A languid fitness club environment continued to hinder Cybex in the third quarter, and the exercise equipment manufacturer will focus on broadening its markets to compensate for declining health club orders.


Following up a second quarter that saw the company post a $2.1 million loss on a 16% drop in sales, Cybex saw third quarter year-over-year sales fall 18.9% from $35.8 million a year ago to $29.0 million this year. The company posted a net income of $81,000, or 0 cents per diluted share, as compared with a net income of $340,000, or 2 cents per diluted share, in the year-ago period.


By product segment, sales for the company’s cardio equipment fell 15% to $16.4 million while strength equipment plummeted 26% to $10.1 million from a year ago. Management said delayed purchases from health club had impacted sales results — particularly in the strength segment. The company’s “other” segment fell 16% to $2.5 million.


Regionally, international sales were down only 6% for the quarter while North America fell 24%. Gross margin for the quarter was 31.6%, down 80 basis points from 32.3% in the year-ago period.


Cybex posted a small operating income of $160,000, with SG&A expenses totaling $8.9 million for the quarter as compared to $10.6 million a year ago.


In a conference call with analysts, chairman and CEO John Aglialoro said that in the last ten years, he estimates the health club market has fallen from 80% to 85% of Cybex’s business to 50% or less. “…the health club market has a particular problem,” said Aglialoro, “With the advent of the 24/7 express [clubs] – great price, good locations, small footprint, a lot of flexibility – their growth is a real competitive challenge to the traditional health club industry.”


Aglialoro added that Cybex would look to capitalize on new opportunities to achieve margin goals, including opportunities with the military, governmental units, municipalities, universities and high schools. Aglialoro also said the company would look to the condominium market and new housing markets. “…we see the changing consumer base is something we need to respond to,” he said. “It’s not a shotgun effort any more – it’s really fine sales training and it’s a rifle approach to each given market.”