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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006.

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to
.

Commission file number 0-4538



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Cybex International, Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|New York                                                       |  | 11-1731581                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                        |  |           
|--------------------------------------- |  | ----------
|10 Trotter Drive, Medway, Massachusetts |  | 02053     
|(Address of principal executive office) |  | (Zip Code)

(508) 533-4300

Registrants telephone number, including area code



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):



|                         |  |                    |  |                          |  |  |  |  |  | 
|------------------------ |  | ------------------ |  | ------------------------ |  |  |  |  |  | 
|Large accelerated filer ̈ |  | Accelerated filer ̈ |  | Non-accelerated filer  x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange
Act).     Yes ̈No  x

On November 13, 2006, the registrant had outstanding 17,191,649 shares of common stock, par value $0.10 per share, which is the registrants only class of
common stock.



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##### Table of Contents

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX



|           |  |                                                                                                               |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                               |  | Page
|PART I.    |  | FINANCIAL INFORMATION                                                                                         |  |     
|           |  |                                                                                                              
|           |  | Item 1.     Financial Statements (unaudited)                                                                  |  |     
|           |  |                                                                                                              
|           |  | Consolidated Statements of Operations Three and nine months ended September 30, 2006 and September 24, 2005 |  | 3   
|           |  |                                                                                                              
|           |  | Consolidated Balance Sheets  September 30, 2006 and December 31, 2005                                       |  | 4   
|           |  |                                                                                                              
|           |  | Consolidated Statements of Cash Flows Nine months ended September 30, 2006 and September 24, 2005           |  | 5   
|           |  |                                                                                                              
|           |  | Notes to Consolidated Financial Statements                                                                    |  | 6   
|           |  |                                                                                                              
|           |  | Item 2.     Managements Discussion and Analysis of Financial Condition and Results of Operations             |  | 16  
|           |  |                                                                                                              
|           |  | Item 3.     Quantitative and Qualitative Disclosures about Market Risk                                        |  | 21  
|           |  |                                                                                                              
|           |  | Item 4.     Controls and Procedures                                                                           |  | 22  
|           |  |                                                                                                              
|PART II.   |  | OTHER INFORMATION                                                                                             |  |     
|           |  |                                                                                                              
|           |  | Item 1.     Legal Proceedings                                                                                 |  | 23  
|           |  |                                                                                                              
|           |  | Item 1A.  Risk Factors                                                                                        |  | 23  
|           |  |                                                                                                              
|           |  | Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds                                       |  | 23  
|           |  |                                                                                                              
|           |  | Item 3.     Defaults Upon Senior Securities                                                                   |  | 23  
|           |  |                                                                                                              
|           |  | Item 4.     Submission of Matters to a Vote of Security Holders                                               |  | 23  
|           |  |                                                                                                              
|           |  | Item 5.     Other Information                                                                                 |  | 23  
|           |  |                                                                                                              
|           |  | Item 6.     Exhibits                                                                                          |  | 24  
|           |  |                                                                                                              
|Signatures |  |                                                                                                               |  | 25  



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|-------------------------------------------- |  | ------------------ | ------ | ----------------- | ----------------- | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                             |  | Three Months Ended |        |                   | Nine Months Ended |       
|                                             |  | September 30,2006  |        | September 24,2005 |                   |        | September 30,2006 |  |   | September 24,2005 |  
|Net sales                                    |  | $                  | 29,849 |                   | $                 | 26,690 |                   |  | $ | 88,712            |   |  | $ | 78,646 |  
|Cost of sales                                |  |                    | 19,269 |                   |                   | 17,143 |                   |  |   | 56,719            |   |  |   | 50,593 |  
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|Gross profit                                 |  |                    | 10,580 |                   |                   | 9,547  |                   |  |   | 31,993            |   |  |   | 28,053 |  
|Selling, general and administrative expenses |  |                    | 9,052  |                   |                   | 8,276  |                   |  |   | 26,973            |   |  |   | 24,325 |  
|Litigation charges                           |  |                    |       |                   |                   | 4,101  |                   |  |   |                  |   |  |   | 4,101  |  
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|Operating income (loss)                      |  |                    | 1,528  |                   |                   | (2,830 | )                 |  |   | 5,020             |   |  |   | (373   | )
|Interest expense, net                        |  |                    | 150    |                   |                   | 679    |                   |  |   | 1,163             |   |  |   | 1,894  |  
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|Income (loss) before income taxes            |  |                    | 1,378  |                   |                   | (3,509 | )                 |  |   | 3,857             |   |  |   | (2,267 | )
|Income tax expense (benefit)                 |  |                    | 561    |                   |                   | 26     |                   |  |   | (13,735           | ) |  |   | 111    |  
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|Net income (loss)                            |  | $                  | 817    |                   | $                 | (3,535 | )                 |  | $ | 17,592            |   |  | $ | (2,378 | )
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|Basic net income (loss) per share            |  | $                  | .05    |                   | $                 | (.23   | )                 |  | $ | 1.09              |   |  | $ | (.16   | )
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  
|Diluted net income (loss) per share          |  | $                  | .05    |                   | $                 | (.23   | )                 |  | $ | 1.05              |   |  | $ | (.16   | )
|                                             |  |                    |        |                   |                   |        |                   |  |   |                   |   |  |   |        |  

