Cybex Sales and Income Down in Second Quarter

MEDWAY, MA -- Cybex International Inc.’s second quarter net sales and net income were down in the second quarter compared to the same period last year. Net sales were $33.1 million, 4.6 percent lower than the $34.7 million for the corresponding 2007 period. Net income was $128,000 compared to $1.1 million for the corresponding 2007 period.

“At this moment, serious issues of credit, debt levels, consumer spending attitudes, and commodity prices are affecting the global economy, the U.S. economy, our fitness industry and, certainly, Cybex,” John Aglialoro, chairman and CEO of the company said in a call with analysts after the financials were released last month. “For now, I'll restate what was reported at this meeting at the last quarter in April, and that is that the orders dropped suddenly at the end of March, affecting second quarter results.”

However, for the six months ended June 28, 2008, net sales increased to $72.9 million compared to $69.4 million for 2007. Net income, however, was still down for the six months, coming in at $1.4 million compared to net income of $2.2 million for 2007.

Aglialoro noted that the company’s first quarter had double-digit revenue gains and solid earnings. So far in the third quarter, the company has had an increase in orders.

“Although I can't predict the third quarter at this point yet, we have an excellent product map, a good balance sheet, and favorable indication for the industry—and Cybex at large—into the future,” Aglialoro said. “The culture change, I believe, is authentic: people are exercising more, health clubs are opening more and more because of the benefits of exercise.”

In the second quarter, cardiovascular equipment sales were down about 8 percent to $17,320,000, Art Hicks, president and COO of Cybex, said in a conference call with analysts last month after the release of the financials. The decrease in cardio equipment was generally due to the sale of Arc Trainers being down almost 17 percent in the quarter. The company will introduce the Arc 2 later this year, which Hicks said should reinvigorate that line.

“Treadmills were up a little bit in the quarter, mostly the effect of the new 750T, which seems to be well received in the marketplace,” Hicks said.

Strength equipment sales were down 4 percent to $12.8 million. The company’s new VR1 was up in the quarter, but most other strength lines were down, Hicks said, adding that no single element drove down sales during the quarter.

The other sales categories, including brake parts and miscellaneous, were up 16 percent at $3.3 million, he said. North America sales were down just under 5 percent, and international sales were down 4 percent.

Selling, general, and administrative costs were down 3 percent at $265,000 in the quarter, Hicks added.

Aglialoro said, “We remain confident that our strategy of emphasizing new products and expanding markets, combined with a continued focus on cost savings and manufacturing efficiencies, will promote both increased long-term sales and earnings growth.”

He noted that the company began preparing for the possible downturn in the fall of 2007.

“We upped prices pretty well at the end of 2007 with the idea that we might need to really start doing some price promotions or be prepared to take less margins,” he said, adding that he doesn’t foresee price increases now. “I think we’re priced attractively, and if this upturn in orders continues throughout the industry, I hope—because what affects the industry affects Cybex—I think we’ll be in pretty good shape.”

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