Document rpxKmD7oDLwdLOq5jMD0yqq70

DHQ-Manville March 31, 1971 ASBESTOS FIBER Mr. Whalen advised that one of the subjects which came up during his visit to Denison last week concerned the various costs related to asbestos fiber, eg. the cost of the current Advocate charter. At Mr. Whalen's request I am forwarding to you herewith for your infor mation and Mr. Richards' copies of my following letters. 1. 2/15/71 (Rev'd 3/12/71) to M. Harris "Pipe Division - Return on Investment" 2. 3/15/71 to M. Harris " Pipe Division - Return on Investment" 3. 3/15/71 to D. Smyth - AFD "Advocate Fibre Shipments" I am also enclosing a copy of Mr. Nowlin's letter of 3/29/71 to Mr. Whalen comparing Jeffrey vs Advocate costs at Denison for the years 1969 thru 1971. F. T. Petersen cc: K. J. Whalen file chrono mb attach. MTC 013216 DHQ-Manville February 15, 1971 (Revised March 12, 1971) M. Harris PIPE DIVISION RETURN ON INVESTMENT At the recent Management Information Meeting held at Research, you asked me to document my comments that our projected 1971 Average Inventory Invest ment was badly distorted by the storage of primarily surplus Asbestos Fiber and to a much lesser extent Rubber Rings. Based on information provided by AFD, we have projected our 1971 average fiber inventory at $8,945,000 out of a total average Division inventory of $20,815,000. If we were buying asbestos fiber in the open market and were not taking it in to satisfy the shipping requirements of Advocate or the storage require ments of Jeffrey, we estimate we would need a 3 to 4 week supply working inventory of Jeffrey and 3 to 4 months of Blue fibers. We have operated at these levels in the past. Using these as the basis for our working fiber inventory levels, we estimate our working inventory at $1,563,000. The difference between $8,945,000 and $1,563,000 or $7,382,000 represents the added inventory investment to the Pipe Division for the convenience of AFD and the Corporation. It would appear that the $7,382,000 or any fiber in excess of $1,563,000 should be excluded in measuring the Pipe Division's return on investment. The $7,382,000 listed above is not the true total added investment for storage fiber. To this must be added the cost of the storage space which we estimate at $788,000 (143,000 sq. ft. at $5.50/sq. ft.). The total in vestment for storage fiber and space would therefore be approximately $8,170,000. We have not tried to be as fine in our analysis of the effect of rubber rings on our inventory investment. We buy the bulk of our ring require ments from PFM and must therefore carry higher protective inventories. We currently carry an average rubber ring inventory of approximately $1,076,000. If we had four or five reliable outside suppliers, I believe the $1,076,000 inventory investment could probably be reduced safely by about 25%, or $265,000. In other words, we are carrying an added $265,000 investment due to our limited in house supply. MTC 013217 DHQ-Manville March 15, 1971 u . M. Harris PIPE DIVISION-RETURN ON INVESTMEm MY LETTER FEBRUARY 15, 1971 CREVISED 3/12/71)_________________ ) Subject letter (attached) was revised to reflect up-to-date figures and to correct an error in the original Green Cove Springs average inventory. In accordance with the above letter we have determined the added costs due to storing surplus fibre and rubber rings. The added costs are: Required facilities for fibre = $140,564 Added inventory taxes on fibre = 112,260 Actual added fiber labor-1970 = 14,249 Required facilities for rings = Added inventory taxes on rings = Actual added labor - 1970 1,422 5,076 247 The attached schedules show the development of these costs. / F. cc: K. J. Whalen R. W. Sherburne W. R. Johnson file chrono mb attach. MTC 013218 Return on Investment -2- February 15, 1971 (Revised March 12, 1971) In recent months we have received a number of requests from PFM to take rings early to relieve a storage capacity situation at their Laurinburg Plant where they make most of the rings we buy. This may be good companywise but adversely effects the Pipe Division's ROI. To summarize, I estimate that our 1971 average projected inventory invest ment is inflated by $8,435,000 due to storage of surplus fiber and extra rubber rings to protect against our single inhouse source of supply. It should be noted that the storage of surplus fiber and extra rubber rings also entails added direct costs to the Pipe Division over and above the effect on investment. These would include the following: 1. Maintenance of warehouses. 