Sales Up 19% to $15.8 Million
Net Income Jumps 155% to $0.32 Per Diluted
Share
Span-America Medical Systems, Inc. (NASDAQ:SPAN) today reported
improved results for the third fiscal quarter and nine months ended
June 27, 2015 compared with the same periods in fiscal 2014. Net
sales for the third quarter of fiscal 2015 rose 19% to $15.8
million compared with $13.3 million in the third quarter of fiscal
2014. Net income for the third quarter of fiscal 2015 increased by
155% to $963,000, or $0.32 per diluted share, compared with
$378,000, or $0.13 per diluted share, in the third quarter of
fiscal 2014.
“Our improved sales and earnings for the third quarter reflect
increased demand for our medical, consumer and industrial
products,” stated Jim Ferguson, president and chief executive
officer of Span-America. “Custom products sales rose 40% to $4.1
million, and medical sales were up 13% to $11.7 million compared
with the third quarter of last year. The growth in custom products
sales came from our consumer bedding products, including higher
sales to a large retail customer, and continued volume gains from
our industrial products. Our medical sales were up due to
broad-based demand for M.C. Healthcare’s beds and related products
combined with higher sales of our therapeutic support surfaces.
“We are encouraged by the strong performance from our M.C.
Healthcare and therapeutic support surface product lines during the
third quarter. We continued to see steady quoting activity for our
medical and consumer products in the third quarter, which is
normally a good indicator of future sales growth. As a result, we
expect to have a solid fourth-quarter sales and earnings
performance, which should give us a strong finish to fiscal year
2015,” continued Ferguson.
Third Quarter Results
Sales for the third quarter of fiscal 2015 rose 19% to $15.8
million compared with $13.3 million in the third quarter of fiscal
2014. The sales increase was due to solid growth in volume from our
medical and custom products business units. Sales in the medical
segment increased by 13% to $11.7 million due to strong growth from
our M.C. Healthcare products and our therapeutic support surfaces.
Sales in the custom products segment were up by 40% to $4.1 million
due to volume growth from our consumer bedding and industrial
product lines.
Medical Segment – Total
medical sales increased by 13% to $11.7 million in the third
quarter of fiscal 2015 compared with $10.3 million in the third
quarter last year. The increase in medical sales was the result of
strong demand for our M.C. Healthcare products combined with solid
growth from our therapeutic support surface product lines compared
with the third quarter last year.
Sales of M.C. Healthcare beds and related products increased by
39% to $3.3 million compared with $2.4 million in the third quarter
last year. The M.C. Healthcare sales growth was broad-based across
our most popular bed products. The Encore® bed, our newest entry
for the long-term care bed market, was a sales leader for M.C.
Healthcare in the third quarter.
“We are pleased to see the advanced Encore bed continue to gain
momentum among our customers, and we look forward to further growth
from our M.C. Healthcare products,” stated Ferguson.
Sales of Span-America’s other medical product lines increased by
6% to $8.4 million compared with $7.9 million in the third quarter
of fiscal 2014. The increase was due primarily to our therapeutic
support surfaces and, to a lesser extent, from our Risk Manager™
bedside safety mat and our Selan® skin care products. Sales in our
largest product line, therapeutic support surfaces, increased by
11% to $5.9 million compared with $5.3 million in the third quarter
last year. Within the therapeutic support surface group, sales of
our powered products, including the newest PressureGuard® Custom
Care® and Protocol® products, increased by 4% while sales of our
non-powered Geo-Mattress® products increased by 20% compared with
the third quarter last year. Sales of all other pressure management
products, including overlays, positioners and seating products,
decreased by 8% during the third quarter to $2.0 million compared
with $2.2 million in the year-earlier quarter.
Custom Products Segment –
Total custom products sales increased by 40% in the third quarter
to $4.1 million compared with $3.0 million in the third quarter
last year. Most of the sales growth came from our consumer bedding
products, which grew 55% to $3.1 million compared with $2.0 million
in the third quarter last year. The consumer sales growth came
almost entirely from a large retail customer after regaining the
majority of its business, which we lost for a period of time in
fiscal 2014 as previously reported.
Sales from our industrial product lines, included within the
custom products segment, rose 8% to $1.0 million in the third
quarter of fiscal 2015 compared with $933,000 in the same quarter
last year. This marked our eighth consecutive quarterly increase in
industrial product line sales, which have benefited from the strong
manufacturing economy in our region. Industrial sales growth in the
third quarter came from sales to new and existing customers
primarily in the automotive and packaging markets.
Earnings – Our earnings
growth in the third quarter was driven by higher sales volume in
the medical and custom products segments and a slightly more
profitable sales mix in the medical segment. Total gross profit
increased 25% to $5.4 million compared with $4.3 million in the
third quarter last year, and our gross margin percentage increased
to 34.4% compared with 32.8% in the same quarter last year. The
increases in gross profit dollars and gross margin percentage were
due primarily to the $2.6 million growth in total sales volume
compared with the same quarter last year.
