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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from _________ to _________.
Commission File Number 0-11392
SPAN-AMERICA MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0525804
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
70 Commerce Center
Greenville, South Carolina 29615
(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 288-8877
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, no par value
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant computed by reference to the last price at which the stock was
sold on December 21, 1995 was $17,315,394.
The number of shares of the registrant's common stock, no par value,
outstanding as of December 21, 1995, was 3,225,608.
Documents Incorporated By Reference
Portions of the 1995 Annual Report to Shareholders are incorporated by
reference into Parts I and II, and portions of the Company's Definitive Proxy
Statement for the annual shareholder's meeting to be held February 16, 1996 are
incorporated by reference into Part III.
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PART I
Item 1. Business
Background
Span-America Medical Systems, Inc. (the "Company" or "Span-America"),
was incorporated under the laws of the state of South Carolina on September 21,
1970. The Company manufactures and distributes a variety of polyurethane foam
products and contract packaging products for the medical, consumer and
industrial markets.
Span-America commenced operations in 1975 as a manufacturer of
polyurethane foam patient positioners. During the next several years, the
Company expanded its product lines to produce lapidus (flat foam) and convoluted
foam mattress overlays for the decubitus care market. Decubitus care products
aid in the treatment or prevention of decubitus ulcers, commonly known as bed
sores or pressure ulcers. In the late 1970's the Company also began producing
foam products for industrial applications, primarily to utilize excess
manufacturing capacity. In 1985, the Company introduced its patented Geo-Matt
mattress overlay in the health care market which became the Company's leading
product. At the same time, the Company began selling its mattress overlay
products to the consumer market segment. Span-America's foam products (including
replacement mattresses described below) made up approximately 79% of the
Company's total net sales in fiscal 1995.
To diversify its operations and to capitalize upon its familiarity and
contacts within the health care industry, Span-America entered the contract
packaging business in 1987. These initial contract packaging operations were
based on a three-year commitment to supply Baxter Healthcare Corporation
("Baxter") with all of its contract packaging requirements. This agreement
expired during the first quarter of fiscal 1991. The Company currently provides
contract packaging services to a variety of customers throughout the United
States. During fiscal 1995, contract packaging products accounted for
approximately 21% of total net sales.
The Company entered the replacement mattress segment of the pressure
ulcer care market in fiscal 1992 through the acquisition of Healthflex, Inc. The
Company is currently marketing Healthflex's PressureGuard line of replacement
mattresses directly to hospitals and long-term care facilities.
The Company's long-term strategy is to become a leading health care
manufacturer specializing in products used in the prevention and treatment of
pressure ulcers. A majority of the Company's medical products are currently
directed toward pressure ulcer care applications, and the Company is actively
seeking to develop or
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acquire new products which are in this market segment. The Company also seeks to
further develop and manufacture consumer and industrial applications of its
medical products.
The Company's products are distributed primarily in the United States
and to a lesser degree in several foreign countries. Total export sales during
fiscal 1995 were approximately $954,000 or 3% of total net sales.
Industry Segment Data
The industry segment data included in Note 15 to the Company's audited
consolidated financial statements for the year ended September 30, 1995,
presented on page 24 of the 1995 Annual Report is incorporated herein by
reference.
Medical Products
Span-America's principal medical products consist of polyurethane foam
mattress overlays, therapeutic replacement mattresses, and patient positioners.
These products are marketed primarily to hospitals but are also marketed to long
term care facilities in the United States. The Company also sells these products
on a limited basis in Canada. Sales of medical products represented 45%, 47%,
and 55% of sales in 1995, 1994, and 1993 respectively.
Mattress Overlays. Span-America produces a variety of foam mattress
overlays, including convoluted and lapidus foam pads and its patented
Geo-Matt(R) overlay. Mattress overlays comprised approximately 22% of the
Company's total net sales in fiscal 1995. These products are designed to provide
patients with greater comfort and assist in treating patients suffering from
burns or pressure ulcers. Span-America's overlay products are mattress pads as
compared to complete mattresses and are marketed as less expensive alternatives
to generally higher priced air and water mattresses. The mattress overlays are
designed for single patient use.
The Geo-Matt mattress overlay, which was introduced in 1985, represents
the Company's single largest product in terms of revenues. However, Geo-Matt
sales have declined in each of the last three fiscal years. Geo-Matt was
designed with computer-aided equipment in conjunction with clinical studies
performed by the Institute for Rehabilitation and Research at the Baylor College
of Medicine. The product's patented design includes over 800 individual cells
which are cut to exacting tolerances on computer controlled equipment to create
a sophisticated and clinically effective mattress surface.
