Cybex Reports Third Consecutive Quarter of Sales Growth

Cybex International reported second quarter 2011 net sales of $32.6 million, an 18 percent increase from the $27.7 million that the Medway, MA-based fitness equipment manufacturer reported in second quarter 2010, according to financials released Tuesday by the company.

This quarter was the third quarter of double-digit growth for Cybex. Net sales in fourth quarter 2010 were $39.9 million, a 15 percent increase from fourth quarter 2009 (with $34.8 million in sales). First quarter 2011 net sales were $31 million compared to $26.1 million in first quarter 2010, a 19 percent increase. For the six months ended June 25, 2011, net sales were $63.6 million compared to $53.8 million for 2010.

“The double-digit quarterly pace of revenue continues at Cybex,” Cybex Chairman and CEO John Aglialoro said in a conference call with analysts Tuesday. “Operating margins are good.”

Customers seem to like the continuing slate of new and current product offerings, Aglialoro continued, including the company’s new treadmill models, the 770T and 625T.

Despite the increase in net sales, the company did experience a larger net loss this quarter than it did in second quarter 2010. The $0.6 million net loss (compared to $0.4 million in second quarter 2010) was partly the result of litigation charges stemming from the Barnhard vs. Cybex International product liability case in which Cybex was held 75 percent liable for the $66 million judgment. The company had $1.6 million in litigation charges for the quarter (primarily related to the interest accruing at the annual rate of 9 percent on the judgment). Cybex has appealed that judgment and has received a stay of enforcement for now, preventing the plaintiff from collecting on the judgment until the appeal is heard in the appellate court in New York.

Cybex had to post $10 million in collateral as part of the appeal process in the Barnhard case, $8 million of which came from a revolver that Cybex recently was able to extend to July 2012, according to Art Hicks, COO of Cybex. The other $2 million came under the company’s insurance policy.

Aglialoro said he expects the Barnhard appeal to be heard this fall, and he does not anticipate the company agreeing to a settlement before then.

In the meantime, Aglialoro and Cybex are focused on growth, particularly in the international market, which Aglialoro said would grow in importance for the company as other countries increase their middle class. International sales currently comprise 28 percent to 30 percent of Cybex’s revenue, but Aglialoro estimated that would increase to “well over” 50 percent in a few years. In response, Cybex changed its marketing department to create a more global focus.

Sales outside of North America for the quarter accounted for 34 percent, compared to 32 percent of sales for the year, Hicks said. Sales outside of North America were up 31 percent for the quarter while North American sales for the quarter were up 12 percent.

Cardio equipment sales increased 16 percent, strength increased 15 percent and other (mostly freight and parts) increased 35 percent.

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