Selling and marketing expenses increased by 7% to $2.7 million
in the third quarter this year due to increased activities related
to the higher sales volumes in both our medical and custom products
segments. R&D expenses increased by 10% to $282,000 due to
new-product development projects in the medical segment.
Administrative expenses increased by 13% to $1.1 million due to
higher costs for incentive compensation and medical benefits
combined with lower income from the cash value of life insurance
policies.
Operating income increased by 134% to $1.3 million for the third
quarter this year compared with $563,000 in the third quarter last
year. Non-operating income increased to $64,000 in the third
quarter this year compared with $13,000 in the same quarter last
year due to realized gains on foreign currency transactions related
to our Canadian business. Net income for the third quarter
increased by 155% to $963,000, or $0.32 per diluted share, compared
with $378,000, or $0.13 per diluted share, in the third quarter
last year. The increases in operating income and net income were
the result of a 19% increase in sales volume, a slightly more
profitable sales mix in the medical segment and lower rates of
growth in operating expenses compared with the third quarter of
last fiscal year.
Year-to-Date Results
For the first nine months of fiscal 2015, total sales rose 9% to
$46.6 million compared with $42.8 million in the first nine months
of last fiscal year. The growth in fiscal 2015 year-to-date sales
came from higher volumes in our medical segment and, to a lesser
extent, higher demand for our industrial product lines compared
with the same period in fiscal 2014.
Total medical sales, including M.C. Healthcare, for the first
nine months of fiscal 2015 increased by 11% to $35.6 million
compared with $32.1 million in the first nine months of last fiscal
year. Sales of M.C. Healthcare products were up 35% to $9.3 million
in the first nine months of this year compared with $6.9 million in
the same period last year. The increase was due to broad-based
growth in sales of our beds and related products, led by strong
customer demand for our new Encore bed.
Sales of our pressure management product lines, which include
all medical products except M.C. Healthcare, increased 4% to $26.3
million during the first nine months of fiscal 2015 compared with
$25.2 million in the same period of fiscal 2014. Sales of
therapeutic support surfaces rose 9% to $18.5 million compared with
$16.9 million in the same period last year. Product leaders within
the therapeutic support surface group included our newest products,
the Geo-Mattress Ultramax® as well as our PressureGuard APM, Custom
Care and Protocol support surfaces.
In the custom products segment, sales for the first nine months
of fiscal 2015 were up 2% to $11.0 million compared with $10.8
million in the first nine months of fiscal 2014. Consumer sales for
the first nine months of fiscal 2015 decreased by 1% to $8.0
million from $8.1 million in the same period last year due
primarily to the loss of a large retail customer in February 2014
that was later regained in November 2014. Industrial sales rose 11%
to $2.9 million during the first nine months of this year compared
with $2.7 million in the same period last year.
Net income for the first nine months of fiscal 2015 increased
40% to $2.7 million, or $0.90 per diluted share, compared with $1.9
million, or $0.65 per diluted share, in the same period last year.
The increase in earnings for the first nine months of fiscal 2015
was the result of higher sales volume in our medical segment,
particularly among our M.C. Healthcare product lines.
Future Outlook
“We expect that our sales and earnings for the fourth quarter of
fiscal year 2015 will be higher than last year’s fourth quarter due
to anticipated growth in medical and custom products sales,”
continued Ferguson. “We expect demand for our M.C. Healthcare
products to continue to be strong during the fourth quarter, with
more modest growth for our therapeutic support surfaces and other
medical products. In addition, we expect growth in custom products
sales compared with the fourth quarter of last year. We believe
sales of consumer products will benefit from increased shipments to
our recently regained retail customer as well as continued growth
in sales of industrial products due to the healthy regional
manufacturing economy,” concluded Ferguson.
Conference Call
The company will conduct a conference call at 10:00 a.m. ET on
Thursday, August 6, 2015, to review the Company’s financial and
operating results for the third quarter ended June 27, 2015. A live
broadcast of the conference call will be available online at
www.spanamerica.com under Investor Relations on the About Us tab.
The online replay will follow immediately and continue for 30
days.
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 a loss of a key customer or distributor for our
products, (c) risks related to international operations and foreign
currency exchange associated with our Canadian subsidiary, (d) the
possibility of having material uncollectible receivables from one
or more key customers or distributors, (e) the potential for
volatile pricing conditions in the market for polyurethane foam,
(f) raw material cost increases, (g) 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, (h) the potential for lost sales due to competition from
low-cost foreign imports, (i) changes in relationships with large
customers or key suppliers, (j) the impact of competitive
products and pricing, (k) government reimbursement changes in
the medical market, (l) FDA and Health Canada regulation of medical
device manufacturing and (m) 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.
