Document ID: EPA-HQ-OW-2002-0014-1913
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2003-08-15T04:00Z

MEMORANDUM
Eastern
Research
Group,
Inc.
110
Hartwell
Avenue
Lexington,
MA
02421
Date:
June
4,
2003
To:
James
Covington,
EPA
From:
Colleen
Campbell
and
Cal
Franz,
ERG
Re:
MPP
Industry
Economic
Impact
Analysis
for
Small
Processors
in
Subcategories
A
through
D,
and
K
1.
INTRODUCTION
ERG
projected
economic
impacts
on
the
Meat
and
Poultry
Products
(
MPP)
industry
based
on
costs
received
from
Tetra
Tech
on
June
27,
2003
and
August
6,
2003.
This
analysis
only
examines
impact
to
small
processors:
those
that
produce
less
than
50
million
pounds
of
meat
products
per
year
in
Subcategory
A
through
D,
and
those
that
produce
less
than
10
million
pounds
of
meat
products
per
year
in
Subcategory
K.
The
attached
tables
show
the
results
of
these
analyses.
Table
1
contains
total
and
average
compliance
costs.
Tables
2
presents
the
results
of
the
closure
analysis
at
the
facility
level.
Table
3
contains
the
Altman
ZN
results,
and
Table
4
shows
the
sales
test
results.

In
reviewing
these
results,
note
that:

C
The
methodology
for
analyzing
small
processors
in
these
two
subcategories
is
identical
to
the
methodology
for
analyzing
large
processors
in
the
same
subcategories.

C
EPA
examined
impacts
to
small
processors
under
Option
1;
this
option
was
not
analyzed
for
nonsmall
processors
in
these
two
subcategories.

C
The
total
number
of
facilities
in
subcategory
K
is
not
equivalent
to
the
number
of
facilities
analyzed;
9
out
of
18
facilities
were
not
analyzed
due
to
lack
of
data.
Therefore,
impacts
as
a
percent
of
total
facilities
may
be
somewhat
misleading
due
to
the
large
number
of
facilities
that
could
not
be
analyzed
in
this
subcategory.

C
No
facilities
in
either
subcategory
were
determined
to
be
baseline
closures.

C
For
cost
annualization
and
the
closure
analysis,
a
6.6
percent
discount
rate
was
used
if
facilities
did
not
provide
a
usable
discount
rate
in
their
survey
data.
The
6.6
percent
discount
rate
is
a
weighted
average
of
the
discount
rate
data
provided
in
the
surveys.
If
the
facility
provided
a
reasonable
discount
rate
in
their
survey
data,
then
that
value
was
used
to
run
the
impact
analysis.

C
Because
all
facilities
in
this
analysis
are
owned
by
small
businesses
(
i.
e.,
fewer
than
500
employees),
no
separate
small
business
analysis
is
presented.

1
2.
SUMMARY
OF
RESULTS
2.1
National
Costs
C
Total
pretax
annualized
costs
of
the
rule
for
these
facilities
range
from
$
1.5
million
under
Option
1
to
$
7.0
million
under
Option
4.

C
Costs
for
Option
2
+
P
exceed
those
for
Option
2.5.

C
Cost
per
facility
is
larger
for
subcategory
A
though
D
than
for
subcategory
K
under
Option
2,
Option
2
+
P,
and
Option
2.5,
but
smaller
for
all
other
options.

2.2
Closure
Analysis
C
9
facilities
are
projected
to
close
under
all
options
in
subcategory
K.

2.3
Altman
ZN
Analysis
C
In
the
baseline,
all
red
meat
and
poultry
companies
that
could
be
analyzed
have
Altman
ZN
scores
in
the
financially
healthy
range.

C
no
Altman
ZN
scores
change
for
any
company
under
any
option.

2.4
Sales
Test
C
In
Subcategory
K,
9
facilities
incur
pretax
costs
that
exceed
1
percent
of
revenues
under
all
options
except
Option
1..

2
Table
1
Total
and
Average
Compliance
Costs
by
Subcategory
and
Option
Small
Facilities:
Subcategory
A
through
D
and
Subcategory
K
Total
Costs
($
000)
Average
Costs
($
000)

