APPENDIX J. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE AND GOVERNMENT REGULATORY IMPACT MODEL

TABLE OF CONTENTS

J.1 MANUFACTURER IMPACT ANALY SIS INTERVIEW GUIDE

............................... J-1 J.2 BOTTLER IMPACT ANALYSIS INTERVIEW GUIDE

............................................ J-10 J.3 MANUFACTURER IMPACT ANALYSI S INTERVIEW GUIDE FOR SMALL BUSINESSES

................................................................................................................ J- 13 J.4 GOVERNMENT REGULATORY IMPACT MODEL

................................................ J-14

LIST OF TABLES

Table J.1.1 Beverage Vending Mach ines Efficiency Levels

.................................................. J-1 Table J.1.2 Financial Paramete rs for CRE Manufacturers

..................................................... J-3 Table J.1.3 Breakdown by Percentage of Fu ll Production Costs for Baseline Beverage Vending Machine

................................................................................................. J-3 Table J.1.4 2012 Industry-Wide Shipment Projections for Beverage Vending Machines (number of units)

.................................................................................................. J-4 Table J.1.5 Percentage of Total Shipments by Efficiency Level for Small-Size Class A Beverage Vending Machines in 2012

.................................................................. J-5 Table J.1.6 Percentage of Total Shipments by Efficiency Level for Medium-Size Class A Beverage Vending Machines in 2012

.................................................................. J-5 Table J.1.7 Percentage of Total Shipments by Efficiency Level for Large-Size Class A Beverage Vending Machines in 2012

.................................................................. J-5 Table J.1.8 Percentage of Total Shipments by Efficiency Level for Small-Size Class B Beverage Vending Machines in 2012

.................................................................. J-6 Table J.1.9 Percentage of Total Shipments by Efficiency Level for Medium-Size Class B Beverage Vending Machines in 2012

.................................................................. J-6 Table J.1.10 Percentage of Total Shipments by Efficiency Level for Large-Size Class B Beverage Vending Machines in 2012

.................................................................. J-6 Table J.1.11 Class A Beverage Vendi ng Machine Conversion Costs

...................................... J-7 Table J.1.12 Class B Beverage Vendi ng Machine Conversion Costs

...................................... J-8 Table J.2.1 Purchase Projections for Be verage Vending Machines in 2012

......................... J-11 Table J.4.1 Detailed Cash Flow Example

.............................................................................. J-17

J-i BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docAPPENDIX J. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE AND GOVERNMENT REGULATORY IMPACT MODEL

J.1 MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE

Key Issues

The U.S. Department of Energy (DOE) is curr ently reviewing eight efficiency levels for its refrigerated beverage vending machines rulemaking analyses. In responding to this questionnaire, please refer to the values for each equipment class described in Table J.1.1.

Table J.1.1 Beverage Vending Machines Efficiency Levels

Equipment Efficiency Baseline Efficiency Level Class Metric 1 2 3 4 5 6 7 8 Small-Size DEC 7.66 5.80 5.21 4.76 4.34 4.16 4.12 3.88 3.71 Class A kWh/day Medium-Size DEC 8.23 6.36 5.76 5.30 4.86 4.63 4.59 4.32 4.14 Class A kWh/day Large-Size DEC 8.69 6.72 6.11 5.60 5.16 4.91 4.86 4.53 4.34 Class A kWh/day Small-Size DEC 10.36 5.49 4.55 4.18 3.93 3.48 3.28 3.26 3.21 Class B kWh/day Medium-Size DEC 10.93 6.02 5.07 4.65 4.26 4.18 3.58 3.55 3.49 Class B kWh/day Large-Size DEC 11.35 6.43 5.49 5.01 4.60 4.51 3.88 3.84 3.78 Class B kWh/day

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

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

1.3 How can we most effectively incorporate thes e issues in the manufacturer impact analysis (MIA)?

2 COMPANY OVERVIEW AND ORG ANIZATIONAL CHARACTERISTICS

DOE is interested in understan ding manufacturer impact at th e plant or profit center level directly pertinent to beverage vending machine production. Howeve r, the context within which the plant operates and th e details of plant producti on and costs are not read ily available from the published literature. Therefore, DOE invites you to provide these details confidentially in your own words to the extent possible and practical . Understanding the orga nizational setting around the beverage vending machine i ndustry profit center will help DOE understand the probable future of the beverage vending machine manu facturing activity with and without energy conservation standards.

