<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
____________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended 3/28/98.
-------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ______ to ______.
Commission file number 0-4538
----------------------------------------------------------
CYBEX International, Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-1731581
- -------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Trotter Drive, Medway, Massachusetts 02053
- --------------------------------------- ------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (508) 533-4300
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
On April 30, 1998, the Registrant had outstanding 8,689,180 shares of Common
Stock, par value $.10 per share, which is the registrant's only class of common
stock.
<PAGE>
CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited) --
Three months ended March 28, 1998 and March 31, 1997 3
Consolidated Balance Sheets -- March 28, 1998 (unaudited)
and December 31, 1997 4
Consolidated Statements of Cash Flows (unaudited) --
Three months ended March 28, 1998 and March 31, 1997 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and AnalYsis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
MARCH 28, MARCH 31, 1997
1998 HISTORICAL(1) PRO FORMA (2)
--------- ------------- -------------
<S> <C> <C> <C>
Net sales $28,637 $15,541 $32,440
Cost of sales 16,572 8,965 18,626
------- ------- -------
Gross profit 12,065 6,576 13,814
Selling, general and administrative expenses 9,372 4,208 11,374
------- ------- -------
Operating income 2,693 2,368 2,440
Interest income 174 28 228
Interest (expense) (244) (211 ) (312)
Income from joint venture -- -- 50
------- ------- -------
Income before income taxes 2,623 2,185 2,406
Income tax provision 1,075 918 1,023
------- ------- -------
Net income $ 1,548 $ 1,267 $ 1,383
======= ======= =======
Basic earnings per share $ .18 $ .30 $ .16
======= ======= =======
Diluted earnings per share $ .18 $ .29 $ .16
======= ======= =======
</TABLE>
(1) Historical results reflect Trotter only.
(2) Pro forma results, as reported on Form 8-K dated August 6, 1997, reflect the
combined results of Trotter and Cybex adjusted for the discontinued Cybex
line of treadmills and certain duplicate costs which, as a direct result of
the Merger, were eliminated. ( see Management's Discussion and Analysis for
additional comments.)
See notes to consolidated financial statements.
3
<PAGE>
CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands, except share information)
<TABLE>
<CAPTION>
MARCH 28, DECEMBER 31,
1998 1997
----------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,381 $ 6,689
Accounts receivable, net of allowances of $3,040 and $2,615 19,920 21,906
Lease receivables 1,903 1,200
Inventories 7,990 6,980
Recoverable income taxes 1,100 1,100
Deferred income taxes 5,838 6,913
Prepaid expenses and other 1,347 2,117
-------- --------
Total current assets 46,479 46,905
Property, plant and equipment, net 12,742 13,103
Lease receivables 1,302 999
Goodwill, net 10,711 10,785
Deferred income taxes 5,960 5,960
Other assets 817 973
-------- --------
$78,011 $78,725
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 2,856 $ 2,954
Accounts payable 5,533 5,192
Accrued expenses 15,750 18,305
Income taxes payable 1,369 1,441
-------- --------
Total current liabilities 25,508 27,892
Long-term debt 10,514 10,685
Accrued warranty obligation 1,278 1,240
-------- --------
Total liabilities 37,300 39,817
-------- --------
Commitments and contingencies (Note 3)
Stockholders' Equity:
Common Stock, $.10 par value, 20,000,000
shares authorized, 8,880,106 and 8,853,756 shares issued 888 885
Additional paid-in capital 44,451 44,189
Treasury stock, at cost (190,926 and 189,707 shares) (1,900) (1,890)
Accumulated deficit (2,728) (4,276)
-------- --------
Total stockholders' equity 40,711 38,908
-------- --------
$78,011 $78,725
======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
MARCH 28, MARCH 31,
1998 1997
--------------------- ---------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,548 $1,267
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 793 304
Provision for doubtful accounts 521 120
Deferred income taxes 1,075 --
Net changes in operating assets and liabilities (1,976) 425
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,961 2,116
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment (255) (65)
------- -------
FINANCING ACTIVITIES:
Principal payments on debt financings (269) --
Exercise of stock options 255 --
------- -------
NET CASH USED IN FINANCING ACTIVITIES (14) --
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 1,692 2,051
CASH AND CASH EQUIVALENTS, beginning of period 6,689 1,656
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 8,381 $3,707
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and changes in cash flows in conformity with
generally accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the three
months ended March 28, 1998, are not necessarily indicative of the results that
may be expected for the entire year.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the financial statements and the notes thereto included in
the Company's latest Annual Report on Form 10-K for the year ended December 31,
1997, the Company's Proxy Statements dated April 23, 1997 and April 3, 1998
filed with the Securities and Exchange Commission.
