<PAGE>
 
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
 
                                                       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,                        02053
             MASSACHUSETTS                           (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE
                OFFICE)
 
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (508) 533-4300
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<CAPTION>
                                                          NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                              WHICH REGISTERED
             -------------------                          ------------------------
<S>                                            <C>
        Common Stock, $.10 Par Value                      American Stock Exchange
</TABLE>
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 
                                     NONE
                               (TITLE OF CLASS)
 
  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 required for the past 90 days. Yes [X] No [_]
 
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
 
                               ----------------
 THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
                        REGISTRANT AS OF MARCH 23, 1998
                   COMMON STOCK, $.10 PAR VALUE--$59,213,985
 
                               ----------------
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON
                          STOCK, AS OF MARCH 23, 1998
                COMMON STOCK, $.10 PAR VALUE--8,676,559 SHARES
 
                               ----------------
 
DOCUMENTS INCORPORATED BY REFERENCE:
  The information required by Part III (items 10, 11, 12 and 13) is
incorporated by reference from the Registrant's definitive proxy statement for
its Annual Meeting of Stockholders, to be filed with the Commission pursuant
to Regulation 14A, or if such proxy statement is not filed with the Commission
on or before 120 days after the end of the fiscal year covered by this Report,
such information will be included in an amendment to this Report filed no
later than the end of such 120-day period.
 
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<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
  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. The Company operates in one industry segment.
 
  On May 23, 1997, a merger (the "Merger") between Trotter Inc. ("Trotter")
and a wholly-owned subsidiary of Cybex was consummated with Trotter surviving
the Merger as a subsidiary of Cybex. For accounting purposes, the transaction
was accounted for as a purchase, with Trotter deemed to be the acquiring
company and therefore the surviving company for financial reporting purposes.
As a result, the accompanying historical financial information is that of
Trotter for all periods presented, with the results of Cybex included from and
after the May 23, 1997 merger date.
 
  Prior to the Merger, Cybex (formerly known as Lumex, Inc.) was engaged in
the manufacture, sale and distribution of fitness equipment, testing and
rehabilitation products and, through its Lumex Division, various healthcare
products and therapeutic support systems. In December 1995 Cybex announced a
restructuring plan which included the sale of the Lumex Division, and on April
30, 1996, Cybex sold substantially all of the assets and business of the Lumex
Division to Fuqua Enterprises, Inc. ("Fuqua"). See Item 3 hereto for a
description of certain legal matters pertaining to this sale.
 
  In connection with the Merger, the Company announced its plans to sell its
testing and rehabilitation product line and its Ronkonkoma, New York facility,
both of which were sold for cash during the fourth quarter of 1997.
 
  The Company has a wholly owned finance subsidiary, Cybex Finance Corp
("CFC"), which provides capital equipment financing for Company products
primarily to its domestic customer base.
 
PRODUCTS
 
  The Company develops, manufactures, distributes and services professional
quality human performance equipment for the commercial and consumer markets.
These products can generally be grouped into two major categories:
cardiovascular products and strength systems. The Company also manufactured
and distributed isokinetics testing and rehabilitation products until the sale
of this product line in the fourth quarter of 1997.
 
  While a portion of the Company's sales are to individuals for home fitness
programs, all of its products are of "premium quality"; they are typically the
best in the category in which they compete featuring high performance and
durability comparable to that utilized in health clubs or by professional
athletes. Accordingly, all of the Company's products are premium-priced.
 
  The contribution to net sales of the Company's product lines over the past
three years is as follows (dollars in millions):
 
<TABLE>
<CAPTION>
                                           1997          1996          1995
                                       ------------- ------------- -------------
                                        NET           NET           NET
                                       SALES PERCENT SALES PERCENT SALES PERCENT
                                       ----- ------- ----- ------- ----- -------
<S>                                    <C>   <C>     <C>   <C>     <C>   <C>
Cardiovascular Products............... $46.2    51%  $35.3    74%  $34.6    79%
Strength Systems......................  41.4    46    12.3    26     9.1    21
Isokinetics (1).......................   2.6     3     --    --      --    --
                                       -----   ---   -----   ---   -----   ---
                                       $90.2   100%  $47.6   100%  $43.7   100%
                                       =====   ===   =====   ===   =====   ===
</TABLE>
--------
(1) Represents sales of the Cybex isokinetics testing and rehabilitation
    product line from the May 23, 1997 merger date to September 30, 1997, the
    date the product line was sold.
 
                                       2
<PAGE>
 
 Cardiovascular Products
 
  The Company's cardiovascular equipment is designed to provide aerobic
conditioning by elevating the heart rate, increasing lung capacity, endurance
and circulation, and burning body fat. Trotter commenced operations in 1973 as
one of the pioneers in the design and manufacture of treadmills specifically
intended for use by individuals in their home as part of a home fitness
program. The Company's cardiovascular products today include five treadmill
models, two bikes and the "Reactor", a human movement product which measures
agility, balance, coordination and reaction time through the use of platforms
which a person moves around on in accordance with audio and visual cues. The
Company anticipates introducing during the first quarter of 1998 the Trotter
600H Hiker by Cybex, which provides a total body workout with a natural
"hiking" motion. The Treadmill and Bike products are motorized. All of the
Company's cardiovascular products incorporate computerized electronics which
control the unit and provide feedback to the user.
 
  Treadmills. Each treadmill model is motorized and incorporates computerized
electronics controlling speed, incline, and both preset and customized
exercise programs. The electronics also provide readout displays to indicate
program profiles, calories burned, calories per hour, speed, incline,
distance, elapsed time and pace. In addition, diagnostic information can be
accessed through the computer system which is useful in the maintenance of the
product. The Company presently sells five treadmill models, with list prices
ranging from $3,695 to $7,995.
 
  Bikes. The Company has two cycle ergometer products, THE BIKE and THE SEMI.
THE BIKE was designed by integrating the most popular features that were
identified by customer focus groups. These features include a biomechanically
contoured design, numerous pre-programmed operating modes and profiles, as
well as a durable structural steel frame and multi-position handle bars. THE
SEMI is a semi-recumbent cycle ergometer that incorporates the same features
as THE BIKE and is designed to complement THE BIKE in both function and
appearance. These two ergometer products have list prices ranging from $2,395
to $2,695.
 
 Strength Training Products
 
  Strength training equipment provides a physical workout by exercising the
muscular system. The Company's strength training equipment uses weights for
resistance. Today, this product line includes selectorized single station
equipment, modular multi-station units, plate loaded and free-weight
equipment.
 
  Selectorized Equipment. The Company's selectorized equipment is sold under
the trademarks "VR2", "Galileo" and VR. Selectorized single station equipment
incorporates stacked weights, permitting the user to select different weight
levels for a given exercise by inserting a pin at the appropriate weight
level. Each selectorized product is designed for a specific muscle group with
each product line utilizing a different technology. The Company sells 85
selectorized equipment products with list prices between $1,795 and $5,295.
 
  Modular Multi-Station Units. This product line has the advanced design and
high performance features of the VR selectorized equipment line while being
able to be configured into multiple station design. The Company has seven
multi-station modular products with list prices ranging from $2,095 to $2,895.
 
  Plate Loaded Equipment. The Company manufactures and distributes a series of
strength equipment which mimics many of the movements found on our
selectorized machines but are manually loaded with weights. These are simple,
space efficient products ranging in price from $695 to $2,795. There are 21
plate-loaded products.
 
  Free-Weight Equipment. The Company also sells free-weight equipment,
including benches, bars, weights and squat racks. This line is complimented by
barbells and plates. The Company offers approximately 28 items of free weight
equipment with list prices ranging from $195 to $1,195.
 
CUSTOMERS AND DISTRIBUTION
 
  The Company markets its products to individuals interested in purchasing
premium quality equipment and to commercial customers. Since its products are
premium-priced, sales to individuals tend to be made to persons interested in
a comprehensive home fitness program. A commercial customer is any purchaser
who does not intend the product for home use. Typical commercial customers are
health clubs, corporate fitness centers, hotels, resorts, spas, educational
institutions, military installations and community centers.
 
                                       3
<PAGE>
 
  The Company distributes its products through independent authorized dealers,
its own domestic sales force and international distributors.
 
  Independent authorized dealers operate independent stores specializing in
fitness-related products and promote home and in certain instances commercial
sales of Company products. The operations of the independent dealers are
primarily local or regional in nature. In North America, the Company enters
into performance standards agreements with its dealers which are designed to
assure that the Company brand is properly positioned in the marketplace. The
dealers must, in order to qualify as an authorized dealer, maintain a retail
showroom, achieve minimum revenue goals, and have personnel trained to install
and service Company products. Today, the Company has approximately 220 active
dealers it North America. The Company believes that its current dealer network
is adequate to service its targeted markets.
 
  The Company's domestic sales force is comprised of 21 territory managers
supported by four regional directors and one national accounts director. The
sales force makes sales to users such as professional sports teams, university
physical education and physiology departments, gym owners, health clubs,
sports medicine clinics and individuals. The Company may also involve its
dealers in some direct sales and utilize the dealer in the delivery and
installation of the product, and in follow-up sales and service. Dealers also
receive a fee for providing delivery and installation services.
 
  International sales accounted for approximately 18% of the Company's net
sales for 1997. The international sales force consists of 2 Regional Sales
Directors, 1 Regional Sales Manager, and 4 Account Representatives. There are
66 independent distributors in 65 countries currently representing the
Company. The Company enters into international distributor agreements with
these distributors which define territories, performance standards and volume
requirements. In 1996, the Company formed a joint venture with a third party
for the sale, distribution and servicing of its products in Europe (including
Russia), Africa and the Middle East. As a result of the Merger, this joint
venture was dissolved and replaced by an international distributor agreement
with the third party involving different pricing and terms, performance
standards, and more limited geography.
 
  The Company markets its products by advertising in publications, such as The
Wall Street Journal, which appeal to individuals within its targeted
demographic profiles. The Company's authorized dealers are provided
cooperative allowances, pursuant to which the dealer advertises its store and
the Company's products on a shared cost basis. In addition, the Company
advertises in trade publications such as Club Industry Magazine, Club Business
International and Fitness Management Magazine and participates in industry
trade shows.
 
  The Company offers lease financing for its products through CFC, its wholly
owned finance subsidiary. The Company periodically enters into agreements to
sell lease receivables to financial institutions.
 
WARRANTIES
 
  The Company promotes its warranty as a statement of the quality of its
products, and believes that its warranty helps differentiate the Company's
products from those of its competitors. The cardiovascular products have a
three year repair or replacement warranty. The various components for strength
products are warranted for varying periods of time, up to a lifetime warranty
with respect to the structural frame. Warranty expense for the years ended
December 31, 1997, 1996 and 1995 was approximately $3,269,000, $1,968,000 and
$1,564,000, respectively.
 
COMPETITION
 
  The market in which the Company operates is highly competitive. Numerous
companies manufacture, sell or distribute exercise equipment. The Company
competes primarily in the premium-priced, professional quality equipment
segment of the market, which is a small segment of the total exercise
equipment market. Its competitors vary according to product line and include
companies with greater name recognition and more extensive financial and other
resources than the Company.
 
 
                                       4
<PAGE>
 
  Important competitive factors include price, product quality and
performance, diversity of features, warranties and customer service. The
Company consistently follows a policy of premium quality, responsive customer
service and a comprehensive warranty program, with the result that its
products in most cases have suggested retail prices at or above those of its
competitors. The Company focuses on the segment of the market which values
quality and is willing to pay a premium for products with performance
advantages over the competition. The Company believes that its reputation for
producing products of high quality and dependability, accompanied by strong
warranties and customer service, constitutes a competitive advantage.
 
