Cybex International, Inc.s top-line growth in the third quarter was helped by high single-digit growth in the cardio end of the business, but double-digit growth in strength equipment pushed overall sales higher for the period.
Total sales improved 9.2% to $32.6 million versus $29.8 million, but a 320 basis point decline in gross margin to 32.2% of sales and a 450 basis point increase in SG&A expenses to 34.8% of sales kept profits flat. Charges in the year-ago period resulted in a reported 806% increase in net income to $4.6 million, or 25 cents per diluted share.
Cardio equipment sales grew 8% to $19.2 million, while Strength Equipment sales rose 13% to $13.6 million; and Other revenues (freight and parts) increased 4% to $3 million. North America revenues rose 11% to $25.5 million and international revenues increased 7% to $10.3 million.
Cardio equipment sales were driven mostly by treadmills, which offset a 1% decline in commercial Arc sales and a $388,000 decline from the home Arc. Strength equipment sales were driven by the lower price point lines, including the VR1 resistance line.
Excluding year-ago charges related to the relocation of its Owatonna, MN facility, gross margins declined 160 basis points as improved warranty and manufacturing efficiencies was offset by increased steel and overhead costs related to its new facility, freight costs, and product mix.
SG&A narrowed 190 basis points, excluding about $1 million in year-ago charges related to the facility relocation. Excluding a tax credit and special charges related to the facility relocation, profits were essentially flat in the latest period.
On a conference call, John Aglialoro, Cybex’s CEO, said predicting revenues remained difficult, but that he expects new product introductions to stimulate sales. New products for Q408 include the next generation Arc, a new home Arc, new commercial bikes, and expanded video display products.