Subsequent to the Trotter Inc. merger, (see Note 2) the Company has changed its
interim financial reporting to reflect the last Saturday of the quarter as the
end of the period. Prior periods have not been restated as the impact is
immaterial. The fiscal year will continue to end on December 31.
NOTE 2 -- TROTTER INC. MERGER
On May 23, 1997, the merger between a wholly-owned subsidiary of Cybex
International, Inc. ("Cybex") and Trotter Inc. ("Trotter") was consummated (the
"Merger") with Trotter surviving the Merger as a subsidiary of Cybex. Pursuant
to the terms of the Merger, 4,273,056 shares of the Company's Common Stock were
issued to UM Holdings, Ltd. (UM), the sole stockholder of Trotter, in exchange
for all of the issued and outstanding Trotter shares. Additionally, options to
purchase Trotter shares were converted to options to purchase 436,920 shares of
Company Common Stock, using the exchange ratio implied in the Merger of
1.1244884-to-1.0. All historical share amounts have been retroactively adjusted
to reflect the exchange. The purchase price allocation used is preliminary. The
Company is still gathering information and analysis primarily related to income
taxes.
The transaction was accounted for as a purchase with Trotter deemed to be the
acquiring company for accounting purposes and, therefore, the surviving company
for financial reporting purposes. As a result, the accompanying historical
financial information is that of Trotter for the three months ended March 31,
1997, and includes the combined results of Trotter and Cybex for the three
months ended March 28, 1998.
The pro forma Statement of Operations for the three months ended March 31, 1997
was filed in conjunction with the Company's 8-K filing dated August 6, 1997
which reflect the combined results of Trotter and Cybex adjusted for the
discontinued Cybex line of treadmills and certain duplicate costs which, as a
direct result of the Merger, were eliminated.
6
<PAGE>
NOTE 3 -- CONTINGENCY RELATED TO SALE OF BUSINESS
Prior to the Merger, Fuqua Enterprises, Inc. ("Fuqua"), asserted a claim against
the Company in connection with the sale of substantially all of the assets of
the Lumex Division to Fuqua.
At the Merger date, the Company provided a reserve for the Fuqua claim based on
the information available at that time in accordance with SFAS No. 38,
"Accounting for Pre-acquisition Contingencies of Purchased Enterprises". A
final decision with respect to the arbitration was received on February 13,
1998, awarding a payment of approximately $2,400,000, including interest, to
Fuqua. The Company recorded a $1,900,000 charge in the fourth quarter of 1997
related to the arbitration and accrued professional fees. While the arbitration
is complete, during 1997 Fuqua notified Cybex of a separate claim for breaches
of certain of Cybex's representations and warranties in the asset sale agreement
involving substantially the same matters submitted to the arbitrator. In
February 1998, Fuqua commenced an action in the State Court of Georgia against
the Company and former executives of the Company, alleging fraud, negligent
misrepresentation, breach of representations and warranties and violation of
Georgia RICO statute seeking an unspecified amount of compensatory and punitive
damages, fees and expenses. Therefore, additional costs related to this matter
may result in the future. Such costs, if any, to resolve this claim will be
included in operations if the costs become probable and quantifiable.
Professional fees related to this matter are being expensed as incurred.
