Spec Rubber finds opportunity in crumbling infrastructure

ALABASTER, Ala.—Much of the waterworks infrastructure still being used in the U.S. is more than a half-century old. And as this infrastructure crumbles, it's often up to an Alabama-based company that just celebrated its 50th anniversary to provide an emergency solution.

These types of emergency products may not be the biggest source of business for Specification Rubber Products Inc., better known as Spec Rubber, which turned 50 years old in May. Yet if there is a water main break somewhere in the U.S., Spec Rubber often is the manufacturer that will get a call to provide an immediate solution, whether it's a gasket for a 48-inch supply pipe needed to fix a main break or one for a six-inch inductile needed for a rural community, according to company President Steven Smith.

"We have a large job shop that works on emergency projects where (gaskets and other products) may be needed right now," Smith said. "We're fortunate in that we've created a fluid and agile business with talented employees that can react quickly to customer needs."

Smith said Spec Rubber ships more than 40 percent of the orders it receives out to the customer that same day. It can manufacture more than 300 products ranging from an array of molded rubber gaskets to rubber sheet material.

Spec Rubber joined the family of companies that today make up American Cast Iron Pipe Co. just a year after it was founded in 1969. It remains a part of American Cast Iron today but is managed largely autonomously from the parent company, Smith said. Spec Rubber not only produces parts for American, but for many of its parent company's competitors around the world.

These parts often are part of the "project-based" gaskets manufactured onsite at the company's 85,000-sq.-ft. facility in Alabaster. Those gaskets include restrained and mechanical joint, water meter, filler flange and other specific gaskets that are registered or trademarked.

When the company was first founded, the majority of gasket and sealing products available to the global waterworks marketplace were manufactured in New England, Smith said, making the company unique as a provider in the southern U.S. Spec Rubber said the vast majority of its competitors have moved to overseas operations to save on labor costs.

While U.S. labor costs are slowly beginning to fall more in line with global costs and the money saved on transportation by being a U.S. manufacturer is at times significant, the company is largely competing with manufacturers in China, Vietnam and Costa Rica.

"Since we service the water industry most of our competitors are offshore," Smith said.

There are advantages to being a U.S.-based producer. Some of the company's governmental clients, from municipalities to counties, will favor American companies if the costs are close, Smith said. However another secret to Spec Rubber's success has been the continual backing of American Cast Iron, which helped it through the 2008-09 recession when the housing market crashed and Spec Rubber's revenues fell significantly. In fact, since Smith joined Spec Rubber 18 years ago, he said the company has invested more than $25 million in capital equipment to help maintain its leadership in innovation and high-tech features.

That also has helped Spec Rubber to gain ISO and NSF certifications signifying quality processes and products. The company employs more than 70 people.

Branching out

Being able to carry a robust inventory of gaskets and sealers allows it to provide versatile solutions for clients in a wide range of industries as well. In recent years the company has expanded its footprint to include clients in the mining, electrical and agricultural industries. At some point in the near future, Smith hopes that those "industrial manufacturing" clients will comprise about 50 percent of the company's revenues. For now, it's at 30 percent, with the other 70 percent coming from the traditional waterworks division.

"We have also talked about starting to provide some consumer-based products," Smith said. "Nothing is final but we're looking into it."

Revenue was consistently growing at 5-8 percent year-over-year on average during the 1990s and through around 2005, before the housing market and recession hit. Smith said the housing crisis put a halt to the demand for new residential subdivisions, lessening the needs for pipes, valves, fittings, hydrants, rubber gaskets and sealing products. Municipalities also had less money from a lower residential tax base to afford infrastructure updates.

Spec Rubber, however, has since seen revenues climb at or near 2005 levels, and the belief is that more industry diversification will prevent such significant revenue hits in the future.

One thing is certain, as long as the U.S. water infrastructure needs help, there will be a market for Spec Rubber even if the company is diversified into other areas.

"(Infrastructure failures) is an issue that requires ongoing conversation and action today," Smith said. "It's something as a country we need to manage better."