UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 29, 2013

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 Number)

70 Commerce Center

                          Greenville, South Carolina 29615                             

(Address of Principal Executive Offices) (Zip Code)

 Registrant's telephone number, including area code: (864) 288-8877

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___      Accelerated filer ___ Non-accelerated filer     X       Smaller reporting company___

        (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___ No   X  

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.

Common Stock, No Par Value – 2,952,416 shares as of August 12, 2013

INDEX

SPAN-AMERICA MEDICAL SYSTEMS, INC.

PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets – June 29, 2013 and September 29, 2012	3
Consolidated Statements of Comprehensive Income – Three and nine months ended June 29, 2013 and June 30, 2012	4
Consolidated Statements of Cash Flows – Nine months ended June 29, 2013 and June 30, 2012	5
Notes to Consolidated Financial Statements – June 29, 2013	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures about Market Risk	19
Item 4. Controls and Procedures	21
PART II. OTHER INFORMATION
Item 1A. Risk Factors	21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 6. Exhibits	23
SIGNATURES	24
OFFICER CERTIFICATIONS

2

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Span-America Medical Systems, Inc.

Consolidated Balance Sheets

	June 29,			September 29,
	2013			2012
	(Unaudited)			(Note)
Assets
Current assets:
Cash and cash equivalents	$	3,598,067		$	2,665,302
Accounts receivable, net of allowances of $278,000 (June 29, 2013) and $233,000 (Sept. 29, 2012)		10,103,953			8,238,266
Inventories - Note 4		6,599,971			9,418,842
Deferred income taxes		613,420			613,420
Prepaid expenses		808,603			314,912
Total current assets		21,724,014			21,250,742
Property and equipment, net - Note 5		5,212,237			5,390,675
Goodwill		4,435,253			4,610,615
Intangibles, net - Note 6		3,458,959			3,990,887
Other assets - Note 7		2,631,868			2,404,847
	$	37,462,331		$	37,647,766
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	3,740,830		$	3,360,859
Accrued and sundry liabilities		3,420,807			3,359,487
Total current liabilities		7,161,637			6,720,346
Deferred income taxes		289,442			293,149
Deferred compensation		509,408			554,287
Total long-term liabilities		798,850			847,436
Total liabilities		7,960,487			7,567,782
Commitments and contingencies - Note 11
Shareholders' equity:
Common stock, no par value, 20,000,000 shares authorized; issued and outstanding shares 2,951,894 (June 29, 2013) and 2,919,250 (Sept. 29, 2012)		3,071,544			2,757,359
Additional paid-in capital		865,834			838,252
Retained earnings		25,994,264			26,199,977
Accumulated other comprehensive (loss)/income		(429,798	)		284,396
Total shareholders' equity		29,501,844			30,079,984
	$	37,462,331		$	37,647,766

Note: The Balance Sheet at September 29, 2012 has been derived from the audited financial statements at that date.

The accompanying notes are an integral part of these consolidated financial statements.  

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Span-America Medical Systems, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 29,			June 30,			June 29,			June 30,
	2013			2012			2013			2012
Net sales	$	18,621,212		$	16,937,129		$	56,904,627		$	58,364,557
Cost of goods sold		12,396,380			11,789,275			38,760,002			40,999,334
Gross profit		6,224,832			5,147,854			18,144,625			17,365,223
Selling and marketing expenses		2,903,918			2,658,221			8,166,201			7,731,704
Research and development expenses		311,030			279,268			978,777			780,474
General and administrative expenses		1,195,663			1,064,464			3,295,323			3,304,162
		4,410,611			4,001,953			12,440,301			11,816,340
Operating income		1,814,221			1,145,901			5,704,324			5,548,883
Non-operating income (expense):
Interest expense		(3,160	)		(4,337	)		(12,002	)		(12,970	)
Other		823			(18,110	)		(27,992	)		(34,493	)
Net non-operating (expense) income		(2,337	)		(22,447	)		(39,994	)		(47,463	)
Income before income taxes		1,811,884			1,123,454			5,664,330			5,501,420
Provision for income taxes		589,000			380,000			1,844,000			1,808,000
Net income		1,222,884			743,454			3,820,330			3,693,420
Other comprehensive income (loss), after tax:
Foreign currency translation (loss) gain		(371,513	)		(216,030	)		(714,194	)		(83,124	)
Comprehensive income	$	851,371		$	527,424		$	3,106,136		$	3,610,296
Net income per share of common stock - Note 9:
Basic	$	0.41		$	0.25		$	1.30		$	1.28
Diluted		0.41			0.25			1.28			1.26
Dividends per common share (1)	$	0.125		$	0.125		$	1.375		$	0.345
Weighted average shares outstanding:
Basic		2,951,894			2,919,250			2,939,057			2,884,191
Diluted		3,002,567			2,975,863			2,993,317			2,937,343

The accompanying notes are an integral part of these consolidated financial statements.

(1) Dividends per share for the nine months ended June 29, 2013 include a special dividend of $1.00 per share paid on December 4, 2012.