PRODUCT DEVELOPMENT
 
  The Company's research and development expenditures were $2,616,000,
$1,167,000 and $1,544,000 in 1997, 1996 and 1995, respectively. At December
31, 1997, the Company had the equivalent of ten employees engaged in ongoing
research and development programs. The Company's development efforts focus on
improving existing products and developing new products, with the goal of
producing user-friendly, bio-mechanically correct, durable exercise equipment.
 
MANUFACTURING AND SUPPLY
 
  The Company maintains integrated manufacturing facilities which are equipped
to perform certain fabrication, welding, grinding, assembly and finishing of
its products, unlike many of its competitors which either acquire products
through original equipment manufacturers or assemble components manufactured
by third party sources. The Company believes that its vertical integration
provides the Company with better control over product quality and cost and
shortens delivery time.
 
  The Company manufactures its products in two facilities located in Medway,
Massachusetts and Owatonna, Minnesota. Raw materials and purchased components
are comprised primarily of steel, aluminum, wooden decks, electric motors,
molded or extruded plastics, milled products, circuit boards for computerized
controls and upholstery. These materials are assembled, fabricated, machined,
welded, powder coated and upholstered to create finished products. The
electronics are specifically designed by Company employees for use in the
Company's products and all electrical motors are made to the Company's
specifications.
 
  The Company single sources certain of its raw materials and component parts,
including drive motors, belts, running decks, molded plastic components and
electronics, where it believes that sole sourcing is beneficial for reasons
such as quality control, reliability of the vendor or cost. The Company
attempts to reduce the risk of sole source suppliers by maintaining varying
levels of parts inventory. However, the loss of a significant supplier, or
delays or disruptions in the delivery of components or materials, or increases
in material costs, could have a material adverse effect on the Company's
operations.
 
  The Company manufacturers most of its strength-training equipment on a
"build-to-order" system which responds to specific sales orders. The Company
manufactures its other products based upon projected sales.
 
BACKLOG
 
  Backlog historically has not been a significant factor in the Company's
business.
 
PATENTS AND TRADEMARKS
 
  The Company owns, licenses or has applied for various patents with respect
to its products and has also registered or applied for a number of trademarks.
While these patents and trademarks are of value, the Company does not believe
that it is dependent to any material extent upon patent or trademark
protection.
 
INSURANCE
 
  The Company's product liability insurance is written on a claims-made basis
and provides an aggregate of $5,000,000 of coverage, with a deductible of up
to $50,000 per claim with an aggregate deductible of $500,000. The Company
believes that this level of coverage is adequate.
 
                                       5
<PAGE>
 
GOVERNMENTAL REGULATION
 
  The Company's products are not subject to material governmental regulation.
 
  The Company's operations are subject to federal, state and local laws and
regulations relating to the environment. The Company regularly monitors and
reviews its operations and practices for compliance with these laws and
regulations, and the Company believes that it is in material compliance with
such environmental laws and regulations. Despite these compliance efforts,
some risk of liability is inherent in the operation of the business of the
Company, as it is with other companies engaged in similar businesses, and
there can be no assurance that the Company will not incur material costs in
the future for environmental compliance.
 
EMPLOYEES
 
  On December 31, 1997, the Company employed 532 persons on a full-time basis.
None of the Company's employees are represented by a union. The Company
considers its relations with its employees to be good.
 
ITEM 2. PROPERTIES
 
  The Company occupies approximately 100,000 square feet of space in Medway,
Massachusetts and approximately 210,000 square feet of space in Owatonna,
Minnesota, in each case for administrative offices, manufacturing and
warehousing. Both facilities are owned by the Company. The Company also
utilizes outside warehousing.
 
  The Company's manufacturing facilities are fully equipped to perform
fabrication, machining, welding, grinding, assembly and powder coating of its
products. The Company believes that its manufacturing and storage facilities
provide adequate capacity for its operations for the foreseeable future, and
the facilities are well maintained and kept in good repair.
 
  Additional information concerning the financing of the Company's owned
facilities is described in Note 5 to the Company's consolidated financial
statements.
 
ITEM 3. LEGAL PROCEEDINGS
 
  As a manufacturer of fitness products, the Company is inherently subject to
the hazards of product liability litigation; however, the Company has
maintained, and expects to continue to maintain, insurance coverage which the
Company believes is adequate to protect against these risks.
 
FUQUA ARBITRATION AND LITIGATION.
 
  On April 3, 1996, the Company completed the sale of substantially all the
assets of its Lumex Division to Fuqua Enterprises, Inc. ("Fuqua") for
$40,750,000 in cash. The asset sale agreement with Fuqua provided for a post-
closing adjustment to the sales price based on the change in the net assets of
the Lumex Division from December 31, 1995, through the closing date.
Subsequent to the closing, Fuqua asserted that the stated amount of the net
assets of the Lumex Division as of the closing date was overstated by
$9,300,000 and demanded arbitration to resolve this dispute. The Company
applied to the New York County Supreme Court for a determination of the scope
of the arbitration clause contained in the purchase price provision of the
asset sale agreement. On May 9, 1997, the court denied the Company's
application for a stay of arbitration and ordered the Company to arbitrate the
dispute with Fuqua in full. The Company appealed this decision, which appeal
was denied.
 
  The arbitration of the dispute proceeded and on February 13, 1998 a final
decision was rendered in the arbitration, awarding to Fuqua claims totaling
$3,180,000, resulting in a net payment currently due to Fuqua, including
interest, of approximately $2,400,000, after offsetting the Company's post-
closing adjustment claim against Fuqua which amounted to $1,146,000.
 
 
                                       6
<PAGE>
 
  During 1997, Fuqua notified the Company of claims for breaches of certain of
the Company'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 Fulton County,
State of Georgia against the Company and certain former officers of the
Company, alleging fraud, negligent misrepresentation, breach of
representations and warranties, violation of the Georgia RICO statute and
seeking an unspecified amount of compensatory and punitive damages and fees
and expenses. The Company intends to vigorously defend this action.
 
KIRILA ET AL V. CYBEX INTERNATIONAL, INC., ET AL
 
  This action was commenced in the Court of Common Pleas of Mercer County,
Pennsylvania on May 14, 1997 against the Company, the Company's wholly-owned
subsidiary, Trotter Inc., and certain officers, directors and affiliates of
the Company. The Plaintiffs are companies, and the principal thereof, which
sold to Trotter Inc., a strength equipment company in 1993. In accordance with
Pennsylvania practice, while this action has been instituted, no Complaint has
been filed. Accordingly, the Company has not received a formal indication of
the claims made or relief sought in the proceeding or the factual basis
alleged to underlie the proceeding. The Company has, however, received a
letter from counsel for the Plaintiffs, indicating that the Plaintiffs will
seek compensatory and punitive damages in an amount exceeding $12,000,000. The
Company intends to vigorously defend this matter.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  No matters were submitted to a vote of the Company's security holders during
the fourth quarter of 1997.
 
SPECIAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT
 
  Officers are elected by the Board of Directors and serve at the pleasure of
the Board. The executive officers of the Company are as follows:
 
<TABLE>
<CAPTION>
NAME                                   AGE POSITION
----                                   --- --------
<S>                                    <C> <C>
Peter C. Haines.......................  47 President and Chief Executive Officer
Gregory Davall........................  42 Vice President--Manufacturing
Raymond Giannelli.....................  43 Vice President--Research and
                                           Development
William S. Hurley.....................  53 Vice President and Chief Financial
                                           Officer
Karen Slein...........................  40 Vice President--Human Resources
</TABLE>
 
  Mr. Haines has served as the Company's President and Chief Executive Officer
since the date of the Merger, May 23, 1997. Prior to the Merger, he was
employed by Trotter since 1980, serving as the President of Trotter since
1983, and acting as its Sales and Marketing Manager from 1980 to 1983. Prior
thereto, he served as Import/Export Manager for Donley Manufacturing for three
years.
 
  Mr. Davall has served as the Company's Vice President--Manufacturing since
December 1997. Prior to such time, he served for five years as Vice President
of Manufacturing for BTI Packaging Technologies, Inc.
 
  Mr. Giannelli has served as the Company's Vice President of Research and
Development since the date of the Merger. He served in the same capacity for
Trotter since May 1991. Prior to such time, he was employed by Cybex for more
than 15 years in a variety of capacities, including most recently Vice
President of Engineering.
 
  Mr. Hurley has served as the Company's Vice President and Chief Financial
Officer since the date of the Merger. He joined Trotter as its Vice President
and Chief Financial Officer in August of 1996. Prior to joining Trotter, Mr.
Hurley was Vice President and Controller of BBN Company of Cambridge,
Massachusetts, a diversified high technology company, from 1992 to 1995. For
nineteen years prior to that, he was employed in various management positions,
most recently Vice President and Controller, at Wyman Gordon Company, a North
Grafton, Massachusetts manufacturer of forgings, investment castings and
advanced composite structures. Mr. Hurley is also a member of the Board of
Directors of L.S. Starrett Company of Athol, Massachusetts.
 
                                       7
<PAGE>
 
  Ms. Slein has served as the Company's Vice President--Human Resources since
the date of the Merger. She joined Trotter in 1995 as Manager of Human
Resources and was promoted to Director of Human Resources in June 1996. From
1992 to 1995, she was Director of Human Resources for EcoScience, a publicly
traded biotechnology company. Prior to that, she spent seven years as Manager
of Administration for New England Shrimp Company.
 
                                       8
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
  The Company's common shares are traded on the American Stock Exchange
(Amex). The Company's
 
  Amex symbol is CYB.
 
  The following table shows the high and low market prices as reported by the
Amex:
 
<TABLE>
<CAPTION>
                                                      1997            1996
                                                 --------------- ---------------
   CALENDAR                                       HIGH     LOW    HIGH     LOW
   --------                                      ------- ------- ------- -------
   <S>                                           <C>     <C>     <C>     <C>
   First Quarter................................ $11.875 $ 8.938 $14.130 $ 9.130
   Second Quarter...............................  12.500  10.125  12.880  10.250
   Third Quarter................................  12.125  10.000  12.130   9.750
   Fourth Quarter...............................  12.250  10.125  11.880   9.000
</TABLE>
 
  As of February 28, 1998 there were approximately 511 common shareholders of
record. This figure does not include stockholders with shares held under
beneficial ownership in nominee name.
 
  The Company's ability to pay dividends is limited to 50% of its net income
(reduced by any repurchases of its stock), by the terms of its financing
arrangements with its principal lender. The present policy of the Company is
to retain any future earnings to provide funds for the operation and expansion
of its business, and the Company does not anticipate paying any cash dividends
in the immediate future.
 
ITEM 6. SELECTED FINANCIAL DATA
 
  The following information has been extracted from the Company's consolidated
financial statements for the five years ended December 31, 1997. This selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes thereto included
elsewhere in this report.
 
