Exhibit 99.1
Span-America Reports Higher Sales and Net Income for the
Second Quarter of Fiscal 2007
GREENVILLE, S.C.--(BUSINESS WIRE)--April 30, 2007--Span-America Medical
Systems, Inc. (NASDAQ:SPAN) today reported a 35% increase in net sales to $16.5
million and an 85% increase in net income to $1.2 million, or $0.42 per diluted
share, for the second quarter ended March 31, 2007, compared with the second
quarter of fiscal 2006.
"Our record results benefited from strong sales growth in our medical and
custom products segments," stated Jim Ferguson, president and CEO of
Span-America Medical Systems. "Medical sales increased on the continued strength
of our proprietary therapeutic support surface product lines. Our custom
products sales also were up strongly due to increased demand for our new fusion
mattress overlay product."
Second Quarter Results
Sales in the second quarter of fiscal 2007 rose 35% to $16.5 million
compared with $12.2 million in the second quarter of last year. The major
contributor to sales growth was the medical segment, which increased 27% to
$10.8 million compared with $8.5 million in the second quarter last year. Sales
in the custom products segment showed solid quarterly sales growth for the first
time in two years, up 51% to $5.6 million compared with $3.7 million in the same
quarter last year. Sales in the safety catheter segment increased 65% to $46,000
compared with $28,000 in the year-ago quarter.
Medical segment sales benefited from increased demand for the Company's
PressureGuard(R) products. The PressureGuard CFT(R) product line was the medical
sales leader, including both the private label and branded versions. The
Geo-Mattress(R) and PressureGuard APM(R) product lines also performed
particularly well in the second quarter. Therapeutic support surfaces made up
75% of total medical sales in the second quarter of this year compared with 70%
in the second quarter last year. In other medical product lines, sales of
seating products rose 15% and Selan(R) skin care sales increased 14% compared
with the second quarter of last year. Span-Aids(R) patient positioner sales
increased 4%. Sales of medical mattress overlays were flat during the second
quarter.
In the custom products segment, sales increased 51% to $5.6 million
compared with $3.7 million in the second quarter last year. The growth was due
primarily to increased shipments of our new fusion mattress overlay to Wal-Mart
and other retailers through our marketing partner, Louisville Bedding Company.
Industrial product sales, which are part of the custom products segment,
declined 9% during the second quarter due to lost business from a key customer
related to price competition.
"Sales of the fusion overlay exceeded our expectations in the second
quarter and we are encouraged by the success of this new product line,"
continued Mr. Ferguson. "We believe the fusion pad offers customers an
attractive combination of the benefits of visco and traditional foam products,
and we continue to work on new product additions to innovate our consumer
product lines."
Safety catheter segment sales rose to $46,000, up 65% from $28,000 in the
year-ago quarter. The revenues consisted of $41,000 in Secure I.V.(R) sales and
$5,000 in sales of HuberPro(R).
"Sales of Secure I.V. remain below our expectations," stated Mr. Ferguson.
"We have made good progress in selling to the emergency medical market, but
product acceptance in the acute care market has been much slower than expected.
Secure I.V. sales growth needs to accelerate significantly during the remainder
of fiscal 2007 for the safety catheter segment to become a viable business. Our
prospects for achieving the necessary growth are uncertain. However we will
continue to evaluate our progress in this business unit to determine its future
prospects."
Second quarter gross profit rose 41% to $5.0 million compared with $3.6
million in the second quarter last year. Gross margin increased to 30.5% of
sales in the second quarter of fiscal 2007 from 29.2% in last year's second
quarter.
"The increase in gross profit benefited from higher sales volume and
reduced costs from the consolidation of our West Coast operations into a new
distribution center," continued Mr. Ferguson. "Our margin improved largely due
to the growth in medical sales, offset somewhat by increased sales of lower
margin consumer products."
R&D expenses increased by 49% to $232,000 due to new product development
efforts in the medical segment.
Total operating income increased 123% to a record $1.7 million compared
with $774,000 in last year's second quarter and benefited from higher sales
volume combined with slower growth in selling and administrative expenses during
the quarter. Operating income also benefited from the sales increase in the
custom products segment, which has moved that business unit much closer to a
return to profitability.