SPAN-AMERICA MEDICAL SYSTEMS, INC. Consolidated
Statements of Income (Unaudited)
Three
Months Ended Nine Months Ended June 27, June 28, June 27, June 28,
2015 2014 % Chg. 2015
2014 % Chg. Net sales $ 15,813,474 $
13,250,985 19 % $ 46,567,766 $ 42,812,791 9 % Cost of goods sold
10,372,903 8,907,793 16 %
30,696,346 28,428,627 8 %
Gross profit 5,440,571 4,343,192 25 % 15,871,420 14,384,164 10 %
34.4 % 32.8 % 34.1 % 33.6 % Selling and marketing expenses
2,717,470 2,532,889 7 % 8,090,610 7,623,819 6 % Research and
development expenses 281,798 256,596 10 % 877,726 819,503 7 %
General and administrative expenses 1,123,101
990,703 13 % 3,316,021
3,032,036 9 % 4,122,369 3,780,188 9 %
12,284,357 11,475,358 7 % Operating income 1,318,202 563,004
134 % 3,587,063 2,908,806 23 % 8.3 % 4.2 % 7.7 % 6.8 %
Non-operating income (expense): Interest expense - (3,160 ) 100 %
(6,285 ) (9,479 ) 34 % Other 64,333
16,209 297 % 308,520
44,537 593 % Net non-operating income (expense)
64,333 13,049 393 % 302,235 35,058 762 % Income before
income taxes 1,382,535 576,053 140 % 3,889,298 2,943,864 32 %
Income taxes 420,000
198,000 112 % 1,183,000
1,009,000 17 % Net income $ 962,535 $
378,053 155 % $ 2,706,298 $ 1,934,864
40 % 6.1 % 2.9 % 5.8 % 4.5 % Net income per common
share: Basic $ 0.32 $ 0.13 152 % $ 0.91 $ 0.66 38 % Diluted 0.32
0.13 154 % 0.90 0.65 39 % Dividends per common share (1) $
0.15 $ 0.14 7 % $ 1.45 $ 0.42 245 % Weighted average shares
outstanding: Basic 2,991,192 2,961,128 1 % 2,976,994 2,944,653 1 %
Diluted 3,017,536 3,004,726 0 % 3,006,430 2,991,124 1 %
Supplemental data: Depreciation expense $ 222,848 $ 253,686 -12 % $
646,336 $ 643,077 1 % Amortization expense 88,616 73,161 21 %
271,208 324,004 -16 %
(1) Dividends per common share for the
nine months ended June 27, 2015 include a special dividend of $1.00
per share paid on January 7, 2015.
SPAN-AMERICA MEDICAL SYSTEMS, INC. Consolidated
Balance Sheets June 27, Sept. 27,
2015 2014 (Unaudited) (Note)
Assets Current assets:
Cash and cash equivalents $ 6,159,687 $ 6,865,931 Accounts
receivable, net of allowances 7,512,051 5,851,822 Inventories
6,639,527 7,395,955 Deferred income taxes 272,504 271,828 Prepaid
expenses 607,398 760,967 Total current
assets 21,191,167 21,146,503 Property and equipment, net
4,679,874 4,888,096 Goodwill 4,068,673 4,291,843 Intangibles, net
2,411,612 2,860,260 Other assets 2,738,736
2,660,132 $ 35,090,062 $ 35,846,834
Liabilities and Shareholders’
Equity
Current liabilities: Accounts payable $ 3,000,639 $ 2,477,198
Accrued and sundry liabilities 2,762,483
2,051,662 Total current liabilities 5,763,122 4,528,860
Deferred income taxes 371,080 160,685 Deferred compensation
396,319 457,457 Total long-term
liabilities 767,399 618,142
Total liabilities 6,530,521 5,147,002
Shareholders’ equity:
Common stock, no par value, 20,000,000
shares authorized; issued and outstanding shares 2,991,192 at June
27, 2015 and 2,962,007 at Sept. 27, 2014
3,421,081 3,064,658 Additional paid-in capital 926,811 906,834
Retained earnings 26,139,675 27,735,768 Accumulated other
comprehensive loss (1,928,026 ) (1,007,428 )
Total shareholders’ equity
28,559,541 30,699,832 $
35,090,062 $ 35,846,834 Note: The Balance
Sheet at September 27, 2014 has been derived from the audited
financial statements at that date.
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version on businesswire.com: http://www.businesswire.com/news/home/20150805006264/en/
Span-America Medical Systems, Inc.Jim Ferguson, 864-288-8877,
ext. 6912President and Chief Executive Officer
Span America (NASDAQ:SPAN)
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