<TABLE>
<CAPTION>
                                       YEAR ENDED DECEMBER 31,
                               ----------------------------------------------
                               1997(A)      1996     1995     1994     1993
                               -------     -------  -------  -------  -------
                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                            <C>         <C>      <C>      <C>      <C>
STATEMENT OF OPERATIONS DATA
 (A):
Net sales..................... $90,234     $47,605  $43,719  $41,365  $32,461
Cost of sales.................  54,101 (b)  29,541   27,860   24,836   19,075
                               -------     -------  -------  -------  -------
  Gross profit................  36,133      18,064   15,859   16,529   13,386
Selling, general and
 administrative expenses......  35,069 (c)  13,797   12,762   12,260   11,159
Nonrecurring charges..........   7,134 (d)     --       --       --       --
                               -------     -------  -------  -------  -------
  Operating income (loss).....  (6,070)      4,267    3,097    4,269    2,227
Interest income...............     427          49        4      --       --
Interest expense..............  (1,188)     (1,004)    (260)    (219)    (210)
                               -------     -------  -------  -------  -------
  Income (loss) before income
   taxes......................  (6,831)      3,312    2,841    4,050    2,017
Income tax provision
 (benefit)....................  (1,586)      1,344    1,171    1,675      780
                               -------     -------  -------  -------  -------
Net income (loss)............. $(5,245)(e) $ 1,968  $ 1,670  $ 2,375  $ 1,237
                               =======     =======  =======  =======  =======
Basic earnings (loss) per
 share........................ $  (.76)(e) $   .46  $   .39  $   .56  $   .29
                               =======     =======  =======  =======  =======
Diluted earnings (loss) per
 share........................ $  (.76)(e) $   .45  $   .38  $   .56  $   .29
                               =======     =======  =======  =======  =======
</TABLE>
 
                                       9
<PAGE>
 
--------
(a) On May 23, 1997, a merger (the "Merger") between Trotter Inc. ("Trotter")
    and a wholly-owned subsidiary of Cybex was consummated with Trotter
    surviving the Merger as a subsidiary of Cybex. For accounting purposes,
    the transaction was accounted for as a purchase, with Trotter deemed to be
    the acquiring company and therefore the surviving company for financial
    reporting purposes. As a result, the accompanying historical financial
    information is that of Trotter for all periods presented, with the results
    of Cybex included from and after the May 23, 1997 merger date.
(b) Includes $2,375,000 of costs considered unusual, or a direct result of the
    Merger.
(c) Includes $4,599,000 of costs considered unusual, or a direct result of the
    Merger.
(d) Includes $2,734,000 of costs related to the Sharpsville plant closure, a
    $2,500,000 charge for acquired research and development and a $1,900,000
    charge related to the Fuqua settlement.
(e) Includes $14,108,000 of pre-tax charges ($9,465,000, on an after-tax
    basis) for nonrecurring and merger-related costs comprised of the items
    listed in (b), (c) and (d) above.
 
<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                      ----------------------------------------
                                       1997    1996    1995     1994    1993
                                      ------- ------- -------  ------- -------
                                                  (IN THOUSANDS)
<S>                                   <C>     <C>     <C>      <C>     <C>
BALANCE SHEET DATA:
Working capital (deficit)............ $19,013 $ 4,205 $ 5,206  $   594 $(1,521)
Total assets.........................  78,725  20,367  21,067   19,306  16,562
Long-term debt.......................  13,639  11,369  14,825    3,900     --
Stockholders' equity (deficit).......  38,908   1,396    (572)   4,263   3,047
</TABLE>
 
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, a wholly owned subsidiary of Cybex merged with Trotter Inc.
("Trotter") with Trotter surviving the merger as a subsidiary of Cybex (the
"Merger"). The Merger 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. Accordingly, the accompanying
financial information is that of Trotter for all periods presented, and is
combined with Cybex from the May 23, 1997 acquisition date.
 
  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
 
  In connection with the Merger, the Company incurred $14,108,000 of pre-tax
charges, ($9,465,000, or $1.36 per share on an after-tax basis), for unusual
or nonrecurring merger-related costs, comprised of $2,734,000 related to
closing Trotter's Sharpsville manufacturing facility, $1,900,000 related to
the Fuqua arbitration settlement, $2,500,000 for acquired in-process research
and development that was written off and $6,974,000 related primarily to
conforming to new accounting and operating policies of the merged company, of
which $2,375,000 is included in cost of sales and $4,599,000 is included in
selling, general and administrative expenses. The following table sets forth
selected items from the Consolidated Statements of Operations as a percentage
of net sales, exclusive of $14,108,000 of unusual or nonrecurring merger-
related charges incurred in 1997:
 
 
                                      10
<PAGE>
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                    1997      1996      1995
                                                   -------   -------   -------
   <S>                                             <C>       <C>       <C>
   Net sales......................................     100%      100%      100%
   Cost of sales..................................      57        62        64
                                                   -------   -------   -------
   Gross profit...................................      43        38        36
   Selling, general and administrative expenses...      34        29        29
                                                   -------   -------   -------
   Operating income...............................       9         9         7
   Interest income................................       *         *         *
   Interest expense...............................      (1)       (2)       (1)
                                                   -------   -------   -------
   Income before income taxes.....................       8%        7%        6%
                                                   =======   =======   =======
</TABLE>
--------
* Not meaningful
 
YEAR ENDED DECEMBER 31, 1997 VS. YEAR ENDED DECEMBER 31, 1996
 
NET SALES
 
  For the year ended December 31, 1997, the Company's net sales increased to
$90,234,000 from $47,605,000 for the year ended December 31, 1996. This
increase is directly due to the Merger as the 1997 period includes the
combined sales of the merged companies from May 23, 1997 through December 31,
1997.
 
GROSS PROFIT
 
  Gross profit increased from $18,064,000 for the year ended December 31, 1996
to $36,133,000 for the year ended December 31, 1997. The increase is primarily
due to the Merger, partially offset by a $2,375,000 one-time charge for
unusual or nonrecurring merger-related costs charged to cost of sales for
1997. Gross margin, excluding the $2,375,000 one-time charge, as a percentage
of net sales, increased to 43% for 1997 from 38% for 1996. The percentage
increase is primarily due to cost containment efforts (particularly in the
second half of 1997), the addition of Cybex's results (whose products have
historically generated higher margins due to its direct distribution system)
for the period from May 23, 1997 through December 31, 1997 and a more
favorable product mix in 1997.
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
 
  Selling, general and administrative expenses increased from $13,797,000 for
the year ended December 31, 1996 to $35,069,000 for the year ended December
31, 1997, primarily as a result of the Merger. Selling, general and
administrative expense, excluding the $4,599,000 one-time charge, as a percent
of net sales, increased to 34% for 1997, from 29% for 1996. The percentage
increase in 1997 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 period from May 23, 1997 through December 31,
1997.
 
NONRECURRING CHARGES
 
  The nonrecurring charges during 1997 include $2,734,000 of costs related to
closing the Sharpsville manufacturing plant (primarily the write-off of
goodwill and other intangibles, severance costs and lease termination costs),
$2,500,000 for the write-off of in-process research and development acquired
in the Merger and $1,900,000 of costs related to the Fuqua arbitration
settlement.
 
INTEREST INCOME
 
  Interest income increased from $49,000 for the year ended December 31, 1996
to $427,000 for the year ended December 31, 1997. The increase is due to the
inclusion of the leasing operations of Cybex for the period from May 23, 1997
through December 31, 1997, as well as larger cash balances in 1997.
 
                                      11
<PAGE>
 
INTEREST EXPENSE
 
  Interest expense increased from $1,004,000 for the year ended December 31,
1996 to $1,188,000 for the year ended December 31, 1997. The increase is due
to larger average outstanding debt balances during 1997.
 
INCOME TAX PROVISION (BENEFIT)
 
  The Company's effective tax rate was 23% for the year ended December 31,
1997 versus a 41% for the year ended December 31, 1996. The rate decrease was
due primarily to the write-off of acquired in-process research and development
in 1997 that is not deductible for income tax purposes.
 
YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
 
NET SALES
 
  Net sales increased 8.9% from $43,719,000 for the year ended December 31,
1995 to $47,605,000 for the year ended December 31, 1996. The increase
resulted primarily from a $3,200,000 increase in the net sales of strength
systems, primarily due to higher volumes, and a $700,000 increase in the net
sales of cardiovascular products.
 
GROSS PROFIT
 
  Gross profit increased 13.9% from $15,859,000 for the year ended December
31, 1995 to $18,064,000 for the year ended December 31, 1996. As a percentage
of net sales, gross profit increased from 36% in 1995 to 38% in 1996. This
improvement was primarily due to a more favorable product mix as well as
certain productivity improvements.
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
 
  Selling, general and administrative expenses increased 8.1% from $12,762,000
for the year ended December 31, 1995 to $13,797,000 for the year ended
December 31, 1996. The increase was primarily a result of increased sales and
marketing costs. As a percentage of net sales, selling, general and
administrative expenses remained flat at 29%.
 
INTEREST EXPENSE
 
  Interest expense increased from $260,000 for the year ended December 31,
1995 to $1,004,000 for the year ended December 31, 1996. The increase is due
to a higher level of outstanding indebtedness in 1996 as a result of a new
loan agreement entered into in December 1995.
 
INCOME TAX PROVISION
 
  The effective income tax rate was 41% for the years ended December 31, 1996
and 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  The Company's financial condition has strengthened subsequent to the Merger.
Working capital increased from $4,205,000 at December 31, 1996 to $19,013,000
at December 31, 1997 and cash and cash equivalents increased from $1,656,000
at December 31, 1996 to $6,689,000, at December 31, 1997. Tangible net worth
increased to $27,191,000 from a net deficit of $1,450,000 at December 31,
1996, and the Company's debt-to-equity ratio decreased to 0.3-to-1 at December
31, 1997 from 8-to-1 at December 31, 1996.
 
  For the year ended December 31, 1997, net cash used in operating activities
was $2,301,000 compared to net cash provided by operating activities of
$4,822,000 for the year ended December 31, 1996. The decrease in
 
                                      12
<PAGE>
 
1997 was primarily due to increases in accounts receivable and inventories and
decreases in accounts payable and accrued expenses, net of the effect of
working capital acquired in the Merger.
 
  Cash provided by investing activities of $5,932,000 for the year ended
December 31, 1997, resulted from net proceeds of $6,837,000 from the sale of
certain assets acquired in the Merger and net cash acquired in the Merger of
$705,000, offset by capital expenditures of $1,610,000. The increase in
capital expenditures from $605,000 in 1996, was primarily the result of
capital expenditures in connection with the new Bike and Hiker product lines
in addition to general increases due to the requirements of the larger, post-
merger company.
 
  Cash provided by financing activities was $1,402,000 for the year ended
December 31, 1997 compared to cash used in financing activities of $2,566,000
in 1996. The increase resulted primarily from the sale of lease receivables in
1997, which generated net proceeds of $4,288,000.
 
  On June 16, 1997, the Company amended its Loan and Security Agreement ("the
Agreement") to renew and increase funds available under the revolver portion
of the Agreement from $3,000,000 to $12,000,000. 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 its 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 $2,000,000. 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.
 
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 Reports filed with the
Securities and Exchange Commission on Form 10-Q for the quarters ended June
30, 1997 and September 27, 1997 and its proxy statement dated April 23, 1997.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
  Not applicable.
 
                                      13
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
 
<TABLE>
<S>                                                                          <C>
Report of Independent Public Accountants.................................... F-2
Consolidated Financial Statements:
  Consolidated Balance Sheets............................................... F-3
  Consolidated Statements of Operations..................................... F-4
  Consolidated Statements of Stockholders' Equity........................... F-5
  Consolidated Statements of Cash Flows..................................... F-6
  Notes to Consolidated Financial Statements................................ F-7
Consolidated Financial Statement Schedule:
  II. Valuation and Qualifying Accounts..................................... S-1
</TABLE>
 
  All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission that are not required
under the related instructions or are inapplicable have been omitted.
 
