MENTOR, Ohio, Jan. 30 /PRNewswire-FirstCall/ -- STERIS Corporation today announced that the Company is transferring the manufacturing portion of its Erie, Pennsylvania operations to Mexico. The announcement follows a detailed analysis of cost reduction alternatives. The Company anticipates pre-tax savings of approximately $20 million annually in the first full fiscal year after this transfer is completed, which is expected to be in the summer of 2007.
STERIS manufactures sterilization equipment at the Erie facility for its Healthcare and Life Science business segments. Approximately 450 employees at the facility are associated with manufacturing and close to 230 employees serve in a variety of business support functions. STERIS expects to maintain its non-manufacturing presence in Erie following the transfer.
“The decision to transfer manufacturing activities from Erie to Mexico was a difficult one. However, the reality is that our core healthcare customers are under significant pressure to reduce costs and we are experiencing new global competition from lower cost suppliers. The new facility will allow us the flexibility to better meet the needs of our customers, enhance our competitive position and provide future growth opportunities,” said Les C. Vinney, president and chief executive officer of STERIS Corporation. “Over recent years, we have invested considerable amounts in new equipment and improved processes and designs to make the Erie manufacturing operation more cost competitive. Despite these ongoing efforts of the Company, the unions and our employees, the Erie manufacturing operation remains STERIS’s highest cost facility. We recognize the impact this will have on our employees and the community, and the Company will work with the unions and employees to attempt to mitigate the impact of this action.”
The transfer of the Erie manufacturing operations is designed to occur in stages over the next 18 months. In the fourth quarter of fiscal 2006, STERIS anticipates incurring pre-tax costs of approximately $30 million, primarily for non-cash expenses related to asset write downs, accelerated recognition of pension and retiree medical benefits related to the transfer, and other restructuring activities. In total, the Company anticipates that these actions will impact diluted earnings per share by approximately $0.27 in the fourth quarter of fiscal 2006.
Additionally, the Company anticipates pre-tax expenses associated with the transfer of approximately $35 million to be incurred over the next several years. Beginning in fiscal 2007, these expenses are expected to be partially offset by savings associated with relocating to Mexico. The net impact of this action is anticipated to be dilutive to pre-tax earnings in the range of $7 million to $9 million in fiscal 2007, and accretive to pre-tax earnings in the range of $6 million to $8 million in fiscal 2008. The Company anticipates reaching steady state, pre-tax cost reductions of $20 million beginning in fiscal 2009.
The Company will announce third quarter fiscal 2006 earnings tomorrow, January 31, 2006, followed by a conference call at 10:00 a.m. EST. The Company will provide fourth quarter fiscal 2006 earnings guidance at that time
and will also further review the financial impact of the actions described above.
About STERIS
The mission of STERIS Corporation is to provide a healthier today and safer tomorrow through knowledgeable people and innovative infection prevention, decontamination and health science technologies, products and services. The Company’s more than 5,000 dedicated employees around the world work together to supply a broad array of solutions by offering a combination of equipment, consumables and services to healthcare, pharmaceutical, industrial and government customers. The Company is listed on the New York Stock Exchange under the symbol STE. For more information, visit www.steris.com.
This news release may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to the Company or its industry that are intended to qualify for the protections afforded “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and other laws and regulations. Forward-looking statements speak only as to the date of this report, and may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” and “seeks,” or the negative of such terms or other variations on such terms or comparable terminology. Many important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation, disruption of production or supplies, changes in market conditions, political events, pending or future claims or litigation, competitive factors, technology advances, and changes in government regulations or the application or interpretation thereof. Other risk factors are described in the Company’s Form 10-K and other securities filings. Many of these important factors are outside STERIS’s control. No assurances can be provided as to any future financial results. Unless legally required, the Company does not undertake to update or revise any forward-looking statements even if events make clear that any projected results, express or implied, will not be realized. Other potential risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, (a) the potential for increased pressure on pricing that leads to erosion of profit margins, (b) the possibility that market demand will not develop for new technologies, products or applications, or the Company’s business initiatives will take longer, cost more or produce lower benefits than anticipated, (c) the possibility that application of or compliance with laws, court rulings, regulations, certifications or other requirements or standards may delay or prevent new product introductions, affect the production and marketing of existing products, or otherwise affect Company performance, results, or value, (d) the potential of international unrest or effects of fluctuations in foreign currencies of countries where the Company does a sizeable amount of business, (e) the possibility of reduced demand, or reductions in the rate of growth in demand, for the Company’s products and services, and (f) the possibility that anticipated cost savings may not be achieved, or that transition, labor, competition, timing, execution, regulatory, governmental, or other issues or risks associated with the matters described in this release may adversely impact Company performance, results, or value.
STERIS Corporation
CONTACT: National Media and Investors, Aidan Gormley, Senior Director,Corporate Communications and Investor Relations, +1-440-392-7607, or Local(Erie area) Media, Stephen Norton, Manager, Corporate Communications,+1-440-725-6001, both of STERIS Corporation
Web site: http://www.steris.com//
