Chaos Theory, the Butterfly Effect and your Maintenance Budget

Robert S. Hill, II CMRP

Senior Manager ± Maintenance & Reliability
PepsiCo Global Operations
Introduction

In the study of physics, Chaos Theory GHVFULEHV³V\VWHPV´WKDWDUHGLVRUGHUHGUDQGRPRUODFN

predictability to the extent that a butterfly flapping its wings in Brazil sets in motion a chain of
events that eventually causes a tornado in Texas. Over the years, I have managed budgets that
certainly felt chaotic, unpredictable and seemed to require a lot of effort to control in order to
prevent being overspent by the end of the accounting period. And there was always some
butterfly effect of unplanned spend at the beginning of the year that caused a tornado in my
accounts by the end of the year.

You can spend hours trying to figure out how much to budget in each category and then track
HYHU\SHQQ\VSHQWGXULQJWKHPRQWKRQO\WRILQGRXWWKDWUHDOLW\GLGQ¶WPDWFKZKDWZDVEXGJHWHG
In these instances budgeting just seems like a futile theoretical exercise. MRVW EXGJHWV GRQ¶W
ZRUNEHFDXVHWKH\GRQ¶WUHIOHFWUHDOLW\WKH\GRQ¶WLQWHUFRQQHFWIURPRQHPRQWKWRWKHQH[WDQG
WKH\GRQ¶WDFFRXQWIRU³VXUSOXV´PRQH\.

It seems that the most common method for building a maintenance budget, or any budget for that
PDWWHULVWRXVHVRPHYDULDWLRQRIODVW\HDU¶VDFWXDOVSHQG

7KLV<HDU¶s Budget = /DVW<HDU¶V%XGJHW,QIODWLRQ± (Target Reduction)

13 periods (or 12 months)

This, by the way, is known as incremental budgeting and it is a simple way to build a budget.
The flaw in this process is that it iV KDUG WR YHULI\ KRZ PXFK RI ³/DVW <HDU¶V %XGJHW´ ZDV
random and unpredictable; we typically GRQ¶Wtrack how much should have been done but instead
focus on ZKDW ZDV DFWXDOO\ GRQH  ,W DVVXPHV WKDW WKH EDVHOLQH EXGJHW LV ³DXWRPDWLFDOO\
DSSURYHG´ DQG RQO\ Whe variances over previous years need to be justified. It should be noted
WKDWWKLVLVDSHUIHFWO\UDWLRQDODQGDFFHSWDEOHDSSURDFKZKLFKGRHVQ¶WUHTXLUHWRRPXFKHIIRUW. It
does tend to perpetuate the problems from the previous year DQG GRHVQ¶W GLIIHUHQWiate between
the accounts (Production Lines); ineffective programs tend to get the same funding as effective
programs do.

Zero-Based Budgeting is a different approach which may initially seem to be more time
consuming but it utilizes planning, preparation and decision-making to arrive at a budget that
accounts for each activity and its estimated time of expense. Using a zero-based approach, your
budget will be based on need and benefit, will drive greater ownership from those impacted by it,
will help identify waste and or excesses within the budget, and will help identify alternate
options when the butterfly flaps it wings.

ϭͮW Ă Ő Ğ 

Chaos Theory, the Butterfly Effect and your Maintenance Budget

The zero-based budget will necessitate you assigning every expense against your monthly budget
allocation; you will be spending your dollars on paper before you ever spend them in real life.

Building the Budget

The first step is to begin involving anyone within the Maintenance organization who has impact
on expenses throughout the month. When I have done this in the past, I involved my
Maintenance Supervisors, Planners and Stockroom Personnel, Lead Mechanics and, depending
on your organization, you may want to involve members from your Operations team. Many
companies today are leveraging programs such as Total Productive Maintenance (TPM) and as
such, many of the Operations personnel are involved in performing activities that were
traditionally performed by the Maintenance department. It is important to involve these
resources in co-developing the maintenance budget as they can have direct impact on and be
directly affected by it.

In preparation for building the budget, I asked the stakeholders to sit down and identify all major
repair activities, refurbishments, rebuilds and the timing within the year for these events. It is
important to have their input at this point in the process. This will generate ownership of the
budget and how the dollars have been allocated. Not doing this will result in what may be the
FXUUHQWSHUVSHFWLYHRIWKRVHVWDNHKROGHUV³+HEXLOWWKDWEXGJHWLQDYDFXXPDQG,GRQ¶WNQRZ
KRZKHWKLQNVZHFRXOGPDQDJHRXUHTXLSPHQWZLWKWKDW´

The items that you should be prepared to account for would be (but are not limited to):

x Legally required ± many of these types of expenses will likely be set up within
your Preventive Maintenance (PM) program but depending on your situation,
there may be items that fall outside of the PM Program for which you should
account. An example might be the contracting of a qualified service provider to
maintain instruments within a Waste Water Discharge System.
x Outside Services ± there will likely be activities that you have decided are better
accomplished by an outside service provider as it does not represent \RXU ³FRUe
ZRUN´ ZLWKLQ WKH 0DLQWHQDQFH Gepartment. This might include regular
maintenance on leased Fork Lifts, HVAC services or perhaps parking lot
maintenance. Additionally, you may want to include in this section any service
contracts which may be held on production equipment; one very typical example
would be for Air Compressors but it may very well be a maintenance contract
from the Original Equipment Manufacturer (OEM) of your Palletizer.
x Annual Preventive/Predictive Maintenance (PPM) ± most Computerized
Maintenance Management Systems (CMMS) will allow you to forecast the tasks
that will generate in a specified time period, like the entire upcoming year. Use
this information to determine how many man-hours of labor and how much