Non-operating income declined to $83,000 in the latest quarter from
$208,000 in the second quarter last year due primarily to the expiration of a
royalty agreement that represented $128,000 of royalty income in the second
quarter of last fiscal year. Investment income for the second quarter this year
was up 83% due to higher balances of short-term investments and slightly higher
interest rates.
Net income for the second quarter increased by 85% to $1.2 million, or
$0.42 per diluted share, compared with $638,000, or $0.23 per diluted share, in
the same period last year. The earnings increase was driven by the 35% increase
in sales and improved operating leverage during the second quarter.
Year-to-Date Results
For the first half of fiscal 2007, total sales grew by 17% to $29.9 million
compared with $25.5 million in the first half last year. The majority of the
year-to-date sales growth was generated by the medical segment, which was up 16%
to $20.4 million compared with $17.6 million in the same period last year. Sales
of therapeutic support surfaces grew by 19% in the first half of fiscal 2007 and
accounted for most of the year-to-date growth in the medical segment. Sales of
seating products grew by 11%, positioners were up by 11%, overlays increased by
6% and Selan skin care products rose 6% compared with the first half of fiscal
2006.
Sales in the custom products segment rose 20% in the first two quarters of
fiscal 2007 to $9.4 million primarily due to the contribution of the new fusion
mattress overlays that were introduced to retailers in early fiscal 2007.
Year-to-date sales in the safety catheter segment increased 101% to $84,000
and consisted of $64,000 in sales of Secure I.V. and $20,000 in sales of
HuberPro.
Net income for the first half increased 54% to $2.2 million compared with
$1.4 million in the same period last year. Diluted earnings per share rose 51%
to $0.78 compared with $0.52 last year to date. The increase in earnings was due
to higher sales volume combined with lower rates of increase in manufacturing
costs and SG&A expenses.
Outlook for Fiscal 2007
"We are off to a strong start in fiscal year 2007 and anticipate continued
sales progress from our medical and custom products segments during the
remainder of the fiscal year," commented Mr. Ferguson. "The outlook for our
medical segment remains very positive due to the demand for our PressureGuard
mattress line. We also expect growth in the custom products segment due to the
market's excellent reception of our new fusion mattress overlays. Our expected
growth rates for these business segments remain positive; however, we do not
expect second half sales and earnings growth rates to match those of the first
half based on our current projections."
"Our Board of Directors recently declared a special $5.00 per share cash
dividend that will be paid on June 6, 2007 to shareholders of record on May 23,
2007. We believe the special dividend highlights the strength of our financial
operations and provides shareholders with an immediate return while allowing
them to continue to participate in our future growth. In addition, the Board
declared a regular quarterly dividend of $0.08 per share with the same record
and payment dates as the special dividend. This regular dividend is our 70th
consecutive quarterly dividend and represents a 78% increase over the regular
dividend paid this time last year. We believe these dividends are important
parts of our ongoing commitment to build long-term shareholder value," 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
Global 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 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 customer or distributor for
the Company's products, (b) the degree of success achieved in manufacturing and
selling the Secure I.V. safety catheter product line, (c) the likelihood that
the assets associated with Secure I.V. could become impaired, (d) potential
problems arising from having a sole source contract manufacturer for the Secure
I.V. product line, (e) the inability to achieve anticipated sales volumes of
medical or custom products, (f) the potential for volatile pricing conditions in
the market for polyurethane foam, (g) raw material cost increases, (h) the
potential for lost sales due to competition from low-cost foreign imports, (i)
changes in relationships with large customers, (j) the impact of competitive
