Flanders Announces 1997 Earnings of $5.8 Million, or $0.32 Per Share.

ST. PETERSBURG, Fla.--(BUSINESS WIRE)--March 26, 1998--Flanders Corp. (NASDAQ:FLDR), Thursday announced its results for the year ended Dec. 31, 1997.

Flanders reported record net earnings of $5.8 million, or $0.32 per share, an increase of 62% over $3.6 million earned in 1996, on record revenues of $134 million, up 84% from $70 million in 1996. The company indicated that the bulk of its revenue growth was due to acquisitions made in 1996.

"In 1997, we began serious implementation of our automation program, and completed the testing and verification of our new isolation environment technologies for pharmaceutical applications," said Robert Amerson, president and chief executive officer.

"During the year, we also established two new filter manufacturing plants, in Illinois and Nevada. We also acquired or developed new air filtration technologies, with the acquisitions of Enviro Spin-Technologies and Glass Fiber Industries Inc., and the establishment of our Indoor Air Quality group. We have also successfully completed the first phase of our vertical integration strategy."

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not reflect the potential impact of any mergers or acquisitions that may be completed after the date of this release.

-- Integration and Consolidation of Subsidiaries. The company has begun consolidating and centralizing the operations of its recently acquired subsidiaries to eliminate duplication in the following areas: Purchasing, production planning, shipping coordination, marketing, accounting, personnel management, risk management and benefit plan administration. The company believes this will have a beneficial impact upon its future operating results as these changes are phased in during the next year.

-- Declining Demand for Semiconductor Cleanrooms. The company experienced declining demand for its laminar-flow grade HEPA filters during 1997 due to a general decline in construction of new semiconductor manufacturing facilities. The company expects this decline in demand to continue through 1998.

-- Increased Awareness of Air Quality. The company believes that there is a growing concern by the public over the quality of the air they breathe. This is evident in many areas of society, from increased popular media concern over the high incidence of asthma in recent years, to concern over secondhand tobacco smoke in public areas. The company believes this could have a beneficial impact upon its business in two ways: The replacement by increasing numbers of consumers, of low-value "throw-away" residential filters with higher-value electrostatic and higher-efficiency filters; and by opening up a new market for "indoor air quality units," developed by Flanders for use in public places such as luxury hotels, commercial office buildings and casinos.

-- Usage of Containment Environments. During real-world evaluations during the past year, containment environments have proven to have a beneficial impact on pharmaceutical production yields and quality, suggesting that using these isolation environments in place of traditional cleanrooms would be cost-effective and beneficial.

-- Automation of Facilities. The company has developed, in-house, automated equipment and labor-saving devices which will decrease the cost of manufacturing its standard-grade filters. After a two-year real-world trial at one of its facilities, the company began converting all of its standard-grade filter production lines to use the new equipment. This conversion is currently on schedule, and is expected to have a significant beneficial impact on the company's gross margins, with benefits being realized gradually as the new equipment is phased in one production line at a time.

The above statements contained in this outlook section contain many forward-looking statements that involve a number of risks and uncertainties. Important factors to consider in evaluating such forward-looking statements include (i) the shortage of reliable market data regarding the air filtration market; (ii) changes in external competitive market factors or in the company's internal budgeting process which might impact trends in the company's results of operations; (iii) anticipated working capital or other cash requirements; (iv) changes in the company's business strategy or an inability to execute its strategy due to unanticipated changes in the market; (v) product obsolescence due to the development of new technologies, and (vi) various competitive factors that may prevent the company from competing successfully in the marketplace. In light of these risks and uncertainties, there can be no assurance that the events contemplated by the forward-looking statements contained in this Press Release will in fact occur.

Financial Highlights

Net Sales: Net sales for 1997 increased by $61,079,000, or 83.6%, to $134,135,000, from $73,056,000 for 1996. The increase in net sales was due to the acquisitions of Airseal, Precisionaire and CSC and establishment of new subsidiaries, which contributed approximately $60,750,000 of net sales. Excluding acquisitions and new subsidiaries, sales from the company's business at Dec. 31, 1996 were up approximately $329,000, or 0.5%. The company attributes this slowdown in growth to a cyclical downturn in demand for new semiconductor production facilities. The company has redirected underutilized capacity normally utilized in the manufacture of high-end filtration products for semiconductor cleanrooms to containment environments for the pharmaceutical and semiconductor industries and industrial-grade HEPA filtration products.

Gross Profit: Gross profit for 1997 increased by $13,864,000, or 71.2%, to $33,323,000, which represented 24.8% of net sales, from $19,459,000 in 1996, which represented 26.6% of net sales. The primary reasons for the decrease in gross margin percentage were (i) higher than normal costs associated with opening new facilities in Momence, Ill. and Henderson, Nev., which consisted primarily of labor inefficiencies associated with training new production employees; (ii) higher than normal freight costs associated with shipping products from facilities on the East Coast to meet demand from new customers while the new facilities were in their startup phase; and (iii) higher than normal costs associated with changing portions of the company's high-end production facilities to emphasize production of containment environments and industrial-grade HEPA filtration products instead of laminar-flow HEPA filters for the cleanrooms.

Operating Expenses: Operating expenses for 1997 increased by $10,696,000, or 79.5%, to $24,156,000, which represented 18.0% of net sales, from $13,460,000 in 1996, which represented 18.4% of net sales. The primary reasons for the overall increase in operating expenses were the Acquisitions and the establishment of Airseal West, which accounted for $10,785,000 of the increase. Operating expenses decreased as a percentage of net sales compared to 1996, primarily due to the impact of savings associated with the consolidation of operations of the various subsidiaries. Other factors affecting operating expenses included: an increase in sales commissions related to the increase in sales volume; additional travel and management expenses associated with establishing new facilities; and expenses incurred developing and marketing new containment and filtration products.

Net income: Net income for 1997 increased by $2,245,000, or 62.5%, to $5,839,000, or $0.32 per share ($0.27 diluted), from $3,594,000, or $0.27 per share ($0.21 diluted) for 1996. -0-

Selected Operations Data (000's Omitted)

                           1997           1996           1995
Net sales            $   134,135    $    73,056    $    38,636
Operating income           9,167          5,999          2,419
Net income (loss)    $     5,839    $     3,594    $     1,146


Selected Balance Sheet Data (000's Omitted)

                                  Dec. 31, 1997       Dec. 31, 1996
Working Capital                  $    55,180           $    22,570
Total assets                         145,881                86,518
Long-Term Debt and Debentures,
 including current portion            14,771                34,156
Total Shareholders' Equity       $   106,207           $    25,353

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For further information on Flanders and its products, visit its web site at http://www.flanderscorp.com/ or contact Steven Clark at 919/946-8081.

CONTACT: Flanders Corp., Washington, N.C.

Steven Clark, 919/946-8081