4

Span-America Medical Systems, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	June 29,			June 30,
	2013			2012
Operating activities:
Net income	$	3,820,330		$	3,693,420
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		954,345			899,775
Provision for losses on accounts receivable		49,784			(27,000	)
Gain on sale and disposal of property and equipment		(916	)		-
Increase in cash value of life insurance		(126,051	)		(148,302	)
Deferred compensation		(44,879	)		(40,503	)
Stock compensation expense		27,582			54,198
Changes in operating assets and liabilities:
Accounts receivable		(2,029,044	)		(967,016	)
Inventories		2,716,959			2,241,060
Prepaid expenses and other assets		(452,764	)		288,275
Accounts payable and accrued expenses		517,142			(395,736	)
Net cash provided by operating activities		5,432,488			5,598,171
Investing activities:
Acquisition of M.C. Healthcare		-			(8,251,831	)
Proceeds from sale of securities available for sale		-			4,000,000
Purchases of property and equipment		(427,654	)		(627,645	)
Proceeds from sale of property and equipment		7,850			-
Payments for other assets		(87,376	)		(88,917	)
Net cash used for investing activities		(507,180	)		(4,968,393	)
Financing activities:
Proceeds of long-term debt		-			9,300,000
Repayment of long-term debt		-			(8,300,000	)
Dividends paid		(4,026,044	)		(993,518	)
Common stock issued upon exercise of options		147,665			68,946
Net cash (used for) provided by financing activities		(3,878,379	)		75,428
Effect of exchange rates on cash		(114,164	)		(40,212	)
Increase in cash and cash equivalents		932,765			664,994
Cash and cash equivalents at beginning of period		2,665,302			2,124,406
Cash and cash equivalents at end of period	$	3,598,067		$	2,789,400

The accompanying notes are an integral part of these consolidated financial statements.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 29, 2013

1.   SIGNIFICANT ACCOUNTING POLICIES

Span-America Medical Systems, Inc., a South Carolina corporation (the “Company,” “Span,” “Span-America,” “we,” “us” or “our”), has prepared the accompanying unaudited financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In our opinion, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended June 29, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending September 28, 2013. For further information, refer to our Annual Report on Form 10-K for the fiscal year ended September 29, 2012.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and Span Medical Products Canada Inc., a British Columbia corporation (“Span-Canada”), its wholly-owned subsidiary. Significant inter-company accounts and transactions have been eliminated.

Foreign Currency Translation

The assets and liabilities of Span-Canada, operating under the name “M.C. Healthcare Products,” which uses the Canadian dollar as its functional currency, are translated into U.S. dollars at the quarter-end exchange rate. Revenues and expenses are translated at weighted average exchange rates. The resulting translation adjustments are recorded as a separate component of shareholders’ equity.

Recently Issued Accounting Standards

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

Stock-Based Compensation

We measure and recognize compensation expense for all stock-based payments at fair value. Stock-based payments include stock option grants. We have granted options to purchase common stock to some of our employees under various plans at prices equal to the market value of the stock on the dates the options were granted. New shares of stock are issued upon share option exercise. We do not have treasury stock.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for grants made in fiscal 2011: risk-free interest rate of 2.54%; dividend yield of 2.5%; volatility factor of the expected market price of our common stock of 43.02%; and a weighted average expected life of the options of 9.0 years. No options were granted during the nine months ended June 29, 2013 or during fiscal year 2012.

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2.   ACQUISITION OF ASSETS OF M.C. HEALTHCARE PRODUCTS INC.

On December 9, 2011, we acquired, through Span-Canada (a new wholly-owned subsidiary), substantially all of the assets of M.C. Healthcare Products Inc. (“MCHP” or “M.C. Healthcare”) for approximately $9,800,000, including cash of approximately $7,980,000 at the time of closing and approximately $354,000 for the post-closing working capital adjustment, paid in January 2012, plus 100,000 shares of Span-America common stock valued at approximately $1,441,000. MCHP manufactures medical bed frames and related products. We funded the acquisition through a combination of cash on hand, proceeds from the sale of securities available for sale and proceeds of approximately $6,500,000 from our revolving credit facility. No cash was acquired from MCHP. The excess of the consideration transferred over the net tangible and intangible assets was reflected as goodwill of approximately $2,530,000.

The allocation of the total consideration to the fair value of the assets acquired and liabilities assumed in U.S. dollars as of December 9, 2011 is as follows:

Receivables	$	1,800,000
Inventories		2,210,000
Intangibles		3,980,000
Other current assets		60,000
Equipment		300,000
Goodwill		2,530,000
Liabilities assumed		(1,070,000	)
Contingent consideration		(70,000	)
Deferred tax liability		(50,000	)
	$	9,690,000

For the Company’s third fiscal quarter ended June 29, 2013, Span-Canada contributed net revenues of approximately $3,500,000 and operating income of approximately $211,000 compared with the same period last year when Span-Canada’s net revenues were approximately $2,300,000 and operating loss was approximately $68,000. For the nine months ended June 29, 2013, Span-Canada contributed net sales of approximately $9,400,000 and operating income of approximately $756,000. For the period from December 9, 2011, the date of the MCHP asset acquisition, through June 30, 2012, Span-Canada contributed net sales of approximately $8,300,000 and operating income of approximately $1,048,000. These results are included in the Consolidated Financial Statements for the fiscal quarters ended June 29, 2013 and June 30, 2012.

