Monday, January 29, 2007

Carolina off their mind: Kazak puts plant in N.H.

By Catherine Williams

New Hampshire beat out both Massachusetts and South Carolina as the final destination for a small manufacturing plant being built by a Bay State materials science company.

For Woburn-based Kazak Composites Inc., a combination of factors -- from the proximity to its current and future work force to the allure of an income-tax free environment -- led to the company's decision to move back to New England.

After almost seven years in the Palmetto State and unmet appeals to Massachusetts state officials, Kazak plans to open the doors of its new 22,400-square-foot plant next month in Hudson, N.H.

The company plans to add 10 new jobs there this year.

The company had decided to move its manufacturing operations to South Carolina in 1999 after an attractive offer to build and occupy a 10,000-square-foot facility by a plant manager who had relocated there. Last year, however, executives decided they needed the company's 36 employees closer to their Woburn headquarters.

"Composites is a specialty area, and not having our engineers with access to projects was a shortcoming. What drove the business decision was to bring us closer together," said John Schickling, Kazak's chief operating officer and CFO.

First, Kazak officials shopped around Massachusetts, in Marlborough, Southborough and Westborough. They appealed to the Massachusetts Executive Office of Economic Development for incentives for the expansion project. But the best the Bay State could offer were low-interest loans for infrastructure, said Schickling.

Kazak wasn't interested in taking on debt. With revenue growing, said Schickling, the company is virtually debt-free. The company has been profitable for the past 15 years, and revenue is projected to grow fivefold from 2004 to 2007, to approximately $20 million this year, said Schickling.

In the end, New Hampshire's income-tax free and sales-tax free status, as well as its available skilled work force and its lower cost of living, made it more appealing for Kazak executives, who were keen on retaining and attracting new employees.

For Kazak -- which specializes in composite materials for airplane wings and ships -- being in the Merrimack Valley also keeps the company close to a steady stream of composites students graduating from the University of Massachusetts Lowell. UMass Lowell has partnered with Kazak on work-force training development grants over the years, said Schickling.

The company holds 10 U.S. patents for technology to create lightweight and rust-free materials that can be manufactured in bulk.

Further, Kazak's Merrimack Valley location is home to other composites companies, including Londonderry, N.H.-based Conductive Compounds Inc.; Chelmsford-based Triton Systems Inc.; and three Billerica-based companies, for example.

New Hampshire also offers a wide selection of available real estate and low unemployment insurance rates, and the state levies no equipment taxes, said John DiNapoli, business development manager for the New Hampshire Business Resource Center, an arm of the state's Economic Development Division. "We don't believe in giving financial subsidies. You get to keep more of what you make here," said DiNapoli.

In 2006, the state attracted 24 companies and created 1,124 jobs worth $40 million in new payroll, according to DiNapoli.

Kazak contacted DiNapoli in October 2006 about relocating.

The Woburn company's objective is to grow by commercializing the technology it has developed through R&D projects stemming from Small Business Innovation and Research (SBIR) grants and a multimillion-dollar, five-year contract with a large shipbuilding contractor, which the company won in 2005. Kazak was founded in 1982 by MIT graduate Jerry Fauccia.

Kazak's new business frontier is the Japanese shipbuilding market. But Kazak faces competition from San Jose, Calif.-based Glasforms Inc.

The new plant will double the capacity of the company's former South Carolina facility. It is expected to employ as many as 20 workers by the end of the year and become a "showplace" for courting customers, said Schickling.