UNITED
STATES
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)
|
August
4, 2014
|
SPAN-AMERICA MEDICAL SYSTEMS, INC.
|
(Exact name of registrant as specified in its charter)
|
South
Carolina
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0-11392
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57-0525804
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(State
or other jurisdiction
of
incorporation)
|
(Commission
File
Number)
|
(IRS
Employer
Identification
No.)
|
70
Commerce Center, Greenville, South Carolina
|
29615
|
(Address
of principal executive offices)
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(Zip
Code)
|
Registrant’s
telephone number, including area code
|
(864)
288-8877
|
N/A
|
(Former name or former address, if changed since last report.)
|
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 4, 2014, Span-America Medical Systems, Inc. ("SPAN") issued a
press release announcing financial information for its third quarter
ended June 28, 2014. The press release is attached as Exhibit 99.1 to
this Form 8-K and is furnished to, but not filed with, the Commission.
Item 9.01 Financial Statements and Exhibits.
(d)
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Exhibits.
|
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Exhibit Number
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Description of Exhibit
|
|
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99.1
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99.1 Press release issued August 4, 2014
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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.
|
|
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SPAN-AMERICA
MEDICAL SYSTEMS, INC.
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(Registrant)
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Date:
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August
4, 2014
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By:
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/s/ Richard C. Coggins
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Richard
C. Coggins
|
|
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Chief
Financial Officer
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EXHIBIT INDEX
Exhibit
|
Description
|
|
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99.1
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Press Release dated August 4, 2014
|
Exhibit 99.1
Span-America
Reports Third Quarter 2014 Results
Announces
New Consumer Bedding Business with Major Retailer
GREENVILLE, S.C.--(BUSINESS WIRE)--August 4, 2014--Span-America Medical
Systems, Inc. (NASDAQ:SPAN) today reported its results for the third
fiscal quarter ended June 28, 2014. Net income for the third quarter of
fiscal 2014 was $378,000, or $0.13 per diluted share, compared with
$1.2 million, or $0.41 per diluted share, in the third quarter of fiscal
2013. Net sales for the third quarter of fiscal 2014 were $13.3 million
compared with $18.6 million in the third quarter of fiscal 2013.
The Company also announced that it has been selected as a supplier of
consumer bedding products to a large retailer with shipments expected to
begin in September 2014. Based on preliminary information from the
customer, annualized sales are expected to be approximately $4.0
million, with opportunities for future growth.
“Span-America’s third quarter results were below last year’s third
quarter due to lower sales volumes from our medical and custom products
segments,” stated Jim Ferguson, president and chief executive officer of
Span-America. “Sales in our medical segment were less than last year
primarily because we had an order from a large customer in the third
quarter last year that was not repeated in the third quarter this year.
Also, sales of our consumer bedding products were lower in the third
quarter this year due to the loss of a large retail customer as we
previously reported.
“We expect our fourth quarter results to improve over third quarter
levels for both medical and consumer sales based on our existing
pipeline of orders. In addition, we expect our consumer sales to
increase in the coming year after our recent selection as a supplier for
consumer bedding products to the same retail customer that we previously
lost. We expect initial sales for this program to start in September
2014, but the impact on our fourth quarter results will be small due to
the project ramp-up. We are very excited about the potential of this new
business and possible future opportunities to expand the relationship in
fiscal 2015,” continued Ferguson.
Third Quarter Results
Sales for the third quarter of fiscal 2014 were down 29% to $13.3
million compared with $18.6 million in the third quarter of fiscal 2013.
The sales decline was due to lower volumes from our medical and custom
products segments.
Total medical sales decreased 23% to $10.3 million for the third quarter
of fiscal 2014 compared with $13.4 million in the third quarter of 2013.
Most of the medical sales decline occurred within our therapeutic
support surface product lines where sales were down 28% to $5.3 million
for the third quarter of fiscal 2014 compared with $7.3 million in the
third quarter of 2013. The decrease in therapeutic support surface sales
was due primarily to a large order from a long-term care customer that
occurred in the third quarter last year that was not repeated in the
third quarter this year. In addition, sales of M.C. Healthcare’s
products and other medical products were down compared with the third
quarter of last year.