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3.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes information on the fair value measurement of the Company’s assets as of June 29, 2013 and September 29, 2012 grouped by the categories described by the FASB:

	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash value of life insurance policies:
June 29, 2013	$	2,259,987		-	$	2,259,987		-
September 29, 2012	$	2,133,935		-	$	2,133,935		-

4.   INVENTORIES

	June 29,			September 29,
	2013			2012
Raw materials	$	4,798,510		$	5,471,177
Work in process		603,313			675,701
Finished goods		1,769,148			3,866,964
Reserve for obsolescence		(571,000	)		(595,000	)
	$	6,599,971		$	9,418,842

5.   PROPERTY AND EQUIPMENT

	June 29,			September 29,
	2013			2012
Land	$	469,718		$	469,718
Land improvements		486,698			486,698
Buildings		6,892,288			6,892,288
Machinery and equipment		8,324,872			7,940,067
Furniture and fixtures		488,346			488,346
Automobiles		11,421			11,554
		16,673,343			16,288,671
Less accumulated depreciation		(11,461,106	)		(10,897,996	)
	$	5,212,237		$	5,390,675

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6. INTANGIBLES

	June 29,			September 29,
	2013			2012
Patents and trademarks	$	2,080,436		$	2,023,060
Trade names		428,606			458,493
Non-compete agreements		187,816			200,913
Customer relationships		3,150,498			3,370,184
		5,847,356			6,052,650
Less accumulated amortization		(2,388,397	)		(2,061,763	)
Net intangibles	$	3,458,959		$	3,990,887

Changes in balances shown for trade names, non-compete agreements and customer relationships result solely from foreign currency fluctuations.

7.   OTHER ASSETS

	June 29,		September 29,
	2013		2012
Cash value of life insurance policies - Note 3	$	2,259,987	$	2,133,935
Other		371,881		270,912
	$	2,631,868	$	2,404,847

8.   PRODUCT WARRANTIES

We offer warranties of various lengths to our customers, depending on the specific product sold. The warranties require us to repair or replace non-performing products during the warranty period at no cost to the customer. At the time revenue is recognized for products covered by warranties, we record a liability for estimated costs that may be incurred under our warranties. The costs are estimated based on historical experience, any specific warranty problems that have been identified and recovery of secondary warranty cost from component suppliers.  The amounts shown below are presented net of any estimated cost recovery from suppliers. Although historical warranty costs have been within our estimations, there can be no assurance that future warranty costs will not exceed historical amounts. We regularly evaluate the adequacy of the warranty liability and adjust the balance as necessary.

9

Changes in our product warranty liability for the nine months ended June 29, 2013 and June 30, 2012 are as follows:

	Nine Months Ended
	June 29,			June 30,
	2013			2012
Accrued liability at beginning of period	$	378,643		$	480,000
Increase (Decrease) in reserve		98,276			(135,664	)
Increase in reserve as a result of MCHP asset acquisition		-			39,000
Expenses		(124,887	)		(27,336	)
Accrued liability at end of period	$	352,032		$	356,000

9.   EARNINGS PER SHARE OF COMMON STOCK

The following table sets forth the computation of basic and diluted earnings per share of our common stock.

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
	2013		2012		2013		2012
Numerator for basic and diluted earnings per share:
Net income	$	1,222,884	$	743,454	$	3,820,330	$	3,693,420
Denominator:
Denominator for basic earnings per share:
Weighted average shares		2,951,894		2,919,250		2,939,057		2,884,191
Effect of dilutive securities:
Employee stock options and restricted stock		50,673		56,613		54,260		53,152
Denominator for diluted earnings per share:
Adjusted weighted average shares and assumed conversions		3,002,567		2,975,863		2,993,317		2,937,343
Net income per share of common stock:
Basic	$	0.41	$	0.25	$	1.30	$	1.28
Diluted	$	0.41	$	0.25	$	1.28	$	1.26

10.   OPERATIONS AND INDUSTRY SEGMENTS

For management and reporting purposes, we divide our business into two segments: medical and custom products. This industry segment information corresponds to the markets in the United States and Canada for which we manufacture and distribute our various products.

10

As described in Note 2, on December 9, 2011, we acquired substantially all of the assets of M.C. Healthcare, which manufactures and markets medical bed frames and related products. M.C. Healthcare’s operations are reported as part of our medical segment.

The following table summarizes certain information on industry segments:

	Three Months Ended						Nine Months Ended
	June 29,			June 30,			June 29,			June 30,
	2013			2012			2013			2012
Net sales:
Medical	$	13,427,180		$	11,618,522		$	36,319,007		$	34,792,619
Custom products		5,194,032			5,318,607			20,585,620			23,571,938
Total	$	18,621,212		$	16,937,129		$	56,904,627		$	58,364,557
Operating profit:
Medical	$	1,816,406		$	1,101,343		$	4,129,152		$	3,809,075
Custom products		179,703			238,157			2,074,631			2,200,179
Total		1,996,109			1,339,500			6,203,783			6,009,254
Corporate expense		(181,888	)		(193,599	)		(499,459	)		(460,371	)
Other expense		(2,337	)		(22,447	)		(39,994	)		(47,463	)
Income before income taxes	$	1,811,884		$	1,123,454		$	5,664,330		$	5,501,420

Total sales by industry segment include sales to unaffiliated customers, as reported in our statements of comprehensive income. In calculating operating profit, non-allocable general corporate expenses, interest expense, other income, and income taxes are not included, but certain corporate operating expenses incurred for the benefit of all segments are included on an allocated basis.

11.   COMMITMENTS AND CONTINGENCIES

From time to time we are defendants in legal actions involving claims arising in the normal course of business. We believe that, as a result of legal defenses and insurance arrangements, none of these actions should have a material adverse effect on our operations or financial condition.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements contained in this Quarterly Report that are not historical facts are forward-looking statements that involve risks and uncertainties. We wish to caution the reader that these forward-looking statements, such as our expectations for future sales results or future expense changes compared with previous periods, 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 our 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 our Company as described in (a) “Part II, Item 1A. Risk Factors” below, (b) “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2012, (c) other risks referenced in our Securities and Exchange Commission filings or (d) other unanticipated risks. We disclaim any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Overview

Total sales for the third quarter of fiscal 2013 increased by 10% to $18.6 million compared with $16.9 million in the third quarter of last fiscal year. The increase in sales for the quarter was the result of higher sales volume in the medical segment. Medical sales rose 16% in the third quarter this year to $13.4 million compared with $11.6 million in the third quarter of fiscal 2012 as a result of higher volumes of our M.C. Healthcare beds and PressureGuard® therapeutic support surfaces. In the custom products segment, third quarter sales for fiscal 2013 decreased 2% to $5.2 million compared with the third quarter last year due to lower sales volume in our industrial product lines. See below for additional information on sales performance.