2.1 Do you have a parent company, and/or any subs idiaries relevant to the beverage vending machine industry?

J-1 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc2.2 Do you manufacture any equipment other than beverage vending machines? If so, what other equipment do you manufacture?

2.3 What percentage of your total manufacturing corresponds to beverage vending machines?

2.4 Where are your production facili ties located, and what type of equipment is manufactured at each location? Could you pr ovide figures for your compan y’s manufacturing at each location by equipment type (beverage vending m achines or other), size, and efficiency (i.e., provide the equipment mix for each location).

2.5 At a particular facility, woul d potential beverage vending mach ine redesigns be difficult to implement? If so, would your company modify the existing facility or develop a new facility?

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

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

2.8 What are your equipment lines, niches, and relative strengths in the beverage vending machine market?

2.9 The Small Business Association (SBA) denotes a small business in the beverage vending machine industry as having less than 500 empl oyees. By this definition, is your company considered a small business?

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

3 FINANCIAL PARAMETERS

Navigant Consulting, Inc. has developed a “strawman” model of the beverage vending machine industry financial performance calle d the Government Regulatory Impact Model (GRIM), using publicly available data on bevera ge vending machine manufacturers. This section attempts to understand how your company’s fina ncial situation differs from our industry aggregate picture.

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

3.2 How would you expect new energy conservati on standards to impact your company’s financial parameters (Table J.1.2)?

J-2 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docTable J.1.2 Financial Parameters for CRE Manufacturers GRIM Input Definition Beverage Vending Machine GRIM Estimated Value % Your Actual (if significantly different from our estimate) Income Tax Rate

Discount Rate

Working Capital

SG&A

R&D

Depreciation

Capital Expenditures Corporate (average) effective income tax paid (percentage of earnings before taxes, EBT) Weighted average cost of capital (inflation-adjusted weighted average of cor porate cost of debt and return on equity) Current assets le ss current liabilities (percentage of revenues) Selling, general, and administrative expenses (percentage of revenues) Research and development expenses (percentage of revenues) Amortization of fi xed assets (percentage of revenues) Outlay of cash to acquire or improve capital assets (percentage of revenues, not including acquisition or sale of business units) 31.3

9.6

14.0

19.3

2.7

3.8

3.7

4 PRODUCTION COST BREAKDOWN

DOE estimated the full production costs of various beverage vending machine units of different efficiencies for all equipment classe s. With the combined data, DOE calculated the industry average percentage of each cost in the full production cost.

4.1 Please compare your full production cost pe rcentages to the estimated GRIM full production cost percentages tabulated in Tabl e J.1.3. Are the different percentages of each cost representative of your company or th e beverage vending machine industry? Please explain any differences.

Table J.1.3 Breakdown by Percentage of Full Production Costs for Baseline Beverage Vending Machine Components of Full

Production Costs Estimated Full Production Cost % Your Actual (if different from our estimate) Materials 86.16

Labor 9.61 Overhead 2.83 Depreciation 1.39

5 SHIPMENT PROJECTIONS AND MARKET SHARES

A new energy conservation standard can change overall shipments by changing equipment attributes, marketing approaches, equi pment availability, and price. The GRIM bases revenue projections on shipment projections obtained from the National Energy Savings Spreadsheet (NES) prepared by the Pacific No rthwest National Laboratory. The NES includes shipment forecasts for the baseline (absent new standards) and new standards at each efficiency level being analyzed.

J-3 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc5.1 Please compare DOE’s projections of indus try-wide shipments for beverage vending machines with your company’s projections of industry-wide shipments (Table J.1.4).