Sales of M.C. Healthcare products declined 27% to $2.4 million from $3.3
million in the third quarter last year due primarily to
quarter-to-quarter fluctuations in capital equipment sales. During last
fiscal year, sales of M.C. Healthcare products were strong in the third
quarter and weak in the fourth quarter. Based on orders currently in
house, we expect to see the opposite pattern this fiscal year with
stronger sales in the fourth quarter fueled in part by our new Encore™
bed.
Total sales of other medical product lines were down compared with the
third quarter last fiscal year due to sluggish demand within our part of
the medical market. Sales of our patient positioners decreased by 1%,
while sales of our seating products were up 5% compared with the third
quarter of last year. Sales of our Risk Manager™ bedside safety mat were
down by 30% due to a large order in the third quarter of last year that
was not repeated this year. Sales of our Selan® skin care products and
our mattress overlays decreased 7% and 13%, respectively, compared with
the third quarter of fiscal 2013.
Custom products segment sales, including consumer bedding and specialty
industrial foam products, were down 43% to $3.0 million compared with
$5.2 million in the third quarter last year, entirely due to the loss of
the large retail customer as previously reported.
Consumer bedding sales were down 54% to $2.0 million compared with $4.4
million in the third quarter of fiscal 2013. Total consumer bedding
sales were lower due to the loss of the large retail customer in
February 2014. Excluding sales related to the lost account, consumer
bedding sales were level compared with the third quarter last year.
Sales of industrial products, also part of the custom products segment,
increased 18% to $933,000 from $793,000 in the third quarter last year.
Our industrial sales growth was broad-based, coming from all major
segments of our industrial market.
“We reduced our operating costs significantly compared with the third
quarter of last year, but the reduction was not enough to offset the
decline in profitability related to our lower sales volume,” stated
Ferguson. “We believe our recent sales decline is temporary, so we
avoided reducing expenses further in areas that could provide for future
sales growth.”
Gross profit declined 30% to $4.3 million in the third quarter of fiscal
2014 compared with $6.2 million in the third quarter last year primarily
due to lower sales levels compared with the third quarter of last fiscal
year. Gross margin percentage declined to 32.8% in the third quarter
this year compared with 33.4% in the same quarter last year. The decline
in gross margin percentage was due to lower sales volume partially
offset by a more profitable sales mix in the third quarter this year
compared with the third quarter last year. Medical sales, which are
generally more profitable than custom products sales, made up 78% of
total sales during the third quarter this year compared with 72% in the
year-earlier quarter.
Selling, R&D and administrative expenses were down 14% to $3.8 million
in the third quarter this year compared with $4.4 million in the third
quarter last year due primarily to the lower sales volume in the latest
quarter.
Operating income decreased by 69% to $563,000 in the third quarter of
fiscal 2014 compared with $1.8 million in the third quarter last year.
Third quarter net income declined 69% to $378,000, or $0.13 per diluted
share, compared with $1.2 million, or $0.41 per diluted share, in the
third quarter last year. The declines in operating income and net income
were caused primarily by lower sales volume compared with the third
quarter of last year.
Year-to-Date Results
For the first nine months of fiscal 2014, total sales decreased 25% to
$42.8 million compared with $56.9 million in the first nine months of
last fiscal year. The majority of the decline occurred in the custom
products segment where sales were $10.8 million for the first nine
months of fiscal 2014 compared with $20.6 million in the first nine
months of fiscal 2013. The sales decrease in the custom products segment
included a $10.2 million (56%) decrease in sales of consumer bedding
products partly offset by a $374,000 (16%) increase in sales of
industrial products.
Total medical sales for the first nine months of fiscal 2014 decreased
by 12% to $32.1 million compared with $36.3 million in the first nine
months of last fiscal year. The medical sales decline included lower
sales to a Canadian government customer related to a large order in the
second quarter of last year that was not repeated this year and lower
sales of therapeutic support surfaces to a U.S. long-term care customer
in the third quarter of this year compared with the prior year.
