United States Pipe and Foundry Company
United States Pipe and Foundry Company
Wholly Owned Subsidiary of Walter Industries, Inc.
Incorporated: 1899 as United States Cast Iron Pipe and Foundry Company
Sales: $457 million (2002)
NAIC: 331210 Iron and Steel Pipe and Tube Manufacturing from Purchased Steel
The United States Pipe and Foundry Company (U.S. Pipe) is one of the nation's leading manufacturers of ductile iron pipe. Ductile iron pipe is used principally to carry water and waste-water. The company also manufactures pipe fittings, valves, joints, and hydrants. U.S. Pipe operates manufacturing plants in Bessemer and North Birmingham, Alabama; Chattanooga, Tennessee; Burlington, New Jersey; and Union City, California. In 2003, the company closed its U.S. Castings division plant in Anniston, Alabama. U.S. Pipe also operates many regional sales offices and is involved in markets in all sectors of the United States. The company also sells to an international market. Early in its history, U.S. Pipe brought in new pipe casting technology, which for the first time made uniform mass production a possibility in the industry. Since 1969, the company has been wholly owned by Walter Industries, Inc., formerly known as the Jim Walters Corp. Walter Industries is a $1.3 billion conglomerate with interests in home building, home financing, mineral, and industrial products. U.S. Pipe is the key component of Walter Industries's industrial products division.
Big Combination at the Turn of the Century
U.S. Pipe was founded in 1899 as the United States Cast Iron Pipe and Foundry Company. This new company put together 12 existing companies spread across eight states. This was a time of massive consolidation in the pipe industry, which had grown up over the previous 40 or so years, mostly in the South. The Alabama Consolidated Coal and Iron Company and the Tennessee Coal and Iron Company were already vigorous rivals by 1899, and that year also saw the formation of another large combination of iron and steel companies, Sloss-Sheffield Steel and Iron, which would become a part of U.S. Pipe in 1942.
The iron industry was booming at the turn of the century, with high demand at home and in Europe. The Birmingham, Alabama, region led the country in iron production, putting out over three times the tonnage of the Pennsylvania region. United States Cast Iron Pipe and Foundry, however, put together companies operating in different regions of the country. Its plants were in Bessemer and Anniston, Alabama, in Chattanooga, Tennessee, in Pittsburgh, Pennsylvania, and in Buffalo, New York, and as far west as Ohio and Wisconsin. Some of the companies that made up the original U.S. Pipe had long histories of their own. The Chattanooga Foundry and Pipe Company dated to 1882. It was the first pit cast pipe maker in the South. It began with one pit and had eight by the time it was bought up by U.S. Pipe. The McNeal Pipe and Foundry Company was even older, founded in 1866 by Andrew McNeal. This was a large industrial complex built along the Delaware River in Burlington, New Jersey. McNeal also built a significant mansion adjoining the plant. U.S. Pipe acquired the mansion in its 1899 takeover, and this graceful building served as its corporate headquarters until 1953. The mansion is now on the National Register of Historic Places.
All the 12 plants in the original corporation manufactured cast iron pipe using a method known as pit casting. Pit casting was essentially a medieval process, dating back 300 years. Workers produced pipes by pouring molten iron into vertical molds lined with sand. This was highly skilled work producing satisfactory pipe, though shifting sand often resulted in variation in the thickness of the pipe wall. Some of U.S. Pipe's plants produced hundreds of tons of pipe a day by this method. The company made cast iron pipe in various diameters, from half an inch to 60 inches, and later also made valves, fittings, and hydrants. Most of the pipe was used for municipal water works. As the nation's population surged in the early part of the 20th century, the demand for pipe was constant, and U.S. Pipe did well. In 1911, it bought another manufacturer, the Dimmick Pipe Company, in North Birmingham, Alabama. Dimmick was already producing from 150 to 175 tons of pipe per day. U.S. Pipe soon added another pit casting facility at the plant, which made larger diameter pipes at a rate of some 125 tons daily.
