SPAN-AMERICA REPORTS SECOND QUARTER RESULTS
Announces Quarterly Dividend
GREENVILLE, S.C. -- (April 25, 2001) -- Span-America Medical Systems, Inc. (Nasdaq/NM:SPAN) today reported net sales of $6.5 million and net income of $175,000, or 7 cents a diluted
share, for the second fiscal quarter ended March 31, 2001.
The Board also declared a regular quarterly dividend of $0.03 per share payable on June 5, 2001, to shareholders of record on May 15, 2001.
Second Quarter Results
Span-America's sales declined 4% in the second quarter to $6.5 million mainly as a result of lower sales volumes of overlays, positioners, and industrial foam products," stated
Jim Ferguson, president and chief executive officer of Span-America Medical Systems, Inc. "Medical sales were down 1% to $3.74 million and custom product sales declined 7% to $2.75 million compared with the
same quarter of last year. After finishing an unusually strong first quarter, we experienced a decline in orders in January and February followed by a rebound in March. We were pleased to see the
business regain some strength in March, and based on current order patterns, we expect sales volume to pick up during the remainder of our fiscal year.
Medical sales declined by 1% during the second quarter due to lower volumes of mattress overlays and patient positioners related to inventory management by one of our key medical
distributors. We saw accelerated purchases of these products in November and December, ahead of a January 1st price increase, followed by lower sales in January and February as the distributor used its excess inventory. Order patterns have since returned to normal.
"We experienced solid growth in medical mattress sales, which rose 16% compared with the second quarter of last year," continued Mr. Ferguson. Demand remains strong for our
therapeutic line of medical mattresses, and we continue to invest in R&D to expand our product offerings. In December 2000, we introduced the Geo-Mattress Atlas™, our newest mattress. The Atlas
is designed to support patient weights of up to 600 pounds, and we expect it to be an important contributor to the continued growth of our medical mattress products."
"Sales in the custom products segment were down 7% during the quarter. Most of the decline occurred in the industrial product lines, which have been weak due to the slowing
economy. Sales of industrial products tend to be sensitive to economic cycles and were soft during the first and second quarters. Sales of consumer pads and pillows increased 4% in the latest quarter,
partially offsetting the decline in industrial sales. Consumer pad and pillow sales are expected to increase in the last half of this fiscal year due to normal seasonal promotions and the marketing efforts of
our distribution partner, Louisville Bedding Company.
Net income in the second quarter declined 32% to $175,000, or 7 cents a diluted share, compared with $259,000, or 10 cents a diluted share, in the second quarter of last year.
Mr. Ferguson continued, "Second quarter earnings were affected by our lower sales levels and increased spending to support our sales, marketing, and research and development efforts
targeted primarily at the medical business. Our administrative expenses were up 6% during the quarter due to an increase in our bad debt reserve and an unrealized loss in the cash value of variable equity life
insurance policies."
Year-to-Date Results
Net sales for the first six months of fiscal 2001 rose 11% to $13.6 million compared with $12.2 million for the first half of fiscal 2000. Net income was up 23% to $503,000, or 20
cents per diluted share, in the first six months of fiscal 2001 compared with $410,000, or 16 cents a diluted share, for the same period in fiscal 2000. Both business segments have performed well in the first
half of fiscal 2001, with medical sales increasing 11% and custom products sales rising 12% year to date.
"We are pleased with the Company's results in the first half of 2001," added Mr. Ferguson. "We had an unusually strong first quarter and a slightly weaker second quarter, the
opposite of the normal seasonal pattern in our business. We are optimistic about the remainder of our fiscal year, and we continue to look for new growth opportunities for the Company."
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®, 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) FDA 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.
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