Contract manufacturer Precision Extrusion Inc. planning local expansion

Dec. 13--GLENS FALLS -- Precision Extrusion Inc. has had a busy two years, marked by a brief foray into China, a recent international certification milestone and fresh plans for a local expansion.

"We've been hiring this year because our business has continued to grow," said President Mike Badera, who founded the company in 1993. "We've kind of doubled in the last four years, and we're looking at continuing good growth next year."

Precision Extrusion is a contract manufacturer. It makes highly engineered extruded plastic tubing, mainly for the medical device manufacturing industry.

Increasingly, the company is being contracted to do "subassembly work," which involves melding different types of tubing for use in specialized products.

"We're doing a lot more of it than we used to, and it's more complicated," Badera said. "There's a lot more labor."

Vice President Rosy Wang explained the contract subassembly work allows overseas companies to get more manufacturing done by experts like Precision Extrusion without paying the high taxes that can be levied on finished medical devices shipped into their countries.

In some cases, the bulk of the technology is in Precision Extrusion's tubing, anyway. Simpler devices are then attached to the tubing at overseas finishing factories.

"The things they add are really low-tech add-ons, but now they can say 'assembled in Turkey,' and the government gives them a break, and they get to sell more," Badera said.

It's the subassembly work that's likely to boost Precision Extrusion's payroll by 20 or more employees over the next three to four years.

The company has about 30 on staff now, Badera said, and architects have been enlisted to plan an expansion of about 7,000 square feet. That will bring the Tech Park plant to about 22,000 square feet and allow the company to add about 10,000 square feet of class-rated clean room space.

The decision to expand in Glens Falls came after Precision Extrusion shuttered a plant in China.

In 2011, the company opened a manufacturing operation in Hangzhou, China, with plans to employ 40 people in making specialty tubing for the Chinese medical device manufacturing industry.

This week, Badera explained that plant was mothballed, and it's unlikely he'll consider launching another overseas operation anytime soon.

"Part of why we were thinking about going to China in the first place is that they're expanding their health care, as are most of the countries in Asia," Badera said. "They were trying to get more domestic-made product; they don't want to import the expensive stuff from the U.S."

But initial promises of incentives didn't pan out, and the rising cost of labor ultimately doomed the China plant, Badera said.

"As it's turned out, we can do the same thing here," he said. "They're still looking for that subassembly, and because the cost of goods in China has gone up, our cost here is now more competitive. We can make it here and ship it."

Precision Extrusion learned another lesson in China: the need to protect its trade secrets.

On previous visits to the company's plant off Dix Avenue, Post-Star photographers were allowed to take photos of employees working in the clean room. That policy has changed.

"I think everyone everywhere is tightening up in general, but we've had some experiences, both domestically and internationally, where we're more aware, more concerned about those kinds of things," Badera said. "We used to allow customers access anytime we were doing a run."

Because Precision Extrusion handles contracts for many companies, it could have been possible for a visiting client to see work related to a competitor's products.

As for the firm's financial performance, Badera wouldn't disclose revenue or profits. As a private company, Precision Extrusion is not required to do so -- and most don't, for competitive reasons.

He did say the company's international business is growing, although not as fast as its stateside operation.

Sales, for instance, have doubled over the past three to four years, and profit margins have "more than doubled" in that time, he said.

"Fortunately, business has been booming all over the U.S.," Badera said. "A few years ago, we were 30 to 33 percent international. International (business) now is only about 21 or 22 percent of our sales this year."

Overseas business is growing, just not as fast as the domestic market, Wang said.

"We've got a couple of customers in Korea and one or two in Japan that are almost ready (to start buying tubing)," Badera added.

Challenges have come in Europe, where several buyouts have taken place in the medical device manufacturing sector, he said.

"There's a little more competition in Europe than there used to be, but I don't think that's what's affecting us," Badera said. "It's more just a matter of a small company being bought up by a company like Medtronic or Boston Scientific, and they either kill the product line or they bring all the production in-house."

Precision Extrusion also learned recently it's going to have help selling itself as a provider of quality products. The company succeeded last month in earning an international classification -- ISO 13485 -- that speaks to a high standard of excellence and quality, specifically as it relates to the manufacture of medical devices.

The certification is issued by the International Organization for Standardization, which was created in 1947.

Many local corporations -- including Precision Extrusion for the past 15 years -- have ISO certification for quality management systems. But the new certification is geared toward medical device manufacturers.

"There's validation ... to ensure the customer's design -- whatever they wanted up front -- is what he gets at the end of the day," Badera said.

Having the dual certification will help Precision Extrusion stand out among competitors, and Wang said some customers are already responding. Specifically, medical device manufacturers seeking to get their devices approved for sale in the European Union are turning to Precision Extrusion because regulatory hurdles are easier to clear if suppliers have the dual certification, Wang said.

The effort to win the certification took several months, and the company hired a consultant to ensure its processes and practices were compliant before applying to ISO.

The certification was granted in November, after a four-day audit that concluded with no concerns on the part of the auditor.

Because Precision Extrusion doesn't sell finished devices, the company is not subject to the medical device excise tax that is hurting other Catheter Valley businesses' bottom lines.

But Badera said he does hear from customers who, in part because of the tax, are driving harder bargains on contracts.

The excise tax is a provision of the Affordable Care Act, also known as Obamacare. It is a 2.3 percent tax on the sale of medical devices, used to help fund the law's other provisions. The tax, which went into effect Jan. 1, is expected to contribute about $2.9 billion toward the annual cost of the legislation.

"Cost is a battle as the device manufacturers have to deal with that tax, but I think in general, they're also dealing with their own cost pressures -- insurance, government, competition," Badera said. "Everyone's trying to get another 1 percent out of their costs ... and we have to justify it six ways from Sunday to get a 2.8 percent price increase, even though the cost of the material went up 2.8 percent."

Precision Extrusion's story is one the region can be proud of, according to Warren County Economic Development Corp. President Ed Bartholomew.

It also highlights the need for the region to educate local workers so they can fill jobs at tech-based firms, he said.

The EDC is working with Precision Extrusion to get approvals -- and possibly some tax benefits -- for the company's expansion, Bartholomew said.

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