The Company's mattress overlays disperse body heat, increase air
circulation beneath the patient, and reduce moisture build-up in order to
prevent the development
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or promote the healing of pressure ulcers. Their convoluted or geometrically
contoured construction also evenly distributes the patient's body weight,
thereby minimizing the pressure that causes ulcers.
Replacement Mattresses. Span-America's replacement mattresses consist
of its PressureGuard(R) mattresses, a line of therapeutic replacement mattresses
(as distinguished from overlays), acquired through the acquisition of Healthflex
in February 1992. The patented PressureGuard product combines a polyurethane
foam shell and static air tubes to form a replacement mattress which
incorporates the comfort and pressure relieving features of both mattress
overlays and more sophisticated mattresses containing dynamic features.
PressureGuard mattresses are designed to replace existing hospital or long-term
care mattresses and to eliminate the need for mattress overlays. The
PressureGuard mattress has preventative and therapeutic features, providing
orthopedically correct positioning, equalized support and weight distribution,
shear reduction, and pressure dispersion. The product line is now being sold
primarily to acute care hospitals in the United States through the Company's
direct sales force of approximately 20 representatives. The Company is also
increasing its marketing efforts for this product in Canada. During fiscal 1995
replacement mattresses and related products made up approximately 9% of total
net sales.
In November 1993, the Company received FDA 510K marketing approval for
its PressureGuard IV (PGIV) mattress system. Building on the comfort and
orthopedic support of the PressureGuard II design, PressureGuard IV is a
sophisticated support system that provides pressure reduction and patient
comfort in a powered, dynamic mattress with turning capabilities. The mattress
automatically senses the patient's weight and adjusts to the appropriate support
level for each patient to minimize surface pressures. The system slowly and
quietly repositions patients at angles up to 30 degrees in cycles of up to two
hours, providing continuous care for effective prevention and treatment of
pressure ulcers. When disconnected from a power source, the system maintains
proper inflation and optimum patient support until power is restored and
rotation can resume. The simplicity of the PressureGuard IV mattress system
makes it easy to use and virtually maintenance free. Standard operating modes
are pre-programmed, with the flexibility to customize settings for each
patient's care. During fiscal 1995, PGIV and related products made up
approximately 6% of total net sales.
In November 1994, Span-America introduced the DynaGuard alternating
pressure mattress. This powered, dynamic replacement mattress is being targeted
to the home care market. In June 1995, the Company introduced the CustomCare(TM)
therapeutic mattress system. The CustomCare mattress uses principles of
"constant force technology" to create a new category of non-powered,
self-adjusting mattress systems for the acute care and long-term care markets.
Patient Positioners. Span-America's specialty line of patient
positioners is sold primarily under the trademark Span-Aids(R). Span-Aids
accounted for approximately 8%
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of the Company's net sales in fiscal 1995. This is the original product line of
the Company and consists of over 300 different foam items which aid in relieving
the basic patient positioning problems of elevation, immobilization, muscle
contracture, foot drop and foot or leg rotation. Span-Aids patient positioners
hold the patient's body in orthopedically correct positions, provide greater
patient comfort and tend to promote healing for long-term comatose patients or
those with a flaccid or immobilized condition. The positioners also aid in the
prevention of pressure ulcers by promoting more effective dispersion of
pressure, heat and moisture. Span-Aids are intended for single-patient use
throughout the patient's entire treatment program. Among the Span-Aids products
presently marketed are abduction pillows, body aligners, wheelchair cushions,
cast elevators and various foot and wrist positioners.
Span-America's patient positioners are sold primarily to hospitals and
long-term care facilities by several national medical products distributors.
Span-Aids are believed by the Company to be one of the most effective patient
positioning devices available in the health care market, as compared to pillows,
rolled towels and other similar materials traditionally used by nursing
personnel to position immobilized patients. Span-Aids are constructed of
open-cell polyurethane foam which allows air to circulate next to the patient's
skin, thereby reducing extensive heat and moisture build-up.
Most Span-Aids body positioners are pressure packaged to reduce the
amount of storage space required by hospitals and other facilities which utilize
them. This patented packaging method reduces the package size by as much as 75%
while protecting the positioners from dust and contamination during
transportation and storage.
