Span-America Medical Systems Inc.'s founder and former CEO Donald Spann died Jan. 6.
The company is the beneficiary of three life insurance policies on Spann that were put in place from 1981 through 1993 to help fund the company's payment obligations under its retirement arrangement with Spann.
Span-America expects to receive life insurance proceeds of about $3.3 million in cash due to Spann's death. It will remove the associated cash value of the life insurance policies of about $2.6 million from its balance sheet.
The company also recognized a liability of about $380,000, which is the future retirement payment to be made to Spann's wife, as of Dec. 31, 2016.
The difference in the total life insurance proceeds and the total cash values of the policies is about $700,000 and will be recorded as non-operating income in the second quarter of fiscal 2017.