                                      F-1
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Cybex International, Inc.:
 
  We have audited the accompanying consolidated balance sheets of Cybex
International, Inc. (see Note 1) and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cybex International, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
 
  Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
 
                                          Arthur Andersen LLP
 
Philadelphia, PA
February 18, 1998
 
                                      F-2
<PAGE>
 
                   CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               ----------------
                                                                1997     1996
                                                               -------  -------
<S>                                                            <C>      <C>
                            ASSETS
Current Assets:
  Cash and cash equivalents................................... $ 6,689  $ 1,656
  Accounts receivable, net of allowance of $2,615 and $477....  21,906    7,604
  Lease receivables...........................................   1,200      --
  Inventories.................................................   6,980    2,083
  Recoverable income taxes....................................   1,100      --
  Deferred income taxes.......................................   6,913      665
  Prepaid expenses and other..................................   2,117      410
                                                               -------  -------
    Total current assets......................................  46,905   12,418
Property, plant and equipment, net............................  13,103    4,725
Lease receivables.............................................     999      --
Goodwill, net.................................................  10,785    2,451
Other assets..................................................     973      558
Deferred income taxes.........................................   5,960      215
                                                               -------  -------
                                                               $78,725  $20,367
                                                               =======  =======
             LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current maturities of long-term debt........................ $ 2,954  $ 1,409
  Accounts payable............................................   5,192    2,838
  Accrued expenses............................................  18,305    2,658
  Income taxes payable........................................   1,441    1,308
                                                               -------  -------
    Total current liabilities.................................  27,892    8,213
Long-term debt................................................  10,685    9,960
Accrued warranty obligation...................................   1,240      798
                                                               -------  -------
    Total liabilities.........................................  39,817   18,971
                                                               -------  -------
Commitments and contingencies (Notes 3, 10 and 13)
Stockholders' Equity:
  Common Stock, $.10 par value, 20,000,000 shares authorized,
   8,853,756 and 4,273,056 shares issued......................     885      427
  Additional paid-in capital..................................  44,189      --
  Treasury stock, at cost (189,707 shares in 1997)............  (1,890)     --
  Retained earnings (accumulated deficit).....................  (4,276)     969
                                                               -------  -------
    Total stockholders' equity................................  38,908    1,396
                                                               -------  -------
                                                               $78,725  $20,367
                                                               =======  =======
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                      F-3
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                   ----------------------------
                                                    1997        1996     1995
                                                   -------     -------  -------
<S>                                                <C>         <C>      <C>
Net sales......................................... $90,234     $47,605  $43,719
Cost of sales.....................................  54,101 (a)  29,541   27,860
                                                   -------     -------  -------
  Gross profit....................................  36,133      18,064   15,859
Selling, general and administrative expenses......  35,069 (b)  13,797   12,762
Nonrecurring charges..............................   7,134 (c)     --       --
                                                   -------     -------  -------
  Operating income (loss).........................  (6,070)      4,267    3,097
Interest income...................................     427          49        4
Interest expense..................................  (1,188)     (1,004)    (260)
                                                   -------     -------  -------
  Income (loss) before income taxes...............  (6,831)      3,312    2,841
Income tax provision (benefit)....................  (1,586)      1,344    1,171
                                                   -------     -------  -------
Net income (loss)................................. $(5,245)(d) $ 1,968  $ 1,670
                                                   =======     =======  =======
Basic earnings (loss) per share................... $  (.76)    $   .46  $   .39
                                                   =======     =======  =======
Diluted earnings (loss) per share................. $  (.76)    $   .45  $   .38
                                                   =======     =======  =======
</TABLE>
--------
(a) Includes $2,375 of costs considered unusual, or a direct result of the
    Merger (Note 4).
(b) Includes $4,599 of costs considered unusual, or a direct result of the
    Merger (Note 4).
(c) Includes $2,734 of costs related to the Sharpsville plant closure, a
    $2,500 charge for acquired research and development (Note 4) and a $1,900
    charge related to the Fuqua settlement (Note 3).
(d) Includes $14,108 of pre-tax charges ($9,465, on an after-tax basis) for
    nonrecurring and merger-related costs comprised of the items listed in
    (a), (b) and (c) above.
 
 
       The accompanying notes are an integral part of these statements.
 
                                      F-4
<PAGE>
 
                   CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              RETAINED    TOTAL
                                                              EARNINGS   STOCK-
                           COMMON STOCK  ADDITIONAL           (ACCUM-   HOLDER'S
                           -------------  PAID-IN   TREASURY   ULATED    EQUITY
                           SHARES AMOUNT  CAPITAL    STOCK    DEFICIT)  (DEFICIT)
                           ------ ------ ---------- --------  --------  ---------
<S>                        <C>    <C>    <C>        <C>       <C>       <C>
Balance, December 31,
 1994..................... 4,273   $427   $ 2,853   $   --    $   983    $ 4,263
  Net income..............   --     --        --        --      1,670      1,670
  Net distributions to UM
   Holdings Ltd...........   --     --     (2,853)      --     (3,652)    (6,505)
                           -----   ----   -------   -------   -------    -------
Balance, December 31,
 1995..................... 4,273    427       --        --       (999)      (572)
  Net income..............   --     --        --        --      1,968      1,968
                           -----   ----   -------   -------   -------    -------
Balance, December 31,
 1996..................... 4,273    427       --        --        969      1,396
  Merger between Trotter
   Inc. and Cybex
   International, Inc..... 4,512    451    43,448    (1,442)      --      42,457
  Exercise of stock
   options................    60      6       643      (486)      --         163
  Common stock issued to
   Directors..............     9      1        98        38       --         137
  Net loss................   --     --        --        --     (5,245)    (5,245)
                           -----   ----   -------   -------   -------    -------
Balance, December 31,
 1997..................... 8,854   $885   $44,189   $(1,890)  $(4,276)   $38,908
                           =====   ====   =======   =======   =======    =======
</TABLE>
 
 
        The accompanying notes are an integral part of these statements.
 
                                      F-5
<PAGE>
 
                   CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                     -------------------------
                                                      1997     1996     1995
                                                     -------  -------  -------
<S>                                                  <C>      <C>      <C>
OPERATING ACTIVITIES:
  Net income (loss)................................. $(5,245) $ 1,968  $ 1,670
  Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
    Depreciation and amortization...................   2,324    1,269    1,487
    Deferred income taxes...........................  (2,620)    (447)     135
    Provisions for losses on accounts and lease
     receivables....................................   2,071      567      264
    Write-off of intangibles and in-process research
     and development................................   4,877      --       --
    Changes in operating assets and liabilities, net
     of effect of the Merger:
      Accounts receivable...........................  (1,084)      60   (1,806)
      Lease receivables.............................    (678)     --       --
      Inventories...................................    (602)     225      406
      Recoverable income taxes......................   1,244      --       --
      Prepaid expenses and other....................     728      253      --
      Accounts payable, accrued liabilities and
       other current liabilities....................  (3,316)     927     (665)
                                                     -------  -------  -------
    NET CASH PROVIDED BY (USED IN) OPERATING
     ACTIVITIES.....................................  (2,301)   4,822    1,491
                                                     -------  -------  -------
INVESTING ACTIVITIES:
  Purchases of property, plant and equipment........  (1,610)    (605)    (716)
  Cash acquired in merger, net of transaction costs
   of $1,645........................................     705      --       --
  Proceeds from sale of acquired assets held for
   sale, net........................................   6,837      --       --
                                                     -------  -------  -------
    NET CASH PROVIDED BY (USED IN) INVESTING
     ACTIVITIES.....................................   5,932     (605)    (716)
                                                     -------  -------  -------
FINANCING ACTIVITIES:
  Proceeds from sale of lease receivables...........   4,288      --       --
  Proceeds from long-term debt......................     --        75    9,000
  Principal payments of long-term debt..............  (2,886)  (1,406)    (200)
  Net borrowings (repayments) under revolving loan..     --    (2,125)   2,125
  Deferred financing costs..........................    (125)     --       --
  Remittances from (repayments to) UM Holdings
   Ltd..............................................     --       890   (5,190)
  Net distributions to UM Holdings Ltd..............     --       --    (6,505)
  Exercise of stock options.........................     125      --       --
                                                     -------  -------  -------
    NET CASH PROVIDED BY (USED IN) FINANCING
     ACTIVITIES.....................................   1,402   (2,566)    (770)
                                                     -------  -------  -------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS........................................   5,033   (1,651)       5
CASH AND CASH EQUIVALENTS, beginning of year........   1,656        5      --
                                                     -------  -------  -------
CASH AND CASH EQUIVALENTS, end of year.............. $ 6,689  $ 1,656  $     5
                                                     =======  =======  =======
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                      F-6
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1997
 
NOTE 1--BACKGROUND AND BASIS OF PRESENTATION
 
  Cybex International, Inc. (the "Company" or "Cybex"), a New York
Corporation, is a strength and cardiovascular equipment company which
develops, manufactures and markets premium quality, human performance products
for the commercial and consumer markets.
 
  On May 23, 1997, the merger between a wholly-owned subsidiary of 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 a subsidiary of
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 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 all periods presented,
and includes the combined results of Trotter and Cybex from the May 23, 1997
acquisition date to December 31, 1997.
 
  The purchase price of the Merger was $44,102,000, which consists of the
$42,457,000 market value of Cybex Common Stock (4,381,555 shares outstanding
multiplied by the $9.69 per share five day average share price ending December
31, 1996) and transaction costs of $1,645,000. The purchase price was
allocated based on the estimated fair market value of Cybex's net assets,
including identifiable intangibles. The Company assigned $2,500,000 to in-
process research and development and such amount was charged to operations in
the accompanying statement of operations. The Company also recorded goodwill
of $10,097,000, which is being amortized on a straight-line basis over 30
years.
 
  The purchase price allocation used in the preparation of the accompanying
financial statements is preliminary. The Company is still gathering
information and analysis, primarily related to income taxes.
 
  The following table summarizes the unaudited pro forma combined results of
operations for the years ended December 31, 1997 and 1996 as if the Merger had
occurred on January 1, 1996. The pro forma information does not purport to be
indicative of the results that would have been attained if the operations had
actually been combined during the periods presented:
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                      ------------------------
                                                         1997         1996
                                                      -----------  -----------
                                                       (IN THOUSANDS, EXCEPT
                                                        PER SHARE AMOUNTS)
                                                            (UNAUDITED)
   <S>                                                <C>          <C>
   Net sales......................................... $   116,147  $   120,528
   Operating income (loss)...........................      (1,266)       3,937
   Net income (loss).................................        (773)       2,264
   Basic and diluted earnings (loss) per share.......        (.09)         .26
   Shares used in computing earnings (loss) per
    share............................................       8,664        8,664
</TABLE>
 
  The pro forma data does not include nonrecurring charges of $7,134,000,
($5,280,000, or $.61 per share, on an after-tax basis) related to the
Sharpsville plant closure, the settlement of the Fuqua arbitration and the
write-off of acquired in-process research and development. The pro forma data
does include nonrecurring charges of $6,974,000, ($4,185,000 on an after-tax
basis or $.48 per share) related primarily to conforming to new accounting and
operating policies of the merged companies.
 
                                      F-7
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles of Consolidation
 
  The consolidated financial statements include the accounts of the Company
and its subsidiaries after elimination of all significant intercompany
accounts and transactions.
 
