Fitness financials: Cybex ruled liable in $66 million jury verdict, plus Forzani Group, Costco, Iconix

A jury has ruled against Cybex Int’l (Nasdaq: CYBI) in a product liability lawsuit that left a New York woman paralyzed, with a jury awarding her nearly $66 million. Plus, Forzani Q3 profit up, Costco Q1 profit up 17 percent, and Iconix board member resigns.
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Cybex ruled liable in $66 million jury verdict

A jury has ruled against Cybex Int’l (Nasdaq: CYBI) in a product liability lawsuit that left a New York woman paralyzed, awarding her nearly $66 million after an eight-week jury trial -- an award that could bankrupty if it stands, an analyst that follows Cybex has said.

Cybex is responsible for $49.5 million of the judgment, it reported. The company, which has less than $4 million in insurance to cover the claim, said it will “vigorously pursue” an appeal.

In the case Barnhard v. Cybex International Inc., Natalie Barnhard was injured in 2004 when a 600-pound leg extension machine toppled where she worked, breaking her cervical vertebrae and other bones that compressed on her spinal cord.

Now a quadriplegic, Barnhard, who was 24 at the time of the accident, had worked at Amherst Orthopedic Physical Therapy as an assistant physical therapist.

Cybex said in a statement it is “extremely disappointed in this verdict, which it does not believe is supported by the facts or the law.”

“This piece of equipment has been in continuous operation for over 25 years in the same facility as Ms. Barnhard was injured, to the current date, with no incidents reported other than this one event,” Cybex CEO John Aglialoro said in a statement. “We strongly believe that Cybex was not negligent and is in no way responsible for this tragic accident.”

At $65.9 million, it is believed to be the largest personal injury award in Erie County history, legal insiders say.

The breakdown of the jury verdict includes $8 million for past pain and suffering, $151,690 in past lost earnings, $1.68 million for past medical expenses, $25 million for future pain and suffering, $1.79 million for future lost earnings, $28.56 million for future medical expenses and $792,435 for care of potential children.

Under the terms of the award, Cybex is responsible for 75 percent of the award while Amherst Orthopedics is responsible for 20 percent and Barnhard is responsible for the final 5 percent. Cybex International may collect 20 percent of its owed award from Amherst Orthopedics.

If the verdict stands, it “would likely bankrupt” Cybex, analyst Reed Anderson of D.A. Davidson & Co. said in a report. Cybex’s earnings wouldn’t cover its operating expenses and the estimated $45 million it would need to borrow for the judgment, he wrote.

Shares of Cybex shed $0.48 to close at $0.82 on Dec. 8 -- the day of the announcement -- after hitting a 52-week low of $0.67 earlier that day on a trading volume of 1.6 million. As of Dec. 10, prices closed at $0.79 on a volume of 49,790. It was also downgraded that same day by DA Davidson from “neutral” to “underperform.”

Forzani Q3 profit up

Forzani Group (TSX: FGL), Canada's largest sporting goods retailer, posted a 20 percent rise in quarterly net earnings, saying it was helped by stronger same-store sales and lower operating costs.

For the quarter ended Oct. 31, Forzani posted a profit of CDN $13.7 million (USD $13.5 million), or CDN 0.47 a share (USD $0.46), up from CDN $11.4 million (USD $11.2 million), or CDN 0.37 a share (USD $0.36), in the year-before quarter.

Revenue for the quarter rose 3.2 percent to CDN $393.2 million (USD $389.4 million).

Forzani, which operates more than 550 retail outlets under banners such as Sport Chek, Atmosphere and Fitness Source, said same-store sales rose 1.2 percent.

The company also said that overall same-store sales during the first five weeks of the fourth quarter were up by 15.9 percent.

While winter weather in Western Canada helped bolster sales of winter clothing and footwear, it said that momentum would slow in December and January.

During the quarter, the company reported that it decreased the number of corporate stores by four: closing four Nevada Bob's Golf stores, one Fitness Source store, and one Sport Mart store, while opening one Sport Chek and acquiring one Nevada Bob's Golf store from a franchisee.

Also, it declared a dividend of $0.075 per Class "A" share, payable on Jan. 31, 2011, to shareholders of record on Jan. 17, 2011.

(Conversion of Canadian dollars into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Dec. 9.)

Costco Q1 profit up 17 percent

Costco Wholesale Corp. said its first-quarter net income rose 17 percent -- even faster than revenue -- on higher gas prices and rising sales of high-profit items.

For the period ended Nov. 21, its net income jumped 17 percent to $312 million, or $0.71 per share, compared to $266 million, or $0.60 per share, a year earlier.

Revenue rose 11 percent to $19.24 billion.

Revenue at clubs open at least a year climbed 7 percent, with international results up 14 percent and U.S. results rising 5 percent.

Iconix board member resigns

In a filing with the SEC, Iconix Brand Group (Nasdaq: ICON) reported that Steven Mendelow resigned as a member of the company’s board of directors.

He has advised the company that his resignation is for personal reasons and not due to any disagreement or lack of confidence in the direction of the company. The filing said.

Fitness EM licenses the Danskin brand name for fitness equipment from Iconix's property, Triumph, formerly known as Danskin.

--Compiled by Wendy Geister

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