Page | 1

Annual
Report 2021
Internal year-end report to the
Executive Committee of the Board

Management Team:
CEO Michael Steele
VP Finance Iris Tong
VP Marketing Miguel Caruncho
VP Production Benedict Schweiger
VP R&D Bell Lotongmongkol
VP Strategy & HR Thao Nguyen

Page | 2

CONTENTS
Andrews at a Glance 12
Message from the CEO 3
Market Overview 4
Competitor Analysis 5
Product Analysis 6-10
High End 6-7
Performance 7-8
Size 8-9
Traditional 9
Low End 10
SWOT 10
Strategic Review 11-12
Action Plan 12
Appendices 13-19
Financial Statements 13-14
Pro-forma 15-16
BCG Product Portfolio 16-17
SWOT Analysis 17-18
TQM Savings/Error Margins 19
Management Team 20
Page | 1

ANDREWS AT A GLANCE

Market Share
Year 2021 marks the firms
inaugural year as the market leader in the
North American sensor industry at 37.96%
market share. The next highest value is
33.10%.

Andrews has also managed to
maintain an average of 41.2% contribution
margin among all of its products.

Maintenance of high contribution
margins stems from investments in TQM
and plant automation.


Return on Investment
After fluctuations in sales,
Andrews has entered a period of strong
growth with sales increasing by 27.19%
from the year 2020 to 2021 alone.

Andrews ROA and ROE have more
than doubled in the last year, hitting
13.1% and 19.3%, respectively. Andrews is
the industry leader in these ratios.

ROS on the other hand is at 10.6%,
3 percentage points behind the industry
leader Baldwin.

Profitability

Aggressive growth following the
recession with two product introductions.

Profitable in 2021 with a net profit
in excess of $30 million increased by
146% from year 2020.

Bright outlook for Andrews with
the economy and the sensor industry
expected to grow by 14.6% in 2022.
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
2014 2015 2016 2017 2018 2019 2020 2021
ROS/ROA/ROE
ROS ROA ROE
0.0%
10.0%
20.0%
30.0%
40.0%
2014 2015 2016 2017 2018 2019 2020 2021
Market Share & Contribution Margin
MKT Share Contribution Margin
$4,109
$199
($811)
$4,127
$2,216
$2,639
$12,230
$30,097
($1,000)
$7,000
$15,000
$23,000
$31,000
2014 2015 2016 2017 2018 2019 2020 2021
Andrews' Net Profit ('000)
Page | 2


Share Price
Andrews share price has risen
in recent years, surging to a value of
$66.69 in 2021. This is a $25.14
increase (60.5%) from 2020.

To deliver more value to
shareholders, Andrews has also bought
back shares in the last two years,
addressing share dilution from the
firms previous equity-based financing
policy.
Goals and Achievements

3.
Goal: Be the absolute industry leader in
quality.
Result: Highest cumulative impacts of TQM
among all players
Material costs reduction: 11.69%
Labour costs reduction: 14.00%
R&D cycle time reduction: 40.01%
Admin costs reduction: 60.02%
Demand increase: 14.32%

A

2.
Goal: Achieve an average
contribution margin of 35% across
the Traditional and Low End
segments.
Result: Average contribution margin
of 53% across the Traditional and Low
End segments in year 2021.

1.
Goal: Achieve an average
market share of 40% across the
High End, Performance, and
Size segments.
Result: Average market share of
49.5% across the High End,
Performance, and Size
segments in year 2021.

0
700,000
1,400,000
2,100,000
2,800,000
3,500,000
4,200,000
$0.00
$15.00
$30.00
$45.00
$60.00
$75.00
2014 2015 2016 2017 2018 2019 2020 2021
Stock Price & Shares
Number of Shares Stock Price
Page | 3

MESSAGE FROM THE CEO

Esteemed members of the board,

Last time we met, our management team outlined several key strategic goals that would be paramount to
our success. Today, I am ecstatic to report that we have met and surpassed all our targets. We are the
overall market leader with dominance in our targeted Top 3 segments (High End, Performance and Size),
and our Bottom 2 (Traditional and Low End segments) products' contribution margins are at an all-time
high. We have also maintained our status as the industry leader in quality. The result of all these
improvements was an incredible surge in profits. In this last fiscal year, we earned more profits than in
every other year of our management teams tenure combined.

Our success can be attributed to a combination of strategic planning and operational efficiency. I feel
strongly that we outlined the ideal Phase 2 strategy for our market conditions. However, these goals would
have been fruitless if it were not for our management team's tactical execution. Our R&D continues to be
on point, leading to high Customer Survey Scores record. I am proud of the way the team developed
extremely strong industry competencies in just a few short years of management.

Looking Forward

Now that Andrews has established the market presence and product portfolio that we have desired, we are
again entering a new phase in the companys life. Our focus now will be on refining our company as a
mature market player that can consistently deliver quality products to our customers and deliver great
value to our shareholders. We intend to continue to improve our margins and our financial ratios in every
year, while maintaining, if not improving, our market share.

