RECEIVED
CLERK’S OFFI CE
G.C D
191
N. Wacker Drive, Suite 3700
FEB
—
6
2Ot~1i
Gardner Carton
&
Douglas
Chicago,
Illinois
60606-1698
Washington,
D.C.
STATE
OF ILUNOIS
SHEILA~H.
DEELY
Tel
312 569
1000
I
Fox
312 569
3000
Pollution Control Board
(312)
569-1440
www.gcd.com
sdeeIy@gcd.com
February 6, 2004
By Personal
Delivery
Dorothy M. Gunn, Clerk
Bradley P. Halloran, Hearing Officer
Illinois Pollution Control Board
Illinois Pollution Control Board
100 West Randolph Street
James R. Thompson Center
Suite 11-500
100 W.
Randolph
-
Suite 11-500
Chicago, IL
60601
Chicago, IL
60601
Re:
In the
Matter ofPetition ofNoveon,
Inc. for an Adjusted Standard
from 35
Ill. Adm. Code 304.122, PCB
No.
AS 02-5
Dear Ms.
Gum
and Mr. Halloran:
In connection with the hearing on the
above referenced matter, Noveon, Inc. is submitting
the Written Testimony ofLinda Shaw to
the Illinois Pollution Control Board, and by carbon
copy to the Illinois EPA.
Ms. Shaw is the Finance Manager ofthe Polymer Additives business
unit and Plant Controller ofthe Akron Plant ofNoveon under a claim oftrade secret protection,
or, in the alterative, as confidential data submitted under the Illinois Environmental Protection
Act, pursuant to
5
ILCS
5/7(a)
and 35 Il. Adm.
Code Part 130.
A trade secret is defined as “the whole or any portion or phase of any.
.
.
business plan..
.“
under 35 Ii. Adm. Code Section 101.202.
This document, and its attached spreadsheet
(Henry Plant S&I’s, IJnaudited, Proforma) includes production figures and costs
and profits of
Noveon’s Hemy facility.
We are providing this testimony to the Board and Illinois EPA under a
claim oftrade secret or other non-disciosable information pursuant to 2 Ill.
Adm. Code Part 130,
arid this document has been marked in accordance with the rules concerning such claims.
To facilitate the Illinois Pollution Control Board’s protection of the enclosed information
asprotected as a trade secret or, in the alternative, as
,
we are providing the information required
by 2 Ill. Adm. Code Section
130.203 or Section
130.404.
This information in the enclosed
testimony is not available publicly outside ofNoveon and is restricted information within
Noveon.
Noveon uses this information as part ofits business plan
to plan strategically.
The
information is
considered sensitive in
a competitive market and the disclosure ofbusiness
planning and manufacturing and selling costs would provide a competitive advantage to an
outsider, particularly Noveon’s competitors.
This information is available to only key Noveon
Gardner
Carton
..~
Doug/as u~
M~.
Dorothy Gunn
Mr. Bradley Halloran
February 6, 2004
Page
2
employees involved in marketing, planning
and production.
It is not available to outside parties
or even generally to other parties within the company.
Noveon treats the information as
confidential and proprietary within its business.
Noveon has no knowledge that the information
requested by the Board has ever beenpublished or disseminated beyond the company except to
attorneys and
agents obligated to treat the information as protected.
Please feel free to
contact me concerning any additional information you need with
respect to Noveon’s claim oftrade secret or other confidential, non-disciosable protection.
Very truly yours,
Sheila H. Deely
cc:
Deborah Williams, Illinois EPA (by facsimile and mail)
KenWilliiigs
Linda Shaw
Mark Latham
CHO2/22291 764.1
iN
THE MATTER OF:
Petition ofNoveon, Inc.
for an Adjusted Standard from
35
Iii. Adm.
Code 304.122
)
)
)
)
)
)
)
CLERK’S OFFICE
FEB
-
6
200k
TATE OF ILLI’IOIS
Pollution Control
oar
NOTICE OF FILING
Dorothy M. Gunn, Clerk
Illinois Pollution Control Board
James R.
Thompson Center
100
West Randolph Street
Suite 11-500
Chicago, IL
60601
Deborah Williams
Assistant
Counsel
Division ofLegal Counsel
Illinois Environmental Protection
Agency
1021
N. Grand Avenue East
Springfield,
IL
62794-9276
Bradley P. Halloran
Hearing Officer
Illinois Pollution
Control Board
James R. Thompson Center
100 West Randolph Street
Suite 11-500
Chicago, IL
60601
PLEASE
TAKE NOTICE
that
on
Monday, February
9,
2004,
we filed the attached
Substituted Written Testimony of Linda M. Shaw with the Illinois Pollution Control Board, a
copy ofwhich is herewith served upon you.
