Wynn’s International, Inc.

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Wynn’s International, Inc.

500 North State College Boulevard, Suite 700
Orange, California 92868
U.S.A.
Telephone: (714) 938-3700
Fax: (714) 938-3739

Public Company
Incorporated: 1947
Employees: 2,121
Sales: $360.3 million (1999)
Stock Exchanges: New York
Ticker Symbol: WN
NAIC: 324191 Petroleum Lubricating Oil and Grease Manufacturing; 325612 Automobile Polishes and Cleaners Manufacturing; 326291 Rubber Product Manufacturing for Mechanical Use; 339991 Gasket, Packing, and Sealing Device Manufacturing; 422690 Other Chemical and Allied Products Wholesalers

Wynn’s International, Inc. manufactures a variety of petrochemical, rubber, and plastic products for the consumer and industrial markets through three primary subsidiaries. Wynn Oil Company produces and sells chemicals and equipment for automotive repairs to do-it-yourself and professional markets worldwide. This subsidiary also produces industrial lubricants, solvents, coolants, and greases for manufacturing, farming, mining, and aerospace uses. With divisions in more than 14 countries, Wynn Oil products are marketed in more than 100 countries through independent distributors and sales representatives. Wynn’s-Precision produces injection and composite molded O-rings, composite gaskets and seals, and several other plastic and rubber products for automotive, aerospace, and industrial manufacturing. The company also provides custom engineered seals and O-rings and is a leader in the industry for engineering these products for transportation fuel systems. Finally, Wynn’s Robert Skeels & Company subsidiary provides builders’ hardware and locksmith supplies to retail outlets, industrial plants, hospitals, hotels, and government agencies in California, Arizona, and Nevada.

From Garage-Based Production to International Conglomeration

Wynn’s International began in Chestein Wynn’s dilapidated one-car garage in San Gabriel, California, where the 70-year-old retired attorney concocted a product to reduce engine wear by reducing friction. In 1939 Wynn started giving bottles of his “friction proofing” oil to friends and, eventually, began to distribute his product to local gas service stations. Resource shortages during World War II prevented Wynn from producing and marketing his invention, but he continued to research and improve on the formula. In 1945 production resumed in Wynn’s garage; with his son Carl, Wynn incorporated the company as Wynn Oil Company in 1947.

Wynn’s Friction Proofing Oil gained acceptance and acclaim through Carl Wynn’s penchant for sensational demonstrations of the product’s value. In one instance he submerged two outboard motors in the ocean harbor at San Pedro for 14 days. The motor treated with Wynn’s Friction Proofing oil, undamaged by salt water, started immediately in front of an audience of stunned engineers. In another display Carl Wynn lubricated an airplane engine with the product and then flew the plane for seven minutes without oil in the crankcase. In 1950 Johnny Parsons won the Indianapolis 500 automobile race in the “Friction Proofing Special” race car. Carl Wynn succeeded his father as president of Wynn Oil in 1950.

With sales at $1 million in 1950, Wynn’s was prepared to expand. The company had opened a production facility in Azusa, California, after the garage burned down in 1948, and three years later Wynn’s initiated international distribution. Foreign manufacturing at St. Niklas, Belgium, near Antwerp, was established in 1958. The company also became more serious about testing its product. In a 1954 50,000-mile test supervised by independent consultants, the car with Wynn’s Friction Proofing oil attained a ten percent increase in gas mileage, 44 percent less bearing damage, and 21 percent less starting friction. To enhance research and development of new products, the company opened Wynn’s Research Center at its plant in Azusa in 1962.

Under the leadership of Wesley E. Bellwood as president in 1965, and with Carl Wynn as chairman, Wynn’s expanded and diversified. The company acquired Robert Skeels & Company, a lock and locksmith supply company in southern California. Although hardware supply never became central to company activities, Roberts Skeels proved a steady profit-maker.

In 1969 an initial public offering of 305,000 shares of stock at $17.50 per share provided capital for further expansion. The company constructed an office building and improved production at the Azusa plant, while a new 42,000-square-foot plant in Cincinnati initiated production of automotive and industrial petrochemicals. In 1971 Wynn’s expanded its plant in Belgium.

Wynn’s strategy of diversification involved the acquisition of innovative companies with national brand identity. In March 1971 the company acquired two subsidiaries of Roy Richter Industries: Cragar Industries, Inc. and Bell Helmets, Inc. Cragar designed, produced, and marketed specialty and high-performance wheels and automotive accessories, while Bell Helmets produced safety helmets and other motorsport accessories. Wynn’s also acquired Peat Manufacturing Company, a die-casting company that supported operations at Cragar. These companies did well in the Wynn’s fold in the 1970s. Sales at Cragar almost tripled with its top-selling “mag” wheel styles. In 1973 Wynn’s reincorporated and adopted a new name that better reflected its diversified and overseas business activities. Wynn’s International, Inc. became the holding company for Wynn Oil Company and the other subsidiaries.