WĂŐĞͮϮ

Chaos Theory, the Butterfly Effect and your Maintenance Budget

material will be needed to accomplish your already defined upkeep plan. An

added benefit of this exercise is that you will be able to see if the PPM activities
are level loaded across the year.
x Rebuilds, Restorations or Modifications ± this category should contain any
planned overhauls, rebuilds or restorations that are perhaps not covered under the
above PM program category. It is also reasonable to expect that there is a flow of
work from internal Continuous Improvement initiatives that will generate
modifications to existing equipment or systems, often these will not meet the
requirements for capitalization. For this category, you may have to rely on an
historical estimate of improvements or you may already have a commitment plan
for expected improvements in the coming year.
x Emergency Repairs ± I have always been told that you cannot plan for a
EUHDNGRZQ DQG WR D FHUWDLQ H[WHQW \RX FDQ¶W EXW \RX FDQ XWLOL]H VRPH RI \RXU
historical data to indicate what your typical breakdown spend is going to be,
assumiQJ \RXU IDLOXUH UDWH KDVQ¶W LPSURYHG RU JRWWHQ ZRUVH  7KLV H[HUFLVH ZLOO
QRWRQO\KHOS\RXDOORFDWHVRPHPRQH\WRDYRLGWKHEXWWHUIO\¶VZLQJVEXWZLOODOVR
help you shape your budget to match any seasonality; more run time in the middle
of the year will relate to more breakdowns in the same period and thus the need to
have more money allocated to that time frame.
x Items that are new to the Budget ± there are many things that could fall into this
category but you should try to account for known changes that will fall under the
budget that are different from the prior year. Some of these items might include a
wage increase for the new contract year or an increased spend/budget associated
to a new equipment or production line installation.
x Operating Supplies & Consumables ± depending on your accounting rules there
ZLOOOLNHO\EHLWHPV LQ WKLVFDWHJRU\WKDWIDOOLQWRDELWRID³JUH\ DUHD´1RWVR
³JUH\´ PLJKW EH LWHPV VXFK DV OXEULFDQWV IODVKOLJKWV DQG WKHLU EDWWHULHV ZRUN
gloves; all of which the MaintenancH WHDP LV XVLQJ GD\ WR GD\ EXW DUHQ¶W
necessarily going to be captured in one of the previous categories. Some of the
³JUH\´LWHPVPD\EHWKLQJs like print ink for code dating equipment or filters for
use in the production process.

NOTE: There always seems to be a debate around Operating Supplies and whether
WKH\VKRXOGEHSDLGIRUE\0DLQWHQDQFHRURSHUDWLRQV,ZRXOGVXJJHVWWKLV³5XOHRI
7KXPE´ ,I LW SUHVHUYHV WKH LQWHJULW\ RI WKH PDQXIDFWXUHG SURGXFW ,QN IRU &RGH
Daters), it is an Operations expense; if it preserves the integrity of the Equipment or
Asset (Lubricants) LW LV D 0DLQWHQDQFH ([SHQVH  $W VRPH SRLQW LW UHDOO\ GRHVQ¶W
matter who pays for it as long as someone budgets for it.

WĂŐĞͮϯ

Chaos Theory, the Butterfly Effect and your Maintenance Budget

With all of these puzzle pieces on the table; begin to construct your budget based on these known
or projected expenditures with a reasonable estimate of the time in which they will occur. I
would recommend that you start with what I will call ³Non-Discretionary spend´; items such as
the known legally required expenses, the projected PPM expenses, the Emergency Repair
projections, any fixed Outside Service contracts, and certain Labor components such as FICA.

Next, start to layer in expenses that consist of what I ZLOO FDOO ³'LVFUHWLRQDU\ spend´ such as
overhauls, consumables and certain improvement projects. Some may find the use of the word
³Discretionary´ to describe these tasks as incorrect; I only categorize them this way because
there is usually some flexibility in these tasks around timing or the level of actual work involved.

I would recommend including a contingency line in the Discretionary category where your
excesses or overages can be offset. Despite your best efforts to identify and control your
monthly expenditures, there are times that they will not be what you forecast. This line will give
you some amount of cushion for WKHVHFKDQJHVEXW FHUWDLQO\VKRXOGQ¶WEHFRPHD³VOXVKIXQG´
This is extremely important to include for the first year or two that you use this process since
WKHUHZLOOOLNHO\EH³VXUSULVHV´WKDWGHVSLWH\RXUEHVWHIIRUWVGLGQRWJHWIDFWRUHGLQ

Once your budget is built, you can evaluate whether you have projected your spend in a manner
that does not overload a particular month or have not projected doing major rebuilds during the
busy season. With any luck you should now have a budget that is not flat across each month in
the year, rather one that rises and falls at that correct time to accommodate more work in the
slower production months and less work in the higher production months. (See Figure #1)

Figure #1: This represents a sample budget for one production line by account.
WĂŐĞͮϰ

Chaos Theory, the Butterfly Effect and your Maintenance Budget

Submission / Approval

Another major benefit of performing this exercise will be realized when the budget is submitted
for approval. When we build a budget using the incremental budgeting method, the budget is
easily challenged and indefensible because there was no apparent logic used to come up with the
final number. 7\SLFDOO\WKHUHYLHZHUDSSURYHUNQRZVWKDWWKHEDVHQXPEHUZHXVHGODVW\HDU¶V
DFWXDOVSHQGLVQ¶WW\SLFDO³EHFDXVHZHKDGWKDWPDMRUIDLOXUHRQ0DFKLQH;DQGWKDWGURYHRXU
DFWXDOVSHQGKLJKHU´ZKHQLQIDFWWKHVSHQGSUREDEO\ZDVQ¶WGULYHQKLJKHUZHMXVWGLGQ¶WVSHQG
money on something else we needed to do (which is probably why Machine X crashed in the
first place).

