Andrews Inc Board Meeting #2 v3

1

ANDREWS INC.“Always Ahead”

BOARD MEETINGMarch 10th , 2015

2

EXECUTIVE TEAM

Nick Krishan, R&D

Paul Thompson,CEO

Lauren Telford, Production

Tique Chandler, HR

Richard Lam, Marketing

Beverley See, Finance

3

EXECUTIVE SUMMARY

BUSINESS ENVIRONMENT

OPERATIONS

LOOKING FORWARD

PERFORMANCE

APPENDIX

4


5


%

5

• Low End and Traditional buyers value proven products at reasonable prices.

• High-end buyers value cutting edge technology and new designs.

• Exited from Performance and Size segments.

INDUSTRY - ELECTRONIC SENSORS

Industry demand has been lacking growth, increasing the competitiveness of industry making consistent sales difficult to achieve.

• Significant market contraction in 2020• Market demand has fluctuated widely• Strong growth expected in upcoming year

Traditional Low-End High-End$0

$15,000

0

750

1500

2250

Segment Sales Revenue

Units Sold

Year 4 Year 5 Year 6 Year 7 Year 890

95

100

105

110

115

120Growth Index

Traditional Low EndHigh EndExpected Growth

100

6


10%

%

5

AndrewsMaintained position as second leading firm in marketplace.

BaldwinMediocre sales combined with significant cash issues has plagued stock price.

ChesterRebounding slowly from earlier poor results.

DigbyContinues to dominate; however position is being challenged in the Low, High, and Traditional segments

COMPETITIVE LANDSCAPE

Firms have adapted to a unpredictable marketplace with different strategies and a significant variety of results.

Andrews Baldwin Chester Digby$0

$15,000,000

$30,000,000

$45,000,000

$37,000,000

$21,000,000

$36,000,000

$213,000,000 Market Capitalization

$213,000,000

Andrews Baldwin Chester Digby$0

$50,000

$100,000 $98,830 $98,605 $91,723

$342,096 Sales $342,000

7


%

5

PRODUCTS & PERCEPTION

Consumer preferences are beginning to become increasing differentiated adding pressure to product margins.

• Product categories that differ in size and performance metrics.

• Product Categories• Low End: aging and cheap • Traditional: proven products at a

moderate price• High End: cutting edge on both

metrics• Performance and Size: exited these

segments• Successes and Challenges

• In line with target markets’ expectations

• Challenge achieving specifications while keeping material costs down

8

OPERATIONS

9

RESEARCH & DEVELOPMENT

5

LOW END: CURRENT PRODUCT OFFERING• Phasing out Acre

• Achieved significant market share while competing with Able

• Kept as insurance policy• Transitioning Able

• Specifications reduced to match expectations and control costs

• Fully transitioned and well positioned

Slowed preference drift rates and material costs considerations made transition period longer than expected.

2.0 4.0 6.0 8.0 10.012.0

14.0

16.0

18.0

20.0

Acre

Able

Able

AbleAcre

Performance

Size

2020 2021 20220%

5%

10%

15%

20%

25%Low End

AcreAble

Year

Mar

ket S

hare • Market Perceptions and Material Costs

• Market perceptions moved slower than anticipated

• More intensive analysis of relationship between material costs and specifications

10

RESEARCH & DEVELOPMENT

5

TRADITIONAL: CURRENT PRODUCT OFFERING• New Product AhHa

• Low initial market penetration consistent with industry practices

• Introduced with expectation of consumer preferences changing more quickly

• Able transitioned to Low End; AhHa sole product in segment

New product took longer to match consumer preferences because of slowed drift rates.

• Position in Segment• AhHa achieved 20% market share in year

2022• Consumer awareness and accessibility

continue to increase• Well positioned in marketplace for future

sales2020 2021 2022

0%

5%

10%

15%

20%

25%Traditional

AbleAhHa

Year

Mar

ket S

hare

6.0 8.0 10.0 12.0 14.08.0

10.0

12.0

14.0

16.0

AhHa

Able

Able

AbleAhHa

Performance

Size

11

MARKETING

%

• Achieved consistent and competitive accessibility ratings

• Attained 26% market share in the High End segment

• Digby’s aggressive strategy and our inability to compete/predict was main contributor to shortfall