Although we have experienced meteoric growth over the last few years, one target still eludes us: we want
to be the most profitable firm in the industry. We are quite close, and we anticipate that in the coming year
we can achieve that goal. Our refinements will push our margins even further. Even if we do not achieve
this in the next year, I feel that this goal has driven our teams success and will continue to do so in the
future.

In Good Hands

Our management teams success has not gone unnoticed. As a result, it is with a somber tone that I
announce that 2022 will be our final managing year, as our team will move on to other roles in other
industries. However, the strategy and initiatives outlined in this document will surely drive even further
success for the next management team. We have experienced great success with Andrews, but I am
confident the best is still yet to come.




Michael Steele
Chief Executive Officer

Page | 4

MARKET OVERVIEW

Andrews is a North American sensor manufacturer. It serves several segments of the sensor market and
offers a wide variety of products which find their use in technological products of all kinds. Below is a
breakdown of the different sensor market segments supplied by Andrews.

The Traditional Segment
Traditional customers seek proven products at a modest price. To satisfy these customers, it is important to
maintain a reasonably stable perceived product age and a relatively low price compared to the
competitors. Less important are the technological specifications and the reliability of the product. This
segment has 5 products competing for a slice of the pie and sits at 28.1% of the industry. In this extremely
competitive market, Andrews is selling Able.

The Low End Segment
Low End customers seek low price and
well proven products. The most important
buying criterion in this market is price. In
the Low End segment, Andrews has
effectively established Acre, which has
greatly contributed to its financial success.
With 4 products present, the Low End
segment is the largest portion of the
industry at 37.4%.

The High End Segment
High End customers seek cutting-edge
technology and the latest designs. This
segment is costly to remain competitive
in, but is characterized by strong margins
from premium-priced products. Andrews has become the market leader in this segment by carrying both
Adonis and Ares, collectively owning over half of the market. The High End segment has its
contribution to the industry at 12.7%.

The Performance Segment
Performance customers seek high reliability and cutting-edge product performance. This demand for fast
and reliable sensors has driven down margins in the market, which has deterred some firms in the industry
from competing. Only Andrews and Baldwin compete in this segment, with Andrews offering Aft and
Athena. This three-product segment rests at 10.9% of the industry.

The Size Segment
Size customers are willing to pay a premium for increasingly smaller sensors with excellent technological
specifications. There are 5 products in this space, two of which are Andrews brand offerings. Andrews
serves the segment with Agape and Adam. This segment makes up 10.8% of the entire industry.
Able
15%
Acre
24%
Adam
11%
Aft
15%
Agape
5%
Adonis
13%
Ares
14%
Athena
3%
Shares of Total Sales by Product
Page | 5

COMPETITOR ANALYSIS

The North American sensor industry consists of five players. Each player collectively comprised a single
monopoly but was forced into an oligopolistic situation seven years ago. To date, these firms have
operated independently and are as follows: Andrews, Baldwin, Chester, Digby, and Erie. Below is a
breakdown of the core competencies and weaknesses of Andrews competitors.

Baldwin
Firm Baldwin competes on a broad
differentiation strategy. They have a
strong presence in each segment
with product offerings that
effectively cater to each segments
buying criteria. They have the highest
automation ratings leading to their
high average contribution margin at
45.5% compared to Andrews 41.2%.
With strong operating and net
profits, Baldwin leads Andrews in the
Traditional and Low End segments.
Despite incurring an emergency loan
in year 2020, Baldwin is Andrews top
competitor.

Chester
Chester competes in the Traditional, High End and Size segments. By focusing on fewer segments, Chester
maintains good product standards in these markets. The firm also has a low leverage ratio of 1.3 with an
S&P rating of AAA, allowing it to take advantage of growth opportunities as it sees fit. Despite this, Chester
incurs high variable costs and is experiencing a decline in market share from Andrews proliferation in the
High End and Size segments.

Digby
Digby is a firm fully focused on the Low End and Traditional segments. Historically, Digby has had a steady
share of the market in both segments. The firm still retains a steady presence in the hypercompetitive
Traditional segment but continues to be edged out of the Low End segment by Andrews and Baldwins
product offerings. The firms ROS, ROA and ROE have been pushed into the negatives as of year 2021.

Erie
After exiting from the High End and Performance segments and phasing out from the Size segment, Erie
has adopted a similar strategy to firm Digby only having presence in the Traditional and Low End
segments. With the lowest average contribution margin and a meager market share of 7.11%, Erie has
struggled to remain profitable. Erie has a high leverage ratio of 5.3 and possesses an ROE of -58.0%.
Page | 6

PRODUCT ANALYSIS

Andrews has invested heavily in capital assets for the Bottom 2 segments (Traditional and Low End),
cementing their positions as Cash Cows with high contribution margins and relatively high market shares.
For the Top 3 segments (High End, Performance and Size), Andrews has driven product innovation and
TQM to consistently serve the market while maintaining healthy contribution margins.

Below is an analysis of each products health, nested in their respective segments. For an analysis of the
firms product portfolio in a BCG matrix framework, please refer to Appendix 3.