Distributor Relationship. Approximately 27% of the Company's medical
foam products are sold to Baxter which distributes these products to hospitals
nationwide. Span-America has maintained a distribution relationship with Baxter
(formerly American Hospital Supply) for 17 years. Sales of the Company's medical
foam overlay products to Baxter Healthcare Corporation, have declined during the
last two fiscal years due to Baxter's decision in February 1994 to begin
carrying a competing line of foam products. A continued decline in sales to
Baxter could have a negative effect on the Company's earnings in fiscal 1996.
However, management believes that any negative earnings impact of the decline in
foam overlay sales should be offset by increases in sales of these products to
other national distributors and by sales increases in the Company's other
product lines. The Company's foam overlay products are now available through a
number of national distributors rather than exclusively from Baxter as was the
case until early 1994. Sales of medical foam products to Baxter have declined by
approximately $11 million since fiscal 1993. However, during the same period,
sales of these products to other national distributors have increased by $6
million, offsetting more than half of the decline in sales to Baxter.
4
Consumer Products
Span-America's consumer products consist primarily of convoluted
mattress overlays and specially designed pillows for the consumer bedding
market. The Company's principal consumer mattress overlays are produced under
private labels for J.C. Penney and Target Stores. The majority of the Company's
consumer bedding products are marketed by Pillowtex, which sells the products to
department stores and mass merchandisers throughout the United States.
In 1990, Span-America introduced its TerryFoam(R) comfort products
which are designed to be used on all types of outdoor furniture. Formerly
produced by contract manufacturers according to the Company's specifications,
these products are now manufactured by the Company. They are being sold and
distributed directly by Span-America to retailers nationwide.
Consumer products represented approximately 23% of the Company's total
net sales in fiscal 1995 as compared to 21% in 1994 and 19% in 1993.
Industrial Products
Span-America's industrial products consist primarily of foam packaging
and cushioning materials. The Company also produces foam products which are used
for flotation, sound insulation and gasketing purposes. The majority of these
products are made to order according to customer specifications instead of being
made to stock. To date, most of the Company's industrial sales have been in the
specialty packaging segment of the industrial foam market. The Company currently
has two full-time sales representatives and several manufacturers
representatives selling its foam fabrication capabilities to the industrial
market. Its customers represent a wide variety of markets, including the
defense, electronics and sports equipment industries. The industrial foam
segment of the business made up approximately 12% of the Company's net sales in
fiscal 1995 as compared to 9% in 1994.
Contract Packaging Products
Span-America's contract packaging products are principally single-use
flexible packettes containing various chemicals which are used for cleaning,
sterilizing or lubricating purposes. Approximately 21% of the Company's fiscal
1995 sales were contract packaging products as compared to 22% in 1994, and 20%
in 1993. Contract packaging products are generally foil pouches containing a
piece of non-woven cloth which has been saturated with substances such as
alcohol or iodine. The Company markets its contract packaging capabilities
principally to large health care and pharmaceutical companies. Since the
Company's main function is that of a contract manufacturer, it primarily relies
on the distribution networks of its customers.
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The Company's contract manufacturing facilities include a high quality
water filtration system, liquid/gel blending facilities and equipment which
fills flexible packettes with a variety of chemicals, powders, gels, swab sticks
and other products. Span-America utilizes high-speed horizontal and vertical
"form, fill and seal" packaging machines to produce a significant portion of the
contract packaging products. The Company also provides bottle (liquid) filling
services to its customers.
Although Span-America functions primarily as a contract manufacturer of
flexible packaging products, it also produces a line of such products under its
own Span-Care brand, consisting principally of single-use towelettes, swabs and
gels. The Company employs two sales representatives to sell this Span-Care line
to hospitals and alternate site facilities, including long-term care facilities
and home health care distributors.
The Company also manufactures contract packaging products for the
consumer market segment. These items consist mainly of health and beauty aid
products such as towelettes, lotions and powders. Span-America acts as a
contract manufacturer of these products, blending and packaging them according
to customer specifications. They are sold and distributed by Span-America's
customers to a variety of retail outlets in the United States.
Competition
Medical. In the medical market segment, the Company faces significant
competition for sales of its foam mattress overlays. The competition for
convoluted mattress overlays is primarily based on price and delivery. For other
foam mattress overlay products (such as the Geo-Matt overlay), the competition
is based mainly on product performance and quality. However, to a lesser extent,
the competition for Geo-Matt type overlays is also based on price and delivery.
