Exhibit 99.1
Span-America Reports Improved Results for First Quarter of Fiscal 2004
Declares Quarterly Dividend
GREENVILLE, S.C., Jan. 28 /PRNewswire-FirstCall/ -- Span-America Medical
Systems, Inc. (Nasdaq: SPAN) today reported higher sales and net income for
the first quarter ended January 3, 2004.
The Board also declared a regular quarterly dividend of $0.035 per
share payable on March 4, 2004, to shareholders of record on February
13, 2004.
"Span-America's first quarter sales jumped 46% to $11.5 million and net
income was up 27% to $422,000, or $0.16 per diluted share, compared with the
first quarter of last year," stated Jim Ferguson, president and chief
executive officer of Span-America Medical Systems. "Our excellent results were
due to higher sales across product lines and especially strong sales of
consumer pillows and mattress pads.
"Sales in the custom products segment were up 133% to $6.1 million and
accounted for 53% of first quarter sales. We benefited from higher sales of
consumer products sold through our marketing partner, Louisville Bedding
Company. Several of our current consumer sales programs did not begin until
the second or third quarters of last fiscal year, which accounts for a large
part of the strong growth comparison in this year's first quarter. In
addition, our first quarter of fiscal 2004 was a 14-week period compared with
a 13-week period in fiscal 2003. We expect continued growth in custom product
sales during the remainder of fiscal 2004, although at a much slower growth
rate than our first quarter.
"Medical sales rose 2% to $5.4 million compared with the first quarter of
last year," continued Mr. Ferguson. "Non-mattress medical products experienced
growth rates that were generally higher than the same quarter last year;
however, the growth rate of therapeutic mattresses, our largest medical
product line, was up only 2% compared with the first quarter of last year. We
are optimistic that the Medicare rate increase in October 2003 will begin to
stimulate demand for these products over the next few quarters," continued Mr.
Ferguson.
First Quarter Results
Total custom products sales rose 133% to $6.1 million in the first quarter
of fiscal 2004 compared with $2.6 million in the same quarter last year. Sales
of all major consumer product lines increased during the quarter. The growth
in consumer sales was partially offset by an 8% decline in sales of industrial
products.
Medical sales rose 2% in the first quarter to $5.40 million compared with
$5.26 million in the first quarter of last year, primarily due to solid,
broad-based growth among medical product lines. Positioners, seating and skin
care sales grew by 7%, 8% and 9%, respectively. Sales of overlays were flat,
and sales of therapeutic mattresses, the largest medical product line, were up
by 2% during the quarter compared with the first quarter of fiscal 2003.
Earnings for the quarter benefited from the higher sales volume. Gross
profit rose 16% to $2.9 million on higher volume compared with $2.5 million in
the first quarter last year. The increase in sales volume for the quarter also
had a positive effect on manufacturing efficiency. Gross margin percentage
declined to 25.2% from 31.8% in the first quarter last year due to a shift in
product mix. Consumer sales typically have a lower margin than medical sales.
SG&A expenses increased 10% during the first quarter to $2.4 million from
$2.2 million in the same quarter last year. The increases were due to higher
professional fees, property and casualty insurance expense, freight expense
and Secure I.V. development and marketing expense. The Company incurred
expenses of approximately $91,000 related to the lawsuit and potential tender
offer activity by shareholder Jerry Zucker. As previously announced, the
matters with Mr. Zucker were settled and resolved in the recently completed
quarter. In addition, expenses for production testing and development of the
Secure I.V. product line increased 62% to $160,000 from $99,000 in the first
quarter last year. The Company expects to begin selling Secure I.V. around
mid-2004.
Operating profit increased by 55% to $490,000 in the first quarter from
$316,000 in the same quarter last year. The increase was due primarily to the
higher sales volume during the quarter.
Non-operating income declined by 19% to $159,000 from $196,000 in the
first quarter of last year due to lower interest and royalty income. Interest
income was down 43% to $17,000 because of lower levels of marketable
securities and lower interest rates. Royalty income on a syringe product
licensed to Becton, Dickinson and Company fell 14% to $141,000 due to lower
sales of the licensed product. Span-America's license agreement with Becton
Dickinson is expected to expire in December 2005, and no further royalty
payments will be received after that time.