However, when a budget request is submitted with the detail and support information inherent in
the zero-based approach, it is very easy for the reviewer/approver to see what expenses are being
projected and usually that person can more easily understand why the allocation was made. On
the other hand, if the budget is returned with the need to reduce by 5%, you are now armed with
a firm understanding of what you requested money for and can make better decisions as to what
can be trimmed out of the request.

It has been my experience that when I arrived at the budget submission meetings with the
Finance and Plant Leadership team to present my budget, ZKLFKZDVPRUHSUHSDUHGDQG³WKRXJKt
WKURXJK´WKDQW\SLFDOWKH\would usually start looking for other areas to trim (such as the other
department budget requests which were a bit more nebulous). When I did get the request to
reduce by some percentage, I was very quickly able to go to my Non-Discretionary category and
make the decision that ³WKHUHVWRUDWLRQRQ0DFKLQH;LQ-XQHFDQEHEURNHQGRZQLQWRDFULWLFDO
piece and a non-critical piece, which I can move to next year or put in my contingency work if
VRPHRWKHUWDVNIDOOVWKURXJK´

As each of these forecast tasks get completed or as the forgotten activities get factored in, keep
UHFRUGRIWKHVHLQ \RXUWUDFNLQJWRRO,I\RXDUHGLOLJHQWZLWKWKLVSURFHVV\RX¶Ol find that you
are already fine-tuning what you will submit for your budget request next year.

Budget Management and Forecasting

The work does not stop once your budget is approved. Avoid the practice of only looking at
your budget when the accounting period closes and you know you have a monthly budget
meeting to go to. The budget is a living document that needs constant attention or it will die.

My recommendation at this point is to develop a spreadsheet which will look very similar to
what you submitted as your budget but with some modifications to allow you to track expenses
and forecast other expenses. If you refer to Figure #2, all of the items in BLUE are forecast

WĂŐĞͮϱ

Chaos Theory, the Butterfly Effect and your Maintenance Budget

expenses and once the actuals for the month are inserted into the spreadsheet, the BLUE items
for that month no longer calculate in the WHITE cells.

You will notice that the upper portion titled ³%XGJHW´UHIOHFWVWKHDFFRXQWOLQHLWHPVVXEPLWWHGLQ

the budget. The actual expenses incurred throughout the month are UHIOHFWHG LQ WKH ³$FWXDOV´
section. It is probably best to update the actual expenses each week if practical as this will allow
you to be a bit more proactive if you see the expenditures are not in control.

,Q )LJXUH \RX ZLOOVHHWKDWXQGHUWKH³1RQ-'LVFUHWLRQDU\6SHQG´KHDGHU ,KDYH DFFRXQWHG

for the PPM expenses, some historical corrective and emergency work expenses, etc. Under the
³'LVFUHWLRQDU\6SHQG´KHDGHULV DFXPXODWLYHWRWDO RIWKH Rebuilds, etc. that were forecast and
listed separately in the blue section near the bottom, as well as the forecast expenses associated
with the Outside Service contracts.

Using a tool like this allows me to see that I have overspent the Material Account for January but
not overspent the total Cost Center. This spreadsheet also cumulates the negative from the
FXUUHQWPRQWKDQGDSSOLHVLWWRWKH³DYDLODEOH´GROODUVLQWKHQH[WPRQWKDOORZLQJPHWRVee the
impact of that overspend, which by the way, has now caused me to need to be more cautious
with my material spend in February.

You will also notice that I have been able to add a $1276 Unplanned Heat Exchanger Cleaning
Task to the February forecast to see what impact that will have on my Labor account for the
month and it would appear that I should be able to absorb that expense.

WĂŐĞͮϲ

Chaos Theory, the Butterfly Effect and your Maintenance Budget

Figure #2: This represents a sample forecast tool based on the budget depicted in Figure #1.

Conclusion

If you manage your budget to your predefined activities and tasks, you will be able to control the
flow of work and its cost, you will be able to identify where streamlining opportunities exist and
the team that helped provide input to the budget creation process will know that the tasks they
need to accomplish are funded and they will know the time period for which the funding is
allocated.

When the butterfly flaps its wings in February, you will be able to see what impact that will have
on November, allowing you to make good choices regarding what should be moved, reallocated
or cancelled altogether.