In 1921, U.S. Pipe introduced a new way of making pipe, called centrifugal casting. This method was developed by a French engineer living in Brazil, Dimitri Sensaud deLavaud. The company bought rights to the method from deLavaud and set new standards for its competitors to follow. U.S. Pipe first introduced centrifugal casting at its North Birmingham plant. Using this method, workers poured molten iron into a rotating steel mold. The centrifugal force of the rotating mold spread the iron evenly around the inside of the form, so the resulting pipe was completely uniform in thickness. At last pipe manufacturing had become a real mass production process.
The company did well throughout the 1920s, paying healthy dividends to its stockholders. It paid out over $8 a share in 1924. U.S. Pipe seemed strong financially, with very little debt, and by the end of the 1920s it was indisputably the largest iron pipe producer in the East. It had set the standard for manufacturing, and other companies hurried to catch up. U.S. Pipe made improvements to the deLavaud process, which allowed it to cut costs and raise quality. At first, the new process limited the diameter of pipes made this way. Eventually, however, the company worked this out and was able to make any diameter pipe in this new way.
Depression and Postwar Years
In 1929, the company changed its name from United States Cast Iron Pipe and Foundry to simply United States Pipe and Foundry. U.S. Pipe had shown solid earnings all through the 1920s and into 1930. Nevertheless, the company soon felt the effects of the Great Depression. U.S. Pipe depended largely on municipal spending on public works projects, and with high unemployment in the depression years, municipal budgets were severely strained. Many cities were hard pressed to meet payrolls for their workers and had to manage relief for the unemployed and hungry. The result was that cities deferred building projects, and pipe companies competed fiercely for whatever work was available. U.S. Pipe reduced its operating expenses in the early 1930s, when the demand for its products was very low. The company posted a net loss of over $1 million for 1932. By 1934, the company's prospects brightened with the addition of government-funded public works projects.
As in many other industries, sales did not pick up in the 1930s until the start of World War II. U.S. Pipe's sales for 1935 troughed at $8.2 million, but by 1942 the company was bringing in over $29 million. That year, U.S. Pipe made a significant acquisition, buying up just over 50 percent of the shares of a principal rival, Sloss-Sheffield Steel and Iron. Sloss-Sheffield was the second largest cast iron pipe producer in the South, and the third largest in the nation. U.S. Pipe spent $5.4 million on the acquisition, taking on debt to swing the deal. By the war's end, U.S. Pipe had a healthy backlog of orders. The company formed a joint operating agreement with a French company to develop concrete pipe, which was becoming increasingly common in large waterworks. The two companies formed a subsidiary called Pontusco Corp., which built a concrete pipe plant in Cuba.
In 1951, U.S. Pipe moved into West Coast markets, building a new manufacturing plant from scratch in Union City, southeast of Oakland, California. This plant would help the company handle new orders as the population west of the Rocky Mountains began to swell. The next year, U.S. Pipe completed its acquisition of Sloss-Sheffield. This gave it control of that company's vast resources of coke, pig iron, and coal, as well as its pipe manufacturing facilities. In 1953, the company abandoned its historic headquarters in Burlington, New Jersey, and moved its offices to the heart of the iron industry, Birmingham, Alabama. It also spent money updating many of its facilities. Sales rose precipitously through the early 1950s. Sales in 1950 stood at $41.2 million, and then more than doubled the next year, to $90 million. Increasing sales allowed the company to pay down debt. U.S. Pipe had over $12 million in long-term debt in 1951, taken on when it purchased Sloss-Sheffield and added to with subsequent expansion. By the mid-1950s, however, long-term debt had dropped to some $5.4 million.