Net income for the third quarter of fiscal 2013 increased 64% to $1.2 million, or $0.41 per diluted share, compared with the third quarter of fiscal 2012 primarily because of the sales increase in the medical segment as described elsewhere in this report.

For the first nine months of fiscal 2013, net sales decreased 3% to $56.9 million compared with $58.4 million in the same period last fiscal year. The year-to-date sales decline was the result of lower sales volume in the custom products segment, where sales were down 13% to $20.6 million compared with $23.6 million in the same period last fiscal year.

Notwithstanding the decline in year-to-date sales, net income for the first nine months of fiscal 2013 increased by 3% to $3.8 million, or $1.28 per diluted share, compared with $3.7 million, or $1.26 per diluted share in the same period last fiscal year. The increase in net income was the result of a more profitable sales mix, as medical sales increased during the period while custom products sales decreased.

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Medical Sales – Third Quarter Fiscal 2013

Sales in the medical segment increased 16% in the third quarter of fiscal 2013 to $13.4 million compared with $11.6 million in the third quarter of fiscal 2012. Most of the increase in medical sales came from our therapeutic support surfaces, which rose 21% to $7.3 million compared with $6.0 million in the third quarter last year. Sales leaders within the therapeutic support surface product line for the third quarter included the PressureGuard Easy Air®, APM²® and Custom Care® products. The majority of the sales increase in our therapeutic support surface product line was due to a large order from a key customer in the long-term care market.

Sales of M.C. Healthcare beds and related products also contributed significantly to the third quarter growth in medical sales. M.C. Healthcare sales increased 41% during the third quarter to $3.3 million compared with $2.3 million in the third quarter last year. The M.C. Healthcare sales increase was the result of higher demand for our beds in the long-term care markets in both the U.S. and Canada.

Sales among our other medical product lines were mostly down in the third quarter this fiscal year compared with the same quarter last year. However, Selan® skin care sales increased by 8% during the quarter. Sales of seating products, mattress overlays and Risk Manager® bedside safety mats decreased by 3%, 8% and 14%, respectively, in the third quarter of fiscal 2013 compared with the third quarter of fiscal 2012. Patient positioner sales in the third quarter this fiscal year decreased by 27% compared with the third quarter last fiscal year due to business lost with one customer in January 2013 as a result of price competition.

Medical sales represented 72% of total company sales in the third quarter of fiscal 2013 compared with 69% in the third quarter of fiscal 2012.

Medical Sales – Year-to-Date Fiscal 2013

For the first nine months of fiscal 2013, total medical sales increased 4% to $36.3 million compared with $34.8 million in the first nine months of fiscal 2012. The majority of the year-to-date increase in medical sales came from our PressureGuard® and Geo-Mattress® lines of therapeutic support surfaces, which rose 11% to $18.4 million for the first nine months of fiscal 2013 compared with $16.6 million in the same period last year.

Sales of M.C. Healthcare products in the first nine months of fiscal 2013 increased 7% to $8.9 million compared with $8.3 million in the first nine months of last year. The year-to-date increase in M.C. Healthcare sales came from two additional months’ sales in fiscal 2013 compared with fiscal 2012 and strong third quarter sales growth as described above. M.C. Healthcare was acquired in December 2011.

Sales among our other medical product lines were generally down for the year-to-date period in fiscal 2013 compared with the same period in fiscal 2012. Sales of seating products, mattress overlays and Risk Manager® bedside safety mats decreased by 2%, 7% and 8%, respectively, in the first nine months of fiscal 2013 compared with the same period in fiscal 2012. Patient positioner sales for the year-to-date in fiscal 2013 decreased by 20% compared with the same period last fiscal year due to business lost with one customer in January 2013 as a result of price competition. However, Selan® skin care sales increased by 11% during the first nine months of fiscal 2013 due mostly to special purchases from a long-time customer.

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Custom Products Sales – Third Quarter Fiscal 2013

In the custom products segment, sales decreased 2% to $5.2 million in the third quarter of fiscal 2013 compared with $5.3 million in the third quarter of fiscal 2012. The custom products segment consists of two main product lines: consumer and industrial. Consumer sales were level at $4.4 million in the third quarters of fiscal years 2013 and 2012. Within the consumer product lines, retail sales were down slightly during the quarter, but those declines were offset by growth in Internet sales. All of our consumer products are now distributed through Hollander Home Fashions, which purchased the utility bedding retail business from Louisville Bedding Company, our previous distributor, effective May 24, 2013. Under the agreement, which expires in December 2015, Hollander replaced Louisville Bedding as the exclusive distributor for Span-America’s consumer foam products. The transition from Louisville Bedding to Hollander went smoothly, and we had minimal disruption in our third quarter consumer sales as a result of the acquisition.

Sales of industrial products decreased 14% to $793,000 in the third quarter of fiscal 2013 compared with $919,000 in the prior year’s third quarter. The industrial sales decline was due to lower volume to a customer in the water sports market and the loss of a customer who moved its manufacturing outside the U.S. in the third quarter last year. Those declines were partially offset by higher sales to customers in the automotive market.