Competition with respect to the Company's Span-Aid products is primarily based
on price. However, a secondary source of competition for patient positioners
results from alternative methods such as the use of pillows and other devices to
position patients.
The Company believes that it is among the top five suppliers of foam
mattress overlays and patient positioners to the health care market. The
Company's primary competitors in the health care market include Bio Clinic
(division of Sunrise Medical), Dermacare, Gaymar, and DeRoyal.
The competition in the therapeutic replacement mattress market is based
on product performance, price and durability. Potential customers typically
select a product based on these criteria after conducting a formal clinical
evaluation of sample mattresses for periods of one to six months. A secondary
source of competition results from alternative products such as mattress
overlays which are significantly less expensive than replacement mattresses.
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The market for therapeutic replacement mattresses has developed
principally during the last three years and is currently dominated by five
suppliers: BG Industries, Hill-Rom, Comfortex, DermaCare, and Bio Clinic. BG
Industries utilizes Baxter to distribute its mattresses primarily to hospitals.
The other competitors use their own sales representatives to sell directly to
hospitals, distributors, and long-term care facilities nationwide. The Company's
entrance into the replacement mattress market in 1992 also placed it in direct
competition with Baxter for sales of replacement mattress products. See
"Distributor Relationship" on page 4 for further discussions regarding Baxter
and the Company.
Many of the Company's competitors in the health care segment are larger
and have greater resources than Span-America.
Consumer. In the consumer market segment, Span-America has encountered
significant competition for its mattress pad and pillow products. The
competition is principally based on price, which is largely determined by foam
density and thickness. However, competition also exists due to variations in
product design and packaging. There are presently a number of companies with the
manufacturing capability to produce similar bedding products. The Company's
primary competitors in this market are Comfort Clinic (a division of Sunrise
Medical) and ER Carpenter, both of which are larger than Span-America.
Industrial. The Company also has a number of competitors in the
industrial foam market, including United Foam, Hibco and Foam Design. Some of
these competitors are larger and have greater resources than Span-America. The
competition for industrial foam products is largely based on price. In some
instances, however, design and delivery capabilities are as important as the
price of the product.
Contract Packaging. A significant level of competition has been
experienced in the markets into which the medical contract packaging products
are sold. This competition is based mainly on price, quality and manufacturing
capability. Many of the contract packaging products have the characteristics of
commodity products and thus can be produced at several manufacturing facilities
in the United States. The Company's chief competitors in this market are
PDI/Nice Pak, Packaging Coordinators, Paco, Marietta Packaging and Clinipad.
There is also significant competition for the Company's contract
packaging products sold in the consumer market. The main bases for this
competition are quality, capacity and breadth of manufacturing capabilities.
There are currently many companies, some larger and with greater resources than
Span-America, which have the capability to produce equivalent products.
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Major Customers
The Company has a business relationship with Baxter Healthcare
Corporation ("Baxter") to distribute certain of its foam and contract packaging
products. In fiscal 1995, sales to Baxter amounted to approximately 12% of the
Company's total net sales and approximately 27% of the Company's sales to the
medical foam segment. Span-America also has a relationship with Pillowtex
Corporation to distribute certain of its consumer foam products. Sales to
Pillowtex during fiscal 1995 made up approximately 15% of the Company's net
sales and approximately 64% of sales in the consumer foam segment. The Company
has a relationship with another customer to manufacture specific contract
packaging products for the consumer market segment. Sales to this customer
comprised approximately 5% of the Company's fiscal 1995 net sales and 25% of the
contract packaging segment sales during the same period.
The loss of any of the customers described above could have a material
adverse effect on the Company. See "Distributor Relationship" on page 4,
"Consumer Products" on page 5, and "Competition" on pages 6 and 7 for more
information on major customers.
Seasonal Trends
Some seasonality can be identified in certain of the Company's medical
foam, consumer foam and contract packaging products. However, the
fluctuations have minimal effect on the Company's operations because of
offsetting trends among these product lines. Span-America has not experienced
any seasonal fluctuations in its industrial segment.
The most seasonal of the Company's products is the TerryFoam line of
chaise and chair pads. Demand for shipments of these products generally is
highest in January through April of each year as retail stores begin stocking
their summer merchandise. The impact of this seasonality on the Company will
depend largely on the volume of sales achieved for this product line. During
previous fiscal years, the seasonality of TerryFoam products has had only a
minor impact on the Company's operations.