High End Segment

Adonis
Key Facts:
Cumulative Revenue: $167.1 M
Cumulative Net Margin: $23.9 M
Market share (by 2021): 26%

Adonis experienced a seamless
introduction in year 2018, achieving a
positive net margin despite heavy
expenditure in promotion and sales
(collectively $5.5 million). It has
experienced a steady growth in sales peaking at $48.4 million in year 2020, and then dropping in
year 2021 due to competing products being brought to competitive standard and the
cannibalization of Ares. While Adonis market share dropped to 26% in 2021, it still remains above
the segment average of 25%. To serve the segments need for cutting-edge technology, Adonis
must continue to undergo frequent product revisions in the forthcoming years.


Ares
Key Facts:
Cumulative Revenue: $53.7 M
Cumulative Net Margin: $5.7 M
Market share (by 2021): 28%

Ares on the other hand, experienced a
slower introduction into the segment.
After two periods of a negative net
margin due to aggressive marketing
spend, the product jumped in sales and
net margin from 2020 to 2021.Its market share increased from 11% to 28% representing its
settlement in the High End segment as a staple product. Ares contribution margin is at 38%, which
is the third highest in Andrews portfolio. As with Adonis, frequent product revisions are the main
priority for Ares down the line.
-$1,000
$9,000
$19,000
$29,000
$39,000
2019 2020 2021
Ares ('000)
Net Margin Sales
0%
10%
20%
30%
40%
2018 2019 2020 2021
Adonis
Market Share Contribution Margin
Page | 7

0%
10%
20%
30%
40%
50%
2014 2015 2016 2017 2018 2019 2020 2021
Aft
Market Share Contribution Margin
$0
$500
$1,000
$1,500
2014 2015 2016 2017 2018 2019 2020 2021
Sales Development ('000)
Adam Adonis Ares


Insight Spotlight: Sales Development in the High End Segment

After Adams repositioning into the Size
segment, Andrews introduced Ares into the
mix to compensate for a diminished
presence. While it is clear that the
introduction of Ares has cannibalized the
sales of Adonis, the effect was expected.
The rationale behind this move is twofold
to command the segment and to stymie
other firms growth in these markets. In
2021 alone, this move has led to over $29.2
million in sales otherwise unobtainable
without 2 products in the market. In the same time period, findings can be extrapolated from the
scenario analysis that Baldwin has lost $13.4 million in sales and Chester has lost a potential of
$12.1 million in sales.


Performance Segment

Aft
Key Facts:
Cumulative Revenue: $180.1 M
Cumulative Net Margin: $12.7 M
Market share (by 2021): 41%

Aft has enjoyed a growth in sales
of over $12 million from 2020 to
2021. As products dropped out
of the Performance segment, Aft
was favourably lifted in both its
margins and sales. Afts market
share also improved, capping at
41% in 2021. A relatively high
ending inventory resulted in
carrying costs that pulled back Afts contribution margin in 2021, but a steadier market going
forward and a segment growth rate of 10.9% ameliorate this outlook. As a whole, Afts contribution
margin is on the low end of Andrews portfolio (26%) and this is due to the segments strong
preference for reliable products. Reliable products are costlier to produce and thus yield lower
contribution margins. For the future, further capital investments will be made to improve Afts
waning margins.

Page | 8

Athena
Key Facts:
Cumulative Revenue: $10.2 M
Cumulative Net Margin: ($4) M
Market share (by 2021): 10%

Athena is Andrews newest addition to its portfolio, nestling itself in the Performance segment. As
the segment widened from product departures, an opportunity to capture even more of the
market at firm Baldwins expense was seen and taken. While Athena is at a negative net margin
capturing only a meager 10% market share, forecasts predict its performance in the year 2022 to
be at $3.9 million net margin and at 31.8% market share.

Insight Spotlight: The Trade-off between Halving the Performance
Segment and Not

As with the High End segment, introducing more products into the same segment is bound to cause
cannibalization. The biggest question in this segment was the assessment of whether or not the
introduction of a new product will cause enough of a benefit for Andrews and enough of a
reduction in Baldwins sales. While year 2021 had produced limited benefits with Baldwin still
possessing 49% share of the segment, the net effect of this move garners returns in the next year.
In 2022, the proposed net gain of the move is $19.7 million in sales while the net loss to Baldwin is
$17.8 million in sales. This difference can also be pronounced in a proposed market share gain of
18.4% for Andrews and a loss of 16.4% for Baldwin from Athenas presence in 2022.