Custom Products Sales – Year-to-Date Fiscal 2013

Custom products sales declined 13% to $20.6 million in the first nine months of fiscal 2013 compared with $23.6 million in the same period last year. The sales decline was due primarily to a 12% decrease in consumer bedding products attributable to a sales promotion that took place in the second quarter of last fiscal year that was not repeated this year. In addition, industrial sales declined 17% to $2.3 million from $2.7 million compared with the first nine months of fiscal 2012. The year-to-date decrease in industrial sales was due primarily to the loss of a customer who moved its manufacturing outside the U.S. in the third quarter last year, partially offset by higher sales to customers in the automotive market.

Gross Profit

Gross profit for the third quarter of fiscal 2013 increased 21% to $6.2 million compared with $5.1 million in the same period last year. Gross margin increased to 33.4% in this year’s third quarter compared with 30.4% in the same quarter last year. The gains in gross profit and margin for the quarter were due to higher sales volume in the medical segment in the third quarter this year compared with the third quarter last year.

For the year-to-date in fiscal 2013, gross profit increased 4% to $18.1 million compared with $17.4 million in the same period last fiscal year. This increase in gross profit was primarily the result of higher sales volume in the medical segment in the first nine months of fiscal 2013 compared with the same period last year.

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Our gross margin percentage for the first nine months of fiscal 2013 increased to 31.9% from 29.8% in the same period of fiscal 2012 for two reasons: a shift in the sales mix from the lower-margin custom products segment toward the higher-margin medical segment and a more profitable sales mix within our medical segment due to sales growth from our therapeutic support surfaces. Medical sales made up 64% of total sales in the first nine months of fiscal 2013 compared with 60% in the same period in fiscal 2012.

Selling, Research & Development and Administrative Expenses

Selling and marketing expenses increased 9% to $2.9 million during the third quarter of fiscal 2013 compared with $2.7 million during the third quarter of fiscal 2012 primarily as a result of higher commission costs and samples expense related to increased sales volume in the medical segment. For the first nine months of fiscal 2013, selling and marketing expenses increased 6% to $8.2 million compared with the same period last fiscal year for the same reasons described above for the third quarter.

Research and development expenses increased 11% to $311,000 for the third quarter of fiscal 2013 compared with the third quarter of fiscal 2012. For the year-to-date in fiscal 2013, research and development expenses increased 25% to $979,000 compared with the first nine months of last fiscal year. The increases for the third quarter and year-to-date were mainly the result of increased new-product development efforts in our medical segment.

General and administrative expenses increased 12% to $1.2 million in the third quarter of fiscal 2013 compared with the third quarter of fiscal 2012. The increase was caused primarily by higher costs for incentive compensation and bad debt expense in the third quarter this year. For the year-to-date in fiscal 2013, administrative expenses were flat at $3.3 million compared with the same period last year. The comparison of year-to-date administrative expense levels in fiscal 2013 and 2012 consisted of increases in amortization, bad debts and insurance costs in the year-to-date this year, offset by decreases in acquisition-related costs in the same period last year.

Operating Income

Operating income for the third quarter of fiscal 2013 increased 58% to $1.8 million compared with $1.1 million in the third quarter last fiscal year because of higher sales volume in the medical segment and a more profitable sales mix in the third quarter of this fiscal year. Operating income for the first nine months of fiscal 2013 increased 3% to $5.7 million compared with $5.5 million in the same period last fiscal year for the same reasons.

Non-Operating Income and Expenses

Net non-operating expense in the third quarter of fiscal 2013 decreased to $2,000 compared with $22,000 in the third quarter of fiscal 2012. The net expense decrease was the result of a decrease in foreign exchange loss compared with the third quarter of fiscal 2012. Net non-operating expense in the first nine months of fiscal 2013 decreased to $40,000 compared with $47,000 in the same period of fiscal 2012 for the same reason.

Net Income and Dividends

Net income for the third quarter of fiscal 2013 increased 64% to $1.2 million, or $0.41 per diluted share, compared with $743,000, or $0.25 per diluted share, in the third quarter last fiscal year. The increase in net income was the result of higher sales volume in the medical segment and a more profitable sales mix during the third quarter this fiscal year. Net income for the first nine months of fiscal 2013 increased 3% to $3.8 million, or $1.28 per diluted share, compared with $3.7 million, or $1.26 per diluted share, in the same period of last fiscal year for the same reasons.

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During the first nine months of fiscal 2013, we paid dividends of approximately $4.0 million, or 105% of net income. These payments consisted of a special cash dividend of $1.00 per share and three regular quarterly cash dividends of $0.125 per share. During the same period last fiscal year, we paid dividends of approximately $994,000, or 27% of net income, consisting of two quarterly dividends of $0.11 per share and one of $0.125 per share. As discussed below, the lending bank under our credit agreement waived any event of default under our credit agreement in connection with the $1.00 per share special dividend declared and paid during the first quarter of fiscal 2013.

The Board of Directors increased the company’s quarterly cash dividend by 12% to $0.14 per share on August 7, 2013. The dividend is payable September 4, 2013, to shareholders of record on August 20, 2013.

