SPAN-AMERICA REPORTS RESULTS FOR FIRST QUARTER OF FISCAL 2003
Declares Quarterly Dividend

GREENVILLE, S.C. (January 22, 2003) Span-America Medical Systems, Inc. (NASDAQ:SPAN) today reported results for the first quarter of fiscal 2003 ended December 28, 2002.

The Company also declared a regular quarterly cash dividend of $0.035 per share payable on March 4, 2003, to shareholders of record on February 14, 2003. 

"First quarter sales rose 15% to $7.9 million due to higher medical and custom products sales," stated Jim Ferguson, president and chief executive officer of Span-America Medical Systems, Inc. "Increased demand for our medical mattress products was the primary driver for first quarter sales.

"Our net income declined slightly to $332,600, or $0.13 per diluted share, in the first quarter of 2003 compared with $354,700, or $0.14 per diluted share, in the same quarter last year. The 6% decline in net income from last year was due to increased development costs associated with our pending introduction of the Secure IV® safety catheter.  As a result of work on Secure IV, R&D expenses were up 92% to $135,000 compared with $71,000 in the first quarter of fiscal 2002.

"We had good earnings growth from our core medical and custom products business units in the first quarter.  Excluding any impact from Secure IV, earnings from the medical and custom products segments rose 12% to $397,100 compared with $354,700 in the first quarter of last year.  Total after-tax expense related to Secure IV for the first quarter this year was $64,500.

"We expect to launch marketing of the Secure IV product line in the second half of this fiscal year.  We also anticipate that initial sales of the Secure IV product line in fiscal 2003 will not offset higher R&D expenses related to the product line's introduction. As previously reported, we expect our fiscal 2003 earnings to be slightly lower than fiscal 2002 based on the additional R&D costs," continued Mr. Ferguson. 

First Quarter Results

Total net sales grew 15% to $7.9 million compared with $6.9 million in the first quarter last year.  Almost all of the increase came from the medical segment, where sales rose 21% to $5.3 million compared with $4.4 million in the first quarter of fiscal 2002.  The majority of the medical sales growth came from the Company's powered and non-powered mattress products.  Total mattress sales increased 55% during the first quarter.  Sales of Span-Aids patient positioners grew 13% in the quarter. Sales of overlays and seating products declined by 9% and 8%, respectively.  Sales in the custom products segment increased 4% to $2.6 million compared with $2.5 million last year.  Within the custom products segment, consumer sales declined 2% due to lower demand for mattress overlays.  Industrial sales rose 21% due mostly to higher volume with existing customers.

"We are pleased with the strength of our medical business in the first quarter," noted Mr. Ferguson.  "We have not experienced any significant changes in demand resulting from the October 2002 Medicare cutbacks in the long-term care industry and expect minimal impact on our fiscal 2003 sales.  We expect our custom products business to gain momentum during the remainder of fiscal 2003, largely due to higher consumer sales.  Overall, we remain optimistic about the current business conditions in our markets."

Gross profit level rose 13% during the quarter to $2.5 million due to higher sales volume.  Gross margin percent declined slightly to 31.8% from 32.2% in the first quarter last year.  The margin decline was due to higher material and overhead costs.  The gross profit was not affected by the development of the Secure IV product line.

Operating profit declined by 9% to $316,000 compared with $345,000 in the first quarter of last year.  The entire decline was due to development expenses for Secure IV, which totaled $99,000 for the first quarter.  Excluding those expenses, operating profit from the medical and custom products segments would have increased by 20% during the first quarter. Total selling and marketing expenses were up by 17% during the quarter due to higher medical sales commissions and expenses for mattress evaluation samples.  R&D expenses were up by 92% due to Secure IV as mentioned above. General and administrative expenses rose by 7% mainly because of higher reserves for bad debt and increased property and casualty insurance expense.

Non-operating income declined 2% to $196,000 for the quarter due to a slight decline in royalty income.  Interest income was flat during the quarter.

Net income declined 6% to $332,600, or $0.13 per diluted share, compared with $354,700, or $0.14 per diluted share, in Q1 last year. 

About Span-America Medical Systems, Inc.

Span-America manufactures and markets a comprehensive selection of pressure management products for the medical market, including Geo-Matt®, PressureGuard®, Geo-Mattress®, Span+Aids®, Isch-Dish®, and Selan® products.  The Company also supplies custom foam and packaging products to the consumer and industrial markets.  Span-America's stock is traded on The Nasdaq Stock Market's National Market under the symbol SPAN.

Forward-Looking Statements

The Company has made forward-looking statements in this release, regarding management's expectations for future sales and earnings performance.  Management wishes to caution the reader that these statements are only predictions. Actual events or results may differ materially as a result of risks and uncertainties facing the Company including: (a) the loss of a major distributor of the Company's medical or custom products, (b) inability to achieve anticipated sales volumes of medical or custom products, (c) raw material cost increases, (d) changes in relationships with large customers, (e) the inability to achieve sales and cost targets for the Secure IV product line, (f) the impact of competitive products and pricing, (g) government reimbursement changes in the medical market, (h) FDA regulation of medical device manufacturing, and other risks referenced in the Company's Securities and Exchange Commission filings.  The Company disclaims any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.  Span-America Medical Systems, Inc. is not responsible for changes made to this document by wire services or Internet services.