Changes in the 1960s
U.S. Pipe made several more acquisitions in the 1960s, and at the end of the decade it was itself bought. In 1961, it increased its holdings in Alabama by acquiring the T.C. King Pipe and Fittings Company, of Anniston, Alabama. The plant expanded in the 1970s, and in the late 1980s became U.S. Pipe's U.S. Castings division. In 1966, U.S. Pipe made another significant acquisition, this time on the East Coast, when it bought an East Orange, New Jersey, manufacturer of valves, hydrants, and related parts called the A.P. Smith Manufacturing Company. Over the next four years, U.S. Pipe moved A.P. Smith's production lines to its existing plant in Chattanooga. In 1967, U.S. Pipe made one more major purchase, buying the Irondale, Alabama, company Southern Precision, Inc. Southern Precision was not a pipe maker but a pattern and specialized tooling business. It was a major producer of specialized tooling used in the foundry business.
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After expanding through the 1950s and making large acquisitions in several markets in the 1960s, U.S. Pipe was bought out by a young company whose principal business was home building. The Jim Walter Corporation was founded in 1946 in Tampa, Florida, by an enterprising 23-year-old builder who discovered a new way to sell houses. Walter's company specialized in building so-called shell homes, which were unfinished on the inside. Because they were unfinished, they were relatively inexpensive to buy, since the new homeowners would complete the interior work themselves. These sold well, especially in the South, and by 1960 Jim Walter was a nationally known businessman. Jim Walter Corp. began a rapid expansion in 1962, buying up a fiberboard manufacturer, Celotex Corp. In 1964, the company went public, and in 1969 it acquired U.S. Pipe. That year Jim Walter Corp. ranked number 287 on the Fortune 500 list of the nation's top companies, with annual sales of $623 million. U.S. Pipe became one division of a classic 1970s conglomerate, which had dozens of subsidiaries in a host of different industries. Jim Walter began developing coal mines in the 1970s on land it had acquired from U.S. Pipe. Walter Corp. also moved into the aluminum industry in 1980. In the early 1980s, Walter's pipe division accounted for 16 percent of sales and about 17 percent of profits. U.S. Pipe's sales rose and fell with the housing industry, though they depended more on the building of subdivisions rather than on individual homes.
Leveraged Buyout of the Parent Company in 1987
By the late 1980s, parent company Jim Walter's interests included carpet manufacturing, paper, jewelry, industrial products and building materials, as well as home building and financing and pipe manufacturing. U.S. Pipe was the second-largest division of Jim Walters Corp. By the late 1980s, the piping division's sales were estimated at more than $400 million. Operating profits at the division were estimated at around $57 million, about half that of the company's homebuilding and financing division. By the mid-1980s, it was clear that Jim Walter was a candidate for takeover. A wave of mergers and acquisitions swept the country in the 1980s, fueled in part by Michael Milken's proselytizing of the junk bond from the California offices of Drexel Burnham Lambert. Public companies like Jim Walter were taken private in leveraged buyouts, meaning the new owners put up very little cash but raised financing from unrated or "junk" bonds. Prime targets of the takeover wars were manufacturing companies with good cash flow and lots of subsidiaries that could be sold off. Jim Walter Corp. fit the pattern, and in 1987 it was taken private by one of the best-known takeover groups, Kohlberg Kravis Roberts (KKR). The deal, valued at $2.4 billion, was a small one for KKR. The year before, it had raised $8.7 billion to buy out Beatrice Foods. In 1988, it made the record-breaking $25 billion buyout of RJR Nabisco, a deal so momentous it inspired not only a book but a movie, Barbarians at the Gate.
After the buyout, Jim Walter Corp. sold off assets, though the pipe division was not affected. Company documents claim Jim Walter Corp. was still a profitable company, but in 1989 it filed for bankruptcy, brought down by a huge class action lawsuit relating to the company's former Celotex subsidiary. At the time, this was the biggest financial collapse of a company taken private in a leveraged buyout. The U.S. Pipe division had its own legal problems. The city of Atlanta complained that U.S. Pipe and another Alabama pipe company had conspired to fix prices on municipal contracts dating back to 1972. A federal judge ruled in 1989 that the city could ask to recover payments it made to U.S. Pipe reaching back to the early 1970s.