LEARNING OUTCOMES FROM HIGH END SEGMENT

More accurate sales forecasting and predicting competitors’ actions is next step

2019 2020 2021 20220%

10%

20%

30%

40%

50%

60%

70%High End Market Share

Andrews Baldwin Chester Digby

Year

Mar

ket

Sh

are

12

MARKETING

%

We spent heavily on marketing to create customer awareness / accessibility in first year of entering market – didn’t realize that market share lagged spending by a year

LOW END SEGMENT TRADITIONAL SEGMENT

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Year 4 Year 5 Year 6 Year 7

% A

war

enes

s /

Acce

ssib

ility

Mar

ket S

hare

Able Market Share Awareness Accessibility

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

5%

10%

15%

20%

25%


% A

war

enes

s /

Acce

ssib

ility

Mar

ket S

hare

AhHa Market Share Awareness Accessibility

13

PRODUCTION

AUTOMATION is a useful tool for increasing margins with slow segment drift rates

2. Low automation in High End

Drive Down Labour Costs Increased Margins

1. High automation in Traditional / Low End

3. Sell down capacity for Performance / Size

4. Ensure first shift capacity used fully / second tapped into, before

expanding

14

PRODUCTION

10%

%

5

• Production constraints haven’t capped availability or decrease units sold

• Increased in capacity with no decrease in plant utilization; able to fill new capacity with demand immediately

• One year of no production for Able to expand capacity and sell excess inventory (markets moving slower than expected)

• Plant utilization back to 131% after Able adjustment; production for Low End took off

PLANT UTILIZATION IS STABLIZING AT SUSTAINABLE LEVELS

Producing at only slightly over first shift capacity means potential to increase production without buying more capacity

131%113% 111%

0%20%40%60%80%

100%120%140%160%180%200%

Able Acre Adam AhHa

Plant Utilization Rates over Time2019 2020 2021 2022

15

HUMAN RESOURCES

10%

%

5

• Dramatic decrease in HR Admin Cost due to investment in TQM

• Overall reduction in HR spending

• Still reaping benefits from spending in previous years

EFFICIENT ALLOCATION OF DOLLARS

Dramatic decrease in HR costs over our competition due to TQM, which will increase margins going forward

2019 2020 2021 2022 $-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

$4,000.00

$4,500.00

Total HR Admin Cost


16

HUMAN RESOURCES

10%

%

5

• Stable increase in productivity, despite reducing training hours from 80 to 40

• Able to ‘coast’ off our initial investment in difficult financial times

• Able to shift HR spending to other departments

EFFICIENT ALLOCATION OF DOLLARS

In this difficult market, it is important to get the greatest value out of each dollar

2019 2020 2021 2022100.00%

105.00%

110.00%

115.00%

120.00%

125.00%

130.00%

Productivity Index


17

FINANCE

10%

%

5

WORKING CAPITAL

In order to forecast cash buffer in the future, we created a bear case scenario to stress test our liquidity needs

2015 2016 2017 2018 2019 2020 2021 2022(20,000)

(10,000)

0

10,000

20,000

30,000

40,000

Net Working Capital Needs

Accounts payable Inventory Accounts receivable

$'00

0s

Net working capital needs did not improve in 2020E leading to a draw of the emer-gency loan

• New way of forecasting demand did not go as planned as competitors used similar strategies in 2020

• Led to a larger than expected NWC draw of ~$10mm due to inventory build

• Net investment in PP&E of $6mm and debt due of $18mm led to a shortage of cash

• Normalized in 2021 as inventories were sold

18

FINANCE

10%

%

5

BEAR/BASE/BULL CASE SCENARIOS

Gives us clear indication of worse-case scenario and ensures we avoid emergency loans in the future

Market ShareBear Base Bull

Low End/Able 15% 19% 22%Traditional/Ah Ha 16% 20% 24%High End/ Adam 22% 26% 30%

Demand ForecastBear Base Bull

Low End/Able 1,561 1,978 2,290 Traditional/Ah Ha 1,211 1,514 1,817 High End/ Adam 824 974 1,123

Forecasted Cash BalanceBear Base Bull

(In'000s) $20,562 $40,854 $54,873

19

FINANCE

10%

%

5

• Used $11m generated for sale of Acre capacity and invested $10mm in capex for TQM in 2023E