Diversification and New Products in the 1970s-80s

Several acquisitions furthered diversification of reincorporation. Wynn’s purchased Dualmatic Manufacturing, manufacturer of four-wheel drive accessories in Longmont, Colorado. Dualmatic made its mark with a locking wheel hub that allowed the driver of a four-wheel drive vehicle to disengage the front wheel drive for reduced wear and better gas mileage on the highway. In 1975 Wynn’s purchased sporting goods manufacturer Riddell Inc. of Des Plaines, Iowa. The 1978 acquisition of Lone Star Manufacturing, which operated under the newly formed Wynn’s Climate Systems, took Wynn’s into the business of producing air conditioning units for the automotive aftermarket, primarily for dealer installation and Japanese imports. Lone Star had grown substantially since 1971 and survived the economic recession in Detroit by selling to Japanese automakers. In 1981 Lone Star obtained a $2.5 million contract to produce 105,000 air conditioner units for Toyo Kogyo Company, manufacturer of the Mazda brand of automobiles. The U.S. government had been encouraging Japanese companies to purchase more automotive parts in the United States to alleviate conflict over the trade imbalance.

As annual sales surpassed $100 million in 1977, Wynn’s found opportunity in the energy crisis of the late 1970s. Two products introduced at this time enhanced fuel efficiency. A fuel system cleaner added to the gas tank, named “1 in 10,” saved as much as a gallon of gas for every ten gallons used. A similar product, Wynn’s X-tend Engine Treatment, saved up to one gallon of gas for every eight gallons when added to the oil crankcase. Both products attracted an international customer base. With more than 20 chemists at its research facilities in Azusa, Paris, and St. Niklas, the company expected to meet demand for similar products. Bell Helmets also benefited from the oil shortage, as increased motorcycle and bicycle transportation resulted in increased helmet sales in 1979; sales of motorcycle helmets increased 38 percent.

Industrial products introduced by Wynn Oil at this time included the first aluminum forging compound designed to meet new Environmental Protection Agency (EPA) standards for lead-free petrochemical products. With growing worldwide concerns about reducing pollution, the product was on back-order internationally as soon as it became available. Another new product, a mold releasing agent for the production of glass bottles, eased release of the glass containers from the mold in which they were shaped.

A steady increase in sales and profits in the late 1970s allowed Wynn’s to boost its production capacity. In addition to a manufacturing and warehousing facility in Johannesburg, South Africa, a 113,000-square-foot facility in Azusa, built in 1979, expanded production of automotive and industrial petrochemicals. A new facility for the production of polymer, the essential ingredient in oil additives, went on line in October 1981. Two more plants, including one overseas, followed over the next two years, supporting the introduction of six new car care products by the Petrochemical Specialty Division in 1982.

Wynn’s divested some operations in a restructuring program to seek opportunities with growth potential and high profit margins. Although Riddell produced a profitable line of football helmets, with a high profit margin, Wynn’s sustained some losses with the discontinuation of the company’s shoe line and sold the company in 1980. The company disposed of Cragar Industries and Peat Manufacturing two years later. Wynn’s acquired Bestop Manufacturing in Boulder, Colorado, manufacturer of convertible tops for jeeps and cars, and merged it with Dualmatic, forming Wynn’s Automotive Products, Inc. in 1982. In 1984 the company purchased Starlite Industries, Inc., a manufacturer of automotive seat covers, seat cushions, floor mats, car covers, and other automotive accessories with facilities in Los Angeles and in Fremont, Ohio. Wynn’s eventually consolidated the sales, manufacturing, warehousing, and financial administration of the company into its Automotive Products.

Key Dates:

1939:: Wynn distributes “friction proofing” oil from his garage.
1948:: Production facility opens.
1951:: International distribution begins.
1969:: Initial public offering of stock.
1977:: Company achieves $100 million in sales.
1985:: Acquisition of Precision Rubber Products, Inc.
1991:: Introduction of Wynn’s Emission Control fuel additive.
1999:: 95th consecutive cash dividend in last quarter.

A joint venture with Diesel Kiki of Tokyo, named Wynn-Kiki, manufactured heat exchangers for air conditioners for new car production as well as for the automotive aftermarket. Wynn’s contributed Lone Star’s Texas facilities to the venture. Customers included Chrysler (Lone Star’s largest), American Motors, Nissan, Honda, and others. Chrysler changed contractors, however, obtaining its air conditioners through its new partner Mitsubishi.

