Span-America Announces Expectations for Fiscal 2014; Sales to Major Customer to Decline by $13.3M; Consumer Sales to be Lower in FY14

Span-America Medical Systems

announced today that it expects consumer sales to be lower in fiscal 2014 because a major retail customer has selected another supplier in a competitive selection process. Span-America's sales to this customer are expected to decrease by approximately $13.3 million in fiscal 2014 compared with fiscal 2013, which includes the previously announced loss of the November seasonal promotion. The sales decline is expected to reduce fiscal 2014 diluted earnings per share by approximately $0.10 - $0.15 compared with fiscal 2013, after factoring in the expected benefits from planned sales growth in other parts of Span-America's business in fiscal 2014. "We are disappointed to lose this account for the coming year, but we expect that continued growth from our core medical business and higher sales to other retail accounts will partially offset the loss," stated Jim Ferguson, president and chief executive officer of Span-America Medical Systems. "We expect to continue supplying consumer bedding products to this customer at normal levels through January 2014. Starting in February, we expect our customer to begin purchasing these products from the new supplier. However, we also believe we will have opportunities to make new proposals to this same customer for other retail programs that will take place in 2014. "We have continued to build our consumer bedding sales to other retailers over the past year and have a strong line of consumer bedding products. We remain optimistic about potential growth opportunities for additional retail accounts with our marketing and distribution partner, Hollander Home Fashions. We plan to remain active in the consumer bedding market and will be working hard to replace the lost sales volume, " concluded Mr. Ferguson. The Company expects an orderly wind down of business with the large account and does not expect any material exit costs associated with the lost business. The Company plans to release its financial results for the fourth quarter and fiscal year 2014 on November 6, 2013. 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), Custom Care(R), Span+Aids(R), Isch-Dish(R), Risk Manager(R) and Selan(R) 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 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 growth in sales of medical and industrial products in fiscal 2014, (b) the possibility that sales to the customer described above could decline faster than we currently expect, (c) 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 on May 24, 2013 as a result of the sale of Louisville Bedding's utility bedding retail business to Hollander, (d) the possibility of a loss of a key customer or distributor for our products, (e) the addition of risks caused by the acquisition of M.C. Healthcare, including those related to business integration, international operations and foreign exchange, (f) the possibility of having material uncollectible receivables from one or more key customers or distributors, (g) the potential for volatile pricing conditions in the market for polyurethane foam, (h) raw material cost increases, (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.