• Holding everything else constant expect this to improve margins by 7%

• Calculated IRRs of 40%

• If similar capital returned to shareholders, it would result in an additional upside of 27%

Investment in TQM to bring down labor costs is the best use of capital

TQM DRIVING DOWN COSTS

No TQM TQM Savings

Labour Cost 29,582 25,411 14%

Material Cost 38,548 35,638 8%

Admin Cost 1,157 1,107 4%

EBITDA Margin 14% 21% 7%

20

FINANCE

10%

%

5

Work towards a healthy balance sheet with 2.0x -2.5x leverage

DELEVERAGING A FOCUS

Andrews Baldwin Chester Digby0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

4.0x

2.2x

5.1x

1.6x

Current Debt/EBITDA Across the Industry

• On a LTM basis, Andrews is currently levered at 4.0x Debt/EBITDA

• As the cost savings from TQM results in a FCF ramp, will use excess FCF to de-lever and refinance to get cost of capital down

• Debt/EBITDA spiked in 2020 due to taking emergency loan

• Have unwound debt ~2 turns in past year, and look to return to stated target as early as next year

21

PERFORMANCE

PERFORMANCE

22

10%

%

5

• 2nd highest stock price of $19.43

• Loss last year of ($594,000) directly attributable to ($5,334,000) loss on Acre

• Only team to post positive cumulative profit (besides Digby)

• Proforma normalized net profit of $7,199,000 in Year 8

Stock price rebounded last year on higher margins and strong sales growth; positive profits, higher margins still and strong market growth rates are all tailwinds in Year 8

KEY PERFORMANCE INDICATOR: Stock Price & EPS

$41.08

$27.15

$16.32 $19.43

$32.59

$39.63

$1.76$9.53

$1.48 $1.00$1.97

$14.81

$47.21$44.21

$50.83

$75.14

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00


Stock Prices Andrews Baldwin Chester Digby

Year 7 Andrews Baldwin Chester Digby

Stock price $19.43 $9.53 $14.81 $75.14Market Cap ($MM) $37 $21 $36 $213EPS ($0.32) ($1.83) $1.08 $7.08Cumulative Profit $6,554,769 ($5,299,808) ($14,980,798) $61,902,965

PERFORMANCE

23

10%

%

5 • Proforma return metrics look very bullish, due mostly to one-time item of $17.3MM

During a contractionary period for our industry, we have outperformed our closest competitors, and are poised to post positive ROE in Year 8

KEY PERFORMANCE INDICATOR: Return on Equity

86.2%

84.6%

71.4%

124.2%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

120.0%

130.0%


ROE Index Since First Board Meeting


-1.2%

23.1%

-0.5%

11.8%

-0.6%

11.6%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Year 7 Year 8

Year 7 Results & Year 8 ProjectionsROE ROA ROS

• ROE Index of 86.2% has us 2nd, only to Digby, since last board meeting

PERFORMANCE

24

%

5

• Contribution margins in Year 8 are 150 bps above where they sat last board meeting at 31.6%

• Have recovered nicely in last two years

• Proforma contribution margins for Year 9 are 42.0% based on increasing automation 1.5 points on a 10-scale across all products

Contribution margins lagged expectations – however, we believe we have finally turned them around

KEY PERFORMANCE INDICATOR: Contribution Margin

25

LOOKING FORWARD

26

Current Year Proforma - No Performance & Size FYE 2019 FYE 2019

Sales $174,476 $135,248Contribution Margin $55,213 $49,834Margin % 31.6% 36.8%EBIT Margin $21,091 $28,593Margin % 12.1% 21.1%

LOOKING FORWARD

10%

5

By focusing on our highest margin products we can drastically increase profitability & drive shareholder returns moving forward

LAST BOARD MEETING

• Contribution margins should increase 520 bps from 31.6% to 36.8%

• EBIT margins should nearly double, increasing 900 bps from 12.1% to 21.1%

• Reducing heavy marketing and R&D spend on Performance and Size products gives us more money to return to shareholders

27

LOOKING FORWARD

10%

Year 8 will see contribution margins increase from 28.5% to 33.1%

YEAR 8: MTBF YEAR 8: TQM

• TQM spending is a value tool to drive margins with no lead time and increasing returns to scale

• Moving from high end of MTBF rating to midpoint can add 3.5% to contribution margins