Size Segment

Agape
Key Facts:
Cumulative Revenue: $142.0 M
Cumulative Net Margin: $9.1 M
Market share (by 2021): 13%

Agapes declining sales in 2021 show a
waning presence in the Size segment.
Sales dropped from $20.3 million in
2020 to $13.1 million in 2021. Delayed
R&D improvements for the product
have made it drop from the
competitive standard, which has translated into lost sales. Market share and contribution margins
have also followed suit. As a main priority for the health of Andrews product portfolio, Agape is
slated to begin the year 2022 as a competitive product. Its aggregated Customer Survey Score is
slightly behind Adam (99) and Buddy (102). Agape holds 13% of the market at a contribution
margin of 35%. The forecast for Agape in 2022 sees it at a net margin of $4.7 million, improving
from -$12,000 in 2021.
0%
10%
20%
30%
40%
2014 2015 2016 2017 2018 2019 2020 2021
Agape
Market Share Contribution Margin
Page | 9

Adam
Key Facts:
Cumulative Revenue: $146.5 M
Cumulative Net Margin: $13.9 M
Market share (by 2021): 30%

Due to the lagging from the
competitive standard in the High
End segment and the diminished
presence of Agape, Adam was
repositioned into the Size
segment. Revamping Adam in
High End proved too costly and
the exit of a product in the Size
segment set the stage for its refocusing. To do this, Adam had absorbed low net margins in years
2018 to 2019 from deferred R&D for the product. Adam experienced a market share of 9% in this
transitionary period. In 2020, Adams resurgence was marked by a positive net margin of $1.2
million then turning into $4.1 million in 2021. Adam commands 30% of the segment in 2021 with a
contribution margin of 34%. In the long run however, Adam can be seen as a mainstay in the Size
segment by keeping the offering catered to market specifications.


Traditional Segment

Able
Key Facts:
Cumulative Revenue: $291.5 M
Cumulative Net Margin: $42.3 M
Market share (by 2021): 19%

Product Able competes in a
hypercompetitive space with the
most competitors present in the
segment. Aggressive moves in
the year 2018 by Digby coupled
with the economic recession
pushed Able into a relatively low
market share of 14%, this forced
a net margin of -$455,000. After this turbulent period, Able recovered drastically. Its net margins
escalated well into positive values, peaking at $12.3 million in 2020. With competitors in the
segment continuously improving their offerings, Able has a 19% market share in 2021 with a $10.2
million net margin. The key driver for purchase in this segment is the perceived product age. Timely
revisions are the main strategy for competition in the future.
0%
10%
20%
30%
40%
2014 2015 2016 2017 2018 2019 2020 2021
Adam
Market Share Contribution Margin
0%
10%
20%
30%
40%
50%
2014 2015 2016 2017 2018 2019 2020 2021
Able
Market Share Contribution Margin
Page | 10

STRENGTHS
Industry leaders in ROA and ROE in year 2021
High profitability in Bottom 2 segments
Strong presence in Top 3 segments
Low turnover rate/Second highest productivity index
Strong cash flows from operations
Relatively low interest rates due to S&P rating
Competitive product attributes
WEAKNESSES
Too little capacity in the Low End, Performance, and
Size segments
Low level of automation in Top 3 segments
High variable costs
OPPORTUNITIES
Erie leaving the Size segment
Financing with low interest rates
Significant market growth in all segments
Price competitiveness in the Bottom 2 segments
THREATS
Losing market share in Bottom 2 segments to
Baldwin due to their advantage in cost leadership
Overestimation of sales leading to high inventory

Low End Segment

Acre
Key Facts:
Cumulative Revenue: $332.0 M
Cumulative Net Margin: $52.3 M
Market share (by 2021): 34%

Acre has seen a sharp growth
from year 2020 to 2021. Its
market share grew 9% in that
period alone to 34%, spurred on
by other products in the segment lagging from the competitive standard. This resulted in a net
margin of $27.7 million in 2021, a 120% increase from 2020. Acre is also the industry leader in
contribution margins at 58%, surpassing even that of firm Baldwins products. By holding a
significant portion of the market and trading at a high margin, Acre is positioned suitably as a Cash
Cow in every sense of the word. To meet the burgeoning demand, periodic investments in capacity
are the next step for improvement.
SWOT ANALYSIS













Please refer to Appendix 4 for a detailed SWOT analysis.
0%
10%
20%
30%
40%
50%
60%
2014 2015 2016 2017 2018 2019 2020 2021
Acre
Market Share Contribution Margin
Page | 11

0%
20%
40%
60%
Material
Cost
Reduction
Labor Cost
Reduction
R&D Cycle
Time
Reduction
Admin Costs
Reduction
Demand
Increase
Cumulative TQM Impacts
Andrews Baldwin Rest of Industry
STRATEGIC REVIEW