Table J.1.4 2012 Industry-Wide Shipment Project ions for Beverage Vending Machines (number of units)

Equipment Class Baseline Shipments Comments or Your Company’s Projection Small-Size Class A Medium-Size Class A Large-Size Class A Small-Size Class B Medium-Size Class B Large-Size Class B 7,700 7,700 7,700 77,600 77,600 77,600

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

5.3 What is your company’s approximate market share of the beverage vending machine industry?

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

6 EQUIPMENT MIX

Current differences in equipment mix (distr ibution of equipment sales by efficiency level) among manufacturers can le ad to different reactions to and impacts from new energy conservation standards.

6.1 If your company offers multiple equipment lines with different efficiency levels, how does your mix of beverage vending machine sales by equipment efficiency compare to our projected 2012 Industry Average distribution for the baseline case as shown in Table J.1.5 through Table J.1.10? If your company does not offer multiple equipment lines with different efficiency levels, are the projected distributions representative of the beverage vending machine industry? A new energy conser vation standard affects the equipment mix by eliminating the sale of equipment belo w the minimum efficiency level. The NES forecasts the distribution of beverage vending machine sales by efficiency level after standards. Are the NES forecasts described in the tables below for 2012 consistent with your own expectations for the industry? Do you expect any changes in your estimated profitability following the new energy conser vation standard? If so, please explain why.

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

J-4 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docTable J.1.5 Percentage of Total Shipments by Efficiency Level for Small-Size Class A Beverage Vending Machines in 2012

Anal y sis Efficiency

Level DEC - kWh/da y Efficiency Level % Baseline

(7.66) 1 (5.80) 2 (5.21) 3 (4.76) 4 (4.34) 5 (4.16) 6 (4.12) 7 (3.88) 8 (3.71)

Baseline

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

1 (5.80)

- - 26.6 14.1 13.9 13.2 12.1 11.6 7.1 1.3 2 (5.21)

- - - - 40.8 13.9 13.2 12.1 11.6 7.1 1.3 3 (4.76)

- - - - - - 54.6 13.2 12.1 11.6 7.1 1.3 4 (4.34) - - - - - - - - 67.8 12.1 11.6 7.1 1.3 5 (4.16) - - - - - - - - - - 79.9 11.6 7.1 1.3 6 (4.12) - - - - - - - - - - - - 91.6 7.1 1.3 7 (3.88) - - - - - - - - - - - - - - 98.7 1.3 8 (3.71) - - - - - - - - - - - - - - - - 100

Table J.1.6 Percentage of Total Shipments by Efficiency Level for Medium-Size Class A Beverage Vending Machines in 2012

Anal y sis Efficiency

Level DEC - kWh/da y Efficiency Level % Baseline

(8.23) 1 (6.36) 2 (5.76) 3 (5.30) 4 (4.86) 5 (4.63) 6 (4.59) 7 (4.32) 8 (4.14)

Baseline

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

1 (6.36)

- - 26.7 14.2 13.8 13.2 12.1 11.7 7.3 1.1 2 (5.76)

- - - - 40.8 13.8 13.2 12.1 11.7 7.3 1.1 3 (5.30)

- - - - - - 54.6 13.2 12.1 11.7 7.3 1.1 4 (4.86)

- - - - - - - - 67.8 12.1 11.7 7.3 1.1 5 (4.63)

- - - - - - - - - - 79.9 11.7 7.3 1.1 6 (4.59)

- - - - - - - - - - - - 91.6 7.3 1.1 7 (4.32)

- - - - - - - - - - - - - - 98.9 1.1 8 (4.14) - - - - - - - - - - - - - - - - 100

Table J.1.7 Percentage of Total Shipments by Efficiency Level for Large-Size Class A Beverage Vending Machines in 2012

Anal y sis Efficiency

Level DEC - kWh / da y Efficiency Level % Baseline

(8.69) 1 (6.72) 2 (6.11) 3 (5.60) 4 (5.16) 5 (4.91) 6 (4.86) 7 (4.53) 8 (4.34)

Baseline

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

1 (8.72)

- - 26.6 14.1 13.8 13.3 12.3 11.9 7.0 1.1 2 (6.11)

- - - - 40.6 13.8 13.3 12.3 11.9 7.0 1.1 3 (5.60)

