The world of drainpipe manufacturing is more complicated and contentious than you might imagine, but Hilliard's company has grown from a plucky upstart into a national leader.
Advanced Drainage Systems is the nation's largest manufacturer of high-density polyethylene pipe and has helped bring the product to the mainstream, taking market share from competing materials like concrete in the process.
The company has kept a low profile for nearly half a century since it was founded, and only recently, after its high-profile growth and initial public offering, has its management team become more proactive outside the company.
“We are a traditional manufacturing company with significant growth potential,” Chairman, President and CEO Joe Kurapaty said in the company's suburban office building.
He describes himself as a “shirt-sleeved accountant” with little patience for tasks he deems unimportant, such as posing for photographs.
“I'm not an 'owl in a tree' kind of guy,” he said with a smile, referring to the arms-crossed pose used in many executive portraits.
He joined the company in 1980 as its chief financial officer and has been CEO since 2004. He's been in the position for so long that it's unclear whether the company has adopted his personality or vice versa, but both men have a hands-on approach.
Advanced Drainage employs approximately 3,700 people in 61 plants worldwide, most of them in the U.S. The company's products are used to manage water flow on roads, buildings and farms.
Drainage pipes are part of a pipe industry that had U.S. sales of $44.6 billion in 2013 and is expected to grow 7 percent annually over the next decade, according to the Freedonia Group, a Cleveland-area market research firm. High-density polyethylene pipes, made from a type of plastic, are expected to grow an average of 9 percent annually.
“Plastic pipes are gaining share of the drainage market due to increased consumer awareness of their superior performance characteristics, including light weight, ease of handling and moderate cost,” the company said in a report last summer.
Employee-Owner
About 25 miles southwest of Advanced Drainage's headquarters is its London plant, one of six plants in Ohio, where workers work around the clock during the weekdays, making pipes up to 42 inches in diameter.
The material starts out as plastic-like pellets. The pellets are melted down into a paste that is then run through a machine to compress it into the shape of a pipe. The process is largely automated, with the bus-sized machine gradually ejecting the black pipe, which is then cooled.
About 50 people work there, and many of them have their names on a banner wall recognizing years of service: six with more than 20 years, six with more than 30 years.
The only veteran, with 40 years of experience, is plant manager Bob Sensabaugh, who has been in the job since construction began on the plant in 1979 and has been with the company since the mid-1970s, when agriculture was its largest market (it now accounts for one-fifth of the company's sales).
Sensabaugh said the company has been able to retain employees thanks to their support, and he means it literally: Employees own about 30% of the company's stock, the result of an employee stock ownership plan that was launched in the early 1990s.
“It's like owning your own business,” he said.
Plastic vs. Concrete
Competition between companies that make concrete and plastic pipes is fierce, and proponents of each material can cite studies and news articles that undermine the other, a type of opposition research often used in political campaigns.
Both sides are trying to influence engineers, contractors and state transportation officials. Polyethylene pipe has won many of these battles, and states are gradually embracing it. As of last fall, Ohio and 13 other states representing 70% of the U.S. population had certified polyethylene pipe for nearly all uses, according to a report by RBC Capital Markets.
Florida-based civil engineer W. Curtis Smith uses the analogy of a power plant to explain the difference between these materials: Concrete pipe is an established, reliable technology, like coal-fired power plants, while polyethylene pipe is a newer technology that's growing in popularity, like renewable energy, he says.
“Each has its place, and we use both all the time,” said Smith, who works for Gresham, Smith & Partners, an architecture and engineering firm with offices throughout the Midwest and South.
There's no debate that Advanced Drainage stands out in the industry, Smith said.
“Anyone who has worked in engineering for at least a year knows the ADS N-12 pipe,” he said, listing it as one of the company's best-selling products.
Growth and Acquisitions
Advanced Drainage was founded in Wilmington, Delaware, in 1966 by Ron Martin and Marty Sixto, engineers who grew up on farms and saw an opportunity to develop new ways to manage water on farms, according to Kurapaty and company documents.
The co-founders quickly brought on two more leaders: Tom Luke came on board to oversee day-to-day operations, and Frank Eck was hired to manage sales and marketing.
The company moved to central Ohio in the early 1970s, where Roark was already based.
Most of the early growth came in one of two ways: by opening plants around the country that could service a 250-mile radius, and by developing larger pipe products that opened up new markets.
More recently, growth has also come from acquisitions, most notably the purchase of Hankol Corp. of Findlay in 2005, a deal that saw the nation's largest polyethylene pipe manufacturer absorb the nation's second-largest manufacturer.
“We weren't fighting each other anymore,” Kurapaty said.
This allows Advanced Drainage to focus on customers who may use other materials.
An eventful year
Mr. Kurapaty, 69, grew up in the Chicago area and attended the University of Iowa, Dubuque, where he currently serves as chairman of the school's board of trustees.
He lives in Dublin with his wife, and they have four adult sons and six grandchildren.
Last year was the most eventful of his career, with the company's initial public offering forcing him and other senior executives into a marathon of travel and meetings with potential investors. They faced pointed questions from highly skeptical audiences and returned home exhausted.
“It was a very tense process,” he said.
The company's shares began trading at $16.05 a share on July 25. The timing was bad: Several initial public offerings have fallen short of expectations, including that of Advanced Drainage, which had previously projected an initial price of $17 to $19 a share.
What followed proved to be a vindication for Mr. Kurapaty: The stock price rose steadily, closing at $27.80 on Friday, up more than 70% since July.
He plans to remain at the helm of the company for at least a few more years.
“I enjoy my job,” he said, “and still believe my best days are yet to come. I know it's my responsibility to plan for succession, but for now I will continue doing my job.”
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Dan Gearino
