Angus Industries equipment

Decision Analysis Leads to a Smoother Ride for Angus

The transition from a private to a public company requires significant financial planning and analysis.

When Worthington Industries (IW 500/323), a $2.4 billion diversified metals-manufacturing company, acquired Angus Industries earlier this year, the synergies between the two companies were attractive. For one, the acquisition of privately held Angus, a $200 million manufacturer of cabs and operator stations for heavy construction equipment (e.g., large tractors and combines), increases Worthington's presence in the construction, agriculture and mining industries, all significant users of the steel products Worthington specializes in. Just as important, though, is the matchup of business philosophies.

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"Angus is a good fit with our strategic objective to decrease earnings volatility and bring higher value-added manufacturing," explains John McConnell, Worthington's chairman and CEO. "They have a dedicated workforce and a great management team with a focus on continuous improvement."

One member of that management team is William Knese, a 30-year financial executive who not only has 12 years of experience with Angus but also is the chair-elect of the Institute of Management Accountants. As his company's vice president of finance and administration and chief financial officer, Knese is heavily involved in Angus's transition from a midsize private company to a business segment of a large public company.

For instance, Angus was audited every year but was not subject to the Sarbanes-Oxley requirements. "We've had to adjust our reporting calendar because as a private company we could decide when the board was going to get together and when we would deal with our year-to-date results," Knese explains. "But with a public company there's a very well-defined reporting calendar because you have to meet SEC requirements and the market expects that you'll report to them in a certain timeframe."

Angus has four manufacturing plants throughout the US, which means it collects four sets of data, both financial and operational. "The operational measures and the metrics we use to run the business are based on cost accounting," Knese says. "We're a capital-intensive business. We get orders from customers and let's say we have to buy industrial robots or lasers or some type of equipment. For us to make that decision, we have to determine what sort of a return it will generate. So we're constantly using discounted cash-flow models to analyze and rank-order the projects we have to see whether that sort of investment makes sense."

  William Knese, CFO of Angus Industries
  "The operational measures and the metrics we use to run the business are based on cost accounting."
-William Knese, CFO of Angus Industries

As the economy slowly recovers from the recession, the role of the CFO is shifting from cutting costs and saving every nickel to becoming more proactive in helping to build the business. Acknowledging that the economy by nature is cyclical, Knese notes that when the company is in a growth mode, the first thing his department does is plan for the future.

"We look at how we can selectively add the resources we need, bearing in mind that there are costs to everything, but making sure that cost considerations don't constrain the business," he explains. "The things that we do are rooted in the numbers."

So, for instance, if Angus is determining which of five different projects in which to invest money, Knese's team employs financial-decision-analysis tools to help guide the decision. "There may be other strategic reasons for purchasing equipment, but you definitely want to know what the economic outcome is going to be," he notes. "There's always risk in a business. I get the biggest kick at the end of the day from knowing that some of the things I did, in terms of analyzing and providing decision support for the operation, are the things that got us to make a decision."

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