Patents and Trademarks
The Company holds 28 federally registered trademarks, including SPAN-
AMERICA, SPAN-AIDS, GEO-MATT, SPAN-CARE AND PRESSUREGUARD. Other federal
registration applications are presently pending. The Company believes that these
trademarks are readily identifiable in their respective markets and add value to
the Company's product lines.
The Company also holds 44 United States patents and 8 foreign patents
relating to various components of its patient positioners, mattress overlays,
and replacement
8
mattresses. Additional patent applications have been filed. Management believes
that these patents are important to the Company. However, while the Company has
a number of products covered by patents, there are competitive alternatives
available which are not covered by these patents. Therefore, the Company does
not rely solely on its patents to maintain its competitive position in the
marketplace.
Span-America's principal patents include the patents on its
PressureGuard and CustomCare replacement mattress, its Geo-Matt overlay and its
Span-Aids patient positioners. The Company's Geo-Matt and PressureGuard patents
have remaining lives of 12 and 14 years, respectively. The Company's Span-Aids
patents have remaining lives ranging from 1 to 14 years.
Certain of the Company's patents have been assigned or exclusively
licensed to the Company by Donald C. Spann, the Company's founder and former
chairman, until January 1, 1996. In connection with such assignments, the
Company is obligated to pay Mr. Spann royalties equal to 3% of net sales on all
products covered by such patents. In the event that the Company defaulted on
these royalty payments, such patents would revert to Mr. Spann. On January 1,
1996, all patents assigned or licensed to the Company by Mr. Spann will become
the property of the Company, and the Company will have no further obligation to
make the royalty payments.
Raw Materials and Backlog
Polyurethane foam, foil packaging, various chemical solutions and
non-woven cloth account for approximately 80% of Span-America's raw materials.
In addition, the Company uses corrugated shipping cartons, polyethylene plastic
packaging material and hook-and-loop fasteners. The Company believes that its
basic raw materials are in adequate supply and are available from many suppliers
at competitive prices.
As of September 30, 1995, Span-America had unshipped orders of
approximately $2.6 million which represents a 10% decrease compared to a backlog
of $2.9 million at fiscal year end 1994. All orders in the current backlog will
be filled in the 1996 fiscal year.
Employees
On September 30, 1995, the Company had full-time employment of 250
persons, including 5 officers. Of these employees, 25 were executive or
management personnel, 12 were administrative and clerical personnel, 19 were
sales personnel and 189 were manufacturing employees. The Company is not a party
to any collective bargaining agreement, and has never experienced an
interruption or curtailment of operations due to labor controversy. Management
believes that its relations with its employees are good.
9
Supervision and Regulation
The Federal Food, Drug and Cosmetic Act, and regulations issued or
proposed thereunder, provide for regulation by the Food and Drug Administration
(the "FDA") of the marketing, manufacture, labeling, packaging and distribution
of medical devices, including the Company's products. These regulations require,
among other things, that medical device manufacturers register with the FDA,
list devices manufactured by them, and file various types of reports. In
addition, the Company's manufacturing facilities are subject to periodic
inspections by regulatory authorities and must comply with "good manufacturing
practices" as required by the FDA and state regulatory authorities. The Company
believes that it is in substantial compliance with applicable regulations and
does not anticipate having to make any material expenditures as a result of FDA
or other regulatory requirements.
Environmental Matters
The Company's manufacturing operations are subject to various
government regulations pertaining to the discharge of materials into the
environment. Span-America believes that it is in compliance with applicable
regulations. The Company does not anticipate that continued compliance will have
a material effect on the Company's capital expenditures, earnings or competitive
position.
Item 2. Properties
The Company's principal office and manufacturing facility is owned by
the Company and located in Greenville, South Carolina. This facility contains
approximately 125,000 square feet and is located on a 13 acre site. The Company
also leases approximately 60,000 square feet of warehouse space in Greenville
for $13,672 per month until the lease expires in May 1997.
The Company produces foam mattress overlays for the medical and
consumer markets in a 40,000 square foot facility in Norwalk, California. The
lease rate is $14,196 per month and increases annually over the term of the
lease to $15,615 per month until the lease expires in December 1997. The Company
closed its Vermont manufacturing plant in July 1994 and consolidated the
operation into the South Carolina facilities.