Net income for the first quarter increased 27% to $422,000, or $0.16 per
diluted share, compared with $333,000, or $0.13 per diluted share, in the same
period last year.
Outlook for Fiscal 2004
"We believe we will see continued growth in sales and earnings during the
next several quarters of fiscal 2004. However, our expected growth rates will
be significantly lower than those achieved in the first quarter," 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(R),
PressureGuard(R), Geo-Mattress(R), Span+Aids(R), Isch-Dish(R), and Selan(R)
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.
Forward-Looking Statements
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 key
distributor of the Company's medical or custom products, (b) inability to
achieve anticipated sales volumes of medical or custom products, (c) raw
material cost increases, (d) changes in relationships with large customers,
(e) the inability to achieve sales and cost targets for the Secure I.V.
product line, (f) the impact of competitive products and pricing, (g)
government reimbursement changes in the medical market, (h) 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.
SPAN-AMERICA MEDICAL SYSTEMS, INC.
Statements of Income (Unaudited)
3 Months Ended
Jan. 3, Dec. 28,
2004 ** 2002 % Chg
Net sales $11,508,500 $7,891,700 46%
Cost of goods sold 8,606,700 5,385,400 60%
Gross profit 2,901,800 2,506,300 16%
25.2% 31.8%
Selling and marketing expenses 1,609,600 1,515,400 6%
Research and development expenses 171,000 135,400 26%
General and administrative expenses 630,800 539,500 17%
2,411,400 2,190,300 10%
Operating income 490,400 316,000 55%
4.3% 4.0%
Investment income 17,000 30,000 -43%
Royalty income 141,300 164,800 -14%
Other 900 800 13%
Total non-operating income 159,200 195,600 -19%
Income before income taxes 649,600 511,600 27%
Income taxes 228,000 179,000 27%
Net income $421,600 $332,600 27%
3.7% 4.2%
Net income per share of common stock:
Basic $0.16 $0.13 26%
Diluted 0.16 0.13 23%
Dividends per common share $0.035 $0.035 0%
Weighted average shares outstanding
Basic 2,561,556 2,538,870 1%
Diluted 2,704,784 2,632,652 3%
Supplemental Data
Depreciation expense 137,700 111,200 24%
Amortization expense 24,000 17,100 40%
** Note: The first quarter of fiscal 2004 was a 14-week period compared
with a 13-week period in the first quarter of fiscal 2003.
SPAN-AMERICA MEDICAL SYSTEMS, INC.
Balance Sheets
Jan. 3, Sep. 27,
2004 2003
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $1,925,900 $1,811,300
Securities available for sale 4,246,500 4,143,800
Accounts receivable, net of allowances 5,302,400 5,941,800
Inventories 2,486,600 2,539,300
Prepaid expenses and deferred income
taxes 566,400 593,000
Total current assets 14,527,800 15,029,200
Property and equipment, net 5,321,900 4,817,400
Cost in excess of fair value of net assets
acquired, net of accumulated amortization 1,924,100 1,924,100
Other assets 3,028,300 2,219,900
$24,802,100 $23,990,600
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $2,793,200 $2,467,500
Accrued and sundry liabilities 1,807,200 1,747,400
Total current liabilities 4,600,400 4,214,900
Deferred income taxes 321,000 321,000
Deferred compensation 922,300 929,400
Shareholders' equity
Common stock, no par value, 20,000,000
shares authorized; issued and
outstanding shares 2,571,718 (2003)
and 2,538,870 (2002) 385,300 284,000
Additional paid-in capital 10,000 10,000
Retained earnings 18,563,100 18,231,300
Total shareholders' equity 18,958,400 18,525,300
$24,802,100 $23,990,600
Note: The Balance Sheet at September 27, 2003 has been derived from
the audited financial statements at that date.
SOURCE Span-America Medical Systems, Inc.
-0- 01/28/2004
/CONTACT: James D. Ferguson, President and Chief Executive Officer of
Span-America Medical Systems, Inc., +1-864-288-8877, ext. 212/
(SPAN)
CO: Span-America Medical Systems, Inc.
ST: South Carolina
IN: HEA MTC
SU: ERN DIV ERP