NOTE 4 -- INVENTORIES
Inventories are valued at the lower of cost or market and consist of the
following (in thousands):
<TABLE>
<CAPTION>
March 28, December 31,
1998 1997
--------- -----------
<S> <C> <C>
Raw materials $4,236 $4,644
Work in process 1,566 1,137
Finished goods 2,188 1,199
---------- ----------
$7,990 $6,980
========== ==========
</TABLE>
NOTE 5-- EARNINGS PER SHARE
The table below sets forth a reconciliation of the shares used in the basic and
diluted earnings per share computations (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
MARCH 28, MARCH 31, 1997
1998 HISTORICAL PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
Shares used in computing basic
earnings per share 8,670 4,273 8,653
Dilutive effect of options 156 124 93
------- ------- --------
Shares used in computing diluted
earnings per share 8,826 4,397 8,746
======= ======= ========
</TABLE>
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
OVERVIEW
Cybex International, Inc. (the "Company" or "Cybex") is a strength and
cardiovascular equipment company which develops, manufactures and markets
premium quality, professional human performance products for the commercial and
consumer markets.
On May 23, 1997, Cybex merged with Trotter Inc. ("Trotter") with Trotter
surviving the merger. The Merger was accounted for as a purchase with Trotter
deemed to be the acquiring company. Accordingly, the accompanying historical
financial information is that of Trotter for all periods presented combined with
Cybex from the May 23, 1997 acquisition date. The pro forma financial
information reflects the combined results of Trotter and Cybex adjusted for the
discontinued Cybex line of treadmills and certain duplicate costs which, as a
direct result of the Merger, were eliminated. The pro forma information does not
eliminate the Cybex isokinetic product line, which was sold in the fourth
quarter of 1997.
Subsequent to the Merger, the Company consolidated its manufacturing facilities,
merged certain product lines, centralized and consolidated support functions,
created a new distribution system that utilizes a combination of its direct
sales staff and its realigned dealer network, and sold Cybex's isokinetic
product line and Ronkonkoma, New York facility for cash of $6,837,000.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's statements of
operations as a percentage of net revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
MARCH 28, MARCH 31, 1997
1998 HISTORICAL PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
Net sales 100 % 100 % 100 %
Cost of sales 57.9 57.7 57.4
----- ----- -----
Gross profit 42.1 42.3 42.6
Selling, general and
administrative expenses 32.7 27.1 35.1
----- ----- -----
Operating income 9.4% 15.2 % 7.5 %
===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 28, 1998 VS. THREE MONTHS ENDED MARCH 31, 1997
(HISTORICAL).
NET SALES
The Company's historical net sales increased from $15,541,000 for the three
months ended March 31, 1997 to $28,637,000 for the three months ended March 28,
1998. This increase is directly due to the Merger as the 1998 period includes
the combined sales of the merged companies.
GROSS PROFIT
Historical gross profit increased from $6,576,000 for the three months ended
March 31, 1997 to $12,065,000 for the three months ended March 28, 1998. The
increase is primarily due to the Merger.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Historical selling, general and administrative expenses increased from
$4,208,000 for the three months ended March 31, 1997 to $9,372,000 for the three
months ended March 28, 1998, primarily as a result of the Merger. Selling,
general and administrative expense, as a percentage of sales, increased to 32.7%
for the three months ended March 28, 1998, from 27.1% for the comparable period
in 1997. The percentage increase is primarily due to the addition of Cybex's
results (whose business historically had higher sales and marketing costs due to
its direct distribution system) for the three months ended March 28, 1998.
INTEREST INCOME
Historical interest income increased from $28,000 for the three months ended
March 31, 1997 to $174,000 for the three months ended March 28, 1998 due
primarily to the inclusion of the leasing operations of Cybex for the three
months ended March 28, 1998 and higher cash balances for the three months ended
March 28, 1998 as compared to the three months ended March 31, 1997.
INTEREST EXPENSE
Historical interest expense increased from $211,000 for the three months ended
March 31, 1997 to $244,000 for the three months ended March 28, 1998. The
increase is a result of the higher debt balances of the combined companies in
1998.
THREE MONTHS ENDED MARCH 28, 1998 VS. THREE MONTHS ENDED MARCH 31, 1997 (PRO
FORMA).
