Greenville, South Carolina (March 2, 1998) -- Span-America Medical Systems, Inc. (Nasdaq/NM:SPAN) announced today that it sold substantially all of the assets of its contract packaging business unit on February 27, 1998.

"We believe the sale of the contract packaging unit will allow Span-America's management to focus on the growth of our core medical business," stated Jim Ferguson, president and chief executive officer of Span-America Medical Systems, Inc. "The sale will also free up space in our main plant in the near future, allowing us to consolidate our off-site consumer manufacturing into our Greenville plant to reduce manufacturing costs and improve overall operating efficiencies."

The purchase price for the contract packaging assets is $2.3 million, with $1.84 million paid in cash at closing and the remainder financed by Span-America over five years. The Company anticipates that no material gain or loss will be recorded in the current quarter as a result of the sale. The contract packaging business accounted for approximately 19% of Span-America's revenues and 8% of total operating profit in fiscal 1997.

The buyer of the contract packaging unit is Span Contract Packaging, Inc., a new company formed by long-time Span-America contract packaging managers, Ian Simpson and Les Teague. The new business is expected to operate at Span-America's Greenville plant for about six months until the operations can be relocated to a larger building near its current location.

"We expect the sale of Span-America's contract packaging business to be mostly transparent to our customers and employees," continued Mr. Ferguson. "Our customers and employees were a prime concern in structuring this transaction. We plan to work closely with the new owners to make the transition as smooth as possible."

Following the move of contract packaging, Span-America will close its consumer manufacturing plant in nearby Greer, South Carolina, and relocate the employees and manufacturing operation into the 50,000-square-foot plant vacated by contract packaging. The Company anticipates the improved efficiencies of combining operations in Greenville and the effect of the recently announced stock repurchase will minimize, and possibly offset, the lost profit contribution from the sale of the contract packaging business.

"We believe the sale of the contract packaging business will allow our management to focus on building our core medical business as we evolve into a clinically driven wound management company. The wound management market encompasses our existing surface, seating, and positioning products and includes new product opportunities in skin care, wound care, and nutrition. In addition, we intend to leverage our manufacturing competencies developed in our medical business to make and sell custom foam and related products in the consumer and industrial markets," concluded Mr. Ferguson.

Span-America Medical Systems, Inc. manufactures and markets products to the health care industry for the prevention and treatment of pressure ulcers. The Company also is a manufacturer and marketer of custom foam and packaging products for the consumer and industrial markets. Span-America's stock is traded on The Nasdaq Stock Market's National Market under the symbol SPAN.