- - - - - - 54.4 13.3 12.3 11.9 7.0 1.1 4 (5.16) - - - - - - - - 67.7 12.3 11.9 7.0 1.1 5 (4.91) - - - - - - - - - - 80.0 11.9 7.0 1.1 6 (4.86) - - - - - - - - - - - - 91.9 7.0 1.1 7 (4.53) - - - - - - - - - - - - - - 98.9 1.1 8 (4.34) - - - - - - - - - - - - - - - - 100

J-5 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docTable J.1.8 Percentage of Total Shipments by Efficiency Level for Small-Size Class B Beverage Vending Machines in 2012 Anal y sis Efficiency

Level DEC - kWh/da y Efficiency Level % Baseline (10.36) 1 (5.49) 2 (4.55) 3 (4.18) 4 (3.93) 5 (3.48) 6 (3.28) 7 (3.26) 8 (3.21)

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

1 (5.49)

- - 26.4 16.7 15.6 14.3 10.0 8.2 7.8 0.9 2 (4.55)

- - - - 43.1 15.6 14.3 10.0 8.2 7.8 0.9 3 (4.18)

- - - - -- 58.8 14.3 10.0 8.2 7.8 0.9 4 (3.93)

- - - - - - - - 73.0 10.0 8.2 7.8 0.9 5 (3.48)

- - - - - - - - - - 83.1 8.2 7.8 0.9 6 (3.28)

- - - - - - - - - - - - 91.3 7.8 0.9 7 (3.26) - - - - - - - - - - - - - - 99.1 0.9 8 (3.21) - - - - - - - - - - - - - - - - 100

Table J.1.9 Percentage of Total Shipments by Efficiency Level for Medium-Size Class B Beverage Vending Machines in 2012 Anal y sis Efficiency

Level DEC - kWh/day Efficiency Level % Baseline (10.93) 1 (6.02) 2 (5.07) 3 (4.65) 4 (4.26) 5 (4.18) 6 (3.58) 7 (3.55) 8 (3.49)

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

1 (6.02)

- - 25.8 16.2 15.5 14.4 10.5 8.6 8.2 0.8 2 (5.07)

- - - - 42.1 15.5 14.4 10.5 8.6 8.2 0.8 3 (4.65)

- - - - - - 57.6 14.4 10.5 8.6 8.2 0.8 4 (4.26)

- - - - - - - - 71.9 10.5 8.6 8.2 0.8 5 (4.18) - - - - - - - - - - 82.4 8.6 8.2 0.8 6 (3.58) - - - - - - - - - - - - 91.0 8.2 0.8 7 (3.55) - - - - - - - - - - - - - - 99.2 0.8 8 (3.49) - - - - - - - - - - - - - - - - 100

Table J.1.10 Percentage of Total Shipments by Efficiency Level for Large-Size Class B Beverage Vending Machines in 2012

Anal y sis Efficiency

Level DEC - kWh/day Baseline (11.35) 1 (6.43) 2 (5.49) 3 (5.01) 4 (4.60) 5 (4.51) 6 (3.88) 7 (3.84) 8 (3.78)

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

1 (6.43)

- - 25.7 16.0 15.5 14.4 10.6 8.8 8.4 0.7 2 (5.49)

- - - - 41.7 15.5 14.4 10.6 8.8 8.4 0.7 3 (5.01)

- - - - - - 57.2 14.4 10.6 8.8 8.4 0.7 4 (4.60)

- - - - - - - - 71.6 10.6 8.8 8.4 0.7 5 (4.51) - - - - - - - - - - 82.2 8.8 8.4 0.7 6 (3.88) - - - - - - - - - - - - 90.9 8.4 0.7 7 (3.84) - - - - - - - - - - - - - - 99.3 0.7 8 (3.78) - - - - - - - - - - - - - - - - 100

J-6 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc7 CONVERSION COSTS

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

7.1 What level of conversion costs do you anticipat e incurring under the different efficiency levels? What portion of your capital convers ion expenditures do you expect to go towards replacing existing assets, which would become obsolete under a new energy conservation standard? Refer to Table J.1.11 and Table J.1.12 below to provide your company’s estimates. Please provide additional qualitat ive information to help DOE understand the nature of your investments.