 Cash and cash equivalents
 
  The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
 
 Inventories
 
  Inventories are valued at the lower of cost (first in, first out) or market.
Costs include materials, labor and manufacturing overhead. Inventories are
summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                   -------------
                                                                    1997   1996
                                                                   ------ ------
     <S>                                                           <C>    <C>
     Finished goods............................................... $1,199 $  407
     Work in process..............................................  1,137    568
     Raw materials................................................  4,644  1,108
                                                                   ------ ------
                                                                   $6,980 $2,083
                                                                   ====== ======
</TABLE>
 
 Property and equipment
 
  Property and equipment are recorded at cost. Depreciation is calculated
using the straight-line method based on estimated useful lives for financial
statement purposes and various prescribed methods for tax purposes. The
estimated useful lives for financial statement purposes are 25 years for
buildings and improvements and 3 to 7 years for equipment and furniture.
 
 Impairment of Long-Lived Assets
 
  In 1995, The Financial Accounting Standards Board ("FASB") issued Statement
of Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-
Lived Assets and for Long Lived Assets to Be Disposed Of ", which the Company
adopted effective January 1, 1996. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles held and used by a company be
reviewed for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS No.
121 also requires that long-lived assets and certain identifiable intangibles
held for sale be reported at the lower of carrying amount or fair value less
cost to sell.
 
  The Company continually evaluates whether later events and circumstances
have occurred that indicate that the remaining estimated useful life of long-
lived assets and intangible assets may warrant revision or that the remaining
balance may not be recoverable. When factors indicate that such assets should
be evaluated for possible impairment, the Company uses an estimate of the
related future undiscounted cash flow in measuring whether the asset should be
written down to fair value. As of December 31, 1997, management believes that
no revision to the remaining useful lives or write-down of such assets is
required.
 
 
                                      F-8
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Goodwill
 
  Goodwill is being amortized over periods ranging from 30 to 40 years. As of
December 31, 1997 and 1996, accumulated amortization was $726,000 and
$780,000, respectively. Amortization expense for the years ended December 31,
1997, 1996 and 1995 was $293,000, $130,000 and $132,000, respectively.
 
 Other Assets
 
  Other assets include intangibles that consist principally of an exclusive
license and patent rights recorded at cost and amortized over their estimated
useful lives by the straight-line method for periods ranging from 3 to 5 years
accumulated amortization at December 31, 1997 and 1996 was $236,000 and
$1,130,000, respectively. Amortization expense was $417,000, $295,000 and
$295,000 for the years ended December 31, 1997, 1996 and 1995, respectively
 
 Fair value of Financial Instruments
 
  The company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses, and debt
instruments. The book values of cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses are considered to be
representative of their respective fair values. Based on the terms of the
Company's debt instruments that are outstanding as of December 31, 1997, the
carrying values are considered to approximate their respective fair values.
See Note 5 for the terms and carrying value of the Company's various debt
instruments.
 
 Concentration of Credit Risk and Export Sales
 
  The majority of the Company's customers are specialty fitness-related
dealers, health clubs, and consumers located in the United States. Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of trade accounts and lease receivables. No single
customer accounted for more than 10% of the Company's net sales for the year
ended December 31, 1997. For the years ended December 31, 1996 and 1995, one
customer accounted for 11% and 10% of net sales, respectively. There is no
single geographic area of significant concentration, and the Company utilizes
third-party insurers for certain trade accounts receivable. Export sales
accounted for approximately 18%, 14% and 12% of total net sales for the years
ended December 31, 1997, 1996 and 1995, respectively.
 
 Accrued Warranty Obligations
 
  The Company generally provides a three-year warranty on cardiovascular
products and a warranty on strength products that varies by components.
Warranty expense was $3,269,000, $1,968,000 and $1,564,000 for the years ended
December 31, 1997, 1996 and 1995 respectively. The accrued warranty obligation
is provided at the time of product sale based on management estimates which
are developed from historical information and certain assumptions about future
events which are subject to change.
 
 Revenue recognition
 
  Revenue is recorded when products are shipped.
 
 Advertising Costs
 
  The Company expenses advertising costs as incurred. For the years ended
December 31, 1997, 1996 and 1995, advertising expense was $2,712,000,
$1,610,000 and $1,455,000, respectively. Included in advertising
 
                                      F-9
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
expense is the cost to reimburse certain customers for a portion of their
advertising costs under a cooperative advertising program. These obligations
are accrued when the related revenues are recognized.
 
 Research and Development Costs
 
  All research and development costs are charged to expense as incurred. Such
costs were $2,616,000, $1,167,000 and $1,544,000 for the years ended December
31, 1997, 1996 and 1995, respectively, exclusive of the $2,500,000 write-off
of acquired in-process research and development. These expenditures are
included in selling, general and administrative expenses in the accompanying
consolidated statements of operations.
 
 Supplemental Cash Flow Disclosures
 
  Cash paid for interest was $1,197,000, $1,004,000 and $191,000 for the years
ended December 31, 1997, 1996 and 1995, respectively. Cash paid for income
taxes, including amounts paid to UM (see Note 7) was $1,663,000, $1,235,000
and $847,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
 
  The following table displays the net non-cash assets and liabilities that
were acquired in 1997 as a result of the Merger (in thousands):
 
<TABLE>
     <S>                                                               <C>
     Non-cash assets (liabilities):
       Accounts receivable............................................ $ 14,989
       Lease receivables..............................................    6,109
       Inventories....................................................    4,295
       Assets held for sale...........................................    6,837
       Prepaid expenses and other.....................................    5,307
       Property, plant and equipment..................................    8,810
       Intangibles and other assets...................................    1,254
       In-process research and development............................    2,500
       Goodwill.......................................................   10,097
       Deferred income taxes..........................................    8,776
       Accounts payable and accrued expenses..........................  (23,710)
       Long-term debt.................................................   (5,157)
                                                                       --------
                                                                         40,107
     Issuance of common stock.........................................   42,457
                                                                       --------
     Net cash acquired................................................ $  2,350
                                                                       ========
</TABLE>
 
 Use of Estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Income Taxes
 
  Income taxes are calculated using the liability method in accordance with
SFAS No. 109, "Accounting for Income Taxes." Accordingly, deferred tax assets
and liabilities are recognized currently for the future tax consequences
attributable to differences between the financial statement carrying amounts
of assets and liabilities
 
                                     F-10
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
and their respective tax basis. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
 
 Reclassifications
 
  Certain amounts reported in prior years have been reclassified conform to
the current year's presentation.
 
 Earnings (loss) per common share
 
  In 1997 the Company adopted SFAS No. 128 "Earnings Per Share". This
statement requires that the Company report basic and diluted earnings (loss)
per share for all periods reported. Basic earnings (loss) per share is
calculated by dividing net income (loss) by the weighted average number of
common shares outstanding for the period. Diluted earnings per share is
calculated by dividing net income by the weighted average number of common
shares outstanding for the period, adjusted for the dilutive effect of common
stock equivalents, consisting of dilutive common stock options using the
treasury stock method. Dilutive common stock options are not included in the
computation during periods with net losses as they would be anti-dilutive.
 
  The table below sets forth the reconciliation of the basic and diluted
earnings (loss) per share computations (in thousands):
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                     -------------------------
                                                       1997     1996    1995
                                                     --------  ------- -------
   <S>                                               <C>       <C>     <C>
   Net income (loss)................................ $ (5,245) $ 1,968 $ 1,670
                                                     ========  ======= =======
   Shares used in computing basic earnings (loss)
    per share.......................................    6,937    4,273   4,273
   Dilutive effect of options.......................      --       109     115
                                                     --------  ------- -------
   Shares used in computing diluted earnings (loss)
    per share.......................................    6,937    4,382   4,388
                                                     ========  ======= =======
</TABLE>
 
  For the year ended December 31, 1997, options to purchase 794,789 shares of
Common Stock at exercise prices ranging from $5.85 to $12.75 per share were
outstanding but not included in the computation of diluted loss per share as
the result would be anti-dilutive.
 
 Recent Accounting Pronouncement
 
  In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
statement was effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. SFAS No. 125
provides accounting and reporting standards based on consistent application of
a financial-components approach that focuses on control. The adoption of SFAS
No. 125 was not material to the Company's financial position and results of
operations (see Note 10).
 
 New Accounting Pronouncement
 
  In June of 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of
an Enterprise and Related Information". This statement establishes additional
standards for segment reporting in the financial statements and is effective
for fiscal years beginning after December 15, 1997. Since the Company operates
in a single line of business, management believes that SFAS No. 131 will not
have an effect on the Company's financial reporting.
 
                                     F-11
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 3--CONTINGENCY RELATED TO SALE OF BUSINESS
 
  On April 3, 1996, Cybex completed the sale of substantially all the assets
of its Lumex Division to Fuqua Enterprises, Inc. ("Fuqua") for $40,750,000 in
cash. The asset sale agreement provided for a post-closing adjustment to the
sales price based on the change in the net assets of the Lumex Division from
December 31, 1995, through the closing date. Fuqua claimed that the stated
amount of the net assets of the Lumex Division as of the closing date was
overstated by $9,300,000 and that they were not responsible for reimbursing
the Company for approximately $1,026,000, of assumed insurance liabilities.
Prior to the Merger, Cybex determined to proceed with arbitration to resolve
the dispute.
 
  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 Preacquisition Contingencies of Purchased Enterprises". A
final decision with respect to the arbitration was received on February 13,
1998, awarding a payment of $2,400,000 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,
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--UNUSUAL AND NONRECURRING MERGER-RELATED COSTS
 
  The statement of operations for the year ended December 31, 1997 includes
pre-tax charges for unusual and nonrecurring merger-related costs of
$14,108,000 ($9,465,000, or $1.36 per share on an after-tax basis), comprised
of $7,134,000 ($5,280,000 or $.76 per share, on an after-tax basis) related to
closing the Sharpsville manufacturing facility, the write-off of acquired in-
process research and development and charges related to the Fuqua arbitration,
and $6,974,000 ($4,185,000 on an after-tax basis or $.60 per share) of costs
and expenses considered by management to be unusual, or a direct result of the
Merger, and not representative of the ongoing business. These latter costs and
expenses are included in cost of sales ($2,375,000) and selling, general and
administrative expenses ($4,599,000). Such costs and expenses relate primarily
to conforming to new accounting and operating policies of the merged company,
including reorganizing the Company's domestic and international sales
operations and manufacturing initiatives aimed at achieving the full benefit
of synergies and efficiencies which the Company believes are available as a
result of the Merger.
 
NOTE 5--LONG-TERM DEBT
 
  Long-term debt consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               ----------------
                                                                1997     1996
                                                               -------  -------
     <S>                                                       <C>      <C>
     Bank term loans.......................................... $ 7,728  $ 7,800
     Industrial development revenue note......................   1,750      --
     Industrial development revenue bond......................   3,300    3,500
     Other....................................................     861       69
                                                               -------  -------
                                                                13,639   11,369
     Less--Current portion....................................  (2,954)  (1,409)
                                                               -------  -------
                                                               $10,685  $ 9,960
                                                               =======  =======
</TABLE>
 
                                     F-12
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 5--LONG-TERM DEBT (CONTINUED)
 
  On December 7, 1995, the Company entered into a Loan and Security Agreement
("the Agreement") with a commercial bank ("the Bank") that consisted of a
$3,000,000 revolving loan and a $9,000,000 term loan. On June 16, 1997, the
Company amended the Agreement to renew and increase funds available under the
revolver to $12,000,000. The revolver matures on December 31, 2000. Borrowings
under the revolver bear interest at the Company's option of either the prime
rate or LIBOR plus 1.25% to 2.25%, adjusted up or down based on the Company's
level of compliance with certain financial covenants, as defined. The average
outstanding revolver balance during 1997 and 1996 was approximately $2,011,000
and $1,011,000, respectively, and the weighted average interest rate in 1997
and 1996 was 7.67% and 8.2%, respectively. Interest expense on the revolver
was $177,000, and $88,000 for the years ended December 31, 1997 and 1996
respectively. No amounts were outstanding under the revolver at December 31,
1997 and 1996 and at December 31, 1997, $11,020,000 was available as $980,000
in stand-by letters of credit were outstanding in connection with the
Company's workers' compensation insurance program.
 