NET SALES
The Company's pro forma net sales decreased from $32,440,000 for the three
months ended March 31, 1997 to $28,637,000 for the three months ended March 28,
1998. This decrease is principally due to the inclusion of $3,100,000 of
isokinetic product sales in the three months ended March 31, 1997.
GROSS PROFIT
Pro forma gross profit decreased from $13,814,000 for the three months ended
March 31, 1997 to $12,065,000 for the three months ended March 28, 1998. The
decrease is primarily due to the inclusion of isokinetic product sales in the
prior period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Pro forma selling, general and administrative expenses decreased from
$11,374,000 for the three months ended March 31, 1997 to $9,372,000 for the
three months ended March 28, 1998, primarily as a result of the sale of the
isokinetics product line and lower expenditures resulting from efficiencies
facilitated by the Merger. Selling, general and administrative expense, as a
percentage of sales, decreased to 32.7% for the three months ended March 28,
1998, from 35.1% on a pro forma basis for the comparable period in 1997. The
percentage decrease is primarily due to efficiencies resulting from the Merger.
INTEREST INCOME
Pro forma interest income decreased from $228,000 for the three months ended
March 31, 1997 to $174,000 for the three months ended March 28, 1998. The
decrease is principally a result of lower average lease receivables in 1998.
9
<PAGE>
INTEREST EXPENSE
Pro forma interest expense decreased from $312,000 for the three months ended
March 31, 1997 to $244,000 for the three months ended March 28, 1998. The
decrease is due to lower average outstanding debt during 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $19,013,000 at December 31, 1997 to $20,971,000
at March 28, 1998 and cash and cash equivalents increased from $6,689,000 at
December 31, 1997 to $8,381,000, at March 28, 1998. The Company's debt-to-equity
ratio decreased to 0.33 to 1 at March 28, 1998 from 0.35 to 1 at December 31,
1997.
For the quarter ended March 28, 1998, net cash provided by operating activities
was $1,961,000 compared to net cash provided by operating activities of
$2,116,000 for the comparable period ended March 31, 1997. Cash generated from
earnings before depreciation, amortization and income taxes was partially offset
by changes in operating assets and liabilities, most notably the pay down of
merger-related accruals.
The Company's capital expenditures for the three months ended March 28, 1998 and
March 31, 1997 consisted mainly of purchases of manufacturing equipment.
The Company has a $12,000,000 revolving line of credit which matures on December
31, 2000. There were no borrowings under the facility for the three months
ended March 28, 1998. At March 28, 1998, $11,020,000 was available due to
$980,000 in stand-by letters of credit which were outstanding in connection with
the Company's workers compensation insurance program. Additionally, the
Company's finance subsidiary is expected to continue to support working capital
requirements through periodic sales of its lease portfolios to third party
financial institutions.
Management believes that the cash flow from the Company's operations and
available borrowings under its line of credit will be sufficient to meet its
general working capital and capital expenditure requirements in the near term.
The Company may need additional capital to pursue acquisitions and significant
capital improvements in 1998. There is no assurance that the Company will have
additional financing available to fund these costs or, if available, that such
financing will be on terms favorable to the Company.
YEAR 2000
Many computer systems were not designed to process dates beyond 1999, and
certain of the Company's computer hardware and software will need to be modified
or replaced prior to the year 2000 in order to remain functional. The Company
has initiated the implementation of a new enterprise resource planning ("ERP")
system to replace the two information technology systems currently in use. It
is anticipated that the total cost of hardware, software, training and
implementation will be approximately $4,200,000. The Company anticipates that
the ERP system and other modifications will be functional in 1999, at which time
it believes it will be Year 2000 compliant. In addition, in the event that any
of the Company's significant suppliers or customers do not successfully achieve
Year 2000 compliance on a timely basis, the Company's business or operations
could be adversely affected.
10
<PAGE>
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations may contain forward-looking statements.
There are a number of risks and uncertainties that could cause actual results to
differ materially from those anticipated by the statements made above. These
include, but are not limited to, competitive factors, technological and product
developments, market demand, and uncertainties relating to the consolidation of
the merged companies' businesses. Further information on these and other
factors which could affect the Company's financial results can be found in the
Company's Report filed with the Securities and Exchange Commission on Form 10-K
for the year ended December 31, 1997 and its proxy statements dated April 23,
1997 and April 3, 1998.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
FUQUA ARBITRATION
-----------------
See Part I, Item 3 of the Company's Report on Form 10-K for the year
ended December 31, 1997 for a description of this proceeding.