Table J.1.11 Class A Beverage Vending Machine Conversion Costs Efficiency Level Small-Size Class A Capital Conversion Expenses * Product Conversion Expenses ** Stranded Assets

Baseline 1 2 3 4 5 6 7 8 Medium-Size Class A Baseline 1 2 3 4 5 6 7 8 Large-Size Class A Baseline 1 2 3 4 5 6 7 8

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

** Product Conversion Expenditures: one-time e xpenses in research, product development, testing, and marketing necessitated by an appliance energy conservation standard.

J-7 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docTable J.1.12 Class B Beverage Vending Machine Conversion Costs Efficiency Level Small-Size Class B Capital Conversion Expenses * Product Conversion Expenses ** Stranded Assets

Baseline 1 2 3 4 5 6 7 8 Medium-Size Class B Baseline 1 2 3 4 5 6 7 8 Large-Size Class B Baseline 1 2 3 4 5 6 7 8

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

8 MARKUPS AND PROFITABILITY

One of the primary objectives of the MIA is to assess the impact of efficiency levels on industry profitability. In this section, DOE would like your assist ance in understa nding how the efficiency levels would impact your company’s markups and profitability.

8.1 Do profit levels vary by equipment class? Do profit levels vary by e fficiency level? Please explain.

8.2 Based on publicly available information, DOE calculated a 1.36 manufacturer markup for beverage vending machine manufacturing. The manufacturer markup is a multiplier that converts manufacturer production cost (MPC ) to manufacture selling price. The manufacture markup is a fixed percentage applied to MPCs to cover standard SG&A

J-8 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docexpenses; standard research and development e xpenses; interest; and profit. It is calculated using the following formula: Manufacturer Markup = 1/(1-Gross Margin). DOE is aware that the manufacturer markup calculated usi ng public information is based on companies that may manufacture other equipment in addition to beverage vending machines. Does this figure seem accurate, or is it too high or low?

8.3 Do you expect changes in your estimated profitability following the new energy conservation standard? If so, please explain.

9 CUMULATIVE REGULATORY BURDEN

Cumulative regulatory burden refers to the burden that industry faces from overlapping effects of new or revised DOE standards, voluntary standards, and/or other regulatory actions affecting the same equipment or industry.

9.1 Are there other recent or impending regulati ons, excluding refrigerant phase-out, that beverage vending machine manufacturers face (from DOE or otherwis e)? What level of expense are you expecting to incur as a re sult of these regulations? How would new standards affect your ability to compete?

9.2 Under what circumstances would you be able to coordinate any e xpenditures related to these other regulations thereby lessening the cumulative burden?

10 EXPORTS/FOREIGN COMPETITION/ OUTSOURCING

Disparity between domestic and foreign en ergy conservation sta ndards could impact exports or imports. Labor content and material changes, resulting from energy conservation standards, may impact sourcing decisions.

10.1 What percentage of your company’s beverage vending machine sales is domestic? Absent standards, are production fac ilities being relocated to fore ign countries? Would new energy conservation standards impact your domestic vs. foreign ma nufacturing decision?

10.2 If applicable, to what foreign countries or regions do you export your equipment? What percentage of sales can be attributed to each?

10.3 Would a new standard be expected to affect your export sales? What would the resulting impact be, if any, on your manufact uring operations and profitability?

10.4 Are your foreign exports affected by energy conservation standards in other countries?

10.5 What percentage of the U.S. market for be verage vending machines has been captured by foreign competition? Would standards have an impact on foreign competition?

10.6 What is your outlook for the future operati on of your company and the beverage vending machine industry with regards to exports?

J-9 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc11 DIRECT EMPLOYMENT IMPACT

The impact of new energy conservation st andards on employment is an important consideration in the rulemaking pr ocess. This section of the in terview guide seeks to explore current trends in beverage vending machin e production employment and solicit manufacturer views on how domestic employment patterns mi ght be affected by new energy conservation standards.

11.1 Would your domestic employment levels be expected to change significantly under new energy conservation standards? If so, please explain how they would change.

