Reports by Cybex International, Medway, MA, of growth in fourth quarter 2010, year 2010 and first quarter 2011 were a bit subdued due to news of other troubles the company faces.
Chief among those troubles is a $66 million product liability lawsuit judgment for which Cybex is 75 percent liable if its appeal for a reduction of the judgment is not heard. The Barnhard v. Cybex International case involved a piece of Cybex equipment that a woman, Natalie Barnhard, allegedly pulled over on herself. The incident rendered her a quadriplegic. As of press time, Cybex had not yet filed its appeal because it could not secure a bond, which is required to file an appeal. The bond would typically be in the amount of the judgment and would prevent the plaintiff from collecting on the judgment until after the appeal is heard.
Early last month, when Cybex held its financial call with analysts to report its fourth quarter 2010 and year 2010 financials, John Aglialoro, chairman and CEO of Cybex, stated that the company was working with banks to secure the bond. However, upon release of its first quarter 2011 financials late last month, Cybex noted that it was unable to secure those bonds.
Cybex also must come up with a plan to prevent delisting on the NASDAQ Stock Market, where its shares are traded. On April 5, Cybex received a notice from NASDAQ that its shareholder equity is at negative $15 million—well below the minimum requirement of $10 million. The company has until May 20 to submit a plan to NASDAQ for how it will regain compliance. If the NASDAQ rejects the plan, Cybex can appeal to a NASDAQ hearing panel.
This is the second time NASDAQ has threatened to delist Cybex. In late January, NASDAQ notified the company that its stock price had been below $1 per share for 30 consecutive days, which put it at risk for delisting. Cybex had 180 days to improve its stock price. After the company’s release of its fourth quarter 2010 and year-end 2010 financials, which showed improved revenues despite the product liability judgment, its stock began to rise, finally reaching a close of $1 on April 6. As of press time, Cybex’s stock price had remained above $1, hitting a high of $1.27 on April 15.
Despite the problems, Cybex has had an improvement in sales during the last two quarters compared to the same periods a year ago. Net sales for fourth quarter 2010 were $39.9 million compared to $34.8 million for the corresponding 2009 period, a 15 percent increase. The company’s net loss of $57.1 million in the fourth quarter included a $46 million pre-tax charge to reserve for the jury verdict in the Barnhard v. Cybex International case, and a $12.7 million incremental tax provision, also ultimately caused by the litigation charge.
Net income for the quarter excluding these charges would have been $1.5 million.
First quarter 2011 net sales were $31 million compared to $26.1 million for first quarter 2010. The company had a net profit in the first quarter of $0.4 million compared to a net loss of $0.8 million in first quarter 2010.