Outlook

We expect total company sales and earnings in the fourth quarter of fiscal 2013 to be similar to or slightly lower than they were in the fourth quarter of fiscal 2012 mainly due to anticipated sluggish demand for our M.C. Healthcare products in the medical segment and because fourth quarter earnings last fiscal year benefited from an unusual volume rebate program on foam purchases and a lower-than-usual effective tax rate that we do not expect to be repeated in the fourth quarter this year. In addition, we expect fourth quarter sales in the custom products segment this fiscal year to be lower than they were in the fourth quarter of fiscal 2012 because the fourth quarter last year included two seasonal promotions that are not expected to be repeated in the fourth quarter this year.

Looking farther forward to the first quarter of next fiscal year, we expect consumer bedding sales to be lower than they were in first quarter of fiscal 2013 because we do not expect to have a seasonal consumer products promotion in November of 2013 as we did in 2012. Our expectations for these consumer products promotions are unrelated to the previously reported sale of a portion of Louisville Bedding Company to Hollander Home Furnishings in May 2013.

The “Affordable Care Act” enacted in 2010 created new Internal Revenue Code provisions that impose a 2.3% excise tax on sales of certain “taxable medical devices.” The tax is to be paid by the manufacturer, producer or importer of these devices. Based on our analysis of the final regulations for the tax that became effective on January 1, 2013, we believe our medical products are exempt from the tax under the retail exemption provisions of the regulations. The retail exemption provision allows an exemption for medical devices of a type that can be purchased by the general public at retail for individual use if (1) the device is regularly available for purchase and use by individual consumers who are not medical professionals, and (2) the device’s design demonstrates that it is not primarily intended for use in a medical institution or office or by medical professionals. See Part II. Other Information, Item 1A. Risk Factors below for more information on the medical device tax.

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LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations during the first nine months of fiscal 2013 decreased to $5.4 million compared with $5.6 million in the first nine months of fiscal 2012. The decrease in operating cash flow was mainly the result of a larger increase in accounts receivable in the first nine months of fiscal 2013 compared with the same period in fiscal 2012. See below for more information about accounts receivable levels. The primary use of cash provided by operations during the first nine months of fiscal 2013 was for the payment of dividends of approximately $4.0 million and the purchase of manufacturing equipment of approximately $428,000.

Working capital increased by less than 1% to $14.6 million as of June 29, 2013 primarily because increases in cash and accounts receivable were mostly offset by a decrease in inventory during the first nine months of fiscal 2013. The current ratio at June 29, 2013 decreased slightly to 3.0 from 3.2 at fiscal year-end 2012 for the same reasons.

Accounts receivable, net of allowances, increased by $1.9 million, or 23%, to $10.1 million at the end of the third quarter of fiscal 2013 compared with $8.2 million at the end of fiscal 2012. The increase was the result of unusually high sales volume in June 2013, the last month of our third fiscal quarter, which was related to a large sale of medical products to a customer in the long-term care market. All of our accounts receivable are unsecured. However, certain receivables of M.C. Healthcare are partially insured under the terms of an insurance policy.

Inventories decreased by $2.8 million, or 30%, to $6.6 million at the end of the third quarter of fiscal 2013 compared with $9.4 million at fiscal year-end 2012. The reduction in inventory occurred mostly in the category of consumer finished goods and resulted from the special sales promotion that took place in November 2012. These promotional products were produced during August through early November 2012 and shipped in November 2012.

From the end of our 2012 fiscal year to the end of the third quarter of fiscal 2013:

● Prepaid expenses increased by $494,000, or 157%, to $809,000 primarily as a result of refundable taxes in Canada and advance deposits paid for certain raw material purchases;

● Net property and equipment decreased by $178,000, or 3%, to $5.2 million due mainly to the combination of depreciation expense of $558,000 and equipment purchases of $428,000;

● Net intangibles decreased by $532,000, or 13%, to $3.5 million primarily as a result of amortization expenses of $374,000 and to a lesser extent from foreign currency translation losses that result from fluctuations in the U.S.-Canadian currency conversion rates from the end of one fiscal period to the next;

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● Other assets increased by $227,000, or 9%, to $2.6 million as a result of increases in the cash value of corporate-owned life insurance and deposits on planned future purchases;

● Accounts payable increased by $380,000, or 11%, to $3.7 million primarily as the result of purchases related to a large order in the medical segment that was shipped in June 2013; and

● Accrued and sundry liabilities increased by $61,000, or 2%, to $3.4 million primarily due to income taxes and commissions payable.

At June 29, 2013, we had no amounts outstanding under our revolving credit agreement. The maximum principal amount we can borrow at any one time under our revolving credit agreement is $10 million with a maturity date of April 30, 2015. The credit agreement is unsecured and accrues interest at a variable rate equal to 30-day LIBOR plus a margin ranging from 85 to 165 basis points, depending on our leverage ratio (as defined in the credit agreement). During December 2012, the last time we borrowed under the credit agreement, the margin was 85 basis points. The interest rate, including the margin, in December 2012, was 1.0635%. Interest-only payments are required monthly. There is a 25 basis point annual fee on any unused availability above $5.0 million, payable quarterly. We have pledged to grant the lending bank a security interest in our accounts, instruments and chattel paper upon its request in the event of a default as defined in the credit agreement. Our obligations under the credit agreement are guaranteed by our subsidiary, Span Medical Products Canada Inc.