Andrews strategy in Phase 2 has three main objectives: increase market share in the Top 3 segments,
increase contribution margins in the Bottom 2 segments, and become the industry leader in quality. We
have achieved these goals in the following ways:
1. Increase Market Share in the Top 3
In addition to Andrews' original plan to
reposition Adam and launch Ares, an
opportunity also arose to further penetrate the
Performance segment. Every firm except
Baldwin exited the Performance segment,
leaving a wildly underserved market. As a result,
Andrews introduced Athena into the
Performance segment, which quickly gained
attraction and led to an unprecedented spike in
Andrews market share in 2021.
2. Increase Contribution Margins in
the Bottom 2
Andrews' cash position in 2019 and 2020 lent
itself well to this strategic initiative. The firms
conservative cash flow management meant it
had financed for more than what was initially
anticipated. However, this ended up working to
Andrews advantage as the firm had more than
enough cash to fund its capital expenditures. As
a result, overall plant capacity is healthy and
automation for Acre is ahead of the firms
target.
3. Become the Industry Leader in
Quality
Andrews was able to stick to its commitment
and spent to the point of diminishing returns on
TQM initiatives. Additionally, other firms
generally seemed unwilling to make this same
kind of investment, making this an area of
significant market advantage for Andrews,
especially over the small players in the market.
Please refer to Appendix 5 for total cost savings
with TQM.
0%
10%
20%
30%
40%
50%
60%
2014 2015 2016 2017 2018 2019 2020 2021
Top 3 Market Share
High End Performance Size
0%
10%
20%
30%
40%
50%
60%
2014 2015 2016 2017 2018 2019 2020 2021
Bottom 2 Contribution Margin
Traditional Low End
Page | 12

Despite these successes, there were some missteps over the course of Phase 2 that must be noted:
In the year 2019, the firms concern for profitability sparked a small sale of plant capacity in Adam and
Agape (80 units each). This sale had brought more concerns that capacity may have to be repurchased
to match growth. However, since one of Andrews priorities is to be profitable, the management
believes that it was the best option at the time.
The companys forecasting, while much improved, still had some missteps. In the year 2020, Andrews
did not anticipate other firms leaving the Performance segment as a result, Aft was under-produced
for the year. Not only was Andrews own market potential unreached, but the entire segment was
underserved by approximately 400 units.
On the other side in the Size segment, Andrews was not prepared for how competitive the segment
would become as it matured, leading to a relatively large amount of inventory of Agape in years 2020
and 2021.

ACTION PLAN MOVING FORWARD

The firms focus will be on maturing through refined margins, incremental spends, and consistent
shareholder value. To achieve this, a three-step action plan is outlined below:

1. Incremental Capital Expenditures

Now that Andrews plants have reached the highest possible level of automation for Acre, the focus will
shift to incremental automation improvements in other products. The immediate priority will be
automating Able, Aft, and Athena. Efforts will also continue to be made to keep capacity in line with
demand, as per company policy.

2. Continued Investment in Human Resources and Total Quality Management

Andrews has invested to the point of diminishing returns on both HR and TQM over the last years, to great
effects. Moving forward, Andrews will continue to afford to spend even past that point, as a way of
ensuring that the company gets the absolute best out of its people and its resources. The anticipated result
of this is a small improvement in margins, efficiency, and demand giving Andrews an unmatched
advantage in the sensor industry.

3. Provide Consistent Value to Shareholders

The firm has hit a point in its life where shareholders can expect tangible value on a yearly basis. This will
come in the form of a stable and improving share price, as well as share buybacks and dividends. In this
upcoming year, Andrews will be issuing dividends for the first time at $10 per share.

Page | 13

APPENDICES

Appendix 1: Past Financial Statements with Common-size Analysis

Income Statement

Year 2018 2019 2020 2021
Sales $183,480 100.0% $195,210 100.0% $222,817 100.0% $283,410 100.0%
Variable Cost $127,216 69.3% $123,565 63.3% $131,499 59.0% $166,590 58.8%
Contribution Margin $56,263 30.7% $71,645 36.7% $91,318 41.0% $116,821 41.2%
Depreciation $12,480 6.8% $12,875 6.6% $15,288 6.9% $18,328 6.5%
SG&A $34,564 18.8% $33,062 16.9% $37,027 16.6% $41,069 14.5%
Net Margin $9,219 5.0% $25,709 13.2% $39,003 17.5% $57,424 20.3%
Other $1,022 0.6% $15,643 8.0% $15,600 7.0% $5,192 1.8%
EBIT $8,197 4.5% $10,066 5.2% $23,403 10.5% $52,232 18.4%
Interest $4,718 2.5% $5,923 3% $4,204 1.9% $4,983 1.8%
Taxes $1,218 0.7% $1,450 0.7% $6,720 3.0% $16,537 5.8%
Profit Sharing $45 0.0% $54 0.0% $250 0.1% $614 0.2%
Net Profit $2,216 1.2% $2,639 1.4% $12,230 5.5% $30,097 10.6%

Balance Sheet
Year 2018 2019 2020 2021
Cash $1,575 1.0% $33,013 19.0% $25,874 13.0% $12,509 5.5%
Accounts Receivable $25,134 15.3% $26,741 15.4% $30,523 15.3% $38,823 17.0%
Inventory $28,898 17.6% $5,025 2.9% $8,140 4.1% $26,115 11.4%
Total Current Assets $55,607 33.8% $64,779 37.3% $64,537 32.3% $77,447 33.8%

Plant and Equipment $187,200 113.8% $198,520 114.4% $240,120 120.3% $274,920 120.0%
Accumulated
Depreciation ($78,307) (47.6%) ($89,741) (51.7%) ($105,029) (52.6%) ($123,357) (53.9%)
Total Fixed Assets $108,893 66.2% $108,779 62.7% $135,091 67.7% $151,563 66.2%
Total Assets $164,500 100.0% $173,558 100.0% $199,628 100.0% $229,010 100.0%