11.2 Would the workforce skills necessary under new energy conservation standards require extensive retraining or replacement of employees?

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

12 CONSOLIDATION

New energy conservation standards can alte r the competitive dynamics of the market. This can include prompting companies to enter or exit the market, or to merge. DOE and the Department of Justice are both in terested in any potential reduc tion in competition that would result from a new energy conservation standard.

12.1 Please comment on industry consolidation and related trends over the last 5 years.

12.2 In the absence of new standards, do you expect any further industry consolidation? Please describe your expectations.

12.3 How would new standards affect your ability to compete?

J.2 BOTTLER IMPACT ANALYSIS INTERVIEW GUIDE

INTRODUCTION

DOE is currently undertaking a rulemaking for refrigerated beverage vending machines. As part of the rulemaking process, DOE request s information from all stakeholders regarding possible impacts from energy cons ervation standards. Although the questions are intended for bottlers and not manufacturers, all the information provided will be valuable to help complete the MIA. All of the information gathered is complete ly confidential and will only be reported in aggregate across the industry.

J-10 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc1 KEY ISSUES

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

1.2 How can we most effectively incorporate thes e issues in the MIA and this rulemaking in general?

2 BOTTLER COMPANY CHARACTERISTICS

2.1 Could you briefly explain how the bottler indu stry is organized and operates? Are there several distribution chains? Who owns the machines at each stage in the distribution chain?

2.2 Do you consider the bottling industry fragmented or concentrated?

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

2.4 Do bottlers fill and/or service their own beverage vending machines or do they rely on third-party vending operators to perform this service?

2.5 Does your company purchase or lease bevera ge vending machines? If owned, does your company lease the beverage vending machines to third parties?

2.6 Who are the largest vendi ng operators you work with?

2.7 What are some example host sites you service?

3 BEVERAGE VENDING MACH INE PURCHASING

3.1 What are the key factors influencing your beverage vending machine purchasing decisions?

3.2 Approximately how many vending machines do you own and or operate? Please provide figures by type of beverage vending machine.

3.3 How many new beverage vending mach ines do you purchase each year?

3.4 Could you provide projected purchases of beverage vending machines for 2012 for your company (Table J.2.1)?

Table J.2.1 Purchase Projections for Beverage Vending Machines in 2012 Equipment Class Purchase number of units Comments or Your Company’s Projection

Small-Size Class A Medium-Size Class A Large-Size Class A

J-11 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docSmall-Size Class B Medium-Size Class B Large-Size Class B

3.5 Over the past 5 years has the number of new beverage vending machine purchases per year changed? If so, how and why has it changed?

3.6 Over the past 5 years has the equipment mix of new beverage vending machine purchases per year changed? If so, how and why has it changed?

3.7 How many new beverage vending machines do you place in new locations each year? How many beverage vending machines do you remove from existing locations each year? Have you noticed any trends related to the placem ent of beverage vending machines in new locations versus the removal of beverage vending machin es from existing locations?

3.8 From which manufacturers do you purchase beverage vending machines? What percentage of your total purchases does each manufacturer represent?

3.9 Are there significant switching costs associated with moving from one manufacturer to another? Are there manufacturer-s pecific investments you must make?

3.10 Does purchasing quantities of beverage ve nding machines affect the price per unit?

3.11 Does your company have any purchasing pr eference for ENERGY STAR or other energy efficient beverage vendi ng machines? If so, why?

3.12 What is the price premium for ENERGY STAR Tier II compared to ENERGY STAR Tier I? Compared to other non-ENERGY STAR models?

3.13 Does the energy efficiency of beverage vendi ng machines significantly affect the price of the equipment from a purchaser point of view?

3.14 Do you require servicing/parts/ warranties from manufacturers?

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

4 REFURBISHMENT AND REPLACEMENT OF BEVERAGE VENDING MACHINES

4.1 How often is a typical beverage vending m achine refurbished (assuming no vandalism or other exceptionally harsh c onditions) during its life?