See notes to consolidated financial statements.



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)



|                                                                                        |  |                   |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                        |  | September 30,2006 |         |   | December 31,2005 |  
|ASSETS                                                                                  |  |                   |         |   |                  |   |         |  
|Current Assets:                                                                         |  |                   |         |   |                  |   |         |  
|Cash                                                                                    |  | $                 | 2,327   |   |                  | $ | 807     |  
|Accounts receivable, net of allowance of $679 and $689                                  |  |                   | 15,174  |   |                  |   | 18,320  |  
|Inventories                                                                             |  |                   | 9,791   |   |                  |   | 9,258   |  
|Prepaid expenses and other                                                              |  |                   | 3,319   |   |                  |   | 2,707   |  
|Deferred tax asset                                                                      |  |                   | 4,140   |   |                  |   |        |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|Total current assets                                                                    |  |                   | 34,751  |   |                  |   | 31,092  |  
|Property, plant and equipment, net                                                      |  |                   | 12,193  |   |                  |   | 12,124  |  
|Goodwill                                                                                |  |                   | 11,247  |   |                  |   | 11,247  |  
|Deferred tax asset                                                                      |  |                   | 9,699   |   |                  |   |        |  
|Other assets                                                                            |  |                   | 1,277   |   |                  |   | 1,209   |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|                                                                                        |  | $                 | 69,167  |   |                  | $ | 55,672  |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                    |  |                   |         |   |                  |   |         |  
|Current Liabilities:                                                                    |  |                   |         |   |                  |   |         |  
|Accounts payable                                                                        |  | $                 | 6,109   |   |                  | $ | 5,918   |  
|Accrued expenses                                                                        |  |                   | 17,468  |   |                  |   | 16,286  |  
|Current maturities of long-term debt                                                    |  |                   |        |   |                  |   | 3,929   |  
|Current portion of capital leases                                                       |  |                   | 323     |   |                  |   | 481     |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|Total current liabilities                                                               |  |                   | 23,900  |   |                  |   | 26,614  |  
|Long-term debt                                                                          |  |                   |        |   |                  |   | 9,730   |  
|Capital leases, excluding current portion                                               |  |                   | 120     |   |                  |   | 332     |  
|Other liabilities                                                                       |  |                   | 1,960   |   |                  |   | 2,808   |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                       |  |                   | 25,980  |   |                  |   | 39,484  |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|Contingencies (Note 9)                                                                  |  |                   |         |   |                  |   |         |  
|Stockholders Equity:                                                                   |  |                   |         |   |                  |   |         |  
|Common stock, $.10 par value, 30,000 shares authorized, 17,399 and 15,340 shares issued |  |                   | 1,740   |   |                  |   | 1,534   |  
|Additional paid-in capital                                                              |  |                   | 67,254  |   |                  |   | 57,565  |  
|Treasury stock, at cost (209 shares)                                                    |  |                   | (2,251  | ) |                  |   | (2,251  | )
|Accumulated deficit                                                                     |  |                   | (22,938 | ) |                  |   | (40,530 | )
|Accumulated other comprehensive loss                                                    |  |                   | (618    | ) |                  |   | (130    | )
|                                                                                        |  |                   |         |   |                  |   |         |  
|Total stockholders equity                                                              |  |                   | 43,187  |   |                  |   | 16,188  |  
|                                                                                        |  |                   |         |   |                  |   |         |  
|                                                                                        |  | $                 | 69,167  |   |                  | $ | 55,672  |  
|                                                                                        |  |                   |         |   |                  |   |         |  

See notes to consolidated financial statements.