The South Carolina and California facilities are considered suitable
and adequate for their intended purposes.
10
Item 3. Legal Proceedings
The Company and its subsidiaries are from time to time parties to
various legal actions arising in the normal course of business. However,
management believes that as a result of legal defenses and insurance
arrangements with parties believed to be financially capable, there are no
proceedings threatened or pending against the Company that, if determined
adversely, would have a material adverse effect on the business or financial
position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the Company's 1995 fiscal year.
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters
The stock price information contained under "Quarterly Financial Data"
within the table and the information set forth below the table on page 11 of the
Company's 1995 Annual Report is incorporated herein by reference. In addition,
the information under "Stock Information" on the inside back cover of the
Company's 1995 Annual Report is incorporated herein by reference.
Item 6. Selected Financial Data
The information contained in the "Selected Financial Information" on
page 10 of the Company's 1995 Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Financial Analysis
Management's Discussion and Financial Analysis on pages 12 through 15
of the Company's 1995 Annual Report are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Company included on pages 16 through 26
of the Company's 1995 Annual Report are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
11
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Information required under Items 10, 11, 12 and 13 of Part III is
incorporated herein by reference to portions of the definitive Proxy Statement
filed or to be filed with the Securities and Exchange Commission on or prior to
120 days following the end of the Company's 1995 fiscal year under the headings
"Election of Directors," "Business Experience of Nominees and Directors,"
"Executive Officers," "Compensation of Directors and Executive Officers,"
"Certain Transactions," and "Security Ownership of Certain Beneficial Owners and
Management."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this report beginning on page F-1.
(3) Listing of Exhibits
3.1 Amendment to the Company's by-laws dated April 25, 1995: Incorporated
by reference to Exhibit 3(ii) to the Company's quarterly report on Form
10-Q for the quarter ended July 1, 1995.
4.1 Specimen of Common Stock certificate: Incorporated by reference to
Exhibit 1 to the Form S-8, Commission File No. 33-32896.
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4.2 The Registrant hereby agrees to furnish to the Securities and Exchange
Commission upon request a copy of any instrument with respect to
long-term debt not being registered in a principal amount less than 10% of
the total assets of the Registrant and its subsidiaries on a consolidated basis.
10.1 Patent Assignment and Royalty Agreement between Donald C. Spann and
the Company, with letter amendment thereto: Incorporated by reference to
Exhibit 10(c) to the Form S-18.
10.2 Contract between the Company and Pillowtex Corporation dated
September 30, 1986: Incorporated by reference to Exhibit 10-1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1986, Commission File No. 0-11392 (the "1986 10-K").
10.3 1987 Stock Option Plan: Incorporated by reference to Exhibit 10 to the
Company's Annual Report on Form 10-K for the fiscal year ended October
2, 1987, Commission File No. 0-11392.
10.4 Employee Stock Ownership Plan - Summary Plan Description:
Incorporated by reference to Exhibit 10.6 to the 1990 10-K.
10.5 1991 Stock Option Plan: Incorporated by reference to Exhibit 10.6 to the
1991 10-K.
10.6 Retirement Agreement dated February 6, 1991 between the Company and
Donald C. Spann: Incorporated by reference to Exhibit 10.7 to the 1991
10-K.
10.7 Contract between the Company and Healthflex, Inc. dated February 28,
1992: Incorporated by reference to Exhibit 2.1 to the February 28, 1992
Form 8-K.
10.8 Loan Agreement dated as of September 15, 1983 and amended as of April
19, 1984 and as of September 1, 1986 among Greenville County, South
Carolina, NCNB South Carolina and the Company, and Mortgage and
Security Agreement dated as of September 15, 1983, and amended as of
April 19, 1984 and as of September 1, 1986 between Greenville County and
the Company: Incorporated by reference to Exhibits 19.1 and 19.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March
28, 1992.
10.9 Contract between the Company and BriGam, Inc. dated October 16, 1992
terminating a royalty agreement: Incorporated by reference to Exhibit
13
10.10 to the Company's annual report on Form 10-K for the fiscal year
ended October 3, 1992, Commission File No. 0-11392.
10.10 Voluntary Resignation Agreement dated July 30, 1993 between the
Company and Donald C. Spann: Incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1993.
10.11 Employment Agreement dated February 28, 1992 between the Company
and John W. Wilkinson: Incorporated by reference to Exhibit 28A to the
Current Report on Form 8-K (the "February 28, 1992 Form 8-K") filed by
the Company with the Commission on February 28, 1992.
