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UNIDYNE CORP. - description of business
INTRODUCTION
UNIDYNE Corporation, through its subsidiaries Dynamatic Corporation ("Dynamatic"), Sabina Industries, Incorporated ("Sabina"), Unidyne Test Systems, Inc. ("Unidyne Test"), Maxwell Emissions Test Systems, Inc. ("METS"), Unidyne Capital, Inc. ("Capital"), Kenosha Corporation ("Kenosha") and Maxwell Dynamometer Systems, Inc. ("Maxwell"), manufactures vehicle testing equipment, including emissions testing and post-manufacturing testing, specialized AC and DC electric motors and variable speed drives and controls utilizing the Eddy Current and DC Drive operating principles to control drive speed and power. UNIDYNE Corporation and its subsidiaries are herein collectively referred to as the "Company".
The Company's products are primarily marketed and sold by a Company field sales force and independent sales agents, all supported by an in-house staff. At present, the Company has an established sales and distribution network with customers located throughout the United States, Canada, Mexico and other foreign countries.
FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-K that are not historical fact are "forward-looking statements". These statements can often be identified by the use of forward-looking terminology such as Aestimate," "project," Abelieve,@ Aexpect," "may," "will," "should," "intends," or "anticipate" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. We wish to caution the reader that these forward-looking statements, such as statements relating to the timing, costs and scope of construction of new facilities, the acquisition of, or investments in, existing businesses, the revenue and profitability levels of such businesses, and other matters contained in this Form 10-K regarding matters that are not historical facts, are only predictions. No assurance can be given that plans for the future will be consummated or that the future results indicated, whether expressed or implied, will be achieved. While sometimes presented with numerical specificity, these plans and projections and other forward-looking statements are based upon a variety of assumptions, which we consider reasonable, but which nevertheless may not be realized. Because of the number and range of the assumptions underlying our projections and forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond our reasonable control, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may occur subsequent to the date of this Form 10-K. Therefore, our actual experience and results achieved during the period covered by any particular projections or forward-looking statements may differ substantially from this projected. Consequently, the inclusion of projections and other forward-looking statements should not be regarded as a representation by us or any other person that these plans will be consummated or that estimates and projection will be realized, and actual results may vary materially. There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate.
HISTORY OF THE COMPANY
The Company was incorporated under the laws of the State of Delaware on December 1, 1980, under the name of Blue Jay Energy Corporation, to engage in oil and gas exploration and development. Subsequently, the Company changed its name to Blue Jay Enterprises, Inc. ("Blue Jay"). In or about 1986, Blue Jay ceased operations in the oil and gas field and until 1990 confined its activities to the winding up of matters arising out of the prior years' operations. Blue Jay discontinued all business operations in or about 1990.
On September 2, 1996, Blue Jay completed the acquisition of all the issued and outstanding stock of United Dynamatics, Inc. ("UDI"), a Delaware corporation, and certain assets of Capital Idea, Inc. ("Capital Idea"), a Colorado corporation. After the acquisition, Blue Jay changed its name to UNIDYNE Corporation. Dynamatic is a wholly-owned subsidiary of UDI. The acquisition of UDI was treated as a reverse acquisition for accounting purposes.
On September 2, 1996, the Company also acquired a 9% interest in Maxwell, a Delaware corporation. On December 31, 1996, the Company acquired the remaining 91% of Maxwell through a merger of Maxwell into a wholly-owned subsidiary of the Company. At the date of the merger, the majority owner of the Company was also a majority owner of Maxwell.
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On September 1, 1995, UDI acquired substantially all of the operating assets of the Eddy Current Drive Division (the "Division") of Eaton Corporation ("EATON"). Effective with the acquisition, the Division commenced operations as Dynamatic, a wholly owned subsidiary of UDI. The Company's Kenosha subsidiary also acquired on this date all of the real estate assets of the Division, consisting of an office, laboratory, and manufacturing facility totaling 307,000 square feet situated on 13 acres of land in Kenosha, Wisconsin.
On September 30, 1997, the Company acquired all of the issued and outstanding shares of the common stock of Sabina Industries, Incorporated, a California corporation, which manufactures motor controls for a broad range of industrial and commercial uses.
In 1997 the Company formed Maxwell Emission Test Systems, Inc. and Unidyne Test Systems, Inc. to market dynamometers used to test automobiles and light trucks for emissions in accordance with a United States Environmental Protection Agency ("EPA") mandate. The organization was staffed to meet the requirements as were identified in accordance with the various states plans to implement their mandated program. Because of delays in the implementation of the programs from 1998 into 1999 by some states, the commitment of resources by the Company, including the construction of inventory, preceding the growth in demand.
In 1997 the Company formed Unidyne Capital, Inc. to provide sources of lease financing to its customers.
PRODUCTS
Dynamatic has been manufacturing proprietary, specialized electric motors and variable speed drives and controls for over 65 years utilizing the Eddy Current Drive operating principle to control drive speed and power. The variable speed drives are used in a variety of products including stamping presses, pumps, and special process equipment. Dynamatic also manufactures engine dynamometers and transmission dynamometers for a variety of large industrial customers, primarily in the automotive, transportation, manufacturing, and processing systems industries.
Dynamatic manufactures certain key components and systems used in the products and systems of other subsidiaries.
Maxwell has been designing and building engine and chassis dynamometers for over 50 years. This equipment is used to test engine and chassis performance for motor vehicles. Maxwell's customer base is made up of heavy-duty truck, bus and automobile manufacturers, fleet owners and transit authorities throughout the United States, Canada, Mexico and other foreign countries.