Net income for the first nine months of fiscal 2014 decreased 49% to
$1.9 million, or $0.65 per diluted share, compared with $3.8 million, or
$1.28 per diluted share, in the same period last year. The decrease in
earnings was caused primarily by lower sales volume of consumer bedding
and medical products.
Future Outlook
“We expect sales and earnings for the fourth quarter of fiscal 2014 to
be higher than they were in the third quarter of fiscal 2014, but sales
and earnings are not likely to exceed the levels we achieved in the
fourth quarter of last fiscal year,” continued Mr. Ferguson. “In the
medical segment, we expect to see solid growth in sales of M.C.
Healthcare products and modest growth in sales of our pressure
management products compared with the third quarter this fiscal year.
Our incoming orders for M.C. Healthcare products, including our new
Encore™ bed, have been strong for the last several months, which should
give us solid fourth quarter sales performance at M.C. Healthcare.
“In the custom products segment, we expect modest growth in consumer
bedding sales in the fourth quarter compared with the just completed
third quarter due to the addition of new customers. We also expect
continued growth in sales of industrial products in the fourth quarter
this fiscal year compared with this year’s third quarter due to ongoing
strong demand in the industrial market.
“We are encouraged about Span-America’s selection as a supplier of
everyday consumer bedding products to a major retailer in the coming
year. We are pleased to participate in this business again, and we look
forward to having the opportunity to expand the relationship in the
future,” concluded 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®, Custom Care®, Span+Aids®,
Isch-Dish®, Risk Manager® and Selan® products. We also supply custom
foam and packaging products to the consumer and industrial markets.
Through our wholly-owned subsidiary Span Medical Products Canada Inc.,
we manufacture and market the M.C. Healthcare Products brands of
Encore™, Maxxum, Advantage and Rexx bed frames as well as related case
goods, tables and seating products for the long-term care market.
Span-America’s stock is traded on The NASDAQ Global Market under the
symbol “SPAN.” For more information, visit www.spanamerica.com
and www.mchealthcare.com.
Forward-Looking Statements
We have made forward-looking statements in this release regarding, among
other things, our expectations for future sales and earnings
performance. We wish to caution the reader that these statements are
only predictions. These forward-looking statements may be generally
identified by the use of forward-looking words and phrases such as
“will,” “intends,” “may,” “believes,” “anticipates,” “should” and
“expects,” and are based on the company’s current expectations or
beliefs concerning future events that involve risks and uncertainties.
Actual events or results may differ materially as a result of risks and
uncertainties facing the company, including: (a) the inability to
achieve anticipated sales growth in the medical and custom products
segments, (b) the possibility of disruptions in our consumer products
business related to the transfer of our exclusive distribution agreement
from Louisville Bedding Company to Hollander Home Fashions in May 2013
as a result of the sale of Louisville Bedding’s utility bedding retail
business to Hollander, (c) the possibility of a loss of a key customer
or distributor for our products, (d) risks related to international
operations and foreign exchange associated with our Canadian subsidiary,
(e) the possibility of having material uncollectible receivables from
one or more key customers or distributors, (f) the potential for
volatile pricing conditions in the market for polyurethane foam, (g) raw
material cost increases, (h) the possibility that some or all of our
medical products could be determined to be subject to the 2.3% medical
device excise tax imposed by the Affordable Care Act, (i) the potential
for lost sales due to competition from low-cost foreign imports, (j)
changes in relationships with large customers or key suppliers, (k) the
impact of competitive products and pricing, (l) government reimbursement
changes in the medical market, (m) FDA and Health Canada regulation of
medical device manufacturing and (n) other risks referenced from time to
time in our Securities and Exchange Commission filings. We disclaim any
obligation to update publicly any forward-looking statement, whether as
a result of new information, future events or otherwise. We are not
responsible for changes made to this document by wire services or
Internet services.
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SPAN-AMERICA MEDICAL SYSTEMS, INC.