Accounts Payable $11,326 6.9% $8,144 4.7% $10,984 5.5% $9,941 4.3%
Current Debt $17,900 10.9% $6,000 3.5% $25,850 12.9% $14,000 6.1%
Long Term Debt $20,850 12.7% $42,350 24.4% $28,500 14.3% $49,500 21.6%
Total Liabilities $50,076 30.4% $56,494 32.6% $65,334 32.7% $73,441 32.1%

Common Stock $79,191 48.1% $79,191 45.6% $84,191 42.2% $78,660 34.3%
Retained Earnings $35,234 21.4% $37,873 21.8% $50,103 25.1% $76,909 33.6%
Total Equity $114,425 69.6% $117,064 67.4% $134,294 67.3% $155,569 67.9%
Total Liabilities &
Owners' Equity $164,500 100.0% $173,558 100.0% $199,628 100.0% $229,010 100.0%

Page | 14

Cash Flow Statement
Year 2018 2019 2020 2021
Cash flows from operating
activities
Net Income (Loss) $2,216 1.2% $2,639 1.4% $12,230 5.5% $30,097 10.6%
Adjustment for non-cash items:
Depreciation $12,480 6.8% $12,875 6.6% $15,288 6.9% $18,328 6.5%
Gains/Loss/Write-offs $0 0.0% ($432) (0.2%) $0 0.0% $0 0.0%
Changes in current assets and
liabilities
Accounts payable $1,191 0.6% ($3,181) (1.6%) $2,840 1.3% ($1,042) (0.4%)
Inventory ($14,047) (7.7%) $23,873 12.2% ($3,114) (1.4%) ($17,975) (6.3%)
Accounts receivable ($11,174) (6.1%) ($1,607) (0.8%) ($3,782) (1.7%) ($8,300) (2.9%)
Net cash from operations ($9,333) (5.1%) $34,167 17.5% $23,461 10.5% $21,107 7.4%

Cash flows from investing activities
Plant improvements ($27,600) (15.0%) ($12,328) (6.3%) ($41,600) (18.7%) ($34,800) (12.3%)

Cash flows from financing activities
Dividends paid $0 0.0% $0 0.0% $0 0.0% $0 0.0%
Sales of common stock $20,440 11.1% $0 0.0% $5,000 2.2% $0 0.0%
Purchase of common stock $0 0.0% $0 0.0% $0 0.0% ($8,823) (3.1%)
Cash from long term debt issued $0 0.0% $21,500 11.0% $7,000 3.1% $21,000 7.4%
Early retirement of long term debt $0 0.0% $0 0.0% $0 0.0% $0 0.0%
Retirement of current debt ($7,000) (3.8%) ($17,900) (9.2%) ($6,000) (2.7%) ($25,850) (9.1%)
Cash from current debt borrowing $4,000 2.2% $6,000 3.1% $5,000 2.2% $14,000 4.9%
Cash from emergency loan $0 0.0% $0 0.0% $0 0.0% $0 0.0%
Net cash from financing activities $17,440 9.5% $9,600 4.9% $11,000 4.9% $327 0.1%

Net change in cash position ($19,493) (10.6%) $ 31,439 16.1% ($7,139) (3.2%) ($13,366) (4.7%)
Closing Cash Position $1,575 0.9% $33,013 16.9% $25,874 11.6% $12,509 4.4%
Page | 15


Appendix 2: Year 2022 Pro-forma with Common-size Analysis

Income Statement
Scenario Worst Case Base Case Best Case
Sales $325,880 100.0% $344,807 100.0% $365,158 100.0%
Variable Costs $194,763 59.8% $203,467 59.0% $214,560 58.8%
Contribution Margin $131,117 40.2% $141,340 41.0% $150,598 41.2%
Depreciation $18,328 5.6% $18,328 5.3% $18,328 5.0%
SGA $36,801 11.3% $2,728 0.8% $36,911 10.1%
Net Margin $75,988 23.3% $86,158 25.0% $95,359 26.1%
Other $222 0.1% $222 0.1% $222 0.1%
EBIT $75,766 23.2% $85,936 24.9% $95,137 26.1%
Interest $4,241 1.3% $4,241 1.2% $4,241 1.2%
Taxes $25,034 7.7% $28,593 8.3% $31,814 8.7%
Profit Sharing $930 0.3% $1,062 0.3% $1,182 0.3%
Net Profit $45,561 14.0% $52,040 15.1% $57,901 15.9%

Balance Sheet
Scenario Worst Case Base Case Best Case
Cash $8,782 4.2% $22,560 10.5% $38,239 17.3%
Accounts Receivable $44,641 21.3% $47,234 21.9% $50,022 22.6%
Inventory $22,511 10.8% $12,619 5.9% $13 0.0%
Total Current Assets $75,934 36.3% $82,413 38.2% $88,274 39.9%