Richard J. Kissel
Mark Latham
Sheila H. Deely
GARDNER CARTON &
DOUGLAS LLP
191
N. Wacker Drive
—
Suite 3700
Chicago, IL
60606
Respectfully submitted,
NOVEON, INC.
By:
One ofIts Attorney
BEFORE THE
ILLINOIS POLLUTION CONTROL BOARD
AS 02-5
THIS FILING IS SUBMITTED
ON RECYCLED PAPER
CERTIFICATE OF SERVICE
The undersigned certifies
that a copy of the foregoing Notice
of Filing
and Substituted
Written Testimony
of Linda
M. Shaw was filed by hand delivery with the Clerk ofthe Illinois
Pollution
Control
Board
and
served
upon
the parties
to
whom
said
Notice
is
directed by
first
class
mail,
postage prepaid, by depositing
in the
U.S.
Mail at
191
N. Wacker
Drive,
Chicago,
Illinois on Monday, February 9, 2004
and facsimile.
,~/LLi~~
CHO1/12336676.1
TRADE SECRET
NON-DISCLOSABLE INFORMATION
BEFORE THE
ILLINOIS
POLLUTION CONTROL BOARD
IN
THE MATTER OF:
)
)
Petition ofNoveon, Inc.
)
)
AS 02-5
)
for an Adjusted Standard from
)
35 Ill. Adm. Code 304.122
)
WRITTEN TESTIMONY OF LINDA M.
SHAW
I am
Linda M.
Shaw,
Finance Manager of the Polymer
Additives business
unit
and
Plant Controller of the Akron Plant of Noveon,
Inc.
My purpose here today is
to
explain the financial performance ofthe Henry Plant ofNoveon, Inc.
in years
2001, 2002
and 2003.
I.
Professional Credentials
I
base
my
testimony
on
more
than
20
years
of
financial
experience
with
NoveonlBFGoodrich.
Since
1998
I
have
performed
financial
analysis
solely
for
the
Polymer Additives business unit
ofwhich the Henry plant
resides.
Please
refer to
my
resume for a
complete listing of the positions held
and
the knowledge
and
experienced
acquired during my career.
II.
Historical Proforma Financial Results
The Henry Plant
Sales
and
Income (S&I) report is
an
unaudited report compiled
primarily from using
financial data from the information systems.
.
This financial data is
used in
the ordinary course ofbusiness
and
relied upon within Noveon for management
purposes.
This
report is used by management
to
gain
an
understanding of the
financial
TRADE
SECRET
NON-DISCLOSABLE INFORMATION
condition of the Henry plant
and
to make decisions.
The definition
and
source of each
line item on the S&I are as follows:
A)
Volume:
Sales
volume
sold to
non-affiliated
third parties.
The source of this
information is
the
sales
system which ties back to
the general ledger accounting
system.
B)
Revenue:
Net
sales
value
sold
to
non-affiliated
third
parties.
Net
sales
is
calculated
by
taking
gross
sales
less
allowances,
returned
goods
and
pricing
adjustments.
The source of this information is the sales system
which ties back
to the general ledger accounting system.
C)
Variable Costs:
Variable portion ofcost of goods
sold.
It is
the manufacturing
costs that vary based on sales volume and includes largely raw materials, utilities
and
freight.
Noveon uses standard costs
that are developed
on
an annual basis
for each product as a starting point
in
determining variable costs.
The variable
portion ofthe standard cost of each product is
multiplied by the
sales volume of
each product
to
determine the standard
variable
costs.
Freight and
production
variances
are then added to the standard variable costs to
arrive at total variable
costs.
Production variances
are either favorable or unfavorable and
occur when
actual raw material
pricing, actual raw material
usage,
actual utility pricing and
actual
utility
usage
are
different
than
the
assumptions
used
to
develop
the
standard
costs.
For
example, if
a
raw material price
is
higher than
what
was
assumed
in
the
standard
cost,
an
unfavorable
raw
material
pricing
variance
occurs
and
the
variance
is
added to
the variable
standard
cost
along
with
any
2
TRADE
SECRET
NON-DISCLOSABLE INFORMATION
other production variances
and
freight to determine the total
variable cost.
The
source ofthis information is the general ledger accounting system.
D)
Market Contribution:
Revenue less Variable Costs.
