SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 27, 1998
SPAN-AMERICA MEDICAL SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
South Carolina 0-11392 57-0525804
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
70 Commerce Center, Greenville, SC 29615
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(Address of principal executive offices)
Registrant's telephone number, including area code (864) 288-8877
Not Applicable
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(Former name or former address, if changed since last report.)
ITEM 5. OTHER EVENTS
On February 27, 1998 the Company signed a definitive agreement to sell
substantially all the assets of its contract packaging business unit. The
disposition did not involve a significant amount of the Company's total assets
or operating income. See the news release below for further details about the
transaction.
SPAN-AMERICA SELLS CONTRACT PACKAGING BUSINESS
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COMPANY TO FOCUS ON CORE MEDICAL BUSINESS
Greenville, South Carolina (March 2, 1998) -- Span-America Medical Systems, Inc.
(Nasdaq/NM:SPAN) announced today that it sold substantially all of the assets of
its contract packaging business unit on February 27, 1998.
"We believe the sale of the contract packaging unit will allow
Span-America's management to focus on the growth of our core medical business,"
stated Jim Ferguson, president and chief executive officer of Span-America
Medical Systems, Inc. "The sale will also free up space in our main plant in the
near future, allowing us to consolidate our off-site consumer manufacturing into
our Greenville plant to reduce manufacturing costs and improve overall operating
efficiencies."
The purchase price for the contract packaging assets is $2.3 million,
with $1.84 million paid in cash at closing and the remainder financed by
Span-America over five years. The Company anticipates that no material gain or
loss will be recorded in the current quarter as a result of the sale. The
contract packaging business accounted for approximately 19% of Span-America's
revenues and 8% of total operating profit in fiscal 1997.
The buyer of the contract packaging unit is Span Contract Packaging,
Inc., a new company formed by long-time Span-America contract packaging
managers, Ian Simpson and Les Teague. The new business is expected to operate at
Span-America's Greenville plant for about six months until the operations can be
relocated to a larger building near its current location.
"We expect the sale of Span-America's contract packaging business to be
mostly transparent to our customers and employees," continued Mr. Ferguson. "Our
customers and employees were a prime concern in structuring this transaction. We
plan to work closely with the new owners to make the transition as smooth as
possible."
Following the move of contract packaging, Span-America will close its
consumer manufacturing plant in nearby Greer, South Carolina, and relocate the
employees and manufacturing operation into the 50,000-square-foot plant vacated
by contract packaging.
The Company anticipates the improved efficiencies of combining operations in
Greenville and the effect of the recently announced stock repurchase will
minimize, and possibly offset, the lost profit contribution from the sale of the
contract packaging business.
"We believe the sale of the contract packaging business will allow our
management to focus on building our core medical business as we evolve into a
clinically driven wound management company. The wound management market
encompasses our existing surface, seating, and positioning products and includes
new product opportunities in skin care, wound care, and nutrition. In addition,
we intend to leverage our manufacturing competencies developed in our medical
business to make and sell custom foam and related products in the consumer and
industrial markets," concluded Mr. Ferguson.
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. MANAGEMENT WISHES TO
CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS SUCH AS MANAGEMENT'S
EXPECTATIONS FOR EFFICIENCY IMPROVEMENTS AND ENTERING NEW MARKETS ARE FORECASTS.
ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY AS A RESULT OF RISKS FACING THE
COMPANY. SUCH RISKS INCLUDE BUT ARE NOT LIMITED TO: THE TIMING OF THE PROPOSED
PLANT CONSOLIDATION, THE OPERATING PERFORMANCE OF SPAN CONTRACT PACKAGING, THE
LOSS OF A MAJOR CUSTOMER FOR THE COMPANY'S CONSUMER PRODUCTS, THE IMPACT OF
COMPETITIVE PRODUCTS AND PRICING IN THE WOUND MANAGEMENT MARKET, RAW MATERIAL
COSTS INCREASES, AND OTHER RISKS REFERENCED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K. THE COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING
STATEMENTS AS A RESULT OF DEVELOPMENTS OCCURRING AFTER THE ISSUANCE OF THIS
PRESS RELEASE.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPAN-AMERICA MEDICAL SYSTEMS, INC.
/s/ Richard C. Coggins
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Richard C. Coggins
Vice President - Finance
/s/ James D. Ferguson
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James D. Ferguson
President and Chief Executive Officer
Date: March 12, 1998