Cybex International, Inc. develops, manufactures, and markets strength and cardiovascular fitness equipment for the commercial and consumer markets.
On Wednesday December 8, 2010, the company issued a press release informing investors that a $66,000,000 jury verdict has been rendered against CYBEX in the product liability litigation lawsuit, Barnhard v. Cybex International, Inc.
The plaintiff in Barnhard was rendered a quadriplegic after she pulled a CYBEX weight machine over on herself. CYBEX Chairman and CEO John Aglialoro stated: “..the plaintiff pulled over on herself a piece of CYBEX equipment produced in 1983. The particular piece of equipment has been used over a million times with no other similar incident and is still being used by the same facility in the same place today."
"The piece of equipment in question is a CYBEX leg extension that weighs a little over 600 lbs. It has a seat and is used by sitting on the seat and pushing the legs to strengthen them. Used in the manner intended, it is physically impossible to tip over – the plaintiff clearly understood how to use a leg extension as she was an employee in the facility where the accident occurred. This is not a design flaw – it is a terribly unfortunate result of plaintiff’s decision to use the leg extension in a manner which is still not clear and which had the disastrous result for which all of us feel great sympathy. The fact remains that this was not faulty equipment and not the responsibility of CYBEX. It is difficult to understand the jury’s decision regarding the amount of the verdict even if CYBEX were in some way responsible for the accident – which we are not."
"We strongly believe that CYBEX was not negligent and is in no way responsible for this tragic accident. We will vigorously pursue all avenues to attain a reversal of this verdict.”
CYBI, which was already trading at roughly 70% of tangible book value prior to the news, saw its share price drop from around $1.30 to today's close of $0.72. Current valuation is around 35% of tangible book value.
Only $4 million or so of CYBI's portion of the plantiff's award (75%) is covered by insurance. Should the jury's award stand, the company will likely be forced into bankruptcy or liquidation. Should the award be overturned, or significantly reduced, risk taking shareholders will likely see a sizable percentage rise in share price.
Disclosure: I am long CYBI.