WĂŐĞͮϳ

Chaos Theory, the Butterfly Effect and your Maintenance Budget

Keywords:

Best Practices
Business Deliverables
Budget
Cost
Estimating
Maintenance Cost
Maintenance Management
Maintenance Process
Maintenance Strategy

WĂŐĞͮϴ

 ůŝĐŬƚŽĞĚŝƚDĂƐƚĞƌƚŝƚůĞƐƚLJůĞ

ƵƐŝŶĞƐƐDĂŶĂŐĞŵĞŶƚ͕dƌĂĐŬϭ

ŚĂŽƐdŚĞŽƌLJ͕ƚŚĞƵƚƚĞƌĨůLJĨĨĞĐƚĂŶĚ
LJŽƵƌDĂŝŶƚĞŶĂŶĐĞƵĚŐĞƚ
ZŽďĞƌƚ^͘,ŝůů͕//DZWͲ WĞƉƐŝŽ
 ZŽďĞƌƚ^͘,ŝůů͕//DZW

• ZŽďĞƌƚƐƉĞŶƚϵLJĞĂƌƐŝŶƚŚĞh͘^͘EĂǀLJ͛ƐEƵĐůĞĂƌWŽǁĞƌ
ƉƌŽŐƌĂŵ͕ƐĞƌǀŝŶŐŽŶƚŚĞh^^ŶƚĞƌƉƌŝƐĞĂŶĚƵůƚŝŵĂƚĞůLJ
ƌĞƚƵƌŶŝŶŐƚŽƚĞĂĐŚĂƚŽŶĞŽĨƚŚĞEƵĐůĞĂƌWŽǁĞƌdƌĂŝŶŝŶŐ
hŶŝƚƐ͘
• ,ĞůĞĨƚƚŚĞEĂǀLJĂƐĂDĂĐŚŝŶŝƐƚDĂƚĞŚŝĞĨWĞƚƚLJKĨĨŝĐĞƌĂŶĚ
ǁĞŶƚƚŽǁŽƌŬĨŽƌ>ŽĐŬŚĞĞĚDĂƌƚŝŶͲDĂƌŝĞƚƚĂĂƚƚŚĞ
ĚǀĂŶĐĞĚdĞƐƚZĞĂĐƚŽƌĂƚƚŚĞ/ĚĂŚŽEĂƚŝŽŶĂůŶŐŝŶĞĞƌŝŶŐ
>ĂďŽƌĂƚŽƌLJ;/E>Ϳ͘
• ,ĞŚĂƐǁŽƌŬĞĚŝŶƚŚĞEƵĐůĞĂƌWŽǁĞƌŝŶĚƵƐƚƌLJ͕'ƌĂŝŶDŝůůŝŶŐ͕
ĞƌĞĂůDĂŶƵĨĂĐƚƵƌŝŶŐ͕ƵƚŽŵŽƚŝǀĞ&ůƵŝĚDĂŶƵĨĂĐƚƵƌŝŶŐĂŶĚ
ĞǀĞƌĂŐĞŝŶĚƵƐƚƌŝĞƐ͘
• &ŽƌƚŚĞƉĂƐƚϭϮLJĞĂƌƐ͕ŚĞŚĂƐǁŽƌŬĞĚĨŽƌWĞƉƐŝŽĂƐĂ^ĞŶŝŽƌ
ZĞůŝĂďŝůŝƚLJŶŐŝŶĞĞƌĂŶĚDĂŝŶƚĞŶĂŶĐĞDĂŶĂŐĞƌ͘ZŽďĞƌƚ͛Ɛ
ĐƵƌƌĞŶƚƌŽůĞǁŝƚŚWĞƉƐŝŽŝƐŝŶ'ůŽďĂůKƉĞƌĂƚŝŽŶƐǁŚĞƌĞŚĞ
ŝƐƌĞƐƉŽŶƐŝďůĞĨŽƌƌĞƐĞĂƌĐŚŝŶŐ͕ƚƌĂŶƐĨŽƌŵŝŶŐĂŶĚ
ŝŵƉůĞŵĞŶƚŝŶŐDĂŝŶƚĞŶĂŶĐĞΘZĞůŝĂďŝůŝƚLJĞƐƚWƌĂĐƚŝĐĞƐĨŽƌ
ϭϳϬďĞǀĞƌĂŐĞƉůĂŶƚƐĂƌŽƵŶĚƚŚĞǁŽƌůĚ͘
• ZŽďĞƌƚŝƐĂĐĞƌƚŝĨŝĞĚĂƐĂDĂŝŶƚĞŶĂŶĐĞĂŶĚZĞůŝĂďŝůŝƚLJ
WƌŽĨĞƐƐŝŽŶĂůŝŶϮϬϬϯĂŶĚŚĂƐƉƌĞƐĞŶƚĞĚĂƚƚŚĞϮϬϬϱ^DZW
ŶŶƵĂůŽŶĨĞƌĞŶĐĞ͘
• ,ĞŚĂƐĂůƐŽƐĞƌǀĞĚƚŚĞ^DZWĂƐƚŚĞŚĂŝƌŽĨƚŚĞ^DZWK
ĚǀŝƐŽƌLJŽƵŶĐŝůĂŶĚĂƐƚŚĞdƌĞĂƐƵƌĞƌĂŶĚsŝĐĞͲŚĂŝƌŽĨ
^DZWK͘
 ŚĂŽƐŝŶƚŚĞDĂŝŶƚĞŶĂŶĐĞƵĚŐĞƚ

