SPAN-AMERICA EXPECTS PRICE INCREASE FOR POLYURETHANE FOAM
---------------------------------------------
Does Not Anticipate Shortage in Foam Materials
GREENVILLE, S.C. – (October 13, 2005) – Span-America Medical Systems, Inc. (NASDAQ: SPAN) announced today that it expects prices for
polyurethane foam to increase by as much as 37% in the near future. Based on information from key suppliers, the Company does not anticipate any shortage or allocations of foam material, the Company's largest
raw material category.
"We were notified by our largest suppliers that foam prices will rise in the range of 10% to 37%, depending on the type of foam, effective November 7th," stated James D. Ferguson,
president and chief executive officer of Span-America. "Our suppliers also indicated that Span-America will not be on allocation for polyurethane foam. We believe this will allow us to continue supplying
our customers without interruption.
"The recent hurricanes in the Gulf states have had a severe effect on the supply of TDI, a key component in urethane foams. In addition to the TDI problems, the price
of polyol, another key foam component, has been significantly affected by the rising price of natural gas. The shortage of TDI combined with higher costs for natural gas and petroleum products has resulted in
price increases and possible shortages of foam. We expect the TDI supply problems to be short-lived, but the higher price of polyol might last longer. We believe the current foam market volatility will
subside in time as supply, demand and pricing become more balanced.
"We plan to pass on the higher costs wherever possible, but we cannot predict how market conditions will affect pricing. We may also
have the opportunity to pick up additional business if our competitors experience foam shortages due to potential allocation and supply problems. We will closely monitor the foam pricing and supply situation
and will make every attempt to adjust our pricing and production to minimize the impact on the company. At this point, we expect that the higher foam prices could reduce our earnings in the first quarter of
fiscal 2006, but cannot quantify the effect until we have some operating history with the increased costs, potential shifts in demand and related competitive factors," concluded Mr. Ferguson.
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." For more information, visit www.spanamerica.com.
Forward-Looking Statements
The
Company has made forward-looking statements in this release, regarding management's expectations for earnings performance and the possible effects on the Company of unusual events in the polyurethane foam
market. 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) volatile pricing and supply conditions in the market for polyurethane foam caused by recent hurricane damage in the Gulf coast region, (b) the potential for shortages of foam caused by
hurricane-related disruptions in the supply of chemicals used in foam manufacturing, (c) the potential for lost revenues and earnings as a result of the Company's actions to increase its sales prices in response to
unusually high raw material cost increases, (d) the loss of a key distributor of the Company's medical or custom products, (e) the inability to achieve anticipated sales volumes of medical or custom products,
(f) raw material cost increases, (g) the degree of success achieved in manufacturing and selling the Secure I.V. safety catheter product line, (h) potential problems arising from having a sole source contract
manufacturer for the Secure I.V. product line, (i) the potential for lost sales due to competition from low-cost foreign imports, (j) changes in relationships with large customers, (k) the impact of competitive
products and pricing, (l) government reimbursement changes in the medical market, (m) 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. |