It is the variable margin of
the business
used to
cover
the salaries,
overhead,
depreciation,
rent,
insurance
and
taxes
of the
manufacturing
operations
and
the
SG&A
that
support
the
business unit
and to earn a profit.
E)
Manufacturing
Overhead
Costs:
Fixed portion
of cost of goods
sold.
It
is
the
manufacturing costs
that
do
not
vary
based
on
sales
volume
and
includes
the
direct
and
indirect
product
costs
at the
plant
such
as
salaries,
overhead,
rent,
insurance
and
taxes.
The
source
of this
information
is
the
general
ledger
accounting system.
F)
Gross
Margin:
Market
Contribution
less
Manufacturing
Overhead
Costs.
It
represents
the
margin
of the
business
used
to
cover
the
salaries,
overhead,
depreciation,
rent, insurance and
taxes of the
SG&A
that
support
the
business
unit and to earn a profit.
G)
Direct
SG&A
Costs:
Selling
and
general
administrative
costs
that
directly
support
the
business
unit
such
as
warehousing,
marketing,
sales,
R&D
and
business
administration.
Some of these costs
are incurred directly at the Henry
plant while some costs are allocated to
the plant based on a fixed percentage that
represents
the amount of effort needed
to
support
the plant.
The source of this
information is the general ledger accounting system.
H)
Corporate SG&A
Costs:
Selling
and
general
administrative
costs
that
are not
directly related to
the business unit but are necessary to
run a company such as
3
TRADE SECRET
NON-DISCLOSABLE INFORMATION
Executive Office, Legal,
Treasury,
IT
and
Corporate Finance.
Noveon’s
policy
is
to
hold these
costs
in a
Corporate pool
and
not
allocate
them to
the business
units.
The income
from
the business
units,
however, must cover these costs
as
well
as
interest
and
taxes
to
generate
a profit
for the
company.
These costs
typically average
5-6
ofrevenue.
I)
Operating Income:
Gross Margin less
SG&A Costs.
It is
the income
earned by
the business that is
used to
cover interest and
taxes and generate a profit for the
company.
J)
Plant,
Property
and
Equipment:
The book
value
of
the
plant,
property
and
equipment
of the
Henry
plant.
The
source
of this
information
is
the
general
ledger accounting system.
III.
Ammonia-Nitrogen Treatment Alternatives Analysis
I was directed to
assess the effect ofthe costs of certain alternatives as determined
in
the Memorandum to
Mark
Latham,
Esq.
concerning
Ammonia-Nitrogen
Treatment
Alternatives by
T.
Houston Flippin memorandum
dated May
17,
2002.
I
assessed
the
costs
reported
in
that memorandum of treatment
alternatives
3
(alkaline air
stripping of
secondary clarifier effluent),
6 (nitrification of PVC
tank wastewater),
7
(nitrification of
combined wastewaters), and
10 (nitrification of secondaryclarifier effluent).
There
would
be
financial implications
if the
Henry plant
would
be
required to
implement
one
of
these
Ammonia-Nitrogen
Treatment
Alternatives
discussed
in
T.
Houston Flippin memorandum
dated May
17,
2002.
The
financial implications
would
vary for each alternative as a result of the capital investment that would be required and
4
TRADE SECRET
NON-DISCLOSABLE INFORMATION
the additional operating
and maintenance
costs that would be
incurred.
The breakdown
ofthe financial implications are as follows:
A)
Incremental
costs:
The Henry plant would
incur additional
operating and
maintenance
costs
to
treat
the
ammonia-nitrogen.
The
costs
of
each
alternative treatment
are detailed in
the T.
Houston Flippin memorandum
dated May 17, 2002.
B)
Depreciation:
The
Henry
plant
would
be
required
to
invest
additional
capital to
treat
the ammonia-nitrogen.
This
capital would be
depreciated
over the
lives of the assets which
are typically
set
at
a
maximum
of
15
years.
C)
Incremental
capital:
The
Henry
plant
would
be
required
to
invest
additional
capital
to
treat
the ammonia-nitrogen.
This
capital would
be
a
further investment in the Henry plant.
The capital cost of each alternative
treatment
is
detailed
in
the
T.
Houston
Flippin memorandum
dated
May
17, 2002.
Redacted
5
TRADE SECRET
NON-DISCLOSABLE INFORMATION
Redacted
6
TRADE SECRET
NON-DISCLOSABLE INFORMATION
Redacted
7
TRADE SECRET
NON-DISCLOSABLE INFORMATION
Redacted
Linda M. Shaw
Finance Manager, Polymer Additives
Plant Controller,
Akron
Noveon, Inc.