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Consolidated Statements of Income (Unaudited)
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|
|
|
|
|
|
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|
|
|
|
|
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|
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|
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Three Months Ended
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Nine Months Ended
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June 28,
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|
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June 29,
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June 28,
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|
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June 29,
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2014
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|
|
2013
|
|
|
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|
|
2014
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|
|
2013
|
|
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|
|
|
|
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|
|
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Net sales
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|
|
$
|
13,250,985
|
|
|
|
$
|
18,621,212
|
|
|
|
-29
|
%
|
|
|
$
|
42,812,791
|
|
|
|
$
|
56,904,627
|
|
|
|
-25
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%
|
Cost of goods sold
|
|
|
|
8,907,793
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|
|
|
|
12,396,380
|
|
|
|
-28
|
%
|
|
|
|
28,428,627
|
|
|
|
|
38,760,002
|
|
|
|
-27
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%
|
Gross profit
|
|
|
|
4,343,192
|
|
|
|
|
6,224,832
|
|
|
|
-30
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%
|
|
|
|
14,384,164
|
|
|
|
|
18,144,625
|
|
|
|
-21
|
%
|
|
|
|
|
32.8
|
%
|
|
|
|
33.4
|
%
|
|
|
|
|
|
|
33.6
|
%
|
|
|
|
31.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Selling and marketing expenses
|
|
|
|
2,532,889
|
|
|
|
|
2,903,918
|
|
|
|
-13
|
%
|
|
|
|
7,623,819
|
|
|
|
|
8,166,201
|
|
|
|
-7
|
%
|
Research and development expenses
|
|
|
|
256,596
|
|
|
|
|
311,030
|
|
|
|
-18
|
%
|
|
|
|
819,503
|
|
|
|
|
978,777
|
|
|
|
-16
|
%
|
General and administrative expenses
|
|
|
|
990,703
|
|
|
|
|
1,195,663
|
|
|
|
-17
|
%
|
|
|
|
3,032,036
|
|
|
|
|
3,295,323
|
|
|
|
-8
|
%
|
|
|
|
|
3,780,188
|
|
|
|
|
4,410,611
|
|
|
|
-14
|
%
|
|
|
|
11,475,358
|
|
|
|
|
12,440,301
|
|
|
|
-8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
563,004
|
|
|
|
|
1,814,221
|
|
|
|
-69
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%
|
|
|
|
2,908,806
|
|
|
|
|
5,704,324
|
|
|
|
-49
|
%
|
|
|
|
|
4.2
|
%
|
|
|
|
9.7
|
%
|
|
|
|
|
|
|
6.8
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%
|
|
|
|
10.0
|
%
|
|
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
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|
|
Interest expense
|
|
|
|
(3,160
|
)
|
|
|
|
(3,160
|
)
|
|
|
0
|
%
|
|
|
|
(9,479
|
)
|
|
|
|
(12,002
|
)
|
|
|
21
|
%
|
Other
|
|
|
|
16,209
|
|
|
|
|
823
|
|
|
|
1870
|
%
|
|
|
|
44,537
|
|
|
|
|
(27,992
|
)
|
|
|
259
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%
|
Net non-operating income (expense)
|
|
|
|
13,049
|
|
|
|
|
(2,337
|
)
|
|
|
658
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%
|
|
|
|
35,058
|
|
|
|
|
(39,994
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)
|
|
|
188
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
576,053
|
|
|
|
|
1,811,884
|
|
|
|
-68
|
%
|
|
|
|
2,943,864
|
|
|
|
|
5,664,330
|
|
|
|