KIRILA ET AL V. CYBEX INTERNATIONAL, INC. ET AL
-----------------------------------------------
See Part I, Item 3 of the Company's Report on Form 10-K for the year
ended December 31, 1997 for a description of this proceeding.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 5,
1998. At the meeting, action was taken on the following matter:
James H. Carll, Peter C. Haines and Arthur W. Hicks were elected
Directors of the Company.
The number of shares cast for, against or withheld, as well as the
number of abstentions and broker non-votes, on each matter
considered at the Meeting were as follows:
<TABLE>
<CAPTION>
ABSTENTIONS/
SHARES VOTED SHARES BROKER
ELECTION OF DIRECTORS FOR WITHHELD NON-VOTES
------------ -------- ---------
<S> <C> <C> <C>
James H. Carll 8,313,904 31,110 342,176
Peter C. Haines 8,304,020 40,994 342,176
Arthur W. Hicks 8,327,704 17,310 342,176
</TABLE>
The terms of office of the following individuals continued after the
meeting: John Aglialoro, Joan Carter, Kay
Knight Clarke, Thomas W. Kahle, Jerry Lee and Alan
H. Weingarten.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.1 Fourth Amendment to Amended and Restated Loan Security
Agreement
27 Financial Data Schedule (Filed herewith)
(b) Reports on Form 8-K
-------------------
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CYBEX International, Inc.
By: /s/ Peter C. Haines
---------------------------------
May 12, 1998 Peter C. Haines
President and Chief Executive Officer
By: /s/ William S. Hurley
---------------------------------
May 12, 1998 William S. Hurley
Vice President and Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
----------- -----------
(a) Exhibits
--------
10.1 Fourth Amendment to Amended and Restated Loan Security
Agreement (Filed herewith)
27 Financial Data Schedule. (Filed herewith)
14
<PAGE>
FOURTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT, dated as of March 25, 1998, among SUMMIT BANK, a New
Jersey Banking Corporation ("Lender"); and CYBEX INTERNATIONAL, INC., CYBEX
FINANCIAL CORPORATION, EAGLE PERFORMANCE SYSTEMS, INC., CYBEX FITNESS GERATE
VERTRIEBS, GMBH, GENERAL MEDICAL EQUIPMENT LIMITED, LUMEX BED SYSTEMS, TROTTER
INC., and TROTTER HOLDING COMPANY (collectively, the "Borrowers").
BACKGROUND
----------
The Lender and the Borrowers have heretofore entered into the Amended and
Restated Loan and Security Agreement dated June 16, 1997 (the "Loan Agreement").
On July 15, 1997 the Lender and the Borrower entered into a First Amendment to
Loan Agreement (Hereinafter "First Amendment"). Thereafter, on August 11, 1997,
Lender and the Borrower entered into a Second Amendment to the Loan Agreement
(hereinafter "Second Amendment"). Thereafter, on December 17, 1997, Lender and
the Borrower entered into a Third Amendment to the Loan Agreement (hereinafter
"Third Amendment"). All capitalized terms utilized herein and not otherwise
defined have the respective meaning indicated in the Loan Agreement. The
parties desire to enter into this Fourth Amendment, to modify certain financial
covenants in the Loan Agreement and to ratify and confirm all the terms and
conditions of the Loan Agreement and the First Amendment, Second Amendment and
Third Amendment except as expressly amended and modified by this Fourth
Amendment.
1. Section 1.2 of the Loan Agreement is hereby amended to read in its
entirety as follows:
1.2 "ADJUSTED TANGIBLE CAPITAL FUNDS" means Tangible Capital Funds
-------------------------------
plus amounts reserved or paid by Cybex subsequent to June 30, 1997 for
settlement with Fuqua, Inc. not to exceed $6,000,000.00.