products and pricing, (k) government reimbursement changes in the medical
market, (l) 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)
Three Months Ended
------------------------
March 31, April 1,
2007 2006 % Chg
-----------------------------
Net sales $16,467,010 $12,233,705 35%
Cost of goods sold 11,443,646 8,659,786 32%
------------------------
Gross profit 5,023,364 3,573,919 41%
30.5% 29.2%
Selling and marketing expenses 2,273,546 1,960,998 16%
Research and development expenses 231,825 155,341 49%
General and administrative expenses 788,905 683,375 15%
------------------------
3,294,276 2,799,714 18%
Operating income 1,729,088 774,205 123%
10.5% 6.3%
Investment income 79,479 43,438 83%
Royalty income - 128,268 -100%
Other 4,008 35,872 -89%
------------------------
Total non-operating income 83,487 207,578 -60%
Income before income taxes 1,812,575 981,783 85%
Income taxes 632,000 344,000 84%
------------------------
Net income $1,180,575 $637,783 85%
7.2% 5.2%
========================
Net income per share of common stock:
Basic $0.44 $0.24 82%
Diluted 0.42 0.23 82%
Dividends per common share $0.080 $0.045 78%
Weighted average shares outstanding
- ----------------------------------------
Basic 2,698,372 2,645,991 2%
Diluted 2,830,116 2,779,341 2%
Supplemental Data
- ----------------------------------------
Depreciation expense $229,236 $206,895 11%
Amortization expense 35,354 33,015 7%
Six Months Ended
------------------------
March 31, April 1,
2007 2006 % Chg
-----------------------------
Net sales $29,936,907 $25,515,216 17%
Cost of goods sold 20,369,298 18,059,565 13%
------------------------
Gross profit 9,567,609 7,455,651 28%
32.0% 29.2%
Selling and marketing expenses 4,399,571 3,912,670 12%
Research and development expenses 395,637 307,055 29%
General and administrative expenses 1,561,954 1,405,206 11%
------------------------
6,357,162 5,624,931 13%
Operating income 3,210,447 1,830,720 75%
10.7% 7.2%
Investment income 161,920 82,880 95%
Royalty income - 246,626 -100%
Other 10,709 36,779 -71%
------------------------
Total non-operating income 172,629 366,285 -53%
Income before income taxes 3,383,076 2,197,005 54%
Income taxes 1,182,000 770,000 54%
------------------------
Net income $2,201,076 $1,427,005 54%
7.4% 5.6%
========================
Net income per share of common stock:
Basic $0.82 $0.54 52%
Diluted 0.78 0.52 51%
Dividends per common share $0.140 $0.090 56%
Weighted average shares outstanding
- ----------------------------------------
Basic 2,682,800 2,638,279 2%
Diluted 2,816,249 2,762,106 2%
Supplemental Data
- ----------------------------------------
Depreciation expense $444,848 $401,277 11%
Amortization expense 69,737 66,626 5%
SPAN-AMERICA MEDICAL SYSTEMS, INC.
Balance Sheets
March 31, Sept. 30,
2007 2006
(Unaudited) (Note)
------------ -------------
Assets
Current assets:
Cash and cash equivalents $ 913,728 $ 975,525
Securities available for sale 6,140,793 5,134,882
Accounts receivable, net of allowances 7,896,464 6,986,794
Inventories 4,764,761 4,353,479
Prepaid expenses and deferred income
taxes 930,955 735,684
------------ -------------
Total current assets 20,646,701 18,186,364
Property and equipment, net 8,373,019 8,132,057
Cost in excess of fair value of net assets
acquired,
net of accumulated amortization 1,924,131 1,924,131
Other assets 2,742,218 2,769,926
------------ -------------
$33,686,069 $ 31,012,478
============ =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,897,085 $ 2,374,357
Accrued and sundry liabilities 2,367,543 2,474,049
------------ -------------
Total current liabilities 5,264,628 4,848,406
Deferred income taxes 815,000 815,000
Deferred compensation 812,998 831,614
------------ -------------
Total liabilities 6,892,626 6,495,020
Shareholders' equity
Common stock, no par value, 20,000,000
shares authorized; issued and
outstanding shares 2,730,155 (2007) and
2,660,345 (2006) 1,426,022 1,032,118
Additional paid-in capital 185,579 136,614
Retained earnings 25,175,107 23,352,221
Accumulated other comprehensive income
(loss) 6,735 (3,495)
------------ -------------
Total shareholders' equity 26,793,443 24,517,458
------------ -------------
$33,686,069 $ 31,012,478
============ =============
Note: The Balance Sheet at September 30, 2006 has been derived from
the audited financial statements at that date.
CONTACT: Span-America Medical Systems, Inc.
Jim Ferguson, (864) 288-8877, ext. 6912
President and Chief Executive Officer