4.2 Is the refurbishment cycle affected at all by the relocation of a beverage vending machine?

4.3 How is the decision between replacement and refurbishment made by your company?

J-12 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc4.4 In your best estimation, what percentage of your units are refurbished each year? What percentage of your units are replaced each year?

4.5 What percentage of your beve rage vending machines are:

Less than 5 years old? 5 to 10 years old? 10 to 15 years old? More than 15 years old?

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

5 CONSOLIDATION

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

5.1 As a customer of the beverage vending machine industry, please comment on industry consolidation and related tre nds over the last 5 years.

5.2 In the absence of new standards, do you expect any further industry consolidation? Please describe your expectations.

J.3 MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE FOR SMALL BUSINESSES

1. Are you aware of DOE’s ongoing rulemaking to establish national minimum energy conservation standards for refrigerated be verage vending machines? For information on DOE’s efficiency standards rulemaking fo r beverage vending machines, visit the following website: http://www1.eere.energy.gov/buildings/appliance_standards/ commercial/beverage_machi nes.html . Would you like to be added to DOE’s ema il database for updates relating to this rulemaking?

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

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

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

J-13 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc Is your company a domestic or international company?

 What types of refrigerated beverage vending machines do you manufacture? Do you manufacture Class A or Class B refrigerated beverage vending machines, or both? Class A refers to a beverage vending machin e that cools the entire internal volume. Class A machines are also referred to as fully-cooled machines. Class B refers to any beverage vending machine not considered to be Class A. Class B machines are often zone-cooled machines in that they typically cool only a fraction of the volume of the machine. What sizes of refrigerated be verage vending machines do you manufacture, measured in vendible capacity and/or refr igerated volume? Could you provide energy efficiency figures for those identified models? Does your equipment meet ENERGY STAR Tier I, Tier II, or any level abov e those energy efficiency levels? (Tier I: Energy Consumption ≤ 0.55 [8.66 + (0.009 x Vendible Ca pacity)]; Tier II: Energy Consumption ≤ 0.45 [8.66 + (0.009 x Vendible Capacity)]).

 Do you manufacture equipment other than refrigerated beverage vending machines? Do you manufacture any niche or specialt y type refrigerated beverage vending machines that do not easily fall in the categories from the previous question?

 What are the types of customers you serve in the refrigerated beverage vending machine market?

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

6. DOE would like to understand your company’ s employment impacts as a result of standards. Would your compa ny consider relocating manufact uring to outside the United States as a result of new energy conservation standards? If not, would standards cause your domestic employment level to change (increase or decrease)?

7. Are there any reasons that a small business such as yours might be at a disadvantage relative to a larger business under mandatory energy conservation standards? Please consider such factors as tec hnical expertise, access to cap ital, bulk purchasing power for materials, etc. If so, would you be willing to participate in a full manufacturer interview where DOE will request detailed informati on about your business and possible impacts due to energy conservation standards?

J.4 GOVERNMENT REGULATORY IMPACT MODEL

1 INTRODUCTION AND PURPOSE

The purpose of the GRIM is to help qua ntify the impacts of energy conservation standards and other regulations on manufacturers. The basic mode of analysis is to estimate the change in value of the industry or manufactur ers(s) following a regula tion or a series of regulations. The model structure also allows an analysis of multiple products with regulations taking effect over a period of time, and of multiple regulations on the same products.

J-14 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc2 Industry net present value is defined, for the purpose of this analysis, as the discounted sum of industry free cash flows pl us a discounted terminal value. The model calculates the actual cash flows by year and then determines the pres ent value of those cash flows both without an energy conservation standard (i.e., the base ca se) and under different trial standard levels.

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

MODEL DESCRIPTION

The basic structure of the GRIM is a standa rd annual cash flow analysis that uses manufacturer selling prices, manu facturing costs, a shipments for ecast, and financial parameters as inputs and accepts a set of regulatory conditions as changes in costs and investments. The cash flow analysis is separated into two major bloc ks: income and cash flow. The income calculation determines net operating profit after taxes. Th e cash flow calculation converts net operating profit after taxes into an annua l cash flow by including investme nt and non-cash items. Below are definitions of listed items on the prin tout of the output sheet (Table J.4.1).

