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SPAN-AMERICA REPORTS RESULTS
FOR FIRST QUARTER OF FISCAL 1999
Declares Quarterly Dividend
GREENVILLE, S.C. (January 26, 1999) Span-America Medical Systems, Inc. (Nasdaq/NM:SPAN) today reported sales of $5.2 million and net income of $47,900, or 2 cents a diluted share,
for the first fiscal quarter ended January 2, 1999. The Company's results for the first quarter of last year have been restated to reflect the sale of the contract packaging business as a discontinued
operation. Span-America sold the packaging business on February 27, 1998.
The Company also announced a regular cash dividend of $0.025 per share, payable on March 4, 1999, to shareholders of record on February 15, 1999.
First Quarter Results
Net sales from continuing operations were $5.2 million in the first quarter of fiscal 1999 compared with $6.4 million in the same quarter of fiscal 1998. The Company reported
income from continuing operations of $47,900, or 2 cents a diluted share, in the first quarter of fiscal 1999 compared with $271,500, or 9 cents a diluted share, in the same quarter of last year. Earnings were
reduced by costs related to closing the Greer, South Carolina, consumer foam plant and its consolidation into Span-America's main plant in Greenville, and lower sales volume from two consumer product lines that were
discontinued in the fourth quarter of fiscal 1998.
"As expected, our first quarter sales and earnings from continuing operations were down from the prior year due to the phase out of two lines of low-margin
consumer foam mattress pads in the fourth quarter of last year," stated Jim Ferguson, president and chief executive officer of Span-America Medical Systems, Inc. "The discontinued products accounted for almost
all of the sales decline. We also incurred approximately $80,000 in costs to close our consumer foam plant and consolidate it into our main plant during the first quarter. We expect earnings performance to
improve beginning in our second quarter as we benefit from higher overall sales volume and the lower cost structure of the combined plants.
"Sales in our core medical business rose 3% in the first quarter this year compared with the first quarter of fiscal 1998. We generated strong sales of our
proprietary medical mattress products which rose 23% compared with the same quarter last year. Our Geo-Mattress® product line showed especially strong growth during the quarter. We believe these
mattress products are well positioned for long-term care providers under the new prospective payment reimbursement system.
"We recently received notification from a division of the Health Care Financing Administration (HCFA) that our new Pressureguard® Site Select® mattress
was approved for reimbursement as a specialty treatment support surface under the Medicare system. We anticipate higher sales volume of the Site Select since this approval should make the product significantly
more attractive to medical equipment providers.
"Industrial sales rose 3% in the first quarter primarily due to the addition of new customers. Since completing the plant consolidation in the first quarter,
we have now physically and strategically combined our industrial and consumer business units into a new unit called Custom Products. We are optimistic about the growth potential and the improved operating
efficiencies of this new unit," continued Mr. Ferguson.
"The elimination of under-performing consumer product lines and the consolidation of our plants were two important decisions for Span-America in the first
quarter. While we expected those actions to hurt our short-term performance, we believe sales and earnings will improve during the remainder of fiscal 1999 because of higher medical sales and lower overhead
costs," 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.
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 consumer products, (b) inability to achieve anticipated sales volume of medical products, (c) changes in relationships with large customers,
(d) the impact of competitive products and pricing, (e) government reimbursement changes in the medical market, (f) F.D.A. regulation of medical device manufacturing, (g) raw material cost increases, (h) disruptions
caused by the Company's plant consolidation, and (i) 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
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