Fitness financials: Cybex 4Q sales up 15 percent, sets aside $46 million for lawsuit reserve

Cybex reported its fourth-quarter sales up 15 percent, but recorded a huge loss as it set aside $46 million in reserves and $12.7 million in tax provisions related to a product liability case it continues to fight in court.
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Cybex International, Inc. (NASDAQ: CYBI) reported strong fourth quarter 2010 sales, but recorded a huge loss as it set aside money relating to a product liability suit it is fighting in court.

The Medway, Mass.-based fitness equipment manufacturer reported fourth-quarter revenue, ended Dec. 31, 2010, of $39.9 million – up 15 percent from same period a year ago.

Despite the sales success, Cybex reported a staggering quarterly net loss $57.1 million, or a loss of $3.34 per diluted share, as it reserved $46 million for an unfavorable jury verdict, which it is appealing, and $12.7 million for a tax provision, also related to the case.

Excluding those charges, Cybex would have reported a net income of $1.5 million, or $0.09 per diluted share for the fourth quarter, company officials said.

In December 2010, a New York jury ordered Cybex to pay $65.9 million in damages to plaintiff Natalie M. Barnhard, who sued the company after one of its exercise machines fell on her in 2004. Cybex contended Barnhard wasn’t using the machine for its intended purpose (Click here to read Cybex's initial, official reaction in December 2010.)

“We will continue to vigorously defend ourselves with respect to the product liability verdict, which we believe was in error,” Cybex Chairman and CEO John Aglialoro said in statement released with the company’s earnings on March 31. “This process may result in a long and uncertain path, but we have faith that our judicial system can produce a reasonable resolution.”

For the full year 2010, Cybex reported revenue of $123 million – up 2 percent from 2009. The yearly net loss, including the above fourth-quarter charges, came in at $58.2 million, or a loss of $3.40 per diluted share, compared to a net loss of $2.4 million, or a loss of $0.14 per share in 2009.

Excluding the charges, Cybex’s 2010 net income would have been $400,000 or $0.03 per diluted share, company officials said.

Aglialoro said 2011 was off to a good start with first-quarter sales up more than 10 percent from the same period a year ago.

Stock prices closed March 31 at $0.85, up nearly 20 percent from a day earlier.

--Compiled by David Clucas

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