Exhibit 99.1
Span-America Reports Higher Sales and Net Income
for Second Quarter of Fiscal 2004
Declares Quarterly Dividend
GREENVILLE, S.C., April 28 /PRNewswire-FirstCall/ -- Span-America Medical
Systems, Inc. (Nasdaq: SPAN) today reported higher sales and net income for
the second quarter and six months ended April 3, 2004.
The board also declared a regular quarterly dividend of $0.035 per share
payable on June 4, 2004, to shareholders of record on May 14, 2004.
"Net sales rose 19% to $12.9 million in the second quarter on the strength
of increased demand for our medical products and higher sales of consumer
products compared with last year," stated Jim Ferguson, president and chief
executive officer of Span-America Medical Systems. "Net income more than
doubled to $498,000, or $0.18 per diluted share, compared with the second
quarter of last year and benefited from a better sales mix, higher margins in
the medical segment and improved operating efficiencies."
Second Quarter Results
Net sales increased to $12.9 million compared with $10.8 million in the
second quarter of last year. Sales growth was broad based with most major
product lines contributing to the increase.
Medical segment sales rose 26% to $6.4 million compared with $5.1 million
for the same period last year. The majority of the medical sales growth was
due to higher demand for powered and non-powered therapeutic mattresses.
Mattress sales were up 44% during the second quarter of fiscal 2004 compared
with the prior year due to higher sales of Span-America's proprietary product
lines, including Geo-Mattress(R) and PressureGuard(R) APM2(R). Contributing to
sales of medical products in the latest quarter were Span-Aids(R) patient
positioners that were up 13%, seating products that grew by 11%, and Selan(R)
sales that increased 5%. Sales of mattress overlays were down 3%, reflecting a
long term trend of customers switching to therapeutic mattresses from
overlays.
In the custom products segment, sales rose 12% to $6.4 million compared
with $5.7 million in second quarter of last year. Consumer bedding sales rose
15% to $5.7 million, while industrial sales declined by 7% to $735,000. The
growth in consumer sales was due to a higher volume of pillows and mattress
pads sold through Span-America's exclusive marketing and distribution partner,
Louisville Bedding Company.
"We expect to begin selling our line of Secure I.V.(R) safety catheters
during the next quarter," continued Mr. Ferguson. "We delayed the launch of
Secure I.V. due to changes in our new production equipment. Pre-market
interest in the product remains high, and we expect that in time the new
product line will become an important contributor to Span-America sales."
Gross profit in second quarter increased 28% to $3.4 million compared with
$2.6 million in the second quarter of last year. Gross margin increased almost
two percentage points to 26.2% compared with 24.3% last year. The margin
improvements came from higher sales volume and improved manufacturing cost
controls, particularly in the medical segment.
Operating profit for the quarter rose 239% to $599,000 compared with
$177,000 in second quarter of last year. The significant growth in operating
profit was due to higher sales volume and higher margins related to a more
profitable mix of products in the medical segment. Last year's second quarter
included unusual expenses of approximately $130,000, or $0.03 per diluted
share after taxes, related to the amendment and restatement of the Company's
shareholder rights plan, which was set to expire in 2003. This year's
administrative expenses included higher incentive compensation, costs related
to Sarbanes-Oxley compliance, and higher insurance costs, which partially
offset the comparison with last year's unusual expenses.
Expenses for pre-production and development of the Secure I.V. line of
safety catheters in the second quarter of fiscal 2004 were $143,000, or $0.03
per diluted share after taxes, compared with $118,000, or $0.03 per diluted
share after taxes, in the second quarter of last year.
Non-operating income declined 2% in the second quarter to $169,000
compared with $173,000 in the same period last year. Interest income declined
34% during the quarter to $12,000 compared with $18,000 in the second quarter
of last year because of lower interest rates and a lower average balance in
marketable securities. Royalty income for the quarter increased 2% to
$156,000. Royalty income is expected to end in December 2005 due to the
expiration of related patents.
Net income for the second quarter of fiscal 2004 more than doubled to
$498,000, or $0.18 per diluted share, compared with $226,000, or $0.09 per
diluted share, in the second quarter of last year.
Year-to-Date
For the first half of fiscal 2004, net sales increased 30% to $24.4
million compared with $18.7 million in the first half of last year. Medical
segment sales rose 14% to $11.8 million and sales in the custom products
segment were up 50% to $12.5 million in the first half of fiscal 2004 compared
with the same period last year.