2. Section 1.15 of the Loan Agreement is hereby amended to read in its
entirety as follows:
1.15 "EBITDA" means, without duplication, for any period for which
------
such amount is being determined, the sum of the amounts for such period of
(i) net income, (exclusive of (a) interest income, and (b) extraordinary
items), (ii) provision for income taxes, (iii) depreciation expense, (iv)
Interest Expense, (v) amortization expense, but each of the above (ii)
through (v) only to the extent reducing net income, and (vi) for the
rolling four-quarter period ending September 30, 1998, all merger-related
costs not to exceed $14,109,000.00, including but not limited to costs
associated with the Sharpsville plant closure, Fuqua dispute, and technical
research and development. All of the foregoing items (i) through (vi) are
otherwise to be determined on a consolidated basis for Borrowers and their
consolidated subsidiaries in accordance with GAAP.
<PAGE>
3. Section 9.12 of the Loan Agreement is hereby amended to read in its
entirety as follows:
9.12 MINIMUM ADJUSTED TANGIBLE CAPITAL FUNDS. Borrowers shall not
---------------------------------------
permit their Adjusted Tangible Capital Funds to be (a) less than
$24,000,000 as of June 30, 1997 and September 30, 1997; (b) less than
$29,000,000 as of December 31, 1997 and quarterly thereafter; (c) less than
35,000,000 as of December 31, 1998 and quarterly thereafter; and (d) less
than $42,000,000 as of December 31, 1999 and quarterly thereafter.
4. Section 9.13 of the Loan Agreement is hereby amended to read in its
entirety as follows:
9.13 FIXED CHARGE COVERAGE RATIO. Borrowers shall not permit their
---------------------------
Fixed Charge Ratio to be less than 1.25:1 to be measured quarterly on a
rolling four quarter basis until December 31, 2000 and annually thereafter.
5. Section 9.18 of the Loan Agreement is hereby amended to read in its
entirety as follows:
9.18 CAPITAL EXPENDITURES. Borrowers shall limit Capital
---------------------
Expenditures to (a) $3,500,000.00 in 1997; (b) $6,500,000.00 in 1998; and
(c) $3,500,000.00 annually thereafter.
6. CONFIRMATION OF OBLIGATIONS. This Fourth Amendment is made
---------------------------
supplemental to and a part of the Loan Agreement. Except as expressly amended
and modified by this Fourth Amendment, the Loan Agreement, the First Amendment,
the Second Amendment and the Third Amendment are hereby ratified and confirmed
in all respects.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Fourth Amendment as of the date first above written.
Witness SUMMIT BANK
_______________________ By:_____________________________
2
<PAGE>
Witness CYBEX INTERNATIONAL, INC.
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness CYBEX FINANCIAL CORPORATION
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness EAGLE PERFORMANCE SYSTEMS, INC.
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness CYBEX FITNESS GERATE VERTRIEBS,
GMBH
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness GENERAL MEDICAL EQUIPMENT LIMITED
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness LUMEX BED SYSTEMS
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness TROTTER INC.
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
Witness TROTTER HOLDING COMPANY
/s/ JEFF ENG By: /s/ WILLIAM S. HURLEY
- ----------------------------------- -----------------------------
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATMENTS CONTAINED IN THE BODY OF THE FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-28-1998
<CASH> 8,381
<SECURITIES> 0
<RECEIVABLES> 22,960
<ALLOWANCES> (3,040)
<INVENTORY> 7,990
<CURRENT-ASSETS> 46,479
<PP&E> 19,545
<DEPRECIATION> (6,803)
<TOTAL-ASSETS> 78,011
<CURRENT-LIABILITIES> 25,508
<BONDS> 10,514
0
0
<COMMON> 888
<OTHER-SE> 39,823
<TOTAL-LIABILITY-AND-EQUITY> 78,011
<SALES> 28,637
<TOTAL-REVENUES> 28,637
<CGS> 16,572
<TOTAL-COSTS> 25,944
<OTHER-EXPENSES> (174)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244
<INCOME-PRETAX> 2,623
<INCOME-TAX> 1,075
<INCOME-CONTINUING> 1,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,548
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