• tŚŽŚĞƌĞŚĂƐŚĂĚƚŽďƵŝůĚĂďƵĚŐĞƚĨŽƌƚŚĞ
DĂŝŶƚĞŶĂŶĐĞĚĞƉĂƌƚŵĞŶƚďĞĨŽƌĞ͍

• tŚŽůŽǀĞƐĚŽŝŶŐŝƚĂƐŵƵĐŚĂƐ/ĚŽ͍

• /ŶƚŚĞŶĞdžƚŚŽƵƌ͕/͛ůůƚĞůůLJŽƵǁŚLJ͊
 KďũĞĐƚŝǀĞƐ

• ŝƐĐƵƐƐǁŚLJƵĚŐĞƚƐĚŽŶ͛ƚƵƐƵĂůůLJǁŽƌŬƚŚĞ
ǁĂLJǁĞŝŶƚĞŶĚƚŚĞŵƚŽ
• ŝƐĐƵƐƐƵĚŐĞƚĚĞǀĞůŽƉŵĞŶƚŵĞƚŚŽĚŽůŽŐŝĞƐ
• ŝƐĐƵƐƐŚŽǁƚŽďƵŝůĚĂƵĚŐĞƚƚŚĂƚĐĂŶďĞ
ƐƵĐĐĞƐƐĨƵů
• ŝƐĐƵƐƐŚŽǁƚŽŵĂŶĂŐĞƚŚĞďƵĚŐĞƚĂĨƚĞƌ
ĂƉƉƌŽǀĂů
 tŚLJŽŶ͛ƚ
ƵĚŐĞƚƐtŽƌŬ͍
 dŚĞƵƚƚĞƌĨůLJĨĨĞĐƚ

• ŽŝŶĞĚďLJĚǁĂƌĚEŽƌƚŽŶ>ŽƌĞŶnjƌĞŐĂƌĚŝŶŐŚŝƐĂƚƚĞŵƉƚ
ƚŽďƵŝůĚĂĐŽŵƉůĞdžǁĞĂƚŚĞƌƉƌĞĚŝĐƚŝŽŶŵŽĚĞů

• dŚĞŽƌĞƚŝĐĂůĞdžĂŵƉůĞŽĨĂŚƵƌƌŝĐĂŶĞ͛ƐĨŽƌŵĂƚŝŽŶďĞŝŶŐ
ĐŽŶƚŝŶŐĞŶƚŽŶǁŚĞƚŚĞƌŽƌŶŽƚĂĚŝƐƚĂŶƚďƵƚƚĞƌĨůLJŚĂĚ
ĨůĂƉƉĞĚŝƚƐǁŝŶŐƐƐĞǀĞƌĂůǁĞĞŬƐĞĂƌůŝĞƌ

• ƚƚŝŵĞƐƚŚĞDĂŝŶƚĞŶĂŶĐĞƵĚŐĞƚĐĂŶĨĞĞůƚŚŝƐǁĂLJ͖ĂŶ
ƵŶĞdžƉĞĐƚĞĚĞdžƉĞŶƐĞŝŶ&ĞďƌƵĂƌLJĐĂƵƐĞƐĞŶŽƌŵŽƵƐ
ŝŵƉĂĐƚŽŶƉůĂŶŶĞĚĞdžƉĞŶƐĞƐŝŶEŽǀĞŵďĞƌ
dŚĞƵƚƚĞƌĨůLJĨĨĞĐƚ
 tŚLJƚŚĞƵĚŐĞƚĚŽĞƐŶ͛ƚǁŽƌŬ

• /ƚĚŽĞƐŶ͛ƚƌĞĨůĞĐƚƌĞĂůŝƚLJ
• /ƚĚŽĞƐŶ͛ƚĐŽŶŶĞĐƚĨƌŽŵŽŶĞŵŽŶƚŚƚŽƚŚĞŶĞdžƚ
• /ƚĚŽĞƐŶ͛ƚƚƌĂĐŬƐƵƌƉůƵƐŵŽŶĞLJ
 tŚLJƚŚĞƵĚŐĞƚĚŽĞƐŶ͛ƚǁŽƌŬ

• /ƚĚŽĞƐŶ͛ƚƌĞĨůĞĐƚƌĞĂůŝƚLJ
– ƵĚŐĞƚŝŶŐŝƐĂŶĞdžĞƌĐŝƐĞŝŶďĞŝŶŐǁƌŽŶŐ
– dƌLJŝŶŐƚŽĚĞƚĞƌŵŝŶĞǁŚĂƚLJŽƵǁŝůůƐƉĞŶĚĞĂĐŚ
ŵŽŶƚŚǁŝůůĂůǁĂLJƐďĞǁƌŽŶŐ
– dŚŝƐďĞĐŽŵĞƐĚŝƐĐŽƵƌĂŐŝŶŐ

• /ƚĚŽĞƐŶ͛ƚĐŽŶŶĞĐƚĨƌŽŵŽŶĞŵŽŶƚŚƚŽƚŚĞŶĞdžƚ
• /ƚĚŽĞƐŶ͛ƚƚƌĂĐŬƐƵƌƉůƵƐŵŽŶĞLJ
 tŚLJƚŚĞƵĚŐĞƚĚŽĞƐŶ͛ƚǁŽƌŬ

• /ƚĚŽĞƐŶ͛ƚƌĞĨůĞĐƚƌĞĂůŝƚLJ
• /ƚĚŽĞƐŶ͛ƚĐŽŶŶĞĐƚĨƌŽŵŽŶĞŵŽŶƚŚƚŽƚŚĞŶĞdžƚ
– džƉĞŶƐĞƐĂƌĞŶ͛ƚƐƚĂƚŝĐĨƌŽŵŵŽŶƚŚƚŽŵŽŶƚŚ
– hŶĞdžƉĞĐƚĞĚƚŚŝŶŐƐĐŽŵĞƵƉ
– KǀĞƌŽƌƵŶĚĞƌƐƉĞŶĚŝŶŐŶĞĞĚƐƚŽďĞĐĂƌƌŝĞĚ
ĨŽƌǁĂƌĚ

