Ballast

Manufacturer

Impact

Analysis

U.S. Department of Energy

Office of Codes and Standards

1000 Independence Ave., SW

Washington, DC

Date: April 21, 1999

EE-RM-97-500 COMMENT 67F

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

EE-RM-97-500 COMMENT 67F

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 
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

EE-RM-97-500 COMMENT 67F

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 oflamp 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 

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

EE-RM-97-500 COMMENT 67F

List of Fig u res 

Figure S1. 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 

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 FlowManufacturer 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

EE-RM-97-500 COMMENT 67F

List of Exh ibits 

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

5% shipment scenario ................................................................................ A-I 

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 S. 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-IO 

Exhibit 8. Standard Case Industry Cash Flow-Existing Dynamics, 

3% shipment scenario ............................................................................ A-I2 

Exhibit 9. Base Case Industry Cash Flow-Manufacturer Submittal, 

5% shipment scenario (all regulated product classes) .............................. A-13 

Exhibit 1 O.Standard Case Industry Cash Flow-Manufacturer Submittal, 

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

EE-RM-97-500 COMMENT 67F

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 fmancial 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. 

De:fmition 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: 

T a e bl 51 . M anu fa c tu rer su b -groups 

Sub-group 1 Sub-group 2 

Manufacturers of both 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

EE-RM-97-500 COMMENT 67F

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 associationNEMA-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 82 Business scenarios 

Future Industry Shipment Competitive Dynamics 

Scenarios Scenarios 

2015 == ~5% annual decline in • Manufacturer Submittal 

shipments • New Entrant 

• Existing Dynamics 

2027 == ~3% annual decline in • Manufacturer Submittal 

shipments • 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 
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 flows

Table 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

NPV

Cash 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

EE-RM-97-500 COMMENT 67F

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. 

• 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 flows 

Table S3 summarizes the financial impacts under the most likely shipment scenario-. 

shipments 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 53. Cash flow impacts of an electronic ballast standard under the 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% 

3 
Table 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

EE-RM-97-500 COMMENT 67F

Table 54. Cash flow impac1s 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 classesMaf!D.etic and Electronic 

Sub-2roup 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-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 in two categories: 

It 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." 

It 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 
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

EE-RM-97-500 COMMENT 67F

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 may be the result of new 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 it tracts 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 

-

rrrrDo 

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 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. 

5 
Table S5. Industry- ide employment impacts 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 ballast

manufacturing

U.S.A 666' 2406 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

EE-RM-97-500 COMMENT 67F

Table 85. Industry __ wide employment im ~acts of an electronic ballast standard 

Country of Direct Jobs lost Associated Jobs Direct Jobs 'J,:> Net Direct Jobs 

Manufacture in magnetic at risk in gained in lost 

ballast magnetic ballast electronic 

manufacturing manufacturing ballast 

manufacturin~ 

2015 ( -5% o d I ) h ec me s Ipmen t scenano 

U.S.A 6661 406.l 500 166 

Mexico 1570 190'; 700 870 

2027 ( -3% o d 1 ) h ecme s Ipment scenano 

U.S.A 717 3632 557 160 

Mexico 1727 161'; . 769 958 

1 Includes both factory and non-factory Jobs 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 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 capacity 

An electronic ballast standard would negatively impact magnetic ballast production 

capacity in the U.S. and Mexico. In all likelihood, an electronic ballast standard win 

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 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. 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 

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 will

accommodate 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

EE-RM-97-500 COMMENT 67F

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 will 

accommodate 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 
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

EE-RM-97-500 COMMENT 67F

1.0 Manufacturer 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 ruiemaking, 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 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 

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 
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

EE-RM-97-500 COMMENT 67F

fInns, 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 

perfonned 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 fmancial 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 offmancial values to be used in the 

GRIM industry analysis. These were calculated by studying publicly available fmancial 

statements of fluorescent lamp ballast manufacturers. A detailed defmition of fmancial 

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

EE-RM-97-500 COMMENT 67F

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 structure was developed using publicly 

available infonnation 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 (NBS) 

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 infonnation. 

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 confmn the accuracy 

and protect the confidentiality of all collected information. 