Plant and Equipment $274,920 131.4% $274,920 127.5% $274,920 124.1%
Accumulated
Depreciation ($141,685) (67.7%) ($141,685) (65.7%) ($141,685) (64.0%)
Total Fixed Assets $133,235 63.7% $133,235 61.8% $133,235 60.1%
Total Assets $209,169 100.0% $215,648 100.0% $221,509 100.0%

Accounts Payable $10,327 4.9% $10,327 4.8% $10,327 4.7%
Current Debt $0 0.0% $0 0.0% $0 0.0%
Long Term Debt $49,500 23.7% $49,500 23.0% $49,500 22.3%
Total Liabilities $59,827 28.6% $59,827 27.7% $59,827 27.0%

Common Stock $71,857 34.4% $71,857 33.3% $71,857 32.4%
Retained Earnings $77,486 37.0% $83,965 38.9% $89,826 40.6%
Total Equity $149,343 71.4% $155,822 72.3% $161,682 73.0%
Total Liabilities &
Owners' Equity $209,170 100.0% $215,648 100.0% $221,509 100.0%


Page | 16

Cash Flow Statement
Scenario Worst Case Base Case Best Case
Cash flows from operating
activities
Net Income (Loss) $45,561 14% $52,040 15% $57,901 16%
Adjustment for non-cash items:
Depreciation & Write-offs $18,328 6% $18,328 5% $18,328 5%
Changes in current assets and
liabilities
Accounts payable $386 0% $386 0% $386 0%
Inventory $3,603 1% $13,495 4% $26,101 7%
Accounts receivable ($5,818) (2%) ($8,411) (2%) ($11,199) (3%)
Net cash from operations $62,060 19% $75,838 22% $91,517 25%

Cash flows from investing
activities
Plant improvements $0 0% $0 0% $0 0%

Cash flows from financing
activities
Dividends paid ($38,332) (12%) ($38,332) (11%) ($38,332) (10%)
Sales of common stock $0 0% $0 0% $0 0%
Purchase of common stock ($13,455) (4%) ($13,455) (4%) ($13,455) (4%)
Cash from long term debt issued $0 0% $0 0% $0 0%
Early retirement of long term
debt $0 0% $0 0% $0 0%
Retirement of current debt ($14,000) (4%) ($14,000) (4%) ($14,000) (4%)
Cash from current debt
borrowing $0 0% $0 0% $0 0%
Cash from emergency loan $0 0% $0 0% $0 0%
Net cash from financing
activities ($65,787) (20%) ($65,787) (19%) ($65,787) (18%)

Net change in cash position ($3,727) (1%) $10,051 3% $25,730 7%
Closing Cash Position $8,782 3% $22,560 7% $38,239 10%

Appendix 3: Andrews Product Portfolio in BCG Matrix Framework
General BCG Matrix Framework

Page | 17

Adonis
Ares
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Relative Market Share (%)
Athena
Aft
Adam
Agape
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0 20 40 60 80 100 120 140 160 180 200
M
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Able
Acre
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Relative Market Share (%)
High End Segment Performance Segment







Size Segment Low End & Traditional Segments








Appendix 4: Detailed SWOT Analysis

Strengths
The firms ROS, ROA and ROE have markedly improved over the last few years, achieving healthy
values. Andrews is an industry leader for ROA and ROE in year 2021 with its utilization of capacity and
buying back of shares with free cash flow.
Andrews has a strong presence in the Top 3 segments. Andrews commands 54% of the market in the
High End segment, 51% in the Performance segment, and 43% in the Size segment. This has come
from Andrews continuous product innovation, taking advantage of underserved markets.
On the other hand, Andrews has a high profitability in the Bottom 2 segments with product Acre
having a 58% contribution margin (Low End) and Able at 48% (Traditional).
In terms of its HR competencies, Andrews has achieved the second lowest turnover rate at 6%.
The firm also has the second highest Productivity Index at 123.8%.
Andrews has garnered $21.1 million in cash from operations in the last operating year alone (2021).
This places Andrews in a strong position to invest in a variety of avenues without compromising its
financial structure.
Page | 18

Relatively low interest rates due to the firms S&P rating of A. Despite taking two rounds of long-term
debt within the last two years, Andrews has maintained a solid S&P rating. This allows the firm to have
the financial capabilities of capitalizing on future growth opportunities.
Andrews has consistent R&D, which led to competitive product attributes.

Weaknesses
Demand for products in the Low End, Performance and Size segments grew significantly in the last few
years due to a mixture of products exiting and lagging in innovation. Despite this, Andrews production
capacity for products in these segments has not increased.
Andrews has low levels of automation for its products in the Top 3 segments. Though this is true,
frequent R&D revisions are required to innovate these products to competitive standards and
automating increases the length of R&D cycles. Recent TQM improvements have decreased R&D cycle
times representing the possibility of further investment in automation.
As a result of having a large portfolio with low automation, the firms variable costs are relatively high.
For comparison, Andrews main competitor Baldwin has variable costs amounting to $134,793 in year
2021. In the same year Andrews incurred $166,590.