  Borrowings under the term loan bear interest at the Company's option at
either the prime rate or LIBOR plus 1.25% to 2.25%, adjusted up or down based
on the Company's level of compliance with certain financial covenants, as
defined. The interest rate at December 31, 1997 was 7.53%. In January 1996,
the Company entered into an interest rate cap agreement which, in effect fixed
the LIBOR rate at 5.625% on the term loan through January 1999. The term loan
matures on December 31, 2000. As of December 31, 1997 and 1996, $6,600,000 and
$7,200,000 were outstanding under the term loan, respectively. Interest
expense on the term loan was $568,000, and $723,000 for the years ended
December 31, 1997 and 1996, respectively.
 
  Pursuant to the Agreement, the Company is required to maintain certain
financial and non-financial covenants, as defined, including minimum working
capital, tangible net worth and certain liquidity ratios, in addition to
restrictions on dividends and capital expenditures. Additionally, the Company
is limited in its ability to pay cash dividends to 50% of its net income.
Borrowings under the Agreement are secured by substantially all of the
Company's assets with certain exceptions.
 
  In December 1997, an industrial development revenue note assumed in the
Merger was assigned to the Bank. The industrial development revenue note was
used to construct and equip the manufacturing facility in Owatonna, Minnesota.
The note is collateralized by land, building and equipment, bears interest at
62.5% of the bank's prime rate and requires annual principal payments of
$175,000 through 2002 with a final payment of $875,000 due on January 1, 2004.
The interest rate of the note at December 31, 1997 was 5.31%. Interest expense
on the note was $57,000 for the year ended December 31, 1997.
 
  In 1992, an industrial development revenue bond provided the funds to
construct and equip the manufacturing and administrative facility in Medway,
Massachusetts. The bonds bear interest at a rate that resets weekly (3.60% at
December 31, 1997) with interest payable monthly and principal payable
annually through May 2007. Interest expense on the bonds was $194,000,
$190,000 and $191,000 for the years ended December 31, 1997, 1996 and 1995
respectively. A letter of credit in the amount of $3,579,000 has been issued
on behalf of the Company for the benefit of the bondholders to guarantee
principal and interest payments.
 
  In connection with the Merger, the Company assumed a bank term loan in the
original amount of $2,465,000 pursuant to a five year, 9.48% fixed rate term
loan agreement. The term loan is payable in equal monthly principal
installments plus interest through March 2001. The term loan is secured by
specific lease receivables. As of December 31, 1997, $1,128,000 was
outstanding under this term loan. Interest expense on the term loan was
$84,000 for the year ended December 31, 1997.
 
  In connection with the Merger, the Company assumed an 8.9% note payable to a
finance company in the original amount of $1,051,000. The note is payable in
equal monthly payments of principal and interest of $22,000 through November
2001. The note is collateralized by certain manufacturing equipment. Interest
expense on the note was $50,000 for the year ended December 31, 1997.
 
                                     F-13
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 5--LONG-TERM DEBT (CONTINUED)
 
  At December 31, 1997, long-term debt maturities are as follows (in
thousands):
 
<TABLE>
     <S>                                                                 <C>
     1998............................................................... $ 2,954
     1999...............................................................   2,927
     2000...............................................................   3,797
     2001...............................................................     712
     2002...............................................................     475
     Thereafter.........................................................   2,774
                                                                         -------
                                                                         $13,639
                                                                         =======
</TABLE>
 
NOTE 6--STOCKHOLDERS' EQUITY
 
 STOCK OPTIONS
 
 1993 Stock Option Plan
 
  In August 1993, Trotter established a nonqualified stock option plan
covering certain key employees and directors. The options cover the purchase
of common stock of the Company at exercise prices initially set above current
fair value as determined by the Board of Directors based in part on
independent appraisals. In connection with the Merger, all options outstanding
under this plan were converted into options under the 1995 Omnibus Incentive
Plan discussed below. Accordingly, Trotter options have been adjusted
retroactively to give effect to the exchange ratio implied in the Merger (see
Note 1).
 
 1995 Omnibus Incentive Plan
 
  Cybex's Omnibus Incentive Plan ("Omnibus Plan"), as amended, is designed to
provide incentives that will attract and retain individuals key to the success
of the Company through direct or indirect ownership of the Company's Common
Stock. The Omnibus Plan provides for the granting of stock options, stock
appreciation rights, stock awards, performance awards and bonus stock purchase
awards. The Company has reserved 750,000 shares of Common Stock for issuance
pursuant to the Plan. The terms and conditions of each award are determined by
a committee of the Board of Directors of the Company. Under the Omnibus Plan,
the committee may grant either incentive or nonqualified stock options with a
term not to exceed ten years from the grant date and at an exercise price per
share that the committee may determine (which in the case of incentive stock
options may not be less than the fair market value of a share of the Company's
Common Stock on the date of grant).
 
 1987 Stock Option Plan
 
  The terms and conditions of grants of stock options under the 1987 Stock
Option Plan were determined by a committee of the Board of Directors. Options
outstanding under this plan were granted at exercise prices which were not
less than fair market value on the date of grant and were generally
exercisable over a period not to exceed ten years from the original date of
grant. No future grants may be made under this plan.
 
                                     F-14
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
 
  Information with respect to options under the Company's plans is as follows:
 
<TABLE>
<CAPTION>
                                                                        WEIGHTED
                                                 NUMBER     RANGE OF    AVERAGE
                                                   OF       EXERCISE    EXERCISE
                                                 SHARES       PRICE      PRICE
                                                 -------  ------------- --------
   <S>                                           <C>      <C>           <C>
   Outstanding at December 31, 1994............. 403,270          $5.85  $ 5.85
     Forfeited.................................. (24,036)          5.85    5.85
                                                 -------  -------------  ------
   Outstanding at December 31, 1995............. 379,234           5.85    5.85
     Granted....................................   4,273           5.85    5.85
     Forfeited.................................. (10,683)          5.85    5.85
                                                 -------  -------------  ------
   Outstanding at December 31, 1996............. 372,824           5.85    5.85
     Merger..................................... 131,050     9.38-12.75   11.00
     Granted.................................... 373,096    10.38-11.75   10.96
     Exercised.................................. (60,681)    5.85-10.00    7.22
     Forfeited.................................. (21,500)    9.38-12.75   12.46
                                                 -------  -------------  ------
   Outstanding at December 31, 1997............. 794,789  $ 5.85-$12.75  $ 8.81
                                                 =======  =============  ======
</TABLE>
 
  At December 31, 1997, 485,788 options with a weighted average exercise price
of $7.37 were exercisable and 119,345 options were available for future
grants. The options generally vest over a five year period except for an
option to purchase 238,000 shares issued to the Company's President in 1997
which is exercisable in June 2004, or sooner if certain performance criteria
is met. The weighted average remaining contractual life of outstanding options
at December 31, 1997 was 7.1 years.
 
  The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" and the related interpretations in accounting
for its stock option plans. Had compensation cost for the plans been
determined based upon the fair value of the options as prescribed by SFAS No.
123, "Accounting for Stock Based Compensation", the Company's net income
(loss) and earnings (loss) per share would have been as follows:
 
<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                             ----------------------------------
                                                1997         1996       1995
                                             -----------  ---------- ----------
   <S>                                       <C>          <C>        <C>
   Net income (loss):
     As Reported............................ $(5,245,000) $1,968,000 $1,670,000
                                             ===========  ========== ==========
     Pro Forma.............................. $(5,426,000) $1,809,000 $1,670,000
                                             ===========  ========== ==========
   Basic earnings (loss) per share:
     As Reported............................ $      (.76) $      .46 $      .39
                                             ===========  ========== ==========
     Pro Forma.............................. $      (.78) $      .42 $      .39
                                             ===========  ========== ==========
   Diluted earnings (loss) per share:
     As Reported............................ $      (.76) $      .45 $      .38
                                             ===========  ========== ==========
     Pro Forma.............................. $      (.78) $      .41 $      .38
                                             ===========  ========== ==========
</TABLE>
 
                                     F-15
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
 
  The weighted average fair value of each stock option granted during the
years ended December 31, 1997 and 1996 was $7.35 and $2.62, respectively. No
options were granted during the year ended December 31, 1995. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions:
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                         -----------------------
                                                            1997        1996
                                                         ----------- -----------
     <S>                                                 <C>         <C>
        Risk free interest rate.........................    6.3%        6.3%
        Expected dividend yield.........................     --          --
        Expected life...................................   7 years     3 years
        Expected volatility.............................     60%         --
</TABLE>
 
  The above pro forma amounts may not be indicative of future amounts because
option grants prior to January 1, 1995, have not been included and because
future option grants are expected.
 
 STOCK RETAINER PLAN FOR NONEMPLOYEE DIRECTORS
 
  The Company's Amended and Restated Stock Retainer Plan for Nonemployee
Directors ("Retainer Plan"), provides that each nonemployee director will
receive 70% of their annual retainer in shares of Common Stock of the Company.
The number of shares to be issued is computed by dividing the applicable
amount of the annual retainer to be paid in stock by the fair market value of
a common share on January 1 of each calendar year. Up to 35,000 shares of
Common Stock may be issued pursuant to the Retainer Plan. The issuance of
shares in payment of annual retainers results in expense based on the fair
market value of such shares. As of December 31, 1997, 10,762 shares of Common
Stock are available for issuance under the Retainer Plan.
 
 LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN
 
  The Company's leveraged Employee Stock Ownership Plan (ESOP) is a
noncontributory plan covering substantially all employees meeting a one year
length of service requirement. The plan is designed to give employees a
proprietary interest in the Company through Common Stock ownership. At
December 31, 1997, no unallocated shares were held by the ESOP.
 
 SHAREHOLDERS' RIGHTS PLAN
 
  The Company's Shareholders Rights Plan (the "Rights Plan") was adopted in
May 1988 to insure that any acquisition of the Company would be on terms that
are fair to and in the best interest of all shareholders. Under the Rights
Plan, holders of Common Stock are entitled to receive one right, as defined by
the Rights Plan, for each share of Common Stock held. Separate rights
certificates would be issued and become exercisable in the event an acquiring
party accumulates 15% or more of the Company's Common Stock or announces an
offer to acquire 30% or more of the Common Stock. The rights expire in May
1998 and may be redeemed by the Company at a price of $.05 per right at any
time up to ten days after they become exercisable (subject to extension in
certain circumstances) or in connection with an approved transaction as
defined in the Rights Plan.
 