1.4. Phase 4: Industry Cash Flow 

As previously described, using the GRIM spreadsheet and an interview 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

EE-RM-97-500 COMMENT 67F

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 
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

EE-RM-97-500 COMMENT 67F

2.0 MIA Results 

2.1. Industry Characterization 

ADL developed an initial industry characterization using infonnation from relevant 

industry and market publications, 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 of a 

detailed and focused interview guide to perfonn the MIA. Specifically, shipment 

infonnation 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 1O-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 
Figure 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

EE-RM-97-500 COMMENT 67F

Figure 1. Historical trend in value of shipments of fluorescent 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 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. 

T a e . bl 1 "Affi ec ted" magne tibll c a as ts an d energy-e ffi' clen t 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 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 

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% 8.02

Uncorrected powerfactor ballasts24.5 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

EE-RM-97-500 COMMENT 67F

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

marketplace factors. 

Most manufacturers stated that a rule requiring 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.l They 

represent 73% of all power-factor corrected magnetic ballasts sold in 1997. Tabie 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. Sh' Ipmentan d I vauee fft uerescent lamp b a II asis in 1997 

Product 1997 1997 Value of % of Revenues Average Price 

Shipments Shipments of aU 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." Data prOVided by NEMA (all other informatIOn was 

obtained from eIRs) 

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 
Table 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

applications 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

EE-RM-97-500 COMMENT 67F

T a bl e • 3 l· IS t 0 fl amp b a II as t manu fat curers 

Manufacturer Characteristics in "affected" categories 

Advance Transformer Producer of magnetic and electronic ballasts with domestic, Mexican 

Company and 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 baIlasts for specialty 

applications with domestic j>roduction facilities 

SLi Lighting/PLP Producer of electronic and magnetic ballasts with Mexican 

production facilities 

The interviews conducted in 199611997 suggested that product mix, ftrm size, location of 

production facilities, and level of vertical integration were possible characteristics to be 

used in deftning 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 

conftdentiality 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 Market share of the 4 Market share of top 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

EE-RM-97-500 COMMENT 67F

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 

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 structure 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 detennines 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 GRlM 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 
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

EE-RM-97-500 COMMENT 67F

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 of3% 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 "BoomlBust" cycle. The industry fears that a costly "boomlbust" 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 
Figure 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

EE-RM-97-500 COMMENT 67F

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

Quarterly Shipments of Magnetic Ballasts 

Peak 10.9 MM Q4 for 48" lamps 

o 

o 

'" '" ~ 

ADL adapted the GRIM spreadsheet so that it could b~ 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 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

EE-RM-97-500 COMMENT 67F

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 Standard Case shipments in the 3% 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 

I--Magnetic --Electronic I 

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 

order to 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

EE-RM-97-500 COMMENT 67F

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 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 

II> .s 

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 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 
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

EE-RM-97-500 COMMENT 67F

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 fmancial 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 NPV s 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 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 Existing Dynamics • Existing Dynamics 

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

EE-RM-97-500 COMMENT 67F

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" ma2Detic ballast business 

Sub-2roup 1 

Manufacturer Submittal 181.3 91.3 -90.0 -50% 

New Entrant 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% 

New Entrant 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 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-2roup 1 

Manufacturer Submittal 210.7 97.1 -113.6 -54% 

New Entrant 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% 

New Entrant 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

EE-RM-97-500 COMMENT 67F

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 V.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 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 

of Energy. 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

EE-RM-97-500 COMMENT 67F

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 win not materially affect the results of the 

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 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, win grow 2.1% annually. 

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 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% 

24 
Table 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

NPV

Cash 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 ballast

margins 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

EE-RM-97-500 COMMENT 67F

Table 10. Cash flow impacts under the 3% shipment scenario, 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% 

New Entrant 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% 

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 NPV s 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 of31%. 