In 1985 the company acquired Fluid Recycling Services, which produced coolant and oil recycling equipment designed to save manufacturers the costs of hazardous waste disposal. Wynn soon found, however, that the company had inherited the cash flow problem that the previous owners had sold the company to resolve and began to liquidate assets. The subsidiary’s president had ideas on how to operate the company and purchased Fluid Recycling Services from Wynn’s in 1990.

Wynn’s completed the acquisition of Precision Rubber Products Corporation of Lebanon, Tennessee, in November 1985. Renamed Wynn’s-Precision, the company produced O-rings, seals, and other molded rubber products for the automotive, aerospace, and hydraulic industries, including such clients as General Motors, Ford, Chrysler, and Cummins Engine Company. Wynn’s-Precision provided development, engineering, durability testing, and manufacturing for the special needs of its clients. The company and its three subsidiaries maintained eight factories, including one in Canada, as well as a Service Center network for regional warehousing and customer support.

Fluctuating Fortunes in the Late 1980s and Early 1990s

In 1988 James Carroll, president of Wynn’s-Precision, succeeded John Lillicrop as president and CEO of Wynn’s International. The appointment followed a struggle between Lillicrop and Carroll to gain control of the company, then for sale, and take it private. Stock value reached $30 per share until the October 1987 stock market crash. When the board announced a halt on the move to sell the following January, Wynn’s stock dipped to below $20 a share, but rebounded to around $26 a year later. With three companies holding a large percentage of shares, Wynn’s adopted a shareholder rights plan to deter a hostile takeover.

In 1991 Wynn Oil patented a fuel additive designed to lower particulate exhaust emissions and improve fuel efficiency. The peroxide-based formula provided the ancillary benefit of a better combustion performance, which improved gas mileage and horsepower. Two years of field research on Wynn’s Emission Control included two major truck fleets and a transit system. Swift Transportation Company of Phoenix tested the product over five months and 3.3 million miles. The research team of four Swift employees and three Wynn’s employees found that fuel economy improved 6.99 percent on 107 diesel trucks and emission reduction reached 40 percent. To control the results the team used a placebo additive on 19 trucks and the drivers did not know if their truck had Wynn’s fuel additive or the placebo. Swift expected to save $1 million year with use of the product. California Milk Producers of Artesia, California tested Wynn’s Emission Control on its 67-truck fleet with similar results and expected to save $100,000 a year. The City of Phoenix Transit System used the additive in high-performance Jet A fuel and gained a 5.8 percent improvement in fuel efficiency, as well as substantially reduced particulate emissions, tested at different operating velocities.

After earlier efforts fell short of expectations, Wynn’s Climate Systems (WCS) perfected its automotive antifreeze/coolant recycling system. Introduced in 1990, the system removed and recycled air conditioner refrigerant in accordance with the Clean Air Act, which restricted venting CFC-contain-ing air conditioner refrigerant. In 1992 Wynn’s received a landmark endorsement by General Motors (GM) for its new X-Tend Antifreeze Recycling System for individual cars, a self-contained, drain and refill, chemical and filtration recycling process. As automotive repair professionals found the system to be effective and easy to use, GM gave its approval for use of the environmentally responsible process on all GM vehicles. The new Du-All Power Drain and Fill Bulk Recycler allowed for recycling a quantity of the fluid at a later time. Wynn Oil developed the accompanying chemical product, Mark X Power Flush. Similar applications for other car systems, such as the fuel system, followed.

Wynn’s experienced several financial fluctuations in the late 1980s and early 1990s. The acquisition of Precision Rubber helped Wynn’s rebound from a $1.9 million loss in 1985, adding $53 million in sales in 1986. Including the sale of Wynn’s Automotive Products for $1.7 million, profit in 1986 reached $6.5 million. With two-thirds of the company’s business in overseas markets, in more than 80 countries, a weaker U.S. dollar in foreign currency exchange improved Wynn’s balance sheet in 1986, but by 1989 the reverse occurred. All of the company’s divisions were hurt by a slow economy and slow car sales in 1989 and 1990, resulting in an overall decline of 3.9 percent in sales in 1990. Despite a loss of $11.2 million in 1991 due to a $14.9 million restructuring charge at WCS, the company still paid its 67th consecutive dividend since 1975 in the last quarter of 1991.

Wynn’s took a number of profit-stimulating measures in all of its divisions. WCS continued to struggle, leading to plant closures and the layoff of more than half of the work force. New manufacturing equipment reduced production costs for WCS and Wynn Oil. Wynn Oil focused on strategic growth in international markets, particularly Japan, Canada, Australia, and New Zealand. The subsidiary expanded existing operations in France with two acquisitions in 1989 and 1990 and expanded into Germany and Mexico in late 1992. Wynn’s also consolidated the marketing departments of the company’s four divisions into one office. Wynn’s-Precision increased revenues despite slow automotive production rates and planned to enter new markets with new product programs, new service centers, and development of the custom-engineered product program. By 1992 Wynn’s returned to profitability with $7.2 million net income and experienced a 32 percent increase in profit to $11.8 million in 1994.