The credit agreement includes financial covenants relating to tangible net worth and leverage ratios, and restricts mergers and acquisitions, assets sales, indebtedness, liens and capital expenditures without prior written consent of or waiver by the lending bank. The credit agreement also restricts (without prior written consent or waiver) dividends and stock repurchases during any fiscal year to an aggregate amount of no more than 50% of the sum of (i) our income from continuing operations for that fiscal year plus (ii) the absolute value of any aggregate after-tax, non-cash and extraordinary losses for that fiscal year. As an exception to the restriction above, we may pay a regular quarterly dividend in an amount no greater than the previous quarter’s regular dividend so long as we remain in compliance with the financial covenants after giving effect to the payment of the dividend. Also, our new subsidiary is not restricted in its ability to pay dividends or make distributions to us. Violation of loan covenants could result in acceleration of the term of the credit agreement. The lending bank waived any event of default in connection with the $1.00 per share special dividend declared and paid during the first quarter of fiscal 2013. At June 29, 2013, we had no amounts outstanding under our revolving credit agreement.

In November 2007, we announced a program to repurchase up to 138,772 shares of our outstanding common stock. In February 2009, our Board of Directors expanded the repurchase program by 100,000 shares, bringing the total number of authorized shares to 238,772. We have repurchased 142,869 shares under this program since November 2007, and we are authorized to repurchase an additional 95,903 shares in the future. We did not repurchase any of our equity securities during the fiscal year-to-date period ended June 29, 2013. Our Board may suspend or discontinue the repurchase program at any time.

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We believe that funds on hand, funds generated from operations and funds available under our revolving credit facility are adequate to finance normal operations and planned capital expenditures during fiscal 2013 and for the foreseeable future.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

IMPACT OF INFLATION AND COST OF RAW MATERIALS

Based on current conditions in the markets for our primary raw materials, we do not expect inflation to be a significant factor for our operations during the fourth quarter of fiscal 2013. We last received price increases on certain of our foam raw materials effective April 1, 2013. The increase was due to a temporary reduction in the supply of a key chemical component used in the foam manufacturing process. These increases were partially rolled back in the third quarter of fiscal 2013 as the component chemical supplies returned to normal levels. See Item 3 “Quantitative and Qualitative Disclosures about Market Risk” below for more information on the cost of polyurethane foam.

FOREIGN CURRENCY EXCHANGE

Span Medical Products Canada Inc. (Span-Canada), operating under the name “M.C. Healthcare Products,” uses the Canadian dollar as its functional currency. We are subject to exchange rate fluctuations, which vary based on volume and currency market conditions. These exchange rate fluctuations will cause foreign exchange gains and losses, which could be material to our results of operations depending on currency market conditions and the timing and levels of our business activities in the U.S and Canada. For the first nine months of fiscal year 2013, our realized foreign currency exchange loss was $29,000 compared with a loss of $38,000 for the first nine months of fiscal 2012.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risk in four areas: commodity price risk, cash value of life insurance, our credit facility and foreign currency exchange. The cost of polyurethane foam, our primary raw material, is indirectly influenced by oil prices. However, other market factors also affect foam prices, including the available supply of component chemicals, demand for related products from domestic and international manufacturers, competition among domestic suppliers, our purchase volumes and regulatory requirements. Consequently, it is difficult for us to accurately predict the impact that future inflation and other factors might have on the cost of polyurethane foam, our largest-volume raw material. If the cost of polyurethane foam increased significantly, and if we were unable to offset the cost increase through sales price increases or other expense reductions, our earnings could be materially negatively affected. See the discussion above under “Impact of Inflation and Cost of Raw Materials” for more information.

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As of June 29, 2013, our other assets included $2.3 million in cash value of life insurance, which is subject to market risk related to equity pricing and interest rate changes. The cash value is generated from life insurance policies that are being used as the funding vehicle for a retirement program for Span-America’s founder and former chairman. The cash value is invested in a combination of fixed income life insurance contracts and a portfolio of mutual funds managed by an insurance company. The fixed income contracts are similar to fixed income bond funds and are therefore subject to interest rate and company risk. The mutual fund portfolios invest in common stocks and bonds in accordance with their individual investment objectives. These portfolios are exposed to stock market, company and interest rate risks similar to comparable mutual funds. We believe that substantial fluctuations in equity markets and interest rates and the resulting changes in cash value of life insurance would not have a material adverse effect on our financial position. During the nine months ended June 29, 2013, cash value of life insurance increased by 6%, creating non-cash income of approximately $124,000.

Our credit facility accrues interest at a variable rate equal to 30-day LIBOR plus a margin ranging from 85 to 165 basis points depending on our then-applicable leverage ratio (as defined in the credit agreement). During December 2012, the last time we borrowed under the credit agreement, the margin was 85 basis points. Interest is payable monthly. There is a 25 basis point annual unused commitment fee associated with the line of credit on any unused availability over $5.0 million. An increase in interest rates would have a negative impact on our financial condition and earnings to the extent that we have outstanding borrowings under our credit facility. The degree of impact would vary depending on the level of borrowings. We had no amounts outstanding under the revolver as of June 29, 2013. Assuming a constant level of debt of $1.0 million for an entire fiscal year, a 100 basis point increase in the interest rate on the outstanding loan balance would increase our interest expense by approximately $10,000 per year.

As a result of the M.C. Healthcare asset acquisition, we now own assets in Canada and manufacture and sell products in Canada in addition to the U.S. We are therefore subject to realized and unrealized gains or losses on foreign currency translation activities related to our operations. Foreign exchange gains or losses have not had a material effect on our results of operations since the M.C. Healthcare acquisition. We do not currently hedge our foreign exchange risks because the exchange rates between the U.S. and Canadian dollars have been relatively stable since the acquisition and because our foreign exchange transactions occur infrequently since our revenues and costs are incurred in both U.S. and Canadian dollars. Our foreign exchange risk could increase if the exchange rates between the U.S. and Canadian dollars became more volatile.