10.12 Consulting Agreement dated August 1, 1994 between the Company and
John W. Wilkinson: Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended July 2,
1994.
10.13 Retirement Agreement dated September 23, 1994 between the Company
and Charles B. Mitchell. Incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended
October 1, 1994.
13.1 1995 Annual Report to Shareholders.
23.0 Consent of Ernst and Young LLP.
27.0 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
fourth quarter of the fiscal year ended September 30, 1995.
(c) Exhibits
The exhibits required by this section of Item 14 are attached
hereto or incorporated by reference.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this report beginning on page F-1.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPAN-AMERICA MEDICAL SYSTEMS, INC.
By: /s/ Brien Laing December 20, 1995
Brien Laing, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the date indicated.
/s/ Charles B. Mitchell President, Chief Executive Officer and
Charles B. Mitchell Director (Principal Executive Officer)
/s/ Richard C. Coggins Chief Financial Officer and Director
Richard C. Coggins (Principal Financial Officer)
/s/ Gwendolyn L. Randolph Controller
Gwendolyn L. Randolph
/s/ Thomas F. Grady, Jr. Director
Thomas F. Grady, Jr.
/s/ Douglas E. Kennemore Director
Douglas E. Kennemore, M.D.
/s/ Brien Laing Director
Brien Laing
/s/ W. Marcus Newberry Director
W. Marcus Newberry, M.D.
/s/ James M. Shoemaker, Jr. Director
James M. Shoemaker, Jr.
/s/ Raymond M. Tortolani Director
Raymond M. Tortolani
/s/ Robert A. Whitehorne Director
Robert A. Whitehorne
15 December 20, 1995
Annual Report on Form 10-K
Items 14 (a) (1) and (2), (c) and (d)
List of Financial Statements and Financial Statement Schedules
Certain Exhibits
Financial Statement Schedules
Year Ended September 30, 1995
Span-America Medical Systems, Inc.
Greenville, South Carolina
F-1
Span-America Medical Systems, Inc.
Form 10-K - Item 14(a)(1) and (2)
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Span-America Medical Systems,
Inc., included in the annual report of the registrant to its shareholders for
the year ended September 30, 1995 are incorporated by reference in Item 8:
Consolidated Balance Sheets - September 30, 1995 and October 1, 1994
Consolidated Statements of Income - Years ended September 30, 1995, October
1, 1994 and October 2, 1993
Consolidated Statements of Shareholders' Equity - Years ended September 30,
1995, October 1, 1994 and October 2, 1993.
Consolidated Statements of Cash Flows - Years ended September 30, 1995,
October 1, 1994 and October 2, 1993
Consolidated Notes to Financial Statements - September 30, 1995
The following consolidated financial statement schedule of Span-America Medical
Systems, Inc. is included in Item 14(d):
Schedule VIII - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
F-2
Schedule VIII - Valuation and Qualifying Accounts
Span-America Medical Systems, Inc.
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COL. A COL. B COL. C COL. D COL. E
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ADDITIONS
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(1) (2)
Description Balance at Beginning Charged to Costs and Charged to Other Deductions- Balance at End
of Period Expenses Accounts - Describe Describe of Period
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Year Ended September 30, 1995
Deducted from asset accounts:
Reserve for uncollectible accounts $225,000 $ 24,000 $44,000 (a) $205,000
Reserve for discounts 116,500 $33,500 (b) 150,000
Totals $341,500 $ 24,000 $33,500 $44,000 $355,000
Year Ended October 1, 1994
Deducted from asset accounts:
Reserve for uncollectible accounts $215,000 $138,000 $128,000 (a) $225,000
Reserve for discounts 69,000 $47,500 (b) 116,500
Totals $284,000 $138,000 $47,500 $128,000 $341,500
Year Ended October 3, 1993
Deducted from asset accounts:
Reserve for uncollectible accounts $145,000 $ 51,000 $73,000 (c) $54,000 (a) $215,000
Reserve for discounts 81,000 12,000 (d) 69,000
Totals $226,000 $ 51,000 $73,000 $66,000 $284,000
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(a) Uncollectible accounts written off.
(b) Net increase in sales discounts charged to income as a reduction of sales.
(c) Returns and allowances charged to income as a reduction of sales.
(d) Net reduction in sales discounts credited to income as reduction of sales adjustments.
F-3