New Developments in the 1990s and After
Parent company Jim Walter Corp. changed its name to Walter Industries, Inc. in 1991. It settled its legal problems in 1994, and in 1995 it emerged from bankruptcy. In 1997, Walter Industries became a public company again, traded on the New York Stock Exchange. By the mid-1990s, U.S. Pipe was still a leading iron pipe manufacturer and remained a division of Walter Industries. It ran six manufacturing plants at that time and had 35 sales offices across the United States. Though the company had regional rivals, U.S. Pipe stood out as the pipe manufacturer with the broadest market coverage in the industry. For 1997, revenue at U.S. Pipe stood at $420 million, a little higher than a decade earlier.
U.S. Pipe's youngest plant dated to 1951. Three of its plants had been in operation since the company was formed in 1899. These old facilities were expensive. In 2000, U.S. Pipe spent some $20 million to upgrade its Chattanooga plant. Despite this heavy investment, two years later the company announced that it had to trim its Chattanooga workforce by 20 percent. Orders had slowed, and the company also faced steep competition from foreign manufacturers. Sales at the company's U.S. Castings division, which ran out of the company's Anniston plant, were so poor that U.S. Pipe was forced to close the plant completely in 2003. The company blamed heavy competition from both foreign and domestic rivals. The Anniston plant had been acquired from the T.C. King Pipe and Fittings Co. in 1961, and the facility had been built in the 1930s. Given the low profitability of the plant, U.S. Pipe announced that it could not afford to modernize it, and so shut it down.
The generally sluggish U.S. economy dampened the company's sales in the early 2000s. However, U.S. Pipe believed it had promising business in replacing older pipe systems, especially in light of new environmental regulations. Many municipalities with aging water systems would need to upgrade their pipes soon. U.S. Pipe believed it was well situated to supply major municipal markets in the Northeast. The company was also in a good position to supply markets on the West Coast from its Union City plant. The West Coast had chronic water shortages, and the company anticipated future municipal water projects in that region.
- A manufacturing concern is formed out of 12 previously existing companies.
- The deLavaud centrifugal casting method is introduced.
- The company builds a new West Coast plant in Union City, California.
- T.C. King Pipe and Fittings Co. is bought.
- Jim Walter Corp. acquires U.S. Pipe.
- U.S. Pipe's parent company is taken private in a leveraged buyout.
- The company goes public, trading on the New York Stock Exchange.
- U.S. Pipe closes its U.S. Castings division.
American Cast Iron Pipe Company; Griffin Ductile Iron Pipe Company; McWane Corporation.
Bass, George G., "U.S. Pipe & Foundry: The Home Building Boom Gives It a Steady Profit Flow," Barron's, September 26, 1955, p. 17.
"Beneficiary of Public Works," Barron's, January 15, 1934, p. 15.
Engardio, Pete, "Why Jim Walter Is Ripe for the Picking," Business Week, August 3, 1987, pp. 31–34.
Gordon, Mitchell, "Rebuilding Profits," Barron's, May 30, 1983, pp. 38–39.
"Great Iron Combination," New York Times, August 10, 1899, p. 9.
"New Ideas Keep Flowing at U.S. Pipe," Water Engineering & Management, March 1994, p. 6.
"Pipe & Foundry Doing Better," Barron's, July 21, 1930, p. 17.
"Record Sales Restore U.S. Pipe's Profit Margin," Barron's, January 12, 1948, p. 34.
"Two Major Chattanooga, Tenn., Employers to Cut Jobs Despite Recent Expansion," Knight Ridder/Tribune Business News, May 24, 2002.
"U.S. Pipe Ordered to Cool It after Blasts Hurt 12 Workers," American Metal Market, December 13, 2000, p. 16.
"U.S. Pipe Shutters Anniston, Ala. Castings Plant," Contractor, May 2003, p. 28.