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May 05, 2010 12:00 AM

Span-America reports challenging second quarter

Utech Staff
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    Greenville, South Carolina -- Span-America Medical Systems Inc, which makes polyurethane foam products for the medical market, has reported sales down by 2 percent to $13.1 million in the second quarter of 2010 (Q2) ended 3 April 2010, compared to the same period last year. Net income rose 18 percent to $1.2 million in the same period.

    For the 6 months ended 3 April 2010, net sales were down 5 percent year-on-year to around $25.4 million, a 3 May company statement said.

    "We experienced solid growth in net income since last year even though our second quarter sales were down by 2 percent compared with the same quarter last year," said Jim Ferguson, ceo of Span-America Medical Systems. "Our continued growth in gross profit, operating margin and net income has been the result of reduced manufacturing costs, lower administrative expenses and a more profitable sales mix compared with last year," he added.

    The sales decrease, the company said, was due mostly to lower volume in custom products, which was down 9 percent to $3.7 million because of lower sales in consumer bedding.

    "A consumer-bedding promotion run by a major customer in the second quarter of last year was not repeated in the second quarter this year," Span America said, adding that a 2 percent increase in medical sales to $9.5 million partially offset lower sales levels of custom products.

    The increase in medical sales was mainly from non-mattress medical products, "partly related to timing of customer orders around a 2009 sales price increase," the statement said. For the first half of 2010, however, total medical sales were down 5 percent to $18.1 million.

    Sales of therapeutic support surfaces declined by 9 percent to $6.0 million compared with $6.6 million in the second quarter of last year. The decline was primarily due to lower sales of support surfaces that were provided to a large customer under a contract that expired in April 2009, the company added.

    Sales of mattress overlays increased 30 percent for the the second quarter of 2010, with patient positioner sales up 20 percent and seating products up 11 percent. Sales of Selan skincare products rose 14 percent, the statement said.

    "This was our second sequential quarterly increase in industrial sales," said Ferguson. "Second quarter sales rose almost 31 percent compared with the first quarter of fiscal 2010," ended 2 Jan 2010. Although this business represents a small part of our total sales, it has been a good leading indicator of sales trends due to our broad customer base for industrial products," he added.

    "Our outlook for the second half of fiscal 2010 is tempered somewhat by the slow recovery in the economy," Ferguson said, adding that the company still sees customers being cautious with their buying decisions, "especially in the medical segment where the purchase of our proprietary support surfaces can be delayed compared with consumable products." Ferguson continued, "In addition, we remain sensitive to higher costs for petroleum-based foam, our largest category of raw material."

    "Based on our current market conditions, we expect to report modest sales and earnings growth in the second half of fiscal 2010 compared with the first half," Ferguson concluded. (RD)"

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