Low MTBF Rating

Mid Point MTBF

High MTBF Rating

25.0%26.0%27.0%28.0%29.0%30.0%31.0%32.0%33.0%34.0%35.0%

2.7%

3.5%

MTBF vs. Material Cost

Mat

eria

l Cos

t as

% o

f Sel

ling

Pric

e

28

LOOKING FORWARD

10%

5

Automation spending in Year 8 decision will drive large increases in contribution margins in Year 9

YEAR 9 CONTRIBUTION MARGINS

Estimated Contribution Margins Able Adam AhHa

Production 2000 800 18151st shift capacity 1400 900 1000% capacity 143% 89% 182%

Selling Price $18.00 $37.00 $26.50

Old Automation Rating 7.0 3.0 5.0Old Labour Cost/unit $5.62 $9.82 $8.95

Old Contribution Margin 37.2% 31.8% 30.4%

New Automation Rating 8.5 4.5 6.5New Labour Cost/unit $3.45 $7.80 $6.61

New Contribution Margin 49.3% 37.3% 39.3%Contribution Margin Increase 12.1% 5.5% 8.8%

Able Adam AhHa0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

37.2%

31.8% 30.4%

49.3%

37.3%39.3%

Estimated Contribution Margins

Old Automation Rating New Automation Rating

29

SUMMARY

Will return to being industry leaders in contribution margins and capital structure will once again be strong foundation for Andrews

1. Will naturally de-lever as cash flows are finally realized

HIGH MARGINS CAPITAL STRUCTURE

1. Year 8: ↑4.6% - $10MM in TQM spending and MTBF reductions

2. Year 9: ↑ 8.9% - Increase automation for all segments by 1.5

2. Large cash balance provides flexibility moving forward

30

APPENDIX

31

APPENDIX

10%

%

5

BALANCE SHEET

Balance Sheet (in$'000s) 2015 2016 2017 2018 2019 2020 2021 2022 2023E

Bear Base Bull

Cash $3,434 $12,093 $5,353 $5,877 $0 $0 $28,691 $17,524 $20,562 $40,854 $54,873Accounts Receivable 8,307 6,927 6,511 10,481 14,340 9,444 10,161 8,123 8,310 10,300 11,669Inventory 8,617 24,465 29,789 27,593 39,040 48,434 19,726 21,365 27,590 11,754 716Total Current Assets $20,358 $43,485 $41,653 $43,951 $53,380 $57,878 $58,578 $47,012 $56,462 $62,908 $67,258Plant and equipment 113,800 118,200 122,600 122,600 106,760 131,836 137,436 137,400 109,634 109,634 109,634Accumulated Depreciation (37,933) (41,413) (47,773) (55,947) (64,120) (58,048) (67,211) (76,347) (49,706) (49,706) (49,706)Total Fixed Assets 75,867 76,787 74,827 66,653 42,640 73,788 70,225 61,053 59,928 59,928 59,928Total Assets $96,225 $120,273 $116,480 $110,605 $124,460 $131,666 $128,804 $108,065 $116,390 $122,835 $127,186

Accounts Payable $6,583 $8,347 $6,717 $6,484 $10,358 $7,180 $5,029 5,734 $6,005 $6,005 $6,005Current Debt 0 0 6,950 0 18,745 13,748 20,850 0 0 0 0Long Term Debt 41,700 60,694 53,744 53,744 39,844 56,864 54,014 54,014 54,014 54,014 54,014Total Liabilities $48,283 $69,041 $67,411 $60,228 $68,947 $77,792 $79,893 $59,748 $60,019 $60,019 $60,019Common Stock 18,360 21,360 21,360 20,420 19,272 19,272 19,272 19,272 19,272 19,272 19,272Retained Earnings 29,582 39,872 27,710 29,956 36,241 34,602 29,639 29,045 37,098 43,543 67,166Total Equity $47,942 $51,231 $49,069 $50,376 $55,513 $53,874 $48,911 $48,317 $56,370 $62,815 $86,438Total Liabilities & Owner's Equity $96,225 $120,273 $116,480 $110,605 $124,460 $131,666 $128,804 $108,065 $116,390 $122,835 $127,186