• /ƚĚŽĞƐŶ͛ƚƚƌĂĐŬƐƵƌƉůƵƐŵŽŶĞLJ
 tŚLJƚŚĞƵĚŐĞƚĚŽĞƐŶ͛ƚǁŽƌŬ

• /ƚĚŽĞƐŶ͛ƚƌĞĨůĞĐƚƌĞĂůŝƚLJ
• /ƚĚŽĞƐŶ͛ƚĐŽŶŶĞĐƚĨƌŽŵŽŶĞŵŽŶƚŚƚŽƚŚĞŶĞdžƚ
• /ƚĚŽĞƐŶ͛ƚƚƌĂĐŬƐƵƌƉůƵƐŵŽŶĞLJ
– DƵƐƚĂĐĐŽƵŶƚĨŽƌ>>ĞdžƉĞŶƐĞƐ
– ^ƉĞŶĚLJŽƵƌĞŶƚŝƌĞďƵĚŐĞƚŽŶƉĂƉĞƌ
– ĞŐŝŶǁŝƚŚƚŚĞĞŶĚŝŶŵŝŶĚ;ŽǀĞLJͿ
 dǁŽƵĚŐĞƚ
ĞǀĞůŽƉŵĞŶƚ
DĞƚŚŽĚƐ
 /ŶĐƌĞŵĞŶƚĂůƵĚŐĞƚ

• ůƐŽƌĞĨĞƌƌĞĚƚŽĂƐŚŝƐƚŽƌŝĐĂůďƵĚŐĞƚŝŶŐ

dŚŝƐzĞĂƌ͛ƐƵĚŐĞƚс>ĂƐƚzĞĂƌ͛Ɛ^ƉĞŶĚн/ŶĨůĂƚŝŽŶʹ dĂƌŐĞƚZĞĚƵĐƚŝŽŶ
ϭϮDŽŶƚŚƐ

• ŝƐĂĚǀĂŶƚĂŐĞƐƚŽ/ŶĐƌĞŵĞŶƚĂůďƵĚŐĞƚŝŶŐ
– WĞƌƉĞƚƵĂƚĞƐƚŚĞƉƌŽďůĞŵƐĨƌŽŵůĂƐƚLJĞĂƌ
– ĐĐŽƵŶƚƐĨŽƌǁŚĂƚǁĂƐĚŽŶĞŝŶƐƚĞĂĚŽĨǁŚĂƚ
ƐŚŽƵůĚŚĂǀĞďĞĞŶĚŽŶĞ
– EŽǀĂƌŝĂƚŝŽŶĨƌŽŵŵŽŶƚŚƚŽŵŽŶƚŚ
 ĞƌŽͲĂƐĞĚƵĚŐĞƚ

• ůůŽĐĂƚĞĞǀĞƌLJĚŽůůĂƌƐŽƚŚĂƚ͗
/ŶĐŽŵĞʹ džƉĞŶƐĞсϬ
• ĚǀĂŶƚĂŐĞƐŽĨĞƌŽͲĂƐĞĚƵĚŐĞƚ
– dŚŝƐŝƐĂ͞ǁŚŝƚĞƐŚĞĞƚ͟ĞdžĞƌĐŝƐĞ
– ĂƐĞĚŽŶŶĞĞĚĂŶĚďĞŶĞĨŝƚ
– tŝůůĚƌŝǀĞďƵĚŐĞƚŽǁŶĞƌƐŚŝƉ
– ĂŶŝĚĞŶƚŝĨLJǁĂƐƚĞŝŶƚŚĞďƵĚŐĞƚ
– ŝĚƐŝĚĞŶƚŝĨŝĐĂƚŝŽŶŽĨĂůƚĞƌŶĂƚŝǀĞƐ
ƵŝůĚŝŶŐƚŚĞ
ƵĚŐĞƚ
 tŚĂƚ͛ƐƚŚĞƉƉƌŽĂĐŚ͍

• ƐƐĞŵďůĞƚŚĞƌŝŐŚƚ^ƚĂŬĞŚŽůĚĞƌƐƚŽďĞ
ŝŶǀŽůǀĞĚŝŶƚŚĞƉƌŽĐĞƐƐ
– DĂŝŶƚĞŶĂŶĐĞ^ƵƉĞƌǀŝƐŽƌƐ
– DĂŝŶƚĞŶĂŶĐĞWůĂŶŶĞƌƐ
– ^ƚŽĐŬƌŽŽŵƉĞƌƐŽŶŶĞů
– KƉĞƌĂƚŝŽŶƐƉĂƌƚŶĞƌƐ

• /ŶĐůƵĚĞĂŶLJŽŶĞǁŚŽŵĂLJŚĂǀĞŝŵƉĂĐƚŽŶŽƌďĞ
ŝŵƉĂĐƚĞĚďLJƚŚĞDĂŝŶƚĞŶĂŶĐĞƵĚŐĞƚ
 tŚĂƚŝƐƚŚĞĂƉƉƌŽĂĐŚ͍

