This presentation describes an overview of practical applications of Probabilistic Decision Analysis and Monte Carlo Models. Examples are provided in the areas of sales forecasting, manufacturing production, and component design

1. Jose A. Briones, Ph.D. CSI Calendering Inc., Arlington, TX Energy Rubber Group Technical Meeting, September 16, 2010

16. Line 1 Line 2 Line 3 Line 4 Product Family A Product Family B Product Family C Product Family D Post-Treatment Facility 350 Units/hr 125 Units/hr/line 87.5 Units/hr/line 62.5 Units/hr/line 37.5 Units/hr/line

19. Typical Range Range Min Max Production Target of product C, Units/mo 15,000 10,000 20,000 Production Target of product D, Units/mo 10,000 5,000 15,000 Production Rate of Product A, lines 1 and 2, Units/hr 250 240 260 Production Rate of Product B, lines 1 and 2, Units/hr 175 165 200 Rate of Production product C, lines 3 and 4 Units/hr 125 90 140 Rate of Production product D, lines 3 and 4 Units/hr 75 60 80 Maximum Production Rate 4 lines running, Units/hr 350 330 370 Var Margin Product A US$/unit $2.50 $2.30 $2.70 Var Margin Product B US$/unit $2.75 $2.60 $3.00 Var Margin Product C US$/unit $4.00 $3.50 $4.50 Var Margin Product D US$/unit $5.00 $4.50 $5.50 Plant fixed cost Euros/month 500,000 € 450,000 € 550,000 € Selling & Admin costs Euros/month 50,000 € 45,000 € 55,000 € Projected fixed cost savings Euros/month 75,000 € 65,000 € 90,000 € US Dollar/ Euro Exchange Rate 0.8 0.7 0.95

22. ~50% of time devoted to C & D A or B C D 5.0% 90.0% 5.0% 100.0% 0.0% 0.0% 0.448 0.575 0 . 0 0 . 1 0 . 2 0 . 3 0 . 4 0 . 5 0 . 6 0 . 7 0 10 20 30 40 50 60 % of treatment line time devoted to A/B, C & D Grades % of treatment line time devoted to A + B Grades / Column Minimum 0.3699 Maximum 0.6080 Mean 0.5203 Std Dev 0.0384 Values 5000 % of treatment line time devoted to Product D / Column Minimum 0.0849 Maximum 0.1304 Mean 0.1032 Std Dev 0.00770 Values 5000 % of treatment line time devoted to Product C / Column Minimum 0.2963 Maximum 0.5094 Mean 0.3766 Std Dev 0.0374 Values 5000

23. Production of B vs. A results in a more significant loss of capacity compared to Scenario 1 A B 5.0% 90.0% 5.0% 100.0% 0.0% 0.0% 2.700 2.906 1 . 8 2 . 0 2 . 2 2 . 4 2 . 6 2 . 8 3 . 0 3 . 2 Values in Millions 0 1 2 3 4 5 6 7 V a l u e s x 1 0 ^ - 6 Total theoretical capacity, Product A vs. B plus Products C & D, kg/yr Total theoretical capacity, Product A plus Products C & D, kg/yr Minimum 2596788.1735 Maximum 3001093.4875 Mean 2803246.3861 Std Dev 62557.3764 Values 5000 Total theoretical capacity, Product B plus products C & D, kg/yr Minimum 1942146.1959 Maximum 2697819.5994 Mean 2362657.7945 Std Dev 120704.1615 Values 5000

24. Production of A has less than 2% probability of losses, 48% probability of profit >1.5 MM $ A B 1.2% 51.1% 47.7% 13.2% 72.0% 14.8% 0.00 1.45 - 3 - 2 - 1 0 1 2 3 4 Values in Millions 0 1 2 3 4 5 6 7 V a l u e s x 1 0 ^ - 7 Profitability, Product A vs. B Case US$/yr Profitability, Product A Case US$/yr / Column Minimum -852160.3638 Maximum 3287264.9694 Mean 1405082.2802 Std Dev 608985.6034 Values 5000 Profitability, Product B Case US$/yr / Column Minimum -2021651.9911 Maximum 3250368.3280 Mean 735213.2672 Std Dev 665321.2558 Values 5000