Medical segment sales benefited from a 22% increase in mattress product
revenues, 10% growth in patient positioners, 9% increase in seating products
and a 7% increase in Selan sales. The growth in the custom products segment
was due to new consumer bedding business with Louisville Bedding Company that
began in the second fiscal quarter last year.
Net income for the first six months of fiscal 2004 rose 65% to $920,000,
or $0.34 per diluted share, compared with $559,000, or $0.21 per diluted
share, in the first half of fiscal 2003. The earnings increase was due mostly
to higher sales volume and improved labor efficiencies.
Outlook for Fiscal 2004
"We are encouraged about the Company's sales and earnings performance
through the first half of fiscal 2004. We expect continued sales and earnings
growth during the second half of the fiscal year. However, the growth rates
will likely be much lower than those achieved in the first and second quarters
of this year," 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
April 3, March 29,
2004 2003 % Chg
Net sales $12,868,800 $10,839,100 19%
Cost of goods sold 9,491,200 8,205,600 16%
Gross profit 3,377,600 2,633,500 28%
26.2% 24.3%
Selling and marketing expenses 1,879,100 1,584,000 19%
Research and development expenses 161,400 149,000 8%
General and administrative expenses 738,400 723,900 2%
2,778,900 2,456,900 13%
Operating income 598,700 176,600 239%
4.7% 1.6%
Investment income 12,100 18,400 -34%
Royalty income 156,500 153,800 2%
Other 800 600 33%
Total non-operating income 169,400 172,800 -2%
Income before income taxes 768,100 349,400 120%
Income taxes 270,000 123,000 120%
Net income $498,100 $226,400 120%
3.9% 2.1%
Net income per share of common stock:
Basic $0.19 $0.09 117%
Diluted 0.18 0.09 112%
Dividends per common share $0.035 $0.035 0%
Weighted average shares outstanding
Basic 2,577,756 2,539,846 1%
Diluted 2,747,573 2,644,583 4%
Supplemental Data
Depreciation expense 139,900 116,400 20%
Amortization expense 23,600 18,500 28%
SPAN-AMERICA MEDICAL SYSTEMS, INC.
Statements of Income (Unaudited)
6 Months Ended
April 3, March 29,
2004 2003 % Chg
Net sales $24,377,300 $18,730,800 30%
Cost of goods sold 18,098,000 13,591,000 33%
Gross profit 6,279,300 5,139,800 22%
25.8% 27.4%
Selling and marketing expenses 3,488,700 3,099,400 13%
Research and development expenses 332,400 284,400 17%
General and administrative expenses 1,369,200 1,263,400 8%
5,190,300 4,647,200 12%
Operating income 1,089,000 492,600 121%
4.5% 2.6%
Investment income 29,200 48,400 -40%
Royalty income 297,800 318,600 -7%
Other 1,600 1,400 14%
Total non-operating income 328,600 368,400 -11%
Income before income taxes 1,417,600 861,000 65%
Income taxes 498,000 302,000 65%
Net income $919,600 $559,000 65%
3.8% 3.0%
Net income per share of common stock:
Basic $0.36 $0.22 63%
Diluted 0.34 0.21 59%
Dividends per common share $0.070 $0.070 0%
Weighted average shares outstanding
Basic 2,569,356 2,539,358 1%
Diluted 2,725,879 2,638,618 3%
Supplemental Data
Depreciation expense 277,600 227,600 22%
Amortization expense 47,700 35,600 34%
SPAN-AMERICA MEDICAL SYSTEMS, INC.
Balance Sheets
April, 3 Sep 27,
2004 2003
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $1,502,400 $1,811,300
Securities available for sale 4,244,500 4,143,800
Accounts receivable, net of
allowances 6,133,900 5,941,800
Inventories 2,526,500 2,539,300
Prepaid expenses and deferred
income taxes 473,600 593,000
Total current assets 14,880,900 15,029,200
Property and equipment, net 5,889,200 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 2,364,300 2,219,900
$25,058,500 $23,990,600
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $2,609,000 $2,467,500
Accrued and sundry liabilities 1,699,300 1,747,400
Total current liabilities 4,308,300 4,214,900
Deferred income taxes 321,000 321,000
Deferred compensation 914,600 929,400
Shareholders' equity
Common stock, no par value,
20,000,000 shares
authorized; issued and
outstanding shares
2,585,718 (2004) and
2,552,154 (2003) 524,200 284,000
Additional paid-in capital 19,300 10,000
Retained earnings 18,971,100 18,231,300
Total shareholders' equity 19,514,600 18,525,300
$25,058,500 $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- 04/28/2004
/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: MTC HEA
SU: ERN DIV ERP