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 ballast 

margins 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 
2.2.5. Cash Flow Impacts

Tables 9 and 10 present the long-term cash flow impacts of a standard from the

perspective 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 regulated ballast product classes

Sub-group 1

Sub-group 2

Indust

26

EE-RM-97-500 COMMENT 67F

2.2.5. Cash Flow Impacts 

Tables 9 and 10 present the long-term cash flow impacts of a standard from the 

perspective of aggregate NPV. 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 fmancial 

leverage. Diminished free cash flow may also make it difficult to meet obligations to 

current and new debt holders andlor 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-tenn cash flow impacts resulting from an electronic ballast standard on the business 

represente d bya II regu I ate db!! a as t d pro uc tl c asse.s 

Scenario: Cash flows ($ mil) 

Years preceding the Electronic Years following the 

"Manufacturer Ballast Standard Electronic Ballast 

Submittal" Standard 

2000 I 2001 I 2002 2003 I 2004 

S b 1 u -~ roup 

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 

S b 2 u -~ roup 

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 

I d n ustry t 

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: 

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

EE-RM-97-500 COMMENT 67F

In years preceding the electronic ballast standard: 

CD capital investments required to build manufacturing capacity to meet the new 

standard; 

In years following the electronic ballast standard: 

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

CD 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 1 in the Manufacturer Submittal 

and 5% shipment scenario 

CASH FLOW TOTALS· SUBGROUP 1 

Fluorescent Lomp Ba1Josts: EkcJronic Ba1Jost Stmtdard 

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, 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 
Figure 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

EE-RM-97-500 COMMENT 67F

Figure 1. 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: Electronic Ballast SlImdsrd 

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 for the Industry in the Manufacturer Submittal 

and 5% shipment scenario 

CASH FLOW TOTALS - INDUSTRY 

Fluo,escenJ Lamp Ballasts: Electronic Bollast Standard 

~.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

EE-RM-97-500 COMMENT 67F

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 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 of questions to identify impacts on 

manufacturing capacity. These questions were developed to understand the impact of an 

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

EE-RM-97-500 COMMENT 67F

• 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 conftrmed 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 stanq.ard. 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 
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

EE-RM-97-500 COMMENT 67F

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-off's 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 
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 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

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

employment impacts.

32

EE-RM-97-500 COMMENT 67F

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 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 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 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 
2.4.1. 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

EE-RM-97-500 COMMENT 67F

2.4.1. Employment levels in 1998 

Based onthe 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. 

T a e bl 12 O· lrec t employmen tl eve I s f or manu fa c t un ·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 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: 

CD 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 
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% scenario 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

EE-RM-97-500 COMMENT 67F

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

where it might close one of its V.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. 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 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 V.S and the third manufacturer produces 

its electronic ballasts in China. In the absence of a 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

Mexico 1570 190 700 870 ^^d

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

EE-RM-97-500 COMMENT 67F

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. Industry-wide employment impacts of an electronic ballast standard 

Country of Direct Jobs lost Associated Jobs Direct Jobs 4,5 Net Direct Jobs 

Manufacture in magnetic at risk in gained in lost 

ballast magnetic ballast electronic 

manufacturing manufacturing ballast 

manufacturing 

2015 ( ~ 5% o d ec r ) me s h· Ipmen t scenano 

U.S.A 6661 406:l 500 166 

Mexico 1570 190'; 700 870 

2027 ( ~ 3% o d I ) h ec me s Ipmen t scenano 

U.S.A 717 363:l 557 160 

Mexico 1727 161'; 769 958 

1 Includes both factory and non-factory Jobs 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 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: 

ED Impact of the 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 of regulations 

Each of these issues is discussed in greater detail in the 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. Differential 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 this

argument. 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

EE-RM-97-500 COMMENT 67F

2.5.1. Impact of the Decline in Magnetic Ballast Shipments on Sub-group 1 

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. 