-48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
|
198,000
|
|
|
|
|
589,000
|
|
|
|
-66
|
%
|
|
|
|
1,009,000
|
|
|
|
|
1,844,000
|
|
|
|
-45
|
%
|
Net income
|
|
|
$
|
378,053
|
|
|
|
$
|
1,222,884
|
|
|
|
-69
|
%
|
|
|
$
|
1,934,864
|
|
|
|
$
|
3,820,330
|
|
|
|
-49
|
%
|
|
|
|
|
2.9
|
%
|
|
|
|
6.6
|
%
|
|
|
|
|
|
|
4.5
|
%
|
|
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.13
|
|
|
|
$
|
0.41
|
|
|
|
-69
|
%
|
|
|
$
|
0.66
|
|
|
|
$
|
1.30
|
|
|
|
-49
|
%
|
Diluted
|
|
|
|
0.13
|
|
|
|
|
0.41
|
|
|
|
-69
|
%
|
|
|
|
0.65
|
|
|
|
|
1.28
|
|
|
|
-49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share (1)
|
|
|
$
|
0.140
|
|
|
|
$
|
0.125
|
|
|
|
12
|
%
|
|
|
$
|
0.420
|
|
|
|
$
|
1.375
|
|
|
|
-69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
2,961,128
|
|
|
|
|
2,951,894
|
|
|
|
0
|
%
|
|
|
|
2,944,653
|
|
|
|
|
2,939,057
|
|
|
|
0
|
%
|
Diluted
|
|
|
|
3,004,726
|
|
|
|
|
3,002,567
|
|
|
|
0
|
%
|
|
|
|
2,991,124
|
|
|
|
|
2,993,317
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
$
|
253,686
|
|
|
|
$
|
188,987
|
|
|
|
34
|
%
|
|
|
$
|
643,077
|
|
|
|
$
|
557,914
|
|
|
|
15
|
%
|
Amortization expense
|
|
|
|
73,161
|
|
|
|
|
129,840
|
|
|
|
-44
|
%
|
|
|
|
324,004
|
|
|
|
|
396,431
|
|
|
|
-18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Dividends per common share for the nine months ended June 29,
2013 include a special dividend of $1.00 per share paid on
December 4, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPAN-AMERICA MEDICAL SYSTEMS, INC.
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
June 28,
|
|
|
Sept. 28,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(Unaudited)
|
|
|
(Note)
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
6,888,968
|
|
|
|
$
|
5,424,521
|
|
Accounts receivable, net of allowances
|
|
|
|
5,854,434
|
|
|
|
|
7,787,837
|
|
Inventories
|
|
|
|
6,689,812
|
|
|
|
|
6,445,950
|
|
Deferred income taxes
|
|
|
|
348,950
|
|
|
|
|
348,950
|
|
Prepaid expenses
|
|
|
|
880,004
|
|
|
|
|
698,003
|
|
Total current assets
|
|
|
|
20,662,168
|
|
|
|
|
20,705,261
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
5,000,750
|
|
|
|
|
5,136,535
|
|
Goodwill
|
|
|
|
4,401,447
|
|
|
|
|
4,487,546
|
|
Intangibles, net
|
|
|
|
3,060,442
|
|
|
|
|
3,430,349
|
|
Other assets
|
|
|
|
2,930,657
|
|
|
|
|
2,616,937
|
|
|
|
|
$
|
36,055,464
|
|
|
|
$
|
36,376,628
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
2,569,782
|
|
|
|
$
|
2,658,125
|
|
Accrued and sundry liabilities
|
|
|
|
1,899,345
|
|
|
|
|
2,875,600
|
|
Total current liabilities
|
|
|
|
4,469,127
|
|
|
|
|
5,533,725
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
|
192,536
|
|
|
|
|
194,883
|
|
Deferred compensation
|
|
|
|
476,652
|
|
|
|
|
534,239
|
|
Total long-term liabilities
|
|
|
|
669,188
|
|
|
|
|
729,122
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
5,138,315
|
|
|
|
|
6,262,847
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
Common stock, no par value, 20,000,000 shares authorized; issued
and outstanding shares 2,962,007 at June 28, 2014 and 2,927,416 at
Sept. 28, 2013
|
|
|
|
3,064,658
|
|
|
|
|
2,626,526
|
|
Additional paid-in capital
|
|
|
|
892,471
|
|
|
|
|
872,494
|
|
Retained earnings
|
|
|
|
27,524,167
|
|
|
|
|
26,828,012
|
|
Accumulated other comprehensive loss
|
|
|
|
(564,147
|
)
|
|
|
|
(213,251
|
)
|
Total shareholders’ equity
|
|
|
|
30,917,149
|
|
|
|
|
30,113,781
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,055,464
|
|
|
|
$
|
36,376,628
|
|
|
|
|
|
|
|
|
Note: The Balance Sheet at September 28, 2013 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
Span America (NASDAQ:SPAN)
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