                                     F-16
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 7--INCOME TAXES
 
  The income tax provision (benefit) consists of the following:
 
<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                            -----------------------------------
                                               1997         1996        1995
                                            -----------  ----------  ----------
   <S>                                      <C>          <C>         <C>
   Current provision:
     Federal............................... $   823,000  $1,423,000  $  847,000
     State.................................     211,000     368,000     189,000
                                            -----------  ----------  ----------
                                              1,034,000   1,791,000   1,036,000
                                            -----------  ----------  ----------
   Deferred provision (benefit):
     Federal...............................  (2,070,000)   (336,000)    101,000
     State.................................    (550,000)   (111,000)     34,000
                                            -----------  ----------  ----------
                                             (2,620,000)   (447,000)    135,000
                                            -----------  ----------  ----------
                                            $(1,586,000) $1,344,000  $1,171,000
                                            ===========  ==========  ==========
</TABLE>
 
  The reconciliation between income taxes at the federal statutory rate and
the amount recorded in the accompanying consolidated financial statements is
as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                     1997      1996     1995
                                                   --------   -------  -------
   <S>                                             <C>        <C>      <C>
   Tax at statutory rate.........................     (34.0)%    34.0%    34.0%
   State income taxes, net of federal tax
    benefit......................................      (3.3)      5.1      5.1
   Acquired in-process research and development..      12.4       --       --
   Other.........................................       1.7       1.5      2.1
                                                   --------   -------  -------
                                                      (23.2)%    40.6%    41.2%
                                                   ========   =======  =======
</TABLE>
 
  The significant components of the Company's net deferred tax assets are as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                 --------------
                                                                  1997    1996
                                                                 -------  -----
     <S>                                                         <C>      <C>
     Deferred tax assets:
       Net operating and capital loss carryforwards............. $ 7,715  $ --
       Litigation reserves......................................   1,427    --
       Warranty reserves........................................   1,310    676
       Other accruals and reserves..............................   1,579    135
       Bad debt and lease reserves..............................   1,234    179
       Depreciation.............................................    (613)    55
       Intangible amortization..................................     429   (161)
       Other--net...............................................     192     (4)
                                                                 -------  -----
                                                                  13,273    880
     Less--Valuation allowance..................................    (400)   --
                                                                 -------  -----
                                                                 $12,873  $ 880
                                                                 =======  =====
</TABLE>
 
  A valuation allowance of $400,000 at December 31, 1997 has been provided due
to uncertainties surrounding the realizability of certain acquired capital
loss carryforwards. Management believes that it is more likely than not that
future taxable income will be sufficient to realize the net deferred tax
asset. Approximately $38,000,000 of future taxable income is needed to fully
realize the net deferred tax asset recorded at December
 
                                     F-17
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 7--INCOME TAXES (CONTINUED)
 
31, 1997. If the capital loss carryforwards are utilized in the future, the
corresponding valuation allowance decrease will reduce goodwill.
 
  At December 31, 1997, the Company had federal net operating and capital loss
carryforwards of approximately $19,814,000, which begin to expire in 2011,
federal AMT credit carryforwards of $269,000, which do not expire and federal
tax credit carryforwards of $269,000, which begin to expire in 2008.
 
  Prior to the Merger, Trotter was included in the consolidated federal income
tax return of UM under a tax-sharing agreement pursuant to which Trotter paid
UM amounts equal to the taxes calculated on a separate return basis. Trotter
paid $1,582,000, $1,235,000 and $847,000 to UM for federal income taxes for
the period from January 1, 1997 to May 23, 1997 and for the years ended
December 31, 1996 and 1995, respectively.
 
NOTE 8--BENEFIT PLANS
 
  Subsequent to the Merger, Trotter's employees (previously included in UM's
401k profit sharing plan) were added to Cybex's defined contribution
retirement plan ("Retirement Plan"). The Company currently matches 100% of the
first 2% of the employee's eligible compensation contributions and 50% of the
next 4% of the employee's eligible compensation contributions. Contributions
by the Company to the retirement plans were $230,000, $97,000 and $87,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. Additionally,
the Company may make discretionary contributions to the Retirement Plan. No
discretionary contributions were made for the year ended December 31, 1997.
 
NOTE 9--RELATED PARTY TRANSACTIONS
 
  For the year ended December 31, 1997, the Company paid $227,000, to a law
firm of which one of the directors of the Company is a member.
 
NOTE 10--COMMERCIAL LEASING
 
  Subsequent to the Merger, the Company continued Cybex's lease financing
program for selected products to its commercial customers through the wholly-
owned Cybex leasing subsidiary. Such leases are generally accounted for as
sales-type leases and are for terms of three to five years at which time title
transfers to the lessee. Leases are secured by the equipment financed, often
with additional security in the form of other equipment liens, letters of
credit, cash down payments and personal guarantees.
 
  At December 31, 1997, lease receivables were comprised of the following (in
thousands):
 
<TABLE>
     <S>                                                                 <C>
     Minimum lease payments receivable.................................. $2,551
     Less--Unearned interest income.....................................   (289)
     Less--Allowance for uncollectible accounts.........................    (63)
                                                                         ------
                                                                         $2,199
                                                                         ======
</TABLE>
 
  Minimum lease payments receivable as of December 31, 1997 are due as follows
(in thousands):
 
<TABLE>
             <S>                                <C>
             1998.............................. $1,287
             1999..............................    750
             2000..............................    340
             2001..............................     91
             2002..............................     61
             Thereafter........................     67
                                                ------
                                                $2,551
                                                ======
</TABLE>
 
                                     F-18
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 10--COMMERCIAL LEASING (CONTINUED)
 
  The Company provided lease financing for $4,604,000 of its sales for the
period from May 23, 1997 to December 31, 1997. Income before income taxes from
leasing activities was $130,000 for the period from May 23, 1997 to December
31, 1997.
 
  The Company periodically enters into agreements, generally subject to
limited recourse, to sell lease receivables to financial institutions. For the
year ended December 31, 1997, the Company generated net proceeds of $4,288,000
from the sale of lease receivables. Under the terms of these agreements the
Company continues to bill and collect the monthly lease payments which are
then remitted to the respective financial institutions each month. The Company
is subject to recourse provisions which may require it to repurchase or
replace leases in default. In return, the Company receives the collateral
position in the defaulted leases. The recourse provisions, which range from
15% to 100% of the outstanding net lease receivables, may be reduced annually
based upon the remaining outstanding lease payment streams. At December 31,
1997, the maximum contingent liability under these recourse provisions was
approximately $5,300,000. A reserve for estimated losses under recourse
provisions of $620,000 has been recorded based upon historical and industry
experience, and is included in accrued liabilities in the accompanying
consolidated balance sheet.
 
NOTE 11--ACCRUED LIABILITIES
 
  Accrued liabilities consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                 --------------
                                                                  1997    1996
                                                                 ------- ------
     <S>                                                         <C>     <C>
     Customer deposits.......................................... $ 1,563 $  --
     Warranty reserves..........................................   2,465  1,042
     Self insurance reserves....................................   2,842    184
     Severance and merger-related reserves......................   2,328    --
     Fuqua reserve..............................................   2,385    --
     Other......................................................   6,722  1,432
                                                                 ------- ------
                                                                 $18,305 $2,658
                                                                 ======= ======
</TABLE>
 
NOTE 12--PROPERTY PLANT AND EQUIPMENT
 
  Property, plant and equipment consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               ----------------
                                                                1997     1996
                                                               -------  -------
     <S>                                                       <C>      <C>
     Land, building and improvements.......................... $ 7,646  $ 4,176
     Equipment and furniture..................................  11,644    6,195
                                                               -------  -------
                                                                19,290   10,371
     Less--Accumulated depreciation...........................  (6,187)  (5,646)
                                                               -------  -------
                                                               $13,103  $ 4,725
                                                               =======  =======
</TABLE>
 
  Depreciation expense was $1,614,000, $844,000 and $1,060,000 for the years
ended December 31, 1997, 1996 and 1995 respectively.
 
                                     F-19
<PAGE>
 
                  CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 13--COMMITMENTS AND CONTINGENCIES
 
 Operating Lease Commitments
 
  The Company has lease commitments expiring at various dates through 2002,
principally for equipment under noncancelable operating leases. Future minimum
payments under these leases at December 31, 1997 are as follows (in
thousands):
 
<TABLE>
             <S>                                  <C>
             1998................................ $263
             1999................................  168
             Thereafter..........................  169
                                                  ----
                                                  $600
                                                  ====
</TABLE>
 
  Rent expense under all operating leases for the years ended December 31,
1997, 1996 and 1995 was $352,000, $291,000 and $214,000, respectively.
 
 Risk Retention
 
  The Company's risk retention amounts per occurrence are as follows:
 
<TABLE>
     <S>                                                     <C>
     Workers compensation................................... $250,000--$500,000
     Product liability......................................   50,000
     Employee medical and hospitalization...................   50,000--70,000
</TABLE>
 
  The Company has excess primary coverage on a per-claim and aggregate basis
beyond the deductible levels and also maintains umbrella policies to
supplement the primary liability coverage. Reserves for self-insured
retention, including claims incurred but not yet reported, are included in
accrued liabilities in the accompanying balance sheets, based on management's
review of outstanding claims and claims history and consultation with its
third-party claims administrators. Actual results may vary from management
estimates.
 
 Product Liability
 
  Due to the nature of its products, the Company is involved in certain
pending product liability claims and lawsuits. The Company maintains product
liability insurance coverage subject to deductibles. Management believes that
the outcome of known product liability claims will not have a material effect
on its financial position or results of operations.
 
 Fuqua litigation
 
  See Note 3 for a description of the Fuqua litigation.
 
 Kirila et al v. Cybex International, Inc., et al
 
  In May 1997, an action was commenced against the Company in regard to the
sale of a strength equipment company to the Company. The Company has not
received a formal indication of the claims made or relief sought in the
proceedings or the factual basis alleged to underlie the proceedings. The
Company intends to vigorously defend this matter.
 
 Other Litigation
 
  The Company is involved in certain other legal actions and claims arising in
the ordinary course of business. Management believes that the outcome of such
litigation and claims will not have a material adverse effect on its financial
position or results of operations.
 
                                     F-20
<PAGE>
 
                   CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES
 
                 CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
 
                                  SCHEDULE II
 
<TABLE>
<CAPTION>
                          BALANCE AT
                         BEGINNING OF                           BALANCE AT END
DESCRIPTION                 PERIOD    ADDITIONS     DEDUCTIONS    OF PERIOD
-----------              ------------ ----------    ----------  --------------
<S>                      <C>          <C>           <C>         <C>
For the year ended
 December 31, 1997
  Allowance for doubtful
   accounts.............   $477,000   $2,808,000(1) $(670,000)    $2,615,000
                           ========   ==========    =========     ==========
For the year ended
 December 31, 1996
  Allowance for doubtful
   accounts.............   $305,000   $  567,000    $(395,000)    $  477,000
                           ========   ==========    =========     ==========
For the year ended
 December 31, 1995
  Allowance for doubtful
   accounts.............   $238,000   $  264,000    $(197,000)    $  305,000
                           ========   ==========    =========     ==========
</TABLE>
--------
(1) Includes allowance for doubtful accounts of $1,037,000 assumed in the
    Merger.
 
                                      S-1
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
  Not applicable.
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  Information regarding the Directors of the Company and compliance with
Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by
reference from the sections captioned "Election of Directors" and "Security
Ownership of Certain Beneficial Owners and Management--Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's definitive proxy
statement for its 1998 Annual Meeting of Shareholders (the "Proxy Statement").
For information concerning the executive officers of the Company, see
"Executive Officers of the Registrant" in Part I of this Report.
 
