Cybex has settled what previously was a $66 million product liability suit verdict against it, reducing the amount to $19.5 million, which most likely will keep the company afloat, officials said.
The Medway, Mass. fitness equipment manufacturer faced possible delisting from the Nasdaq Stock Market due to its failure to maintain $10 million in stockholders’ equity and a minimum stock price of $1 per share, as uncertainties remained surrounding the suit.
Cybex shares (NYSE:CYBI) soared more 100 percent to more than $1 per share, the morning of Feb. 6, following the settlement announcement.
“Cybex is confident that, once the settlement is reflected in the company’s financial statements, its stockholders’ equity will exceed the $10 million minimum required by Nasdaq,” officials said in a statement. “As we move past this lawsuit, Cybex remains a healthy business and a leader in the fitness industry. We are confident of our future as we move forward with our Cybex team.”
Officials and investors are upbeat about the $19.5 million settlement’s impact because the company previously had set aside $46 million, plus $12.7 million in tax provisions, related to the case, a year ago.
In December 2010, a New York Supreme Court case ruled Cybex responsible for an accident and major injury in which Natalie Barnhard allegedly pulled a Cybex weight machine over on herself in 2004 at Amherst Orthopedic Physical Therapy in New York, where she was employed. Cybex officials maintained that Barnhard improperly used the machine and the company was not at fault.
The jury initially awarded Barnhard $66 million, which was later reduced to $44 million by a New York appeals court in November 2011.
The latest agreement will have Cybex pay $18.5 million upon closing the settlement, expected within 30 days, with the remaining $1 million paid over the course of seven years. The company will be released of all further liability with respect to the litigation, which will be dismissed with prejudice.
Cybex officials expect to report the company’s fourth-quarter 2011 results Feb. 16, 2012.