2. Taxes on warehouses 3. Inventory taxes 4. Cost of pallet replacement 5. Depreciation. I am working up the above added cost figures and will send them to you for your information as quickly as possible. F. T. Petersen cc: K. J. Whalen R. W. Sherburne W. R. Johnson file chrono mb MTC 013219 SCHEDULE "C" Added Inventory Taxes on Surplus Fibres: (Actual 1971 Costs) Tax Date Denison 1/1/71 Green Cove 1/1/71 Long Beach 3/1/71 Stockton 3/1/71 Waukegan 4/1/71 Manville (no tax) * Tax on Surplus Normal Inventory Actual Inventory______ Surplus Tons Valuation Taxes Tons Valuation Taxes Tons Taxes 1,158 $ 270,000 $ 6,318 7,196 $1,614,000 37,775 6,038 $ 31,457 718 165,000 2,640 1,741 393,000 6,290 1,023 3,650 1,435 349,000 7,015 7,846 1,871,000 37,603 6,411 30,588 1,192 291,000 6,984 7,173 1,823,000 43,759 5,981 36,775 1,016 249,000 8,043 2,475, . 552,000 17,833 1,459 9,790 1,072 239,000 - 4,4l?v-V/l 984.000 - 3,340 _ 6,591 $1 ,563,000 $31,000 30,843 $7,231,000$143,260 24,252 $112,260 (Marrero figures are not included in any of these calculations. However, as of 3/1/71 Marrero had 4,045 tons of fibre valued at $862,000). SCHEDULE "D" Added Costs incurred in storing surplus rubber rings: Inventory taxes $5,076 Depreciation on Warehouses = 331 Maint. on Warehouses = 650 Real Estate Taxes = 441 Added Receiving Labor(1970) = 247 MTC 013220 SCHEDULE "A" Yearly Costs for Warehouse Space: These costs are constant and are incurred even though surplus fibre is not available. The space is allocated to fibre storage and must be available when required for surplus fibre. Total Fibre Space Available Space for Normal Inventory Allocated for Surplus Fibre 179,396 sq. ft. 36,088 sq. ft. 143,308 sq. ft. Total Capacity of Space Normal Fibre Inventory Surplus Fibre Allocation 46,130 tons 6,591 tons 39,539 tons Total Fibre Pallets Available Pallets for Normal Fibre Inv. Allocated for Surplus Fibre 41,938 6,464 35,474 Constant Cost Per Year: Depreciation of Warehouses: Maintenance of Warehouses: Real Estate Taxes-Whses.: (Weighted Rates): Maint. of Pallets: (Weighted Life): TOTAL YEARLY CONSTANT COSTS (143,308 sq. ft. x $5.50/sq.ft.) * 40 yrs.=$ 19,705 143,308 sq.ft, x $0.27/sq. ft. 38,693 (143,308 sq. ft. x $5.50 - $788,194 Value) $788,194 x $3.34/$l00 26,321 (35,474 x $6.55 ea.-$233,354 Value) $233,354 * 4.2 yrs. 55,845 $140,564 SCHEDULE "B" Actual labor costs to receive fibre - 1970 Total tons fibre received Normal tons fibre required Surplus tons received 75,194 tons 64,658 tons 10,536 tons Labor costs to receive fibre = $14,249 (10,536 tons surplus x $1.35/ton (weighted) These added labor costs occur during a given period of time whenever the Pipe Division is required to take in more fibre than it uses. When all surplus space is occupied there is no additional labor cost involved. f MTC 013221 / DHQ-Manville March 15, 1971 D. Smyth - AFD ADVOCATE FIBRE SHIPMENTS The current shipment of 4400 tons of Advocate to Green Cove Springs and Denison departed Baie Verte March 13th at a charter rate of $14.10 per ton. This vessel, "Thora Dan", is a substitute for vessel "Nigeria" which was originally chartered for $9.00 per ton. "Nigeria" then cancelled because of extreme ice conditions at Baie Verte. Our previous shipment of Advocate was on "Astrid Schulte" in November, 1970. This vessel originally chartered at $12.00 per ton and was then revised to $14.00 per ton because the Pipe Division substituted Houston for Port of New Orleans. Des, these fluctuations in charter rates and difficulties of winter shipments raise the following questions: 1. Why is it necessary to ship Advocate to us during the ice months or January thru June? We prefer to take in Advocate during the months July-December. 2. Aren't more competitive charters easier to obtain during July-December? Aren't they cheaper because of not requiring ice-breaking facilities? (eg. "Nigeria", a non-ice breaker at $9.00 per ton vs. "Thora Dan" an ice breaker at $14.10 per ton). 3. Aren't insurance rates lower during the months of July-December or when the ice conditions are not prevalent? 4. If the Pipe Division received its Advocate during July-December how much would the Charter be per ton? (The charter difference between "Nigeria" and "Thora Dan" amounts to $5.10 per ton, for an additional cost to the Pipe Division of more than $22,000.) F. T. irsen cc: K. J. Whalen L. Delaney K. Patterson W. R. Johnson file chrono mb MTC 013222 DHQ, Manville March 29, 1971 K. J. Whalen ADVOCATE FIBER TO DENISON Following is cost of Advocate and Jeffrey Fiber over the past three (3) years and shows the reason for "loading" Denison with as much Advocate as possible: 1969 A-25 4T Base Price $/Ton 175.70 175.00 Freight $/Ton 28.86 31.00 Total $/Ton Z7~& $/Point Ton 204.56 206.00 2.84 2.86 1970 A-25 4T 177.93 30.30 208.23 180.44 32.55 212.99 2.89 2.96 1971 A-25 " 4T 189.39 30.05 219.44 2//. 3.04 190.14 36.58 226.72 3.14 Reeves Fiber is about the same as Jeffrey to Denison, maybe 1C per point ton higher. fi .ytcrdb* D. Nowlin DN:bc cc: file/chrono MTC 013223