Opportunities
The Size segment has become more attractive as Erie decides to withdraw Egg out next year (2022).
There will only be three firms competing in this segment with two products from Andrews Agape
and Adam representing a huge part of the market available for Andrews to serve.
After a period of recession, the market is once again growing. From negative growth rates in the
industry in years 2018 and 2019, the market has recovered to an average growth rate exceeding 10%
across all segments. Specifically, the Performance segment is seeing a growth of 19%, furthering the
opportunities available there.
The Bottom 2 segments regard price as an important driver for purchasing. Andrews has managed to
maintain an above average presence in these markets despite being in the upper boundary of the
segments price ranges. The firm can then capitalize on this with its high contribution margins for Able
(48% as of 2021) and Acre (58% as of 2021). By having the financial leeway to lower its price, Andrews
can garner more market share, ultimately leading to greater overall profits.
Threats
Firm Baldwins aggressive borrowing stance has allowed it to invest considerably in many avenues.
While Andrews ratios are of a similar level, Baldwins early and consistent investments into
automation has allowed for very high margins. This gap has proven to be difficult to close.
Due to the volatile nature of many of the segments, demand forecasting has proven to be a difficult
task. Products are constantly exiting, lagging or innovating in unpredictable manners. Case in point,
after Digbys introduction of two more products in the Traditional and Low End segments, it decided
to pull out both products in the following year. This has spurred a more rigorous inventory error
analysis with production cushions heavily reliant on these error margins. Please refer to Appendix 6
for forecasting error margins.

Page | 19


Appendix 5: Total Cost Savings with TQM
Note:
MC Material costs
LC Labour costs
AC Admin costs








Appendix 6: Forecasting Error Margins

MPE Mean Percentage Error
Actual VS
Potential
Forecast VS Actual

MPE MPE
MPE (First Board
Meeting)
MPE (Second
Board Meeting)
Able 8.29% 9.34% 17.36% -1.35%
Acre 1.29% -6.48% -3.88% -9.94%
Adam 3.17% -2.53% -2.82% -2.15%
Aft -0.84% -4.08% 3.94% -14.78%
Agape 4.90% 7.84% 2.35% 15.17%
Adonis 2.20% -1.03% -12.18% 2.69%
Ares -24.19% 1.09%

1.09%
Athena 0.00% 55.89%

55.89%
Avg.
1
-0.65%

Avg.
2

3.17%

Note
1
: The first average calculation includes all products in Andrews portfolio.
Note
2
: The second average is calculated without Ares and Athena due to production constraints.




2019 2020 2021
TQM Expenditures $15,000 $15,000 $4,010

Total Material $70,521 $77,077 $98,030
Total Labour $52,441 $53,445 $65,425
Admin $4,369 $3,381 $4,253

MC Reduction 5.03% 11.35% 11.69%
LC Reduction 6.21% 13.57% 14.00%
AC Reduction 43.11% 60.02% 60.02%

Savings
Material $3,735 $9,868 $12,977
Labour $3,472 $8,391 $10,651
Admin $3,311 $5,076 $6,385
Total $10,518 $23,335 $30,012
Page | 20

Appendix 7: Management Team

Michael Steele CEO
Michael comes to Andrews with a background in B2B digital marketing software.
In his leadership role, he is relied on to oversee the strategic vision of the
company and manage the execution of the company's goals and initiatives. His
personal background is in elite basketball, and he brings a competitor's mentality
to the sensor industry.

Iris Tong - VP, Finance
Iris brings years of financial acumen to her role as VP. Her main responsibilities
are procuring finance for various ventures, and molding financial structure. As
the team member most in tune with financials, she often acts as a "voice of
reason" in the meeting room.

Miguel Caruncho - VP, Marketing
Like Michael, Miguel's professional background is in
digital marketing. However, he also has a formal education in Psychology, which
lends him a unique perspective in our oligopolistic marketplace. He has
established a methodology for creating our sales forecasts and pro-forma
statements, and is responsible for our yearly marketing budgets. Miguel also has
experience in startups, which gives him a keen eye for Andrews areas of growth.

Benedict Schweiger - VP, Production
Ben brings a holistic perspective to production that is fitting of his background
in general business. He determines our production levels, optimal plant
investments, and the cushion of inventory we are comfortable in taking on. He
exceeds in his field by building full business cases for his initiatives and
maintaining a focus on shareholder value.

Bell Lotongmongkol - VP, Research and Development
Bell brings a combination of business and engineering to her role as VP of R&D,
having honed her skills at an international engineering firm. She has developed a
systematic way to keep Andrews' products at the
forefront of the industry by utilizing long-term
projections. Her consistent focus on the true needs of
our customers drives our innovation.

Van Thao Nguyen - VP, Strategic Planning and HR
Thao arrived at Andrews with a background in sales and branding. She quickly
translated those skills in an executive role, where she coordinates our strategic
planning with the CEO and oversees our overall marketing mix. Her experience
with working face-to-face with clients also makes her a perfect head of HR.