305 Bowman St.
Holding to a longstanding commitment to innovation, growth, improvement, and product superiority, Gorman-Rupp has seen its position as a leader in the domestic pump market dramatically expand to incorporate the global market as well. Today, this leadership is reflected in the vital role that Gorman-Rupp pumps are playing in municipal, industrial, and petrochemical operations worldwide.
The Gorman-Rupp Company ranks among the ten largest pump manufacturers in the United States. Throughout its more than 60 years in the fluids handling industry, Gorman-Rupp has positioned itself as a niche player, developing a particular emphasis on pumps used in the construction industry. Gorman-Rupp's product line ranges from small pumps for soft drink dispensers and medical devices to massive machines capable of moving up to 200,000 gallons of fluid per minute.
Its core operation, the Mansfield Division, generated 58 percent of total corporate revenues via the design, manufacture, and sale of self-priming centrifugal pumps. Acquired in 1988, the Patterson Pump Subsidiary contributed another 31 percent of sales, but this segment's large volume centrifugal pumps were cited as a drag on Gorman-Rupp's profitability in the mid-1990s. The manufacturer's remaining revenues came from three divisions: Gorman-Rupp Industries, IPT, and Ramparts. These business segments produced small specialty pumps, often for original equipment manufacturers. The corporate credo, "to enter a field of pumping service only when able to provide superior products with better performance," codifies its fairly conservative long-term strategy.
Founded During the Great Depression
Gorman-Rupp's roots stretch back well over half a century to 1933 when two engineers, J. C. Gorman and Herbert E. Rupp, pooled $1,500 and started a pump manufacturing business in a barn outside the small town of Mansfield, Ohio. By that time, pumps had long been integral to many businesses. In fact, pumps remained the second most common machine used in industry into the 1990s. Perceiving an opportunity to carve out a profitable niche in this highly fragmented industry, Gorman and Rupp worked diligently to design pumps with particular features for specific tasks.
They established a long-standing corporate reputation for product development early on, launching "the first simplified self-priming centrifugal pump with no valves or orifices" in 1933. In keeping with its name, a centrifugal pump generates drawing pressure by moving liquids (and in some applications gases) in a circular pattern. The "self-priming" part of the name meant that the machine did not need a consistent flow of fluids in order to maintain its pumping capacity. These relatively quiet, rugged, and inexpensive devices are most often used to remove water (known in industry parlance as "dewatering") at intermittently wet construction sites, sewers, and quarries. Self-priming centrifugal pumps formed the core of Gorman-Rupp's product line.
World War II and Postwar Era
Within six years of its creation, the company was generating about $345,000 in annual sales. In the 1940s, Gorman-Rupp developed a solids handling trash pump that featured a removable endplate for easy maintenance. The company would later call it a "bellwether" product, one often imitated by competitors. Fueled in part by wartime contracts with the U.S. Army and Navy, for which the company was awarded an "E" for excellence, Gorman-Rupp sales multiplied to over $2 million by 1949. Manufacturing capacity grew correspondingly, and the company moved from its rural barn to a factory in town during this decade.
Sales continued to mount rapidly in the postwar era, when Gorman-Rupp's close attention to the dewatering needs of the constriction industry paid off. In 1952, the company re-engineered a diaphragm pump for this market. Diaphragm pumps incorporate a flexible, but impenetrable membrane that prevents the material being pumped from coming in contact with the inner workings of the pump and vice versa. They are designed to pump abrasive or uncontaminated substances, and can also tolerate extended dry runs. Gorman-Rupp improved on the basic diaphragm pump design by decreasing the pump's weight and increasing its capacity. The pump manufacturer benefited indirectly from the residential housing boom of the 1950s. Its revenues tripled over the course of the decade, from $2.25 million in 1949 to $7 million by 1959.
Diversification Begins in 1950s, Accelerates in 1960s and 1970s
But company executives realized that they could not rely on a single market--especially one as cyclical as the construction industry--for consistent sales and earnings growth. The seeds of the diversification process were sown in the early 1950s, when the firm established its Gorman-Rupp Industries Division in nearby Bellville, Ohio. Created to meet the needs of original equipment manufacturers (OEMs), Gorman-Rupp Industries made small, specialized pumps used in larger machines like photocopiers, coffee machines, kidney dialysis machines, and photo-processing equipment. This division's emphasis on research and development helped make it the parent company's highest-margin segment by the mid-1990s.
In 1960, the company went international with the construction of a plant in Ontario, Canada. Gorman-Rupp of Canada Limited mirrored the parent company's main plant in Ohio, and its product line grew accordingly.
Gorman-Rupp also began to diversify within the pump category in earnest in the 1960s. It launched new lines of submersible pumps for mining, centrifugal pumps and fiberglass pumping stations for municipal sewage systems, specialty pumps for moving home heating oil and aircraft fuel quickly and safely, as well as pumps for the consumer market (i.e., the "handy pump") and a backpack pump for firefighters. These technological developments and the new markets they opened helped triple Gorman-Rupp's sales for the second consecutive decade, from $7 million in 1959 to $21 million by 1969.
The company continued to penetrate new niches of the pump industry in the 1970s, launching a magnetic drive pump that could be used to move liquid metals. A key development of this decade was the creation of the Gorman-Rupp International Division, which marketed the entire line of pumps via overseas distributors. This segment's contribution to sales rose from 7 percent in 1980 to about 11 percent in 1995. Gorman-Rupp hoped to further increase its share of global pump sales by emphasizing the petrochemical, municipal, and industrial markets in the late 1990s. Driven by these developments, total corporate sales doubled over the course of the 1970s, exceeding $50 million in 1978 and reaching more than $58 million by 1979. Having gone public during the previous decade, Gorman-Rupp common stock was listed on the American Stock Exchange in the 1970s, where it continued to trade into the 1990s.
