The Gorman-Rupp Company

1933–2002

Early 1950s:Gorman-Rupp Industries Division is formed to meet the needs of original equipment manufacturers.

The Gorman-Rupp Company is one of the largest pump manufacturers in the United States, producing more than 4,000 models of pumps. The company's product line ranges from small pumps for soft drink dispensers and medical devices to massive machines capable of moving up to 500,000 gallons of fluid per minute. The larger pumps are used in such applications as boosting water pressure in municipal water systems and pumping petroleum products, as in the ground refueling of aircraft. Over the company's several decades of operation, and through both organic and acquisitive growth, the product line has expanded to include an increasingly diverse array of pumps and related equipment, including products for municipal water and sewerage systems, the construction industry, fire protection systems, a variety of industrial applications, original equipment manufacturers, government agencies such as the U.S. military, and petroleum applications. Gorman-Rupp maintains more than one million square feet of manufacturing and warehousing facilities, the bulk of which is located in the company's headquarters city of Mansfield, Ohio; other facilities are situated in Bellville, Ohio; Sand Springs, Oklahoma; Toccoa and Chamblee, Georgia; Royersford, Pennsylvania; St. Thomas, Ontario; and County Westmeath, Ireland. The plants in Canada and Ireland support the company's efforts to penetrate international markets, and in 2002, 14 percent of sales were generated outside the United States from customers located in 75 countries. Gorman-Rupp's fairly conservative long-term strategy is codified in the corporate credo: "It is our practice to enter a field of pumping service only when able to provide a superior product with better performance."

Company's Founding 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 longstanding 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 the 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 more than $2 million by 1949. Manufacturing capacity grew correspondingly, and the company moved from its rural barn to a factory in town during this decade.

Army and Navy, for which the company was awarded an "E" for excellence, Gorman-Rupp sales multiplied to more than $2 million by 1949.

1949–1995

Sales continued to mount rapidly in the postwar era, when Gorman-Rupp's close attention to the dewatering needs of the construction industry paid off. In 1952, the company reengineered 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.

Progressive Diversification: 1950s-70s

Yet 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 such as 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. 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 in 1968, Gorman-Rupp common stock was listed on the American Stock Exchange in the 1970s.

Acquisitions Distinguishing the Late 1970s and Continuing in the 1980s

1977–1990

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 Ramparts, Inc. (becoming Gorman-Rupp's 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 1 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, U.S. 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 about $14.8 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.

The 1990s and Beyond

Several key factors contributed to Gorman-Rupp's seven-decade record of growth. The company 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. In addition, "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 was 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. 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, "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.

1991–2002

Although Gorman-Rupp operated as a nonunion manufacturer, it 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 possibly reflected 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.

Also 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. Two years later he did just that, being named president and CEO in April 1998. Gorman remained chairman, and Walter retired but remained on the board of directors.

The period of the late 1990s and early 2000s was particularly noteworthy for the firm's aggressive pursuit of overseas revenues. In 1996 the company set up an office in Greece as a way to improve its distribution to the Middle East and Europe. Through a majority-owned subsidiary called Patterson Pump Ireland Limited, Patterson Pump Company began manufacturing pumps in Ireland in 1998 for sale in Europe. (In March 2002 Patterson purchased the minority holding in the subsidiary, making it wholly owned.) In 1999 the Mansfield Division opened a warehouse in Grindstead, Denmark, and another distribution center was opened in Singapore in 2001 to serve markets in Asia. The warehouse in Denmark was closed in 2001, however, and was replaced by one near Amsterdam. By the early 2000s, between 14 and 19 percent of overall revenues was generated outside the United States.

In 2002 Gorman-Rupp completed two significant acquisitions, the first in 14 years. In February, American Machine and Tool Co., Inc. (AMT) was purchased for $12.6 million. Based in Royersford, Pennsylvania, AMT was a producer of small centrifugal and diaphragm pumps for industrial, construction, agricultural, marine, and household use. The firm provided pumps under its own name as well as private-brand products for national distributors. In March 2002 Patterson Pump acquired Atlanta-based Flo-Pak, Inc. for about $6.5 million. Flo-Pak specialized in prepackaged pumping systems for the municipal, fire protection, industrial, plumbing, and heating, ventilating, and air conditioning (HVAC) markets.

The stellar history of Gorman-Rupp was reflected in the company's achievement of 15 consecutive years of increased revenue and earnings through the year 2001. That year, revenues surpassed the $200 million mark for the first time, hitting $202.9 million. The difficult economic climate of the early 2000s finally brought an end to this streak in 2002, however, as revenues fell 4.4 percent and earnings were down 38.7 percent. Gorman-Rupp products nevertheless continued to prove good at pumping profits for shareholders. The firm that year increased its dividend for the 30th consecutive year.