The EPA has created an Emission Testing Program (the "Program") which mandates enhanced emission tests of vehicles in 22 states which have not attained the required level of clean air as prescribed by the Clean Air Act of 1990. Also, six additional states have voluntarily agreed to comply with the enhanced standards of the Program for automobile emissions testing. The enhanced emissions tests mandated by the Program must be performed under conditions that more closely simulate actual driving conditions, and are most effectively obtained by testing vehicles under load conditions, utilizing a chassis dynamometer. The Company has developed and is manufacturing Emission Test Stands ("ETS") which are capable of meeting the enhanced standards of the Program. The major components of the ETS are a specialized chassis dynamometer designed and patented by Maxwell and emissions testing equipment and computer controls designed and developed by Dynamatic and Maxwell. The ETS is manufactured and assembled by Dynamatic.
The Company has completed development and is introducing a new generation of motor control technology incorporating digital electronics. The digital control system is produced, installed and operated at a lower cost than existing systems with more efficient performance.
Sabina designs and manufactures motor controls for a broad range of industrial and commercial applications. Sabina supplies major process system designers and manufacturers, and Fortune 500 manufacturers. The motor control package and system include electric motors manufactured by Dynamatic.
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SUPPLIERS
The Company currently purchases all of its materials from major vendors. In the past, the Company has not experienced any significant delays due to vendors' inability to meet demand, and management believes that adequate materials will continue to be available to meet product needs.
The Company has begun a program to maximize the extent to which subsidiaries utilize components manufactured by other Company subsidiaries. The Company also has a program of joint purchases by subsidiaries to maximize volume purchases and discounts.
MARKETING AND DISTRIBUTION
The Company markets and distributes its products under the Dynamatic, Maxwell, and Sabina names. Dynamatic continues to be the leading supplier, integrator, and manufacturer of standard Eddy Current drives, custom test stands and stamping press drives, highly engineered definite purpose motors and Eddy Current clutches, brakes and dynamometers. Dynamatic's products are sold through its own in-house staff and field sales force, both directly and through distributors throughout the United States, Canada and other foreign countries.
Maxwell markets its product through its own in-house staff. Maxwell markets its engine and chassis dynamometers and brake testers to heavy-duty truck, bus and automobile manufacturers, fleet owners and transit authorities throughout the United States, Canada and other foreign countries.
The ETS is marketed through in-house staff and through a Company field sales force. The Company is focusing its sales and marketing efforts in the states of Pennsylvania, Virginia, New Jersey, and Massachusetts.
The Company also uses its web sites www.udyn.com and www.maxdyn.com to reach potential customers and supply information.
COMPETITION
The Company competes on the basis of product integrity, service, design and performance characteristics, as well as a competitive price.
The Company competes for sales of the ETS primarily with four emissions testing equipment integrators [ESP, SPX (Automotive Diagnostics), Snap-On/Sun and Worldwide Environmental]. Competition for sales of the specialized chassis dynamometer designed for light trucks and automobiles comes primarily from three chassis dynamometer manufacturers (Clayton Industries, John Bean and Mustang Dynamometer). Maxwell competes for dynamometer sales with five dynamometer manufacturers (Clayton Industries, Mustang Dynamometer, Superflow, MAHA and Schenk Pegasus).
The electric drives market is highly competitive. Dynamatic is the world's leading manufacturer of Eddy Current products, but continues to experience competitive pressures from manufacturers utilizing adjustable frequency and direct current technologies.
PATENTS
Dynamatic and Maxwell hold a number of patents. In 1995, Maxwell designed and patented a specialized chassis dynamometer for testing automobiles and light trucks under the EPA's Program. Maxwell has obtained United States design and utility patents on the chassis dynamometer, which expire January 2010 and February 2014, respectively. The Company has also patented the chassis dynamometer in several foreign countries. Protection of these patents is important to the Company's competitive position.
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TRADEMARKS
Dynamatic has registered two of its trademarks, AJUSTO-Spede(TM) and DYNAMATICJ in the United States and several foreign countries. All trademark filings are monitored and renewals are applied for on a timely basis. The trademark DYNAMATIC was first used on April 4, 1936.
GOVERNMENT APPROVAL
In order for equipment to be used in the ETS Program, it must be certified by each state implementing the Program. In September 1997, the Company obtained the first certification for this equipment in Pennsylvania and subsequently has obtained its Phase II certification. The Company has certification from California on its analyzer and dynamometer equipment and is completely certified in Virginia. The Company is pursuing certification in New Jersey and other states based upon scheduled Program implementation dates.
EMPLOYEES
As of December 31, 1998, the Company employed approximately 230 people at locations in Kenosha, WI, Exton and Hazleton, PA, and Anaheim and San Francisco, CA.
A union represents all hourly plant employees of Dynamatic. In September 1996, Dynamatic and the union representing these employees reached an agreement on a three-year contract, which will expire on September 30, 1999. The Company believes that its relations with its employees are satisfactory.
GOVERNMENT REGULATION
None of the Company's businesses are in regulated industries. However, the ETS must be certified for sale in states participating in the Program.
The Company received the first certification issued by Pennsylvania for Phase I testing and has subsequently received Phase II certification. The Company is fully certified in Virginia and has received provisional component approval for the BAR 97 Emission Inspection System (EIS) Specifications in California. The Company is in the process of obtaining certification in New Jersey. The Company is preparing for certification in Massachusetts, Canada, and Mexico.
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