New Worthington Industries CEO Andy Rose leads with the art of dealmaking
Andy Rose brought an offbeat background to a nearly 70-year-old steel manufacturing stalwart. His private equity prowess promises to take Worthington Industries into the future.
Destiny is an often-overused word. So, let’s just say it seems fateful Andy Rose was named CEO of Worthington Industries on Sept. 1, becoming the first non-McConnell to lead the local steel manufacturing giant since it was founded in 1955.
You be the judge.
“My grandfather [Mic McDaniel] and Mr. Mac [John H. McConnell, the founder of Worthington Industries, who died in 2008] went to high school together, Chester High School in West Virginia,” Rose says. “They played football together. My grandfather was student council president, and Mr. Mac was vice president.” The two remained friends all their lives.
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Rose’s father, Dick Rose, worked for Worthington Industries for several years in the early 1970s, in the plant and in purchasing.
The teenaged Rose became enamored with the stock market and, of course, had some Worthington Industries stock in his growing portfolio. “My grandfather was a stockholder, he believed in Mr. Mac from the early days of the company, and we benefitted from that,” he says. Rose says it’s hard to determine how much he’s made over the years from that initial stock, as it’s split and multiplied several times. Selling shares “helped me buy my first house,” he says.
On second thought, perhaps the word destiny might be appropriate.
Taking over for John P. McConnell, who succeeded his father as CEO in 1993, leaves a couple of pairs of rather large shoes to fill. But Rose seems poised to continue the company’s steady growth and the modernization and diversification plan launched by the second McConnell.
“I guess I’m blessed in that I don’t feel this massive burden or pressure” in being the first non-McConnell to lead the company, Rose says. “But I will tell you I have the utmost respect for the McConnells, and I’m highly motivated to help this amazing company continue to be successful.”
Rose was born in Columbus but grew up in the South, as his stepfather worked in pharmaceuticals and was transferred several times. Rose was a business major at the University of North Carolina, worked a few years at JPMorgan Chase, then earned an MBA at Duke University in 1996 and turned his sights to what he loved best: private equity.
“I love the risk-return aspect of investing capital,” Rose says.
He was recruited by Charlotte, North Carolina-based Wachovia National Bank and placed in the Atlanta office working on mergers and acquisitions and raising capital. “But they were also starting up a private equity group, and my goal was to work hard and beg and plead to get into that business,” Rose says.
His persistent pestering paid off.
“One of the guys [in the group] told me this guy had screwed up a financial model, can you redo it by Monday,” Rose says. “I did and they said, why don’t you work in our group for six months and see how it works out?”
Six months turned into five years.
And then, in September 2001, First Union, which also was based in Charlotte, completed a merger with Wachovia. “[First Union] had a private equity division 10 times our size, and they kicked us out,” Rose says. Undaunted, Rose and three others from the defunct division “convinced Goldman Sachs to back us, and they wrote us a $110 million check to buy our existing portfolio and do new investments.”
The new private equity firm was called Peachtree Equity Partners.
“To me, the thing that made Andy good at private equity, and now at Worthington, is he takes a very measured approach and is very analytical and thoughtful,” says David Christopher, another of the Peachtree founding partners. “He really understood cash flow and management teams.”
Learning what works
Professionals in private equity get to take a close look at hundreds of companies and the executive teams who run them. In good times and bad.
“You learn there are thousands of ways to make money—and lose money,” Rose says. He did his due diligence and put together a checklist of the leadership qualities he admired and thought added up to success.
“The most important thing if you’re leading a company is to have the trust of the people you work with and work for you,” Rose says. “If they don’t believe in you and the mission of the company, you’ll have a hard time motivating them. I also learned in private equity that some [CEOs] are super dynamic, great in front of people. And then you meet [other CEOs], and they’re quiet and a little introverted.”
Most people, he says, mistakenly assume the first type of leader is the better leader. This isn’t always the case. “Sometimes the quiet and reserved people know how to lead and run a business. You can build the respect of your team and employees both ways,” Rose says.
The McConnells are an example of the two different types of leadership, according to Rose.
“Mr. Mac had a more out-in-front leadership style, and John P. is a little more reserved,” he says. “But, when John P. decides to get up and speak, he’s one of the most dynamic speakers I’ve been around.”
As for Rose, he says he’s a combination of the two styles. “I’m not a limelight seeker who wants to be out in front of thousands of people, but I’m comfortable with it. My style of leadership is much more to hire great people and let them do their thing and trust that they’ll do the right thing. But of course, you have to guide them.”
Coming to Worthington Industries
Rose had no plans to return to Columbus or leave private equity. But then there’s that popular business expression: Man makes plans, and the stock market laughs.
He left Peachtree in 2007 to start a second private equity company within the publicly traded MCG Capital Corp., which is based in Arlington, Virginia. It was not a great time to launch a private equity venture as the Great Recession was pulling the economy into its turbulent depths. “We got our first deal funded and [MCG] said ‘We’re out of money,’ ” Rose says. “I had a mortgage and two kids and had to figure out what I was going to do.”
A call came in from Columbus—John P. McConnell was asking him to come up to Worthington Industries to talk. “He said, we’ll find a place to plug you in,” Rose says. But he wasn’t interested in being plugged in, and quickly turned his sights to the open CFO position at the company. This is a position that usually goes to an accountant or the company’s controller. Plus, Rose had never worked for a publicly traded company. But remember, he’s persistent. And determined.
Rose bought and studied a copy of the CFO Financial Leadership Manual and realized he had many of the skills required of the job, and that his private equity background could be a plus. “The most important role of the CFO is to allocate capital and invest it for the future,” he says. “And that’s what I did.”