• ƐƐĞŵďůĞƚŚĞƌŝŐŚƚŝŶĨŽƌŵĂƚŝŽŶĂŶĚĐĂƚĞŐŽƌŝnjĞ

• EŽŶͲŝƐĐƌĞƚŝŽŶĂƌLJdžƉĞŶƐĞƐ
• ŝƐĐƌĞƚŝŽŶĂƌLJdžƉĞŶƐĞƐ
 tŚĂƚŝƐƚŚĞĂƉƉƌŽĂĐŚ͍

• ƐƐĞŵďůĞƚŚĞƌŝŐŚƚŝŶĨŽƌŵĂƚŝŽŶĂŶĚĐĂƚĞŐŽƌŝnjĞ

• EŽŶͲŝƐĐƌĞƚŝŽŶĂƌLJdžƉĞŶƐĞƐ
– >ĞŐĂůůLJƌĞƋƵŝƌĞĚĞdžƉĞŶƐĞƐ
– džƚĞƌŶĂů^ĞƌǀŝĐĞĐŽŶƚƌĂĐƚƐ
– ŶŶƵĂůWƌĞǀĞŶƚŝǀĞͬWƌĞĚŝĐƚŝǀĞDĂŝŶƚĞŶĂŶĐĞ;WWDͿ
ĞdžƉĞŶƐĞƐ
– ŵĞƌŐĞŶĐLJZĞƉĂŝƌĞdžƉĞŶƐĞƐ
• ŝƐĐƌĞƚŝŽŶĂƌLJdžƉĞŶƐĞƐ
 tŚĂƚŝƐƚŚĞĂƉƉƌŽĂĐŚ͍

• ƐƐĞŵďůĞƚŚĞƌŝŐŚƚŝŶĨŽƌŵĂƚŝŽŶĂŶĚĐĂƚĞŐŽƌŝnjĞ

• EŽŶͲŝƐĐƌĞƚŝŽŶĂƌLJdžƉĞŶƐĞƐ
• ŝƐĐƌĞƚŝŽŶĂƌLJdžƉĞŶƐĞƐ
– ZĞďƵŝůĚƐ͕ZĞƐƚŽƌĂƚŝŽŶƐ͕DŽĚŝĨŝĐĂƚŝŽŶƐ
– /ƚĞŵƐƚŚĂƚĂƌĞŶĞǁƚŽƚŚĞƵĚŐĞƚ
– KƉĞƌĂƚŝŶŐ^ƵƉƉůŝĞƐĂŶĚŽŶƐƵŵĂďůĞƐ
 WŽƉƵůĂƚĞƚŚĞ͞tŚŝƚĞ^ŚĞĞƚ͟
^ƚƌĂŝŐŚƚ>ĂďŽƌŝƐƉƌŽďĂďůLJ WƌĞŵŝƵŵ>ĂďŽƌ
ĨŝdžĞĚĞĂĐŚŵŽŶƚŚ ĨƌŽŵŚŝƐƚŽƌLJ

ŝƐĐƌĞƚŝŽŶĂƌLJΘ
EŽŶͲŝƐĐƌĞƚŝŽŶĂƌLJ
/ƚĞŵƐ
 &ŽƌĞĐĂƐƚdŽŽů

^ĞĐƚŝŽŶĨŽƌƚŚĞƉƉƌŽǀĞĚƵĚŐĞƚ

^ĞĐƚŝŽŶĨŽƌƚŚĞDŽŶƚŚůLJĐƚƵĂůƐ

^ĞĐƚŝŽŶĨŽƌƚŚĞ
EŽŶͲŝƐĐƌĞƚŝŽŶĂƌLJ/ƚĞŵƐ
^ĞĐƚŝŽŶĨŽƌƚŚĞ
ŝƐĐƌĞƚŝŽŶĂƌLJ/ƚĞŵƐ

^ĞĐƚŝŽŶhƐĞĚƚŽ&ŽƌĞĐĂƐƚŚĂŶŐĞƐ

dŚŝƐƐĞĐƚŝŽŶŝƐĂŶĞdžƉĂŶĚĞĚǀŝĞǁƚŚĂƚ
ĐƵŵƵůĂƚĞƐŝŶƚŽƚŚĞĂďŽǀĞ
ŝƐĐƌĞƚŝŽŶĂƌLJ/ƚĞŵƐƐĞĐƚŝŽŶ
hƐŝŶŐƚŚĞ&ŽƌĞĐĂƐƚdŽŽů

EŽƚŝĐĞƚŚĂƚƚŚĞ>ĂďŽƌ&ŽƌĞĐĂƐƚĨŽƌ
&ĞďƌƵĂƌLJŝƐΨϭϵD
hŶƉůĂŶŶĞĚ>ĂďŽƌdžƉĞŶƐĞ

ŶƵŶĞdžƉĞĐƚĞĚĨŽƵůŝŶŐŽĨĂ,ĞĂƚ
džĐŚĂŶŐĞǁŝůůĐĂƵƐĞĂŶĂĚĚŝƚŝŽŶŽĨ
ΨϭϮϳϲƚŽƚŚĞĨŽƌĞĐĂƐƚ>ĂďŽƌƐƉĞŶĚ͘
tŚĞŶĂĚĚĞĚƚŽƚŚĞĨŽƌĞĐĂƐƚŝŶŐ
ƐĞĐƚŝŽŶ͕ǁĞƐĞĞƚŚĂƚƚŚĞĞdžƉĞŶƐĞƐƚŝůů
ĨĂůůƐǁŝƚŚŝŶƚŚĞĂǀĂŝůĂďůĞďƵĚŐĞƚ͘
KǀĞƌƐƉĞŶƚDĂƚĞƌŝĂůĐĐŽƵŶƚ

