SPAN-AMERICA REPORTS HIGHER SALES AND NET INCOME
FOR THIRD QUARTER OF FISCAL 1998

Declares Quarterly Dividend

Greenville, South Carolina (July 21, 1998) ) Span-America Medical Systems, Inc. (Nasdaq/NM:SPAN) today reported higher sales and net income from continuing operations for the third quarter and nine months ended June 27, 1998. The Company's results 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 September 2, 1998, to shareholders of record as of August 14, 1998. 

"Net income from continuing operations rose 28% to $431,000, or $0.15 per diluted share, in the third fiscal quarter," stated Jim Ferguson, president and chief executive officer of Span-America Medical Systems, Inc. "Our growth in income benefited from higher sales of medical and industrial products and lower operating expenses compared with the prior year. We expect further improvements in our overhead expenses after the consolidation of our consumer manufacturing facility into our main plant in early fiscal 1999.

"Span-America's sales of its core medical products rose 13% to $4.2 million as a result of increased demand for our proprietary mattress and positioner products. Mattress sales were up 21% primarily due to higher sales of the new PressureGuard® products that were introduced last quarter after receiving FDA marketing approval in February. We designed and priced the mattresses to be used in a wide range of health-care settings and believe the products are particularly well positioned to benefit from Medicare's new prospective payment system, which was rolled out to long-term care providers in July 1998," continued Mr. Ferguson. 

Third Quarter Results

Net sales from continuing operations increased 5% to $7.4 million in the third quarter of fiscal 1998 compared with $7.0 million in the third quarter last year. Medical sales rose 13% to $4.2 million, industrial sales were up 18% to $1 million, and consumer sales were down 10% to $2.2 million compared with the third quarter of fiscal 1997.

"Industrial sales continued as our fastest growing segment as a result of increased demand from new and existing customers," continued Mr. Ferguson. "Consumer sales were down in the third quarter due to lower volumes of convoluted foam and OEM sales, somewhat offset by higher sales of Terryfoam products. We are planning to combine our industrial and consumer segments into one new business called custom products. The businesses will be strategically aligned to focus on higher margin, value-added products that take advantage of technologies and capabilities developed in our medical business. We also plan to combine their manufacturing operations. The combination will be completed when we close our Greer, SC consumer products plant and consolidate it into our main manufacturing facility in Greenville in early fiscal 1999."

Net income from continuing operations rose 28% to $431,000, or $0.15 per diluted share, compared with $335,000, or $0.10 per diluted share, in the third quarter of last year. Net income, including discontinued operations, increased 8% to $431,000, or $0.15 per diluted share, in the third quarter of fiscal 1998 compared with net income of $399,000, or $0.12 per diluted share, in the third quarter of fiscal 1997.

Nine-Month Results

Net sales from continuing operations for the first nine months of fiscal 1998 increased 3% to $21.1 million compared with $20.5 million in the first nine months of the prior fiscal year. The majority of sales growth was generated by industrial sales which rose 23% to $3.0 million. Medical sales increased 1% to $11.9 million and consumer sales declined 2% to $6.3 million compared with the first nine months of fiscal 1997.

Net income from continuing operations for the first nine months of fiscal 1998 rose 11% to $1.2 million, or $0.39 per diluted share, compared with $1.1 million, or $0.34 per diluted share, in the first nine months of fiscal 1997. Net income, including discontinued operations, increased 18% to $1.35 million, or $0.44 per diluted share, in the first nine months of fiscal 1998 compared with net income of $1.15 million, or $0.36 per diluted share, in the first nine months of fiscal 1997.

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.

With the exception of historical factual information, the statements made in this press release constitute forward-looking statements, contain the words "believes," "anticipates," "expects," and words of similar import based upon current expectations and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve certain assumptions, risks and uncertainties that could cause actual results to differ materially from those included in or contemplated by the statements. The Company disclaims any obligation to update any forward-looking statements as a result of developments occurring after the issuance of this press release.