Most of our M.C. Healthcare operating costs and liabilities are denominated in Canadian dollars. Sales are denominated in the currency of the country in which they occur. Accordingly, material changes in the Canadian-U.S. dollar exchange rate may significantly impact our revenues and costs and the value of our assets and liabilities. The magnitude and direction of this impact primarily depends on our production and sales volume, the proportion of our production and sales that occur in Canada, the proportion of our financial liabilities denominated in Canadian dollars and the magnitude, direction and duration of changes in the Canadian-U.S. dollar exchange rate. Increases in the value of the Canadian dollar versus the U.S. dollar reduce our earnings, which are reported in U.S. dollar terms. Assets and liabilities are translated into U.S. dollars at the quarter-end exchange rate. Revenues and expenses are translated at weighted average exchange rates. Under the exchange rates and operating conditions that existed during the nine months ended June 29, 2013, for every 1% increase in the value of a Canadian dollar compared to a U.S. dollar, our operating income for the nine-month period would have been reduced by approximately $15,000. Based on the exchange rate in effect on June 29, 2013, for every 1% increase in the value of a Canadian dollar compared to a U.S. dollar our total assets would have increased by approximately $117,000, and our total liabilities would have increased by approximately $11,000 for a net change of approximately $106,000.

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ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of June 29, 2013, and, based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective as of June 29, 2013. There were no changes in the Company’s internal control over financial reporting during our fiscal quarter ended June 29, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

ITEM 1A.     RISK FACTORS

Our exclusive distribution agreement for consumer products was transferred 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. If the combined marketing and distribution efforts of Span-America and Hollander are not as effective as the previous combination of the efforts of Span-America and Louisville Bedding, there could be a material adverse effect on our sales and income, which in turn could have a material adverse effect on our financial condition. Louisville Bedding was the exclusive distributor of our consumer foam products from March 1999 through May 2013, when certain assets of their utility bedding business were sold to Hollander. Our distribution agreement with Louisville Bedding was assigned to Hollander on May 24, 2013. The agreement expires in December 2015. We expect to work with Hollander under the same general terms and conditions as we did with Louisville Bedding. Sales to Louisville Bedding under the agreement were approximately $26.2 million during our 2012 fiscal year and made up approximately 34% of our total sales. Hollander is larger and has greater resources than Louisville Bedding. We believe that the new relationship with Hollander creates opportunities to expand our consumer products sales and earnings. However, we can give no assurance that the combined efforts of Span-America and Hollander will be as successful as the previous combination of the efforts of Span-America and Louisville Bedding. If sales of our consumer products decline as a result of the new arrangement, our earnings and financial condition could be materially negatively affected.

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If some or all of our medical products were determined to be subject to the medical device excise tax imposed by the Affordable Care Act, there could be a material adverse effect on our net income. Beginning January 1, 2013, the Affordable Care Act imposes a 2.3% excise tax on sales of products defined as “medical devices” by the regulations of the U.S. Food & Drug Administration (the “FDA”) unless the products fit within certain exemptions enumerated in the Affordable Care Act. We believe that all of our medical products except for Selan® skin care products are “medical devices” within the meaning of the FDA regulations. We also believe that our medical products are exempt from the excise tax because our interpretation is that they fit within what is commonly referred to as the “retail exemption.” The retail exemption provision allows an exemption for medical devices of a type that can be purchased by the general public at retail for individual use if (1) the device is regularly available for purchase and use by individual consumers who are not medical professionals, and (2) the device’s design demonstrates that it is not primarily intended for use in a medical institution or office or by medical professionals. While we believe all of our medical products are exempt, the retail exemption is based on a facts-and-circumstances inquiry into numerous factors listed in the Act rather than a “bright line” standard. We are not aware of any IRS or court rulings interpreting these regulations, so we cannot be absolutely certain that all of our medical products are exempt. If some or all of our medical products were found to be medical devices subject to the excise tax, we could incur material tax expenses on our sales of medical devices which could have a material adverse effect on our earnings and financial condition. Our medical sales excluding Selan have totaled $24.5 million in the six-month period from January 2013 (when the tax became effective) through our third fiscal quarter ending in June 2013. If the excise tax were found to apply to all of our medical products (other than Selan products), our additional tax expense for this six-month period would be approximately $569,000, or approximately $1.1 million on an annualized basis. Of course, actual future sales levels and the amount of any applicable excise tax would vary.

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

We did not purchase any of our equity securities during the fiscal quarter ended June 29, 2013. In November 2007, our Board of Directors authorized the Company to repurchase up to 138,772 shares of our common stock. In February 2009, our Board expanded the repurchase program by 100,000 shares, bringing the total number of authorized shares to 238,772. We have repurchased 142,869 shares to date, and we may yet repurchase an additional 95,903 shares. Our Board may suspend or discontinue the repurchase program at any time.

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Our credit facility restricts dividends and stock repurchases. See the description of these restrictions under Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, which description is incorporated herein by reference.

ITEM 6. EXHIBITS

31.1 Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2 Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1 Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2 Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS** XBRL Instance

101.SCH** XBRL Taxonomy Extension Schema

101.CAL** XBRL Taxonomy Extension Calculation

101.DEF** XBRL Taxonomy Extension Definition

101.LAB** XBRL Taxonomy Extension Labels

101.PRE** XBRL Taxonomy Extension Presentation

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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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 thereunto duly authorized.

SPAN-AMERICA MEDICAL SYSTEMS, INC.

/s/ Richard C. Coggins

Richard C. Coggins

Chief Financial Officer

/s/ James D. Ferguson

James D. Ferguson

President and Chief Executive Officer

Date: August 13, 2013

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