Despite battling a $66 million judgment against it for most of 2011, Cybex International, Medway, MA, ended the year with a 14 percent increase in sales, the company announced. Net sales improved from $123 million in 2010 to $140.1 million in 2011.
“We are delighted that we were able to continue in the face of a major headwind to put new and innovative products out in the marketplace,” John Aglialoro, Cybex CEO said in a call with analysts on Wednesday. “We expect an improving revenue picture and performance going forward. With these handsome results, there’s no reason we can’t continue in this vein.”
The 2011 net income for Cybex also increased to $34.3 million from a net loss of $58.2 million in 2010.
For fourth quarter 2011, Cybex reported net sales of $43.1 million compared to $39.9 million in fourth quarter 2010, an 8 percent increase. Net income for the quarter was $34.7 million compared to a net loss of $57.1 million in fourth quarter 2010.
For fourth quarter 2011, cardio sales increased by 1 percent, strength increased by 16 percent and other sales were up by 23 percent.
Cybex’s new 770T treadmill has been outselling its 625 treadmill, which is a little less expensive, Art Hicks, president and COO, said in the call. He added that the higher sales for the 770T means the features built into the product are worth the extra cost to the customers. Cybex will phase out the 750 Arc Trainer and replace it with two models that have upper body and lower body motion, he said.
International sales were up 20 percent in the fourth quarter while North American sales were up 3 percent. Thirty percent of Cybex’s sales are international, Aglialoro said, but he expected the company to be up to 50 percent in international sales in the future.
Aglialoro credited the good financial performance despite the lawsuit to a good management team, led by Hicks, who made strides in marketing and product development.
Earlier this month, Cybex reached a $19.5 million settlement in the Barnhard vs. Cybex International product liability lawsuit in which a jury had found Cybex 75 percent responsible for a $66 million judgment. The lawsuit stemmed from an incident in which a physical therapist assistant, Natalie Barnhard, pulled a Cybex leg extension machine over on herself in 2004 while stretching on it as she worked with a client at Amherst Orthopedic Physical Therapy, Buffalo, NY. The accident caused Barnhard to become a quadriplegic. An appeals court had reduced the $66 million judgment to $44 million, which Cybex was appealing. Barnhard ultimately settled for $26 million, $19.5 million of which is payable by Cybex. Cybex’s insurance company will pay Barnhard an additional $2 million.
Cybex will pay Barnhard $18.5 million in a lump sum using a combination of cash and loans from its bank, Hicks said. Cybex will have a note of about $9 million, which Hicks expects the company to pay back over 15 years, but final details are still being worked out.
Cybex also will pay Barnhard $1 million as a legal note over seven years at $144,000 per year. The payout is in exchange for consulting services that Cybex has asked Barnhard to provide related to the disabled market, Aglialoro says.
“It was important in the settlement for Natalie to continue with something that she loves,” Aglialoro said, adding that details of her role have yet to be worked out.
Currently, about 1 percent to 2 percent of Cybex’s sales are in the disabled market, Aglialoro said, but with this new venture, he expects that to increase.
“I am very positive and open about having her involved as a spokesperson, for the increased revenue and participation that Cybex is going to have in that disabled market,” he said. “It is minor sales now, but we were a leader and one of the first to provide total access in the UK. These accidents happen worldwide. It’s a great market opportunity and an opportunity for Natalie. It’s a good thing for Cybex in the long run that we come to grips with the reality that occurred and work with her and have it be a win-win.”
The settlement and the better-than-expected financials helped Cybex continue to trade at more than $1 per share, where it has been trading since the announcement of the settlement on Feb. 6. Cybex’s stock must trade at more than $1 for 10 consecutive trading days in order to remain listed on the NASDAQ Stock Market. It closed today at $2.35 per share.
Cybex also must have a minimum stockholders’ equity of $10 million and a market value of publicly held shares of $5 million, both of which Aglialoro said would happen now that the lawsuit is settled.