32

APPENDIX

10%

%

5

INCOME STATEMENT

Income Statement (in$'000s) 2015 2016 2017 2018 2019 2020 2021 2022 2023E

Bear Base Bull

Sales $101,073 $101,141 $95,066 $127,519 $174,475 $114,898 $123,627 $98,830 $101,107 $125,322 $141,975Variable Costs (72,513) (74,138) (68,298) (84,397) (119,262) (83,767) (92,261) (70,694) (70,144) (84,079) (93,792)Direct Labor (28,932) (30,458) (26,863) (33,258) (50,824) (34,375) (40,147) (29,582) (32,076) (39,621) (44,823)Direct Material (42,546) (40,743) (37,860) (47,827) (63,754) (43,580) (49,746) (38,548) (34,757) (43,048) (48,883)Inventory Carry (1,034) (2,936) (3,575) (3,311) (4,685) (5,812) (2,367) (2,564) (3,311) (1,410) (86)

Gross Margin $28,560 $27,003 $26,768 $43,122 $55,213 $31,131 $31,366 $28,136 $30,963 $41,243 $48,183SG&A (8,978) (9,781) (14,340) (22,673) (26,948) (18,872) (17,512) (14,601) (13,012) (13,173) (13,285)R&D 0 (2,132) (3,424) (3,260) (3,943) (3,041) (1,930) (1,844) (1,545) (1,545) (1,545)Promotions (4,100) (2,900) (4,080) (7,200) (8,200) (6,700) (7,500) (6,100) (5,325) (5,325) (5,325)Sales (4,100) (3,850) (5,200) (9,772) (9,675) (5,500) (5,500) (5,500) (4,975) (4,975) (4,975)Admin (778) (899) (1,636) (2,441) (5,130) (3,631) (2,582) (1,157) (1,167) (1,328) (1,440)

EBITDA $19,582 $17,222 $12,428 $20,449 $28,265 $12,259 $13,854 $13,535 $17,951 $28,070 $34,898Depreciation (7,587) (7,880) (8,173) (8,173) (8,173) (8,789) (9,162) (9,160) (7,309) (7,309) (7,309)Net Margin $11,995 $9,342 $4,255 $12,276 $20,092 $3,470 $4,692 $4,375 $10,642 $20,761 $27,589Other 0 (1,320) (7) (32) (42) 2,442 (5,400) 11 17,301 17,301 17,301EBIT $11,995 $8,022 $4,248 $12,244 $20,050 $5,912 ($708) $4,386 $27,943 $38,062 $44,890Short Term Interest 0 0 (771) 0 (2,473) (1,868) 0 0 0 0 0Long Term Interest (5,421) (7,567) (6,803) (6,803) (5,065) (6,563) (6,926) (5,300) (5,300) (5,300) (5,300)Taxes (2,301) (159) 1,164 (1,904) (4,379) 883 2,672 320 (4,425) (7,966) (10,357)Profit Sharing (85) (6) 0 (71) (163) 0 0 0 (164) (296) (385)Net Profit $4,188 $290 ($2,162) $3,466 $7,970 ($1,636) ($4,962) ($594) $18,054 $24,500 $28,848Normalized Net Profit $4,188 $1,610 ($2,155) $3,498 $8,012 ($4,078) $438 ($605) $753 $7,199 $11,547Normalized Net Profit Margin 4% 2% -2% 3% 5% -4% 0% -1% 1% 6% 8%

33

APPENDIX

10%

%

5

CASH FLOW STATEMENT

Cash Flow Statement (in'000s) 2015 2016 2017 2018 2019 2020 2021 2022 2023E

Bear Base Bull

Cash flows from operating activitiesNet Income (Loss) $4,189 $290 ($2,162) $3,465 $7,969 ($1,639) ($4,963) ($594) $8,053 $14,498 $18,849Depreciation 7,587 7,880 8,173 8,173 8,173 8,789 9,162 9,160 7,309 7,309 7,309Extraordinary gains/losses/writeoffs 0 220 7 0 0 (4,793) 0 (11) (17,301) (17,301) (17,301)Accounts payable 3,583 1,764 (1,630) (233) 3,874 (3,178) (2,151) 706 271 271 271Inventory (8,617) (15,848) (5,324) 2,196 (11,446) (9,394) 28,708 (1,639) (6,225) 9,611 20,649Accounts receivable (307) 1,380 416 (3,970) (3,859) 4,897 (717) 2,038 (187) (2,177) (3,546)Net cash from operations $6,434 ($4,314) ($520) $9,632 $4,711 ($5,318) $30,039 $9,660 ($8,080) $12,211 $26,231

