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Cybex Looks on the Bright Side after Q3 Earnings Report

MEDWAY, MA -- CEO John Aglialoro is focusing on some good news at Cybex, despite the company's third quarter $15,000 loss, which he says was mostly due to the company increasing spending on marketing, sales and new products.

For starters, the company had a net sales increase of $0.2 million in the quarter, putting it at $29.2 million in sales compared to $29 million in third quarter 2009, according to third quarter 2010 financials.

Even though international sales were down 5 percent, North American sales increased 4 percent in the quarter.

Strength sales were up 1 percent in the quarter to $10.2 million.

Although cardio sales were down 3 percent to $15.9 million compared to the same quarter last year, Arc Trainer sales were up slightly, comprising $7 million of the company's cardio sales.

“The trend seems to be that clubs are being forced to make replacements for equipment for their clubs,” Aglialoro said in a conference call with analysts upon release of the financials last month. “That's a welcome sign.”

And even though funding continues to be difficult for small club operators, Aglialoro says he sees some companies beginning to again finance these small operators.

On top of these positives, Cybex recently partnered with Colarossi Consulting and Management and Fabiano Designs to launch Hotel Cybex, a customizable, high-end, pre-packaged fitness option created for the full-service and luxury hotel and hospitality markets.

The facilities can be customized for various hotel brands with plans, specifications, material selection, equipment, AV systems, millwork, flooring, lighting, decorative glass, hardware and wall coverings. The program features high-end design elements, such as green technologies, clear entry and smart multi-use circulation space, abundant natural light, certified bamboo and other woods, natural fibers, low VOC paints and construction products to reduce airborne pollutants.

The clubs, scalable from 500 square feet and up, include Cybex fitness equipment, on-demand video training sessions available to each guest on monitors in the hotel fitness center or in-room TVs, and studio space for body movement, yoga and other classes.

The greater move into the hotel market corresponds with Cybex's focus on markets beyond health clubs. Aglialoro had announced previously that the company would focus more on the military, university, fire and police markets.

“Those are better margins,” he said about the other markets. “They are longer sales, but they work to our advantage. In doing so, we see better gross margins. Some of that is disciplined pricing, but I also think it's the result of our continuing concentration on our website, marketing activities, advertising, public relations and setting a tone for Cybex to differentiate.”

He also noted that the company's focus on safety with its Cybex Institute has meant more people seeking out Cybex equipment for purchase.

“It's still a slugfest, but I see clarity where a year or two ago we all know where we were in the general economy globally, in the U.S. market and certainly for Cybex,” Aglialoro said.

Art Hicks, Cybex COO, said in the call that the company's liquidity is adequate or better. Cash on hand is at $3.9 million, an increase of $2.7 million from September 2009. Debt continues to decrease, dropping from $18.8 million in September 2009 to $16.2 million in September 2010, he said.

Part of the company's expense control has been reducing inventory on hand, something Hicks and Aglialoro indicated the company would continue to do.

“Right now, we can build as we need, spend the cash as we need to,” Aglialoro said. “Some of our competitors have to get a boatload in and have to build up inventory. We're fortunate in that we make everything and we can build to suit.”

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