The fortunes of WCS continued to change. After WCS fulfilled a $1.5 million contract for Range Rover sport utility vehicles, the division benefited from conversion to the manufacture of air conditioner components that met new environmental standards. The retrofit kit featured new aluminum condensers that allowed air conditioners designed to run on Freon to operate on R-134a, a CFC-free refrigerant. Wynn’s was the first to accommodate the EPA’s ban on CFC-containing Freon, effective December 1995, but it provided WCS with a higher profit margin than its products had experienced in the past. The struggling division showed no sign of permanent improvement, however, as factory installed air conditioning became the norm and thus reduced aftermarket demand for air conditioners. In May 1996 Wynn’s sold WCS to Moog Automotive for $25 million, thus eliminating the Automotive Parts Division.

Financially and organizationally Wynn’s stability continued in the late 1990s. In December 1996, the board of directors elected James Carroll as chairman of Wynn’s International, with John Huber as president and COO. After a three-for-two stock split in December 1995, and again in December 1996, the board initiated a tender offer stock repurchase of up to 1.1 million shares in early 1997. As revenue grew 13 percent each year from 1993 to 1997, and while net income continued to grow as well, the company paid its 95th consecutive quarterly dividend since 1975 for the last quarter of 1998. With no debt and a cash-on-hand at $40 million Wynn sought entry into the European market for seals through an acquisition or joint venture.

Focus on Wynnes-Precision in the Late 1990s

Although Wynn Oil had been eclipsed by STP in the fuel additives market, the company maintained its position as a major supplier of petrochemicals to the professional auto repair industry as well as to manufacturing industries. Wynn Oil continued to introduce new consumer products and supported them with new marketing programs. In 1998 Wynn’s supplemented existing car repair warranty programs with the launch of the Extended Care Service Contract. The program offered a warranty protection for repairs to new and late model used vehicles, as well as towing, car rental, and toll free Roadside Assistance. Internationally, Wynn Oil faced economic instability in Asia, the Pacific Rim, and Brazil, as well as a decline of up to 25 percent of sales in Asia and Eastern Europe due to a strong U.S. dollar. France and Belgium continued to provide a solid base for expansion to Germany, Italy, and the United Kingdom, while consumer products continued to provide sound opportunities for growth in France, Spain, Canada, South Africa, and Australia, where awareness of the Wynn’s brand remained strong.

Acquisition, reorganization, and expansion at Wynn’s-Pre-cision marked Wynn’s approach to growth in the late 1990s. In October 1996 Wynn’s-Precision purchased Lawson Mardon Wheaton, Inc., of Springfield, Kentucky, an automotive plastics company. Lawson was the major supplier of components, constant-velocity joints (CVJ), boots, and rack-and-pinion bellows to automakers. Wynn’s-Precision consolidated all plastics manufacturing at the 90,000 square foot facility in Springfield.

In May 1997 the company made investments in major growth areas of Wynn’s-Precision. Reorganization involved a $10 million investment to concentrate production of custom engineered seals, which experienced a 20 percent growth rate in 1996, in one of the Lebanon facilities. In Lynchburg, Virginia, Wynn’s-Precision added one-third more floor space for the production of composite gaskets to accommodate a 20 percent growth rate for three years in a row. The purchase of a 26-acre site adjacent to the facility anticipated future growth.

By summer 1998 Wynn’s-Precision required even further expansion. A new O-ring plant in Livingston, Tennessee, involved all new equipment for the manufacture of compression and injection moldings of O-rings for transportation fuel systems. The Livingston facility accommodated new contracts for fuel injector seals and a $15 million contract for leakless transmission pan gaskets of rubber-on-plastic. To support the higher demand for rubber, Wynn’s-Precision began construction on a new 30,000-square-foot rubber mixing facility to supplement an existing facility in Lebanon. At a cost of $8 million, the updated plant incorporated new computer-controlled equipment. Wynn’s-Precision temporarily outsourced some of its contracts until the project was completed in spring 2000.

Wynn’s-Precision expanded through the acquisition of Goshen Rubber Companies in October 1999. The transaction for $85 million included $45 million in cash and the balance in assumed debt. The Indiana-based manufacturer of O-rings, gaskets, and rubber seals antivibration mounts, grommets, tips, bumpers, and elastomeric balls generated $172 million in revenue in 1998. Goshen Rubber added 21 manufacturing plants and 2,200 employees to Wynn’s-Precision’s nine plants and 1,120 employees.