47.1 16.9 30.1
30.1 19.8 (2.0) 47.9 (20.1) (1.8) (21.9) 26.0 6.1 2015 76.17 0.00 0.00 76.17 812.79 745.4 20.1

47.3 17.0 30.3
30.3 20.1 (2.1) 48.3 (21.6) (1.8) (23.4) 24.9 228.1 85.8

A-15