As Cybex International celebrates higher revenue in first quarter 2011, the company awaits word on whether banks will put up money to cover a bond the company needs to stay the execution of its liability suit payment before its appeal can be filed in appellate court later this month.
John Aglialoro, Cybex CEO, said yesterday in a conference call that the Medway, MA-based fitness equipment manufacturer had first quarter 2011 revenue that was 10 percent higher than the same period last year. First quarter 2010 net sales were $31 million compared to $26.12 million a year ago. The purpose of the call was to discuss fourth quarter 2010 and year-end 2010 financials, but because the call came almost a month later than normal, Aglialoro was able to share a sneak peek at first quarter numbers.
Cybex also had higher fourth quarter 2010 and year-end 2010 revenue compared to the same periods last year, but the numbers were affected by a product liability suit judgment of $66 million in which Cybex was found 75 percent liable.
Cybex had vowed to appeal the December judgment in a case where a 25-year-old piece of Cybex equipment was pulled over on a woman, rendering her a quadriplegic. In January, the trial court denied Cybex’s post-trial motions for a new trial or reduction of the judgment. Cybex must now appeal to the appellate court, which it expects to do within the next 30 days.
“I believe it is outrageous litigation that the government has allowed to happen to Cybex,” Aglialoro said during the call. “It’s an unacceptable reality that has occurred. We must deal with it. We are close to getting this into the appellate courts where we think a more rational outcome will occur.”
Art Hicks, COO, said management is working with banks to secure a bond. A bond prevents the plaintiff from collecting on the $66 million judgment during the appeal process.
The appellate court must determine the amount of the bond, Hicks says, adding that it could be anywhere from 0 percent to 100 percent of the judgment.
“If they demand 100 percent, we don’t have 100 percent, so we are coming up with a proposal that we think is reasonable,” Hicks says. “The lawyers tell us it’s likely we’ll get the court to agree to a bond that we can post.”
James Moss, a lawyer and editor of recreation-law.com, says that the bond amount is often the amount of the judgment. Moss says that 97 percent of all cases such as this settle before trial. Because the plaintiff received such a big reward, however, he doubts a settlement will occur.
Hicks is more optimistic, saying, “These things either settle or get thrown out, hopefully. I wouldn’t be surprised by either result.”
Hicks estimated a resolution might take six to 12 months, with legal fees running about $100,000 per quarter.
“We are going to win this thing,” Aglialoro said. He also was positive about future revenues, noting an upswing in fitness equipment buying that he expects to continue.
“Visibility has substantially improved,” Aglialoro said. “We see a tone there where people are buying and getting their clubs redone and expanding to a certain degree.”