CHOI/12337053.I
8
Noveon
Restricted
Trade Secret Non-Disciosable
Information
Henry Plant S&IIs*
(Unaudited,
Proforma)
000’s
REDACTED
Footnotes:
(A)
Trade sales volume
(B)
Gross sales less allowances,
returned
goods, and pricing adjustments
(C)
Production costs that varywith volume such as raw materials, utilities and freight
(D)
Revenue less Variable Costs
(E)
Direct and indirect production costs that are “fixed” in nature
such as salaries,
overhead,
rent,
insurance, taxes
(F)
Market Contribution less Manufacturing Overhead
(G)
Costs that directlysupport the business unit such as marketing, sales,
R&D
and business administration
(H)
Corporate costs that are not directlyrelated to the business but are necessary to
run a company such as
IT, Treasury,
Corporate Finance,
Executive Office;
Noveon’s policy is to not allocate these costs to the business units; the income from
the business units, however,
must cover these costs as well
as
interest and taxes to generate income for the company.
For Noveon, these costs typIcally average
5-6
of revenue.
Used 5.5
for this analysis.
(I
)
Gross Margin less SG&A
(J)
Book value of the Henry plant fixed assets such as plant, property and equipment
(1)
Treatment Alternatives perT. Houston
Flippin memorandum dated
May 17, 2002
(2)
Annual
operating and maintenance Cost Estimates for Treatment Alternatives
(3)
Depreciation
related to the capital costs estimatesfor Treatment Alternatives
(4)
Capital cost estimatesfor Treatment Alternatives
Linda
M.
Shaw
8877
Sherri Drive
Home: 330-467-6056
Macedonia,
OH 44056
Work:
330-374-3954
EXPERIENCE
Noveon Inc. (formerly BFGoodrich)
July
1981
—
Present
A $1.1 billion revenue corporation headquartered in Brecksville, Ohio
with major business segments in acrylicpolymer thickeners, chlorinated PVC,
thermoplastic polyurethanes, coating emulsions,
and
plastic
and
rubber additives.
1998— Present
Finance Manager
—
PolymerAdditives
Division/Plant Controller
-
Akron;
Akron OH
•
Business analyst of $90 million global business
unit
with plants
in the U~S.
and
operations
in Europe
and
Asia Pacific, reporting to the business unit Vice
President
and
Vice President/Controller
•
Responsible for fmancial
and
strategic planning, operational analysis,
and
fmancial justification of business
unit
projects
and
capital investments
•
Provided
fmancial guidance to marketing
and
sales personnel on product pricing
and
sales proposals
•
Performed divestment andacquisition analysis
•
Responsible for accounting
and
controls at
the Akron facility with an annual
operating
budget of
$16 million
and
employment of 120 (2001- present)
1995
—
1998
Manager, General Ledgerand CostAccounting
—
PerformanceMaterials
Segment; Brecksville OH
•
Responsible for the general ledger, cost and capital accounting functions of the
entire segment including the supervision of seven employees
•
Led the design
and
implementation ofthe
JDE
general ledger system
•
Assisted the implementation ofcustomer order, inventory, manufacturing
and
capital tracking systems
•
Supported business units in the integration of acquisitions by providing fmancial
direction on accounting policies and structuring of the general ledger
1993
—
1995
Manager, General Ledger, Budgeting and Reporting
—
PerformanceMaterials
Segment;Brecksville OH
•
Responsible for the general ledger accounting, international accounting,
budgeting and financial reporting functions ofthe entire
segment including the
supervision of four employees
•
Coordinated the budgeting process forthe segment
•
Directed the globalization ofthe foreign subsidiaries’ results
into
the domestic
business unit results andthe integration ofthe Canadian entity
•
Developed PC spreadsheets
and
computer programs generating savings equalto
the cost ofone employee
1990—
1993
Supervisor, Financial Reporting andBudgeting
—
Performance Materials
Segment; Brecksville OH
1988
—
1990
Supervisor, Ledgerand Reporting
—
Geon
VinylDivision;Independence OH
1986
—
1988
SpecialAccountant, CostAccounting
—
Geon
Vinyl Division;Independence OH
1982
—
1986
Sr. Accountant &Accountant,
InternationalAccounting
—
Chemical Group;
Independence OH
1981
—
1982
AssociateAccountant, ACDP
—
Chemical Group; Independence OH