Worthington Industries hired Bob McMaster as a consultant and to help lead the search for a new CFO. He championed Rose. “I talked to a bunch of candidates with the traditional CFO background,” McMaster says. “But, I thought of Worthington as a small holding company with a number of different businesses, and what intrigued me about Andy was his private equity background. His real expertise was in buying and selling companies. I talked to John [about hiring Andy], and he was moderately surprised, given his background. I told him Andy comes from a business where if he doesn’t do deals, he’s out of a job. And if he does bad deals, he’s out of a job. John said that made good sense.”
Asked to describe Rose, McMaster, who became his mentor, says he’s collaborative, thoughtful, straightforward and “has a good bedside manner.”
Soon after he accepted the CFO job, Rose and McMaster had dinner together. “I told him, it’s like you have a rocket tied to your back, and it’s a question of whether you’ll launch or explode,” McMaster says. “Obviously, he launched very well.”
Day one disaster
Actually, day one included a launch pad implosion. The day began with McConnell and the senior leaders deciding to announce “a $100 million inventory write-down because steel prices had plummeted,” Rose says. “That was a real eye-opener for me. [I immediately] got all the bank agreements—I needed to protect the balance sheet and preserve cash.”
Worthington weathered the economic hurricane better than many manufacturing and steel-producing companies, and it was able to make several acquisitions in the years coming out of the Great Recession that have paid off. “Warren Buffett has a saying: Be greedy when others are fearful, and be fearful when others are greedy,” Rose says.
Those were also the early days of a transformation plan implemented by McConnell that focused on three main areas: the steel-producing business, cylinders and the WAVE partnership with Armstrong to produce ceiling grid systems. “Each is about one third of our business,” Rose says.
In that pursuit, John P. McConnell quickly became a mentor for Rose.
“I remember Andy telling me how impressed he was by how much [McConnell] thinks about making sure the employees are taken care of and motivated to succeed,” Christopher says.
“Coming from private equity, that’s something we don’t think about as much.”
The succession plan
Rose was named president of Worthington Industries in 2018, and CEO two years later. “Andy is a good listener, approachable and is open minded,” John P. McConnell says of his successor. “He has a way of sorting through all the information and opinions to identify the best path forward. He’s earned the trust of the board, the investment community and our employees, and I’m confident that he’ll do a great job leading Worthington through its next phase of growth.”
As he looks ahead, in the midst of the Covid-19 pandemic and economic downturn, Rose believes Worthington Industries is positioned to get greedy in a strategic manner. “If we don’t [acquire companies], I would be very disappointed,” he says. “We have a better balance sheet today than we’ve ever had in my tenure here.”
Opportunities most likely will be in the cylinder business, led in part by the surging popularity of home baking and creme brulee, the custard dessert in which a culinary hand torch is used to caramelize the top layer of sugar, creating a crispy crust.
“We’re developing a lot of new products, and it’s no longer a cylinder business, it’s a consumer products business.” Rose says. “There’s been a big time increase in gas-grill cylinders, Coleman cylinders and even hand torches are up year over year.”
Learning on the job
The past several months have been a learning experience for Rose as he leads Worthington Industries through another tough economic time and the Covid-19 pandemic.
And, when he needs a little inspiration, he looks to his predecessor.
“John P. is a great mentor,” Rose says. “I used to think the CEO made all the decisions because they’re at the top. But John P. allows his leadership team to have input into strategy. And, the reality is, with a company of our size, you can’t make all the decisions. So, you have to hire all the right people and let them make a lot of decisions and then get involved in the big decisions.”
You were named CEO in the midst of the Covid-19 pandemic. What’s that been like, and how has Worthington adapted?
Early on, we spent a lot of time on safety protocols. Most of our businesses are essential. They kept operating and, if you look at our facilities, most of the jobs are spaced out. We have an amazing safety culture, and we approached Covid as a new hazard, how will we protect our people.
And then there’s the economic hardship caused by Covid.
That’s a different crisis. You don’t know where the bottom is, and you have to think three or four steps ahead, and that’s natural for me. [We’ve had to make many] human resources decisions, and those decisions are important in terms of our culture. Nobody likes laying people off.
How many people have you had to lay off?
About 5 percent. We’re sensitive to these people’s needs and treat them respectfully and give them a soft landing for what’s next, or we bring them back when the business supports it, and we have started bringing some folks back.
The company recently sold about a quarter of its stake in Nikola Corp. (a startup that focuses on zero-emission trucks) for $238 million. Why?
We’ll invest in a startup if it makes sense, and Nikola turned out to be wildly successful. The reason we sold some of our shares is we’re not an investment company, we’re an operating company, we make things. To have [Nikola] on our balance sheets for a short period is fine, but for an extended period, it doesn’t make sense.
You announced that $20 million from the Nikola sale will go to fund the Worthington Industries Foundation. What’s your philosophy on philanthropy?
We believe in supporting worthwhile community causes, and about 1 percent of our annual profits have always gone back into the community. With the 1 percent and the $20 million, the thought was to create something more sustainable for generations that will grow and allow us to give more to the community.
No easing-in period for new Worthington Industries CEO Andy Rose—he’s steering the company through the pandemic and a shaky economy.
Steve Wartenberg is a freelance writer.
President and CEO
In position since: Sept. 1, 2020
Employees/revenue: 7,500/$3.1B in FY 2020
Previous: Chief financial officer, 2008-18, and president, 2018-present, Worthington Industries; MCG Capital Corp., 2007-08; founding partner, Peachtree Equity Partners, 2002-07; vice president of private equity, Wachovia Capital Associates, 1996-2002
Education: Bachelor’s degree in business administration, University of North Carolina, 1992; MBA, Fuqua School of Business, Duke University, 1996
Resides: Upper Arlington
Family: Daughters Hannah, 20, and Sydney, 18