25. Values in $ 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Fixed cost US$/kg Products A, B, C & D Fixed cost US$/kg Product D / Column Minimum $4.6730 Maximum $8.7315 Mean $6.3410 Std Dev $0.6228 Values 5000 Fixed cost US$/kg Product C / Column Minimum $2.6522 Maximum $5.8660 Mean $3.8579 Std Dev $0.4645 Values 5000 Fixed cost US$/kg Product A / Column Minimum $1.2306 Maximum $2.6219 Mean $1.9559 Std Dev $0.2068 Values 5000 Fixed cost US$/kg Product B. / Column Minimum $1.8782 Maximum $3.2967 Mean $2.5241 Std Dev $0.2136 Values 5000 Fixed Cost of Product A drops in this scenario A B D C 5.0% 90.0% 5.0% 99.8% 0.2% 0.0% 5.40 7.43 1 2 3 4 5 6 7 8 9

26. Values in $ 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 Profit Products A, B C & D US$/Kg Profit Product A US$/Kg / Column Minimum -$0.1944 Maximum $1.2512 Mean $0.5441 Std Dev $0.2233 Values 5000 Profit Product B US$/Kg / Column Minimum -$0.6366 Maximum $1.0344 Mean $0.2593 Std Dev $0.2276 Values 5000 Profit Product C US$/Kg / Column Minimum -$2.0249 Maximum $1.5637 Mean $0.1421 Std Dev $0.5091 Values 5000 Profit Product D US$/Kg / Column Minimum -$4.8411 Maximum -$0.3715 Mean -$2.3410 Std Dev $0.6569 Values 5000 Profit of Product A increases in this scenario A B D C 0.7% 94.3% 5.0% 13.2% 86.7% 0.1% 0.00 0.91 - 5 - 4 - 3 - 2 - 1 0 1 2

27. Product A has much higher gross profit than Product B Product D has negative gross profit Fixed Cost/Kg Gross Profit/Kg Product A $1.96 $0.54 Product B $2.52 $0.26 Product C $3.85 $0.14 Product D $6.34 -$2.34

28. Emphasizing sales of Product A has the best probability for higher profits Scenario 2 - A Scenario 2 - B % time devoted to C & D 48% 48% Production of C 0.7 MM kg/yr 0.7 MM kg/yr Total Plant Capacity 2.8 MM kg/yr 2.4 MM kg/yr Profitability 1.4 MM $/yr 0.7 MM $/yr Probability of Losses 1% 13%

29. 0.73 -0.51 0.34 0.22 0.13 0.10 0.07 0.06 0.06 -0.05 0.05 0.04 0.03 0.02 0.01 - 0 . 6 - 0 . 4 - 0 . 2 0 . 0 0 . 2 0 . 4 0 . 6 0 . 8 Coefficient Value Production of product D, Kg/mo Hours/day operating Production Rate of Product A, lines 1 and 2, kg/hr Var Margin Product D US$/kg Rate of Production product D, Kg/mo Selling & Admin costs Euros/month Var Margin Product C US$/kg Production of product C, Kg/mo Days of the week operating Operational Efficiency Projected fixed cost savings Euros/month Maximum Production Rate 4 lines running, kg/hr Var Margin Product A US$/kg Plant fixed cost Euros/month US Dollar/ Euro Exchange Rate Profitability, Product A Case US$/yr / Column Regression Coefficients Maximum Production Rate for the 4 lines is a critical factor for profitability of A

36. 5.0% 90.0% 5.0% 100.0% 0.0% 0.0% 154.4 172.8 8 0 9 0 1 0 0 1 1 0 1 2 0 1 3 0 1 4 0 1 5 0 1 6 0 1 7 0 1 8 0 1 9 0 Values in Thousands 0 1 2 3 4 5 6 7 8 V a l u e s x 1 0 ^ - 5 Theoretical capacity Products A & B Kg/mo Theoretical capacity Product A Kg/mo / Column Minimum 143825.4377 Maximum 182165.7345 Mean 163603.8872 Std Dev 5589.9594 Values 5000 Theoretical capacity Product B kg/mo / Column Minimum 89846.9886 Maximum 157539.8296 Mean 126888.1712 Std Dev 10465.5035 Values 5000