Acquisitions Distinguish Late 1970s and Continue in 1980s
A fairly modest industry contraction saw manufacturers of pumps and pumping equipment shrink from 613 in 1977 to 528 in 1987. Gorman-Rupp played a role in this trend, executing three acquisitions during this period. In 1977, the company acquired its Ramparts Division, which manufactured air-driven diaphragm pumps and replacement parts for the chemical industry. These specialized machines were most often used to move highly corrosive and/or viscous liquids like sulfuric acid and hydrochloric acid. Although the Ramparts Division was still only generating one percent of Gorman-Rupp's annual sales 20 years after its acquisition, the parent company considered its high profit margins an important contributor to long-term growth.
Like many manufacturers, United States pump makers faced heavy competition from foreign producers in the 1980s. To combat this problem, Gorman-Rupp acquired the IPT Pumps Division, a manufacturer of economically-priced, portable, and durable pumps for the construction market, in 1986. Although this division also only contributed 1 percent of annual revenues and scant profits, it helped Gorman-Rupp maintain a presence in this competitive industry segment.
Gorman-Rupp made its largest acquisition to date in 1988, when it paid Banner Industries $14.5 million for control of the Patterson Pump Company. Based in Toccoa, Georgia, Patterson manufactured a comprehensive line of large volume centrifugal pumps used for flood control and irrigation as well as fire pumps for automatic sprinkler systems and fire hydrants. Patterson complemented Gorman-Rupp's existing water, sewer, and fire-fighting lines, enabling the company to offer custom-designed, large-scale fluid transport systems to these key markets.
Although Patterson added $24 million to Gorman-Rupp's sales tally, its returns were less than stellar. Treating its newest affiliate as a turnaround situation, Gorman-Rupp pumped an additional $20 million into plant and office renovations over the ensuing eight years. And while Patterson's profitability remained comparatively low into the mid-1990s, Gorman-Rupp was committed to wringing higher margins from this subsidiary.
The 1990s and Beyond
Several key factors have contributed to Gorman-Rupp's six-decade record of growth. The company has long emphasized innovation and product quality. So confident were Gorman and Rupp in the capabilities of their products that they empowered their distributors "to put a Gorman-Rupp contractor's pump on any pumping job, anytime, anywhere, beside any competitor's pump of comparable size." The company guaranteed that its products would move more volume more efficiently and for a longer time. And "if it wasn't the best all-around pump, our distributors would accept the return and pay the user any installation expense incurred."
Gorman-Rupp's reputation for excellent customer service is predicated on its network of knowledgeable distributors and its thorough inventory of new and replacement products. Gorman-Rupp supported its nearly 1,000 distributors in North America with in-depth product and process training. Sales representatives, distributors, engineers, and customers alike could attend corporate educational programs at one of two permanent training centers. The company also outfitted three recreational vehicles as mobile exhibitions for on-the-spot training and demonstrations. And although many industries and companies made the transition to just-in-time inventory in order to cut costs, Gorman-Rupp perceived its reserve as a key element of customer service. As James C. Gorman, CEO and son of the founder, told Barron's magazine in 1982, "Some 20 percent to 30 percent of our business is crisis business. They don't buy anything from us until they are up to their noses in water." A prime example of the wisdom of this strategy came in 1989, when Gorman-Rupp was able to provide an estimated 90 percent of the pumps used to clean up after the Exxon Valdez oil spill. In a brief article for Fortune magazine in 1990, CEO Gorman crowed that "Our Alaskan distributor called us on Saturday, and at six Sunday evening we had the first DC-8 load of pumps in Anchorage." In addition to its ready supply of new pumps, Gorman-Rupp estimated its trade in replacement parts was at 20 percent to 25 percent of total revenues. This segment was doubtless another vital factor in the company's customer service equation.
Although Gorman-Rupp is a non-union manufacturer, it has cultivated such a good working environment that one industry observer characterized the company as "paternalistic." It launched hospitalization and profit-sharing programs in the mid-1930s, and carefully avoided layoffs in the recessions of the 1970s and 1980s, a policy that may reflect its Depression-era origins. In return for its fair treatment of employees, Gorman-Rupp enjoyed low turnover and a strike-free history. Healthy labor-management relations also helped give Gorman-Rupp one of the industry's highest productivity rates. In 1996, the company's volume of sales per employee stood at $153,800, having risen from $120,000 in 1991.
A 1996 analysis of Gorman-Rupp by Robert W. Baird & Co., indicated that the company was ripe for an acquisition. But many of the factors that signaled its readiness to acquire--low debt, good cash flow, and a low stock price--also made it a prime takeover target. Takeover seemed an unlikely outcome, however, given that family and insiders owned a controlling interest in the company. Furthermore, in 1996, 72-year-old James C. Gorman drew the lines of corporate succession, ceding the chief executive office to President John A. Walter, 61. It was expected that Gorman's son, Jeffrey S., 44, who was named executive vice-president at that time, would eventually follow in his father's (and grandfather's) footsteps.
Aside from all their other attributes, Gorman-Rupp products have also proven good at pumping profits for shareholders. The company not only chalked up record sales and operating profits in 1996, but also continued its more than twenty consecutive years of annual dividend increases.
Principal Subsidiaries: Gorman-Rupp of Canada, Limited; The Gorman-Rupp International Company; Patterson Pump Company.
Principal Divisions: Mansfield Division; Gorman-Rupp Industries Division; Ramparts Division; IPT Pumps Division.
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