Cybex International, Inc. reported sales for the first quarter increased 18.7 percent to $31.0 million compared to $26.1 million in the year-ago quarter. The company swung to a net profit of $379,000, or 2 cents per share, in the first quarter, compared to a net loss of $753,000, or 4 cents per share, in the year-ago period.
The 2011 results include a $356,000 charge related to a product liability judgment.
Cybex reported that a judgment has been entered with respect to the December 2010 jury verdict in the product liability litigation, Barnhard v. Cybex International, Inc., filed by a woman who was severely injured when a Cybex weight machine fell on her. Company Chairman and CEO John Aglialoro issued a statement shortly following the ruling, calling the ruling an “injustice” and “another example of a tort system run amok.” Nonetheless, Cybex was forced to absorb a large amount of the damages as insurance coverage only accounted for about $4 million.
As previously reported, the company recorded as of December 31, 2010 a $62,696,000 litigation reserve as a current liability pertaining to the Barnhard jury verdict and a corresponding litigation related receivable for $15,904,000, representing the amount recoverable from the co-defendant in the matter and the estimated amount recoverable under the company’s insurance policies. The entry of the judgment has resulted in a first quarter 2011 addition of $380,000 to the litigation reserve and $24,000 to the related receivable. Interest at the annual rate of 9% will accrue from the judgment date.
The company believes that it was not at fault for the accident that is the basis of the Barnhard suit and accordingly that this case was wrongly decided as to liability, and further that the amount of damages awarded by the jury was grossly overstated. The company will continue to pursue all avenues to attain a reversal or substantial reduction of this judgment.