ITEM 11. EXECUTIVE COMPENSATION
 
  The information set forth under the captions "Executive Compensation" and
"Election of Directors--Compensation of Directors" in the Proxy Statement is
incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  The information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  The information set forth under the captions "Election of Directors" in the
Proxy Statement is incorporated herein by reference.
 
                                     II-1
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a) The following documents are filed or incorporated by reference as a part of
this report:
 
(1) (2) EXHIBITS
 
    27       Financial Statements and Schedules See Index to Consolidated
             Financial Statements and Schedules (Part II--Item 8).
 
(3)EXHIBITS
 
    2(a)     Asset Sale Agreement, dated as of March 13, 1996, by and
             between the Company, MUL Acquisition Corp. I, MUL Acquisition
             Corp. II and Fuqua Enterprises, Inc., incorporated by reference
             to Exhibit 2.1 to the Company's Current Report on Form 8-K,
             dated April 3, 1996.
 
    2(b)(i)  Agreement and Plan of Merger, dated as of December 27, 1996, by
             and among the Company, Trotter Inc., and CAT'S TAIL, INC.,
             incorporated by reference to Exhibit 2(b)(i) to the Company's
             Annual Report on Form 10-K for the year ended December 31, 1997
             (the "1997 10-K").
 
    2(b)(ii) First Amendment to Agreement and Plan of Merger, dated as of
             January 16, 1997, to Agreement and Plan of Merger, dated as of
             December 27, 1996, by and among the Company, Trotter Inc., and
             CATS TAIL, INC., incorporated by reference to Exhibit 2(b)(ii)
             to the 1997 10-K.
 
    3(a)(1)  Restated Certificate of Incorporation of the Company, dated May
             20, 1988, incorporated by reference to Exhibit 3(a)(1) to the
             Company's Quarterly Report on Form 10-Q for the quarter ended
             June 30, 1996 (the "June 1996-10-Q").
 
    3(a)(2)  Certificate of Amendment of the Certificate of Incorporation of
             the Company, dated May 30, 1988, incorporated by reference to
             Exhibit 3(a)(2) to the June 1996 10-Q.
 
    3(a)(3)  Certificate of Amendment of the Certificate of Incorporation of
             the Company, dated August 7, 1996, incorporated by reference to
             Exhibit 3(a)(3) to the June 1996 10-Q.
 
    3(a)(4)  Certificate of Amendment of the Certificate of Incorporation of
             the Company, dated May 27, 1997, incorporated by reference to
             Exhibit 3.1 to the Quarterly Report on Form 10-Q for the
             quarter ended June 30, 1997 (the "June 1997 10-Q").
 
    3(b)     By-Laws of the Company, as amended, incorporated by reference
             to Exhibit 3(b) to the Company's Annual Report on Form 10-K for
             the year ended December 31, 1987.
 
    4(i)(a)  Rights Agreement dated as of May 23, 1988 between the Company
             and Registrar & Transfer Company, incorporated reference to
             Exhibit 4.1 to the Company's Current Report on Form 8-K dated
             May 18, 1988 (the "May 1988 8-K").
 
    4(i)(b)  Amendment to Rights Agreement dated as of March 15, 1989
             between the Company and Registrar & Transfer Company,
             incorporated by reference to Exhibit 4.1 to the Company's
             Current Report on Form 8-K dated March 15, 1989.
 
    10(i)(a) Loan Agreement dated December 28, 1983 between City of
             Owatonna, Minnesota and the Company, incorporated by reference
             to Exhibit 10(i)(b) to the 1983 10-K.
 
    10(i)(b) Combination Mortgage, Security Agreement and Fixture Financing
             Statement dated December 28, 1983 between the Company,
             Mortgagor, and Norwest Bank Owatonna, National Association,
             Mortgagee, incorporated by reference to Exhibit 10(i)(c) to
             the 1983 10-K.
 
                                     II-2
<PAGE>
 
    10(i)(c)   Construction Loan Agreement dated December 28, 1983 by and
               between the Company and Norwest Bank, National Association, and
               the City of Owatonna, incorporated by reference to Exhibit,
               10(i)(d) to the 1983 10-K.
               
    10(i)(d)   Assignment of Rents and Leases dated December 28, 1983 between
               the Company and Norwest Bank Owatonna, National Association,
               incorporated by reference to Exhibit 10(i)(e) to the 1983 10-K.
 
    10(i)(e)   Form of City of Owatonna Industrial Development Revenue Note in
               the principal amount of $3,500,000 dated December 1983,
               incorporated by reference to Exhibit 10(i)(f) to the 1983 10-K.
 
    10(i)(f)   Amendment to Industrial Development Revenue Note (Lumex, Inc.
               Project) and Loan Agreement dated December 17, 1997 (filed
               herewith).
               
    10(i)(g)   Assignment Agreement from Norwest Bank Minnesota South, N.A.,
               successor in interest to Norwest Bank, Owatonna N.A., to
               Summit Bank (filed herewith).
 
    10(ii)     Lumex, Inc. Amended and Restated 1987 Stock Option Plan,
               incorporated by reference to Exhibit 28 to the Company's
               Registration Statement on Form S-8 (No. 33-48124), filed May
               26, 1992.*
 
    10(iii)(a) Amended and Restated Loan and Security Agreement, dated June
               16, 1997, among Summit Bank, the Company and the Company's
               subsidiaries, incorporated by reference to Exhibit 10.3(a)
               to the June, 1997 10-Q.
 
    10(iii)(b) First Amendment to Amended and Restated Loan and Security
               Agreement, dated July 15, 1997, among Summit Bank, the
               Company and the Company's subsidiaries, incorporated by
               reference to Exhibit 10.3(b) to the June, 1997 10-Q.
 
    10(iii)(c) Second Amendment to Amended and Restated Loan and Security
               Agreement, dated August 11, 1997, among Summit Bank, the
               Company and the Company's subsidiaries, incorporated by
               reference to Exhibit 10.1 to the Company's Quarterly Report
               on Form 10-Q for the quarter ended September 27, 1997.
 
    10(iii)(d) Third Amendment to Amended and Restated Loan and Security
               Agreement, dated December 17, 1997, among Summit Bank, the
               Company and the Company's subsidiaries (filed herewith).
 
    10(iv)     Distributor Agreement dated June 5, 1997 among the Company,
               Trotter, Inc., Forza Fitness Equipment, Ltd. and Forza Group,
               Ltd., incorporated by reference to Exhibit 10.1 to the June,
               1997 10-Q.
 
    10(v)      Loan Agreement, dated as of July 30, 1993, among the Company,
               CYBEX Financial Corp., and Chemical Bank, incorporated by
               reference to Exhibit 10(vi) to the 1993 10-K.
 
    10(vi)     First Amendment to Loan Agreement, dated as of November 26,
               1993, among the Company, CYBEX Financial Corp., and Chemical
               Bank, incorporated by reference to Exhibit 10(vii) to the 1993
               10-K.
 
    10(vii)    Asset Purchase Agreement between Henley Healthcare, Inc. and
               the Company, dated September 30, 1997 (filed herewith).
 
    10(viii)   Loan Agreement, dated as of May 18, 1994, among the Company,
               CYBEX Financial Corp. and European American Bank, incorporated
               by reference to Exhibit 10(ix) to the Annual Report on Form
               10-K for the year ended December 31, 1994 (the "1994 10-K").
 
    10(ix)     Ultimate Net Loss Vendor Agreement with Portfolio Purchase,
               dated December 30, 1994, among the Company, CYBEX Financial
               Corp. and C.I.T., incorporated by reference to Exhibit 10(x) to
               the 1994 10-K.
 
                                     II-3
<PAGE>
 
    10(x)    Portfolio Purchase Agreement, dated December 30, 1994, among
             the Company, CYBEX Financial Corp. and European American Bank,
             incorporated by reference to Exhibit 10(xi) to the 1994 10-K.
 
    10(xi)   Amended and Restated 1995 Stock Retainer Plan for Non-Employee
             Directors of the Company (filed herewith).*
 
    10(xii)  1995 Omnibus Incentive Plan, as amended, incorporated by
             reference by Exhibit 10(xx) to the Company's Registration
             Statement on Form S-8 (No. 333-29045), filed June 12, 1997.*
 
    10(xiii) Covenant Not to Compete, dated as of April 3, 1996, by and
             among the Company, Lumex Medical Products, Inc. (f/k/a MUL
             Acquisition Corp. I), MUL Acquisition Corp. II, and Fuqua
             Enterprises, Inc., incorporated by reference to Exhibit 10
             (xvii) to the June 1996 10-Q.
 
    10(xiv)  Management Employment Agreement between the Company and Peter
             C. Haines, incorporated by reference to Exhibit 10.2 to the
             June, 1997 10-Q.*
 
    21       Subsidiaries of the Registrant. (filed herewith)
 
    23.1     Consent of Independent Public Accountants - Arthur Andersen LLP
             (filed herewith)
 
    27       Financial Data Schedule. (filed herewith)
--------
* Executive Compensation Plans and Arrangements
 
(b)Reports on Form 8-K
 
               No reports on Form 8-K have been filed during the quarter ended
               December 31, 1997.
 
                                     II-4
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
                                          _____________________________________
                                                      (REGISTRANT)
 
  March 26,                                         /s/ Peter C. Haines
    1998                                  By: _________________________________
_____________                                            PRESIDENT
   (DATE)
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
 
  March 26,                                         /s/ Peter C. Haines
    1998                                  By: _________________________________
_____________                                PETER HAINES, PRESIDENT AND CHIEF
   (DATE)                                      EXECUTIVE OFFICER (PRINCIPAL
                                                    EXECUTIVE OFFICER)
 
  March 26,                                        /s/ William S. Hurley
    1998                                  By: _________________________________
_____________                                WILLIAM S. HURLEY, VICE PRESIDENT
   (DATE)                                       AND CHIEF FINANCIAL OFFICER
                                                 (PRINCIPAL FINANCIAL AND
                                                    ACCOUNTING OFFICER)
 
  March 26,                                         /s/ John Aglialoro
    1998                                  By: _________________________________
_____________                                    JOHN AGLIALORO, DIRECTOR
   (DATE)
 
  March 26,                                         /s/ James H. Carll
    1998                                  By: _________________________________
_____________                                    JAMES H. CARLL, DIRECTOR
   (DATE)
 
  March 26,                                           /s/ Joan Carter
    1998                                  By: _________________________________
_____________                                      JOAN CARTER, DIRECTOR
   (DATE)
 
  March 26,                                        /s/ Kay Knight Clarke
    1998                                  By: _________________________________
_____________                                   KAY KNIGHT CLARKE, DIRECTOR
   (DATE)
 
  March 26,                                      /s/ Arthur W. Hicks, Jr.
    1998                                  By: _________________________________
_____________                                 ARTHUR W. HICKS, JR., DIRECTOR
   (DATE)
 
  March 26,                                            /s/ Jerry Lee
    1998                                  By: _________________________________
_____________                                       JERRY LEE, DIRECTOR
   (DATE)
 
  March 26,                                         /s/ Thomas W. Kahle
    1998                                  By: _________________________________
_____________                                    THOMAS W. KAHLE, DIRECTOR
   (DATE)
 
  March 26,                                       /s/ Alan H. Weingarten
    1998                                  By: _________________________________
_____________                                  ALAN H. WEINGARTEN, DIRECTOR
   (DATE)
 
                                     II-5