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  • Crisis investing - CYBEX International, Inc. - CYBI
    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.
    Dec 13 9:23 PM | Link | 3 Comments
  • It Has Been A Very Good Year!
    A job change in 2003 gave me the opportunity to pull all the funds I had in my previous employer's 401k plan out and move them into a self-directed Rollover IR Account.  I've always hated being forced to choose between poor performing mutual funds.  I like to do my own thing.  The chart below graphs the performance of the account from its inception on July 11th, 2003 thru close of business today, May 3rd, 2010.  The fact that this account has never had "non-organic" funding added or subtracted since the initial deposit was made in 2003 makes the numbers much more meaningful.  The colume on the left lists every security ever traded in this account.  Total dividends collected amount to $477.05.  Everything else is pure capital appreciation.

    Rollover IRA Lifetime Performance

    Disclosure: This account is currently long ARII and CYBI. I am at 82% cash.
    Tags: Performance
    May 03 10:01 PM | Link | 1 Comment
  • New Solar Power Business Model (Feel free to steal)
    I've been thinking about a new business model involving
    residential solar power generation which would serve as a legitimate use for CDO's.

    The plan would involve outfitting single residence homes (or any power consuming building for that matter) with solar panels.  The twist is as follows. Instead of the homeowner paying for the cost of the panels and installation in the traditional manner, the homeowner would sign a contract placing a lien against their home (similar to a 2nd mortgage or equity line of credit) equal to the value of the system. Part of the contract would be that the homeowner would agree to continue to pay his current per KWH rate for any electricity produced by the system for some to be determined period of time (say 20 years for instance). A financial instrument (similar to a bond or annuity) would then be created and sold in the financial markets (like mortgages are today) with the cashflow derived from the sale of electricity to the homeowner used to pay the bondholder.

    The profit from the business model described above would come from the difference between the cost to install/maintain a system and the amount the financial instrument could be sold for based on the cash flow generated. The key would be to lobby state legislatures for credits/tax breaks, negotiate with utility companies for partial payment of cost avoidance savings, and to utilize economies of scale with regard to the purchase of solar panels and related equipment from manufacturers in order to bring the cost of the system down.

    The benefit to the homeowner would be that he would be guaranteed a fixed electricity cost for XX years. After that time the system would belong to the homeowner and the lien would be removed from the mortgage.


    No stocks mentioned

    Disclosure: No stocks mentioned.
    May 02 6:26 PM | Link | Comment!
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