Total
in
Class
Cost
Type
Option
1
Option
2
Option
2+
P
Option
2.5
Option
2.5+
P
Option
4
Option
1
Option
2
Option
2+
P
Option
2.5
Option
2.5+
P
Option
4
Subcategory
A
through
D
14
Capital
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
O&
M
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
One
Time
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
Post­
tax
Annualized
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
Pre­
tax
Annualized
$
400
­
$
700
$
500
­
$
750
$
1,000
­
$
2,500
$
750
­
$
1,500
$
2,000
­
$
4,000
$
2,500
­
$
5,000
CBI
CBI
CBI
CBI
CBI
CBI
Subcategory
K
18
Capital
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
O&
M
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
One
Time
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
Post­
tax
Annualized
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
Pre­
tax
Annualized
$
750
­
$
1,000
$
1,000
­
$
2,500
$
2,500
­
$
5,000
$
1,000
­
$
2,500
$
2,500
­
$
5,000
$
3,000
­
$
6,000
CBI
CBI
CBI
CBI
CBI
CBI
Table
2
Summary
of
Projected
Facility
Closure
Impacts
by
Subcategory
and
Option
Small
Facilities:
Subcategory
A
through
D
and
Subcategory
K
Option
1
Option
2
Option
2+
P
Option
2.5
Option
2.5+
P
Option
4
Total
Baseline
Facilities
not
Variable
in
Class
Closure*
Analyzed**
Number
Percent
Number
Percent
Number
Percent
Number
Percent
Number
Percent
Number
Percent
Subcategory
A
through
D
Facilities
14
0
0
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%

Revenues
($
000)
CBI
$
0
NA
$
0
0.0%
$
0
0.0%
$
0
0.0%
$
0
0.0%
$
0
0.0%
$
0
0.0%

Employees
CBI
0
NA
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%

Subcategory
K
Facilities
18
0
9
9
50.0%
9
50.0%
9
50.0%
9
50.0%
9
50.0%
9
50.0%

Revenues
($
000)
CBI
$
0
NA
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
Employees
CBI
0
NA
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
CBI
*
Baseline
closures
are
facilities
projected
to
have
a
negative
NPV
under
at
least
3
of
5
forecasting
methods
prior
to
regulatory
costs.

**
Facilities
not
analyzed
due
to
a
lack
of
survey
data.
Table
3
Altman
Z'
Results
by
Meat
Type
Small
Facilities:
Subcategory
A
through
D
and
Subcategory
K
Option
Number
of
Companies
with
Z'
Score**

Less
than
2.9;

Meat
Type
Greater
than
2.9
Greater
than
1.23
Less
than
1.23
Baseline
Red
Meat
CBI
0
0
Poultry***
CBI
0
0
Mixed
0
0
0
Post
Regulatory
Incremental
Change
(
Relative
to
Baseline)*

Option
1
Red
Meat
0
0
0
Poultry***
0
0
0
Mixed
0
0
0
Option
2
Red
Meat
0
0
0
Poultry***
0
0
0
Mixed
0
0
0
Option
2+
P
Red
Meat
0
0
0
Poultry***
0
0
0
Mixed
0
0
0
Option
2.5
Red
Meat
0
0
0
Poultry***
0
0
0
Mixed
0
0
0
Option
2.5+
P
Red
Meat
0
0
0
Poultry***
0
0
0
Mixed
0
0
0
Option
4
Red
Meat
0
0
0
Poultry***
0
0
0
Mixed
0
0
0
*
Numbers
indicate
the
number
of
companies
with
Altman
Z
scores
changing
from
one
category
to
another.

**
Altman
Z
scores
greater
than
2.9
indicate
a
financially
healthy
company;
scores
less
than
1.23
are
in
danger
of
bankruptcy;
scores
less
than
2.9
but
greater
than
1.23
are
indeterminate.

***
Nine
small
poultry
companies
cannot
be
analyzed
due
to
lack
of
data.
Table
4
Facilities
with
Annualized
Costs
Exceeding
Specified
Percentage
of
Revenues
by
Subcategory
and
Option
Small
Facilities:
Subcategory
A
through
D
and
Subcategory
K
Facilties
with
Annualized
Costs
Exceeding
Specified
Percentage
of
Revenues
Option
1
Option
2
Option
2+
P
Option
2.5
Option
2.5+
P
Option
4
Percent
Compliance
Total
of
Revenues
Costs
in
Class
Number
Percent
Number
Percent
Number
Percent
Number
Percent
Number
Percent
Number
Percent
Subcategory
A
through
D
1%
Pre­
tax
14
0
0%
0
0%
14
100%
0
0%
14
100%
14
100%

Post­
tax
14
0
0%
0
0%
14
100%
0
0%
14
100%
14
100%

3%
Pre­
tax
14
0
0%
0
0%
0
0%
0
0%
0
0%
0
0%

Post­
tax
14
0
0%
0
0%
0
0%
0
0%
0
0%
0
0%

Subcategory
K
1%
Pre­
tax
18
0
0%
9
50%
9
50%
9
50%
9
50%
9
50%

Post­
tax
18
0
0%
9
50%
9
50%
9
50%
9
50%
9
50%

3%
Pre­
tax
18
0
0%
0
0%
0
0%
0
0%
0
0%
0
0%

Post­
tax
18
0
0%
0
0%
0
0%
0
0%
0
0%
0
0%

*
Nine
small
poultry
facilities
cannot
be
analyzed
due
to
lack
of
data.