Cash flows from investing activitiesPlant improvements (net) $0 ($9,020) ($6,220) $0 ($12,600) ($6,703) ($5,600) $23 $11,118 $11,118 $11,118

Net cash from investing activities $0 ($9,020) ($6,220) $0 ($12,600) ($6,703) ($5,600) $23 $11,118 $11,118 $11,118

Cash flows from financing activitiesDividends paid (4,000) 0 0 0 0 0 0 0 0 0 0Sales of common stock 0 3,000 0 0 0 0 0 0 0 0 0Purchase of common stock 0 0 0 (2,158) (2,833) 0 0 0 0 0 0Cash from long term debt issued 0 18,994 0 0 0 17,020 18,000 0 0 0 0Early retirement of long term debt 0 0 0 0 0 0 0 0 0 0 0Retirement of current debt 0 0 (6,950) (6,950) 0 (18,745) (13,748) (20,850) 0 0 0Cash from current debt borrowing 0 0 6,950 0 0 0 0 0 0 0 0Cash from emergency loan 0 0 0 0 4,845 13,748 0 0 0 0 0

Net cash from financing activities ($4,000) $21,994 $0 ($9,108) $2,012 $12,023 $4,252 ($20,850) $0 $0 $0

Net change in cash position $2,434 $8,660 ($6,740) $524 ($5,877) $0 $28,691 ($11,167) $3,038 $23,329 $37,349

34

APPENDIX

10%

%

5

• Deploy excess FCF to invest in TQM. Expected to decrease cost of direct labour and materials to fall

• Retirement of acre and sale of capacity generates income (Other costs for 2023E)

• Looking forward, exploring increasing margins through further reinvestment in the business

COST STRUCTURE

Increased investments in plant capacity to decrease labour costs

2022 2023E(Base)

-20%

0%

20%

40%

60%

80%

100%

120%

30% 32%

39% 34%

3% 1%

15%11%

9%

6%

5%

4%

0%

6%

-1%

12%

Cost Structure Breakdown

Net IncomeOtherTaxesInterestDepreciationSG&AInventory CarryDirect MaterialDirect Labor

35

APPENDIX

10%

%

5

CAPITAL STRUCTURE

2015 2016 2017 2018 2019 2020 2021 2022 2023E$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

5.5x6.6x

7.1x

5.1x

4.8x

10.2x

6.9x6.3x

1.4x

CashLong Term DebtShort-term debtMarket CapEV/EBITDA(in

$'00

0s)

Cash build up will allow us to pursue additional TQM and capacity expansions as market forces dictate

36

APPENDIX

TQM IRR CALCULATION

Investing in TQM produces ~40% IRRs and also drives key metrics such as contribution margins

2022 2023E 2024E 2025E 2026E 2027E 2028E

Sales $98,830 $12,650 $12,650 $12,650 $12,650 $12,650 $12,650

EBITDA $13,535 $13,535 $2,657 $2,657 $2,657 $2,657 $2,657

DA ($9,160) ($1,172) ($1,172) ($1,172) ($1,172) ($1,172) ($1,172)

EBIT $4,375 $12,363 $1,484 $1,484 $1,484 $1,484 $1,484

Taxes ($1,531) ($4,327) ($519) ($519) ($519) ($519) ($519)

NOPAT $2,844 $8,036 $965 $965 $965 $965 $965

Capex ($10,000)

Cash Flows ($1,964) $965 $965 $965 $965 $965

IRRs 40%

Assumptions

Incremental Revenue 13%

Existing EBITDA margin 14%

New EBITDA Margin 21%

Tax Rate 35%

37

APPENDIX

STOCK PRICE

Andrews’ stock price depreciated over 41% due to the challenging industry environment and increasing leverage

2015 2016 2017 2018 2019 2020 2021 2022$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$34$31

$21

$29

$41

$29$26 $26

Andrew's Stock PriceOver 41% depreci-ation in stock price

38

APPENDIX

ROES and ROAS

Market is forecasted to grow and our new cost structure supports higher ROAs and ROEs

2015 2016 2017 2018 2019-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

ROEs and ROAs

ROAROE

Documents

Andrews Inc Board Meeting #2 v3