(1) Unit Sales : Total annual shipments for the indus try were obtained from the National Energy Savings Spreadsheet; (2) Revenues : Annual revenues computed by multiplying unit costs at each efficiency level by the appropriate manufacturer markup; (3) Labor : The portion of cost of goods sold (COGS) that includes direct labor, commissions, dismissal pay, bonuses, vacation, sick leave, so cial security contributions, fringe, and assembly labor up-time; (4) Material : The portion of COGS that includes materials; (5) Overhead : The portion of COGS that in cludes indirect labor, indir ect material, energy use, maintenance, depreciation, property taxes, and insurance related to assets. While included in overhead, the depreciation is shown as a separate line item; (6) Depreciation : The portion of overhead that includes an allowance for the total amount of fixed assets used to produce that one unit. A nnual depreciation computed as a percentage of COGS. While included in overhead, the depreciati on is shown as a separate line item; (7) Stranded Assets : In the year the standard become s effective, a one time write-off of stranded assets (i.e., plant, pr operty, and equipment rendered obsolete due to the standard) is accounted for; (8) Standard SG&A : Selling, general, and administrative costs are computed as a percentage of Revenues (2) ; (9) R&D : GRIM separately accounts for ordinary research and development (R&D) as a percentage of Revenues (2) ; (10) Equipment Conversion Costs : Equipment conversion costs are one-time investments in research, development, testing, and marketi ng focused on making products designs comply with the new energy conservation standard. GRIM allocates these costs over the period between the standard’s announcem ent and effective dates;

J-15 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc(11) Earnings Before Interest and Taxes (EBIT) : Includes profits before deductions for interest paid and taxes; (12) EBIT as a Percentage of Sales (EBIT/Revenues) : GRIM calculates EBIT as a percentage of sales to compare with the industry’s av erage reported in financial statements; (13) Taxes : Taxes on EBIT (11) are calculated by multiplying the tax rate contained in Major Assumptions by EBIT (11)

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

, SG&A (8)

, R&D (9)

, Equipment Conversion Costs (10) , and Taxes (13) from Revenues (2)

. (15) NOPAT repeated : NOPAT is repeated in the Statement of Cash Flows; (16) Depreciation repeated : Depreciation and Stranded Assets are added back in the Statement of Cash Flows because they are non-cash expenses; (17) Change in Working Capital : Change in cash tied up in accounts receivable, inventory, and other cash investments necessary to suppor t operations is calculated by multiplying working capital (as a percenta ge of revenues) by the cha nge in annual revenues. (18) Cash Flow From Operations : Calculated by taking NOPAT (15) , adding back non-cash items such as a Depreciation (16) , and subtracting out Change in Working Capital (17) ; (19) Ordinary Capital Expenditures : Ordinary investments in prope rty, plant, and equipment to maintain and replace existing production assets, computed as a percentage of Revenues (2) ; (20) Capital Conversion Costs : Capital conversion costs are one- time investments in property, plant, and equipment to adapt or change exis ting production facilities so that new product designs can be fabricated and a ssembled under the new regulation; (21) Capital Investment : Total investments in property, plant, and equipment are computed by adding Ordinary Capital Expenditures (19) and Conversion Capital Expenditures (20) ; (22) Free Cash Flow : Annual cash flow from operations and investments; computed by subtracting Capital Investment (21) from Cash Flow from Operations (18) ; (23) Terminal Value : Estimate of the continuing value of the industry after 2042. Computed by growing the Free Cash Flow in year 2 042 at a constant rate in perpetuity; (24) Present Value Factor : Factor used to calculate an esti mate of the present value of an amount to be received in the future; (25) Discounted Cash Flow : Free Cash Flows (22) multiplied by the Present Value Factor (24) . For 2042 the discounted cash flow includes the discounted Terminal Value (23) ; and (26) Industry Value thru 2042 : The sum of Discounted Cash Flows (25)

.

J-16 BVM_FINAL_FR_TSD_AppendixJ_08-14-09.docTable J.4.1 Detailed Cash Flow ExampleJ-17BVM_FINAL_FR_TSD_AppendixJ_08-14-09.doc