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Cybex Reports Revenue Increase in Fourth Quarter

MEDWAY, MA -- Cybex International Inc. reported a net sales increase of 16 percent for the fourth quarter of 2007, John Aglialoro, chairman and CEO of Cybex, announced in a conference call with analysts yesterday.

Net sales for the fourth quarter were $44.5 million compared to $38.2 million for the same period in 2006. This increase was driven by strong sales of both cardio and strength products and continued growth in the commercial equipment market, he said. The company reported net income for the fourth quarter of $3 million compared to $2.8 million in the fourth quarter of 2006.

The Medway, MA-based company’s year-end results also showed increases. For 2007, the company’s net sales increased by 15 percent to $146.5 million compared to $126.9 million for 2006. Net income for 2007 was $9.8 million compared to $20.1 million for 2006. The 2007 results include the third quarter reduction in the tax valuation reserve, which increased net income by $5.2 million. The 2006 results include a second quarter reduction in the tax valuation reserve, which increased 2006 net income by $14.4 million.

Aglialoro said the company’s commercial business continues to increase despite the uncertainty in the economy.

“The economic environment is probably unsettling to all of us,” he said in the call. “Our industry is no exception. We have seen no major affect of that. We’ve had spotty sales decreases here and there, but we are still sticking to double-digit revenue as our goal. If we hit that, we’ve stated that each year our earnings would be commensurate with that.”

When asked about the overall health of the commercial fitness market, Aglialoro said, “Overall, the industry continues to grow. It’s a phenomenon of the overall lifestyle changes that have taken place.”

Aglialoro said that belonging to a health club is not just about muscle building, weight loss and looking good, but it’s now become an integral way of living for many people. For that reason, a recession or downturn in the economy, which he thinks would be modest to moderate, would not affect the commercial fitness market, he said.

“People may take less vacation time, but I get the sense that club membership is put in the must-have, must-do category,” he said, adding that he sees continued growth with the strategy of customization of equipment.

Aglialoro said that the company would not outsource production as much in the future. Instead, he indicated a preference for keeping tighter control on quality of production within the company’s own facilities. That, however, would probably lead to Cybex products selling at higher price points, he said.

“Our pricing will probably be higher, but we will get what the customer wants,” he said.

Pricing was an issue with the company’s commercial bike, the Cyclone, he said. The bike had a lot of options built into it, which put it at a higher price point, but many club owners wanted a bike with fewer options and a lower price. For that reason, Cybex will offer two versions of the Cyclone—one at a higher price with more options and the other at a lower price with fewer options.

During the company’s third quarter 2007 call with investors, Aglialoro had noted a backlog of 12 weeks at the company’s new production plant. In this call, Aglialoro said the backlog is now just 6 weeks, which is more typical in the industry.

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