ĨƚĞƌĂĚĚŝŶŐƚŚĞĐƚƵĂůƐƉĞŶĚƚŽĐůŽƐĞ
ƚŚĞŵŽŶƚŚŽĨ&ĞďƌƵĂƌLJ͕ǁĞƐĞĞƚŚĂƚ
ƚŚĞDĂƚĞƌŝĂůĐĐŽƵŶƚŚĂƐďĞĞŶ
ŽǀĞƌƐƉĞŶƚďLJΨϭϯϭϳ͘dŚĞĨŽƌĞĐĂƐƚƚŽŽů
ĂůůŽǁƐƵƐƚŽƐĞĞƚŚĞŝŵƉĂĐƚŝƚǁŝůůŚĂǀĞ
ŽŶƚŚĞƌĞŵĂŝŶĚĞƌŽĨƚŚĞLJĞĂƌ͘
ŽƌƌĞĐƚĞĚDĂƚĞƌŝĂůĐĐŽƵŶƚ

dĂůŬŝŶŐƚŽƚŚĞDĂŝŶƚĞŶĂŶĐĞWůĂŶŶĞƌƐ͕
ǁĞĚĞĐŝĚĞƚŚĂƚĂƉŽƌƚŝŽŶŽĨƚŚĞƚĂƐŬƐ
ĂƐƐŽĐŝĂƚĞĚǁŝƚŚDĂĐŚŝŶĞηϯ͛Ɛ
ƌĞƐƚŽƌĂƚŝŽŶĐĂŶďĞĚĞĨĞƌƌĞĚƚŚƵƐ
ĂůůŽǁŝŶŐƚŚĞDĂƚĞƌŝĂůĂĐĐŽƵŶƚƚŽŐĞƚ
ďĂĐŬŽŶƚƌĂĐŬďLJDĂLJ͘
ůƚĞƌŶĂƚĞŽƌƌĞĐƚŝŽŶ

,ŽǁĞǀĞƌ͕ĂŶŽƚŚĞƌŽƉƚŝŽŶƚŽŽĨĨƐĞƚƚŚĞ
ŽǀĞƌƐƉĞŶƚĂĐĐŽƵŶƚŝƐƚŽůĞǀĞƌĂŐĞƐŽŵĞ
ŽĨƚŚĞĐŽŶƚŝŶŐĞŶĐLJůŝŶĞŝƚĞŵĨŽƌDĂƌĐŚ
ĂŶĚƉƌŝůƚŽŽĨĨƐĞƚƚŚĞŽǀĞƌĂŐĞ͕
ĂůůŽǁŝŶŐƚŚĞĂĐĐŽƵŶƚƚŽŐĞƚďĂĐŬŽŶ
ƚƌĂĐŬĂŵŽŶƚŚƐŽŽŶĞƌ͘
 ^ƵŵŵĂƌLJ

• ƵŝůĚLJŽƵƌďƵĚŐĞƚĂŶĚĂĐĐŽƵŶƚĨŽƌĞǀĞƌLJ
ĞdžƉĞŶƐĞŽĨǁŚŝĐŚLJŽƵĂƌĞĂǁĂƌĞ
• ƵŝůĚĂƚƌĂĐŬŝŶŐŵĞĐŚĂŶŝƐŵƚŽƵŶĚĞƌƐƚĂŶĚŝĨ
LJŽƵĂĐƚƵĂůůLJƐƉĞŶƚŽŶƚŚĞƚĂƐŬƐƚŚĂƚLJŽƵ
ƉůĂŶŶĞĚ
• hƐĞƚŚŝƐƚƌĂĐŬŝŶŐƚŽďĞƚŚĞďĂƐŝƐŽĨƚŚĞďƵĚŐĞƚ
ĨŽƌŶĞdžƚLJĞĂƌĂŶĚŝƚǁŝůůďĞƐŝŵƉůĞƚŽƉƵƚƚŚĞ
ŶĞǁďƵĚŐĞƚƚŽŐĞƚŚĞƌ
 ŽŶĐůƵƐŝŽŶƐ

• ĞƌŽͲĂƐĞĚďƵĚŐĞƚǁŝůůĂůůŽǁLJŽƵƚŽ͗
– ŽŶƚƌŽůƚŚĞĨůŽǁŽĨǁŽƌŬĂŶĚŝƚƐĐŽƐƚ
– /ĚĞŶƚŝĨLJǁŚĞƌĞƐƚƌĞĂŵůŝŶŝŶŐŽƉƉŽƌƚƵŶŝƚŝĞƐĞdžŝƐƚ

• dŚĞdĞĂŵƚŚĂƚŚĞůƉĞĚĚĞǀĞůŽƉƚŚĞďƵĚŐĞƚǁŝůů͗
– ,ĂǀĞĨĂŝƚŚƚŚĂƚƚŚĞƚĂƐŬƐƚŚĞLJŶĞĞĚƚŽĂĐĐŽŵƉůŝƐŚ
ĂƌĞĨƵŶĚĞĚ
– <ŶŽǁƚŚĞƚŝŵĞƉĞƌŝŽĚĨŽƌǁŚŝĐŚƚŚĞƚĂƐŬƐĂƌĞ
ĨƵŶĚĞĚ
YΘ