Announces Increase in Quarterly Dividend

GREENVILLE, S.C. -- (April 26, 2000) -- Span-America Medical Systems, Inc. (Nasdaq/NM:SPAN) today reported a 4% increase in sales to $6.7 million and a 746% increase in net income to $259,000, or 10 cents a diluted share, compared with $30,600, or 1 cent per diluted share, in the second quarter of last year. 

 The Board of Directors voted to increase the Company's quarterly dividend to 3 cents per share from 2.5 cents per share. The Board declared the dividend payable on June 5, 2000, to shareholders of record on May 15, 2000. The increased dividend is an indication of the Company's excellent financial condition and the Board's confidence in the Company.

Second Quarter Results

"Second quarter income improved dramatically since last year as a result of our higher sales volume and improved expense controls," stated Jim Ferguson, president and chief executive officer of Span-America Medical Systems, Inc. "Sales of custom products grew 24% to $2.96 million as a result of healthy demand for consumer mattress pads and pillows sold through our marketing partner, Louisville Bedding Company. We also continued to make improvements in manufacturing efficiencies that are contributing to higher margins.

"Medical segment sales were down 8% during the quarter to $3.8 million compared with $4.1 million in the second quarter of last year. Almost all of the sales decline occurred in our mattress overlay product lines as a result of hospitals switching from disposable overlays to therapeutic replacement mattresses. Sales of our medical seating products were up 10% for the quarter, but that was offset by slight declines in our positioner and mattress product lines, which were down by 6% and 3%, respectively. Although our medical sales were down slightly from the year-earlier quarter, this is our fourth consecutive quarter of revenue growth in the medical business. We expect medical sales in the last half of fiscal 2000 to show improvement compared with the same period last year.

"In March, we introduced a new therapeutic replacement mattress, the PressureGuard APM^2™. This newest PressureGuard mattress adds a lateral rotation feature to the proven performance of our alternating pressure mattress. It is targeted at the fast-growing long-term care and home-care markets. Initial sales results are positive for the PressureGuard APM². We plan to introduce another new medical mattress product later in the year, and we are optimistic about the growth potential from this expanded product line.

"We are pleased with the sales and earnings growth we have seen so far this year, and we expect continued performance improvements during the remainder of fiscal 2000. We are continuing to look for growth opportunities – both inside and outside the Company," concluded Mr. Ferguson.

Net income in the second quarter rose to $259,000, or 10 cents a diluted share, compared with $30,600, or 1 cent per diluted share, in second quarter of last year. Although selling and administrative expenses were down slightly in the second quarter, the Company expects to increase its investment in marketing and product development in future quarters.

Year-to-Date Results

Net sales were up 5% to $12.2 million in the first six months of fiscal 2000 compared with $11.7 million for the first half of fiscal 1999. The sales growth came from the custom products segment, which increased by 20% to $4.7 million on strong growth in pillows and mattress pads. Medical sales were down 3% for the first half to $7.5 million due to declines in overlay sales. Sales in all other medical product lines (mattresses, seating and positioners) were up during the first six months of 2000 compared with the same period last fiscal year.

Net income was $409,800, or 16 cents per diluted share, in the first six months of fiscal 2000 compared with $78,600, or 3 cents a diluted share, for the same period in fiscal 1999. The increase in earnings was from higher sales volume, improved manufacturing efficiencies and flat selling and administrative costs.

Span-America manufactures and markets a comprehensive selection of pressure management products for the medical market, including Geo-Matt®, PressureGuard®, Geo-Mattress®, Span+Aids®, and Isch-Dish® 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.

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) 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, and (h) 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.