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 

offset the impact of the overall market decline 

CD 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 

CD 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. Differential 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 this 

argument. 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 
2.5.3. 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

EE-RM-97-500 COMMENT 67F

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 I 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 
Attachment A

Cash i

EE-RM-97-500 COMMENT 67F

Attachment A 

Cash Flow Outputs 
uor'escent Lam 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 OffProfit 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 273

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

EE-RM-97-500 COMMENT 67F

Wiuoresc:ent Lamp Bauasts: Rlectronic: Ballast Standaf!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--Manufacturer Submittal, 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-1 
E7uor6uont 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 Cash flow--Manufacturer Submittal, 5% Shipment Scenario

EE-RM-97-500 COMMENT 67F

IFluoresunt La",!! BalJiI!lhlt Eledronlc BaJ,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··Manufacturer Submittal, 5% Shipment Scenario 

A-2 
50testent 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--Manufacturer Submittal, 5% Shipment Scenario

EE-RM-97-500 COMMENT 67F

IFluorescent Urnp, dauasta: kiectronle JFailast Standard 

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 Before Tax 

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 Used In 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-3 
Fluorescent 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

AEE-RM-97-500 COMMENT 67F

BASE 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 

Profit Before Tax 

Taxes 

Net Income Before Financing 

IlI{it#lj:'i ... ~t-!4 Net Income 

Depreciation 

Asset Write Off 

Change in Working Capital 

Cash Flows from Operations 

Ordinruy Capital Expenditures 

Conversion Capital Exp. (CC) 

Conversion Capital Exp. (Bloc) 

Cash Used 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% 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 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-4 
lluorettent 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 Cash flow--Manufacturer Submittal, 3% Shipment Scenario

A-5

EE-RM-97-500 COMMENT 67F

IFluorescent Lam!! Ballasts: Eleetrqnlc Ballast Standard 

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-5 
Fluoreseent 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 01 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

EE-RM-97-500 COMMENT 67F

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 Before Tax 

Taxes 

Net Income Before Financing 

Depreciation 

Asset Write Off 

Change in Working Capilal 

Cash Flows from Operations 

Ordinwy Capital Expenditures 

Conversion Capital Exp. (CC) 

Conversion Capital Exp. (Bloc) 

Cash Used In 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 

Exhibit 4: 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-S 
tluoteseent 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

EE-RM-97-500 COMMENT 67F

IFluoreScent Lamp BaIIaslal EleelNnlc Ballast Stllndard 

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 Before Tax 

Taxes 

Net Income Before Financing 

1'.~~.~i\t{I!\l~~il Net Income 

Depreciation 

Asset Write 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-7 
E1uanEseeat 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

EE-RM-97-500 COMMENT 67F

IFluorescentLame BaUIl!iIs: EI«m.nlcBldlllSl Slftndai'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

EE-RM-97-500 COMMENT 67F

IFlUOrelltent Lamp Ball .. l .. Eletlronlc Ballast Standard 

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 Net Income 

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-9 
Fluorescentlatu 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

EE-RM-97-500 COMMENT 67F

lliIifQrOsteilt Lamp BaUasls: Ekttronle Ballilsl Stilndard, ' 

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 

Profit Before Tax 

Taxes 

Net Income Before Financing 

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 

Present Value Factor 

Discounted Cash 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-10 
Fluorescent 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

EE-RM-97-500 COMMENT 67F

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-11 
Fluoresecnt 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 11 0

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

EE-RM-97-500 COMMENT 67F

!FluomUllt Lamp Bi\IIlIJllSt EIe.lronlc Ballast Standard:.,. 

Announce Standard 

STANDARD CASE SCENARIO Base Vear Vear Year 

1998 1999 2000 200 I 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 Before Tax 

Taxes 

__ 

Net Income Before Financing 

, Net Income 

Depreciation 

Asset Write 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: Standard Case 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-12 
Fluorescent 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

EE-RM-97-500 COMMENT 67F

!Fluofesteol Lamp Ballaala: Eleelrotile Ballast StandAtd . 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-13 
k7udresceaft 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 Cash flow--Manufacturer Submittal, 5% Shipment Scenario, includes "unaffected" electronic ballasts

A-14

EE-RM-97-500 COMMENT 67F

IFluotemijlLame ,111111l1li18: EletlrobicBillII$l SWidiU'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% Shipment Scenario, includes "unaffected" electronic ballasts 

A-14 
Floorcseent 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

EE-RM-97-500 COMMENT 67F

IFluoreSWlt Lamp Ballas!!: I!lettronie Ballast Standard 

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 Before Tax 

Taxes 

Net Income 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