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                         |  |                   |         |   |                   |   |         |  
|---------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                         |  | Nine Months Ended |        
|                                                                                         |  | September 30,2006 |         |   | September 24,2005 |  
|OPERATING ACTIVITIES:                                                                    |  |                   |         |   |                   |   |         |  
|Net income (loss)                                                                        |  | $                 | 17,592  |   |                   | $ | (2,378  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                   |         |   |                   |   |         |  
|Depreciation and amortization                                                            |  |                   | 2,421   |   |                   |   | 2,629   |  
|Amortization of deferred financing costs                                                 |  |                   | 283     |   |                   |   | 412     |  
|Deferred income taxes                                                                    |  |                   | (13,839 | ) |                   |   |        |  
|Stock-based compensation                                                                 |  |                   | 92      |   |                   |   | 43      |  
|Provision for doubtful accounts                                                          |  |                   | 172     |   |                   |   | 329     |  
|Change in fair value of foreign currency contract                                        |  |                   | 176     |   |                   |   | (111    | )
|Increase to litigation reserve                                                           |  |                   |        |   |                   |   | 4,101   |  
|Changes in operating assets and liabilities:                                             |  |                   |         |   |                   |   |         |  
|Accounts receivable                                                                      |  |                   | 2,974   |   |                   |   | 1,495   |  
|Inventories                                                                              |  |                   | (533    | ) |                   |   | (1,623  | )
|Prepaid expenses and other                                                               |  |                   | (1,274  | ) |                   |   | (259    | )
|Accounts payable, accrued liabilities and other liabilities                              |  |                   | 149     |   |                   |   | 1,175   |  
|                                                                                         |  |                   |         |   |                   |   |         |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                |  |                   | 8,213   |   |                   |   | 5,813   |  
|                                                                                         |  |                   |         |   |                   |   |         |  
|INVESTING ACTIVITIES:                                                                    |  |                   |         |   |                   |   |         |  
|Purchases of property, plant and equipment                                               |  |                   | (2,456  | ) |                   |   | (3,046  | )
|Deposits related to equipment purchases                                                  |  |                   |        |   |                   |   | (24     | )
|                                                                                         |  |                   |         |   |                   |   |         |  
|NET CASH USED IN INVESTING ACTIVITIES                                                    |  |                   | (2,456  | ) |                   |   | (3,070  | )
|                                                                                         |  |                   |         |   |                   |   |         |  
|FINANCING ACTIVITIES:                                                                    |  |                   |         |   |                   |   |         |  
|Repayments of term loans                                                                 |  |                   | (12,320 | ) |                   |   | (4,341  | )
|Borrowings under term loans                                                              |  |                   |        |   |                   |   | 4,654   |  
|Repayments under revolving loan                                                          |  |                   | (89,405 | ) |                   |   | (84,233 | )
|Borrowings under revolving loan                                                          |  |                   | 88,066  |   |                   |   | 76,790  |  
|Proceeds from real estate sale                                                           |  |                   |        |   |                   |   | 3,600   |  
|Deferred financing costs                                                                 |  |                   |        |   |                   |   | (151    | )
|Proceeds from issuance of common stock, net of costs                                     |  |                   | 9,609   |   |                   |   |        |  
|Proceeds from exercise of stock options                                                  |  |                   | 183     |   |                   |   | 24      |  
|Principal payments on capital leases                                                     |  |                   | (370    | ) |                   |   | (417    | )
|                                                                                         |  |                   |         |   |                   |   |         |  
|NET CASH USED IN FINANCING ACTIVITIES                                                    |  |                   | (4,237  | ) |                   |   | (4,074  | )
|                                                                                         |  |                   |         |   |                   |   |         |  
|NET INCREASE (DECREASE) IN CASH                                                          |  |                   | 1,520   |   |                   |   | (1,331  | )
|                                                                                         |  |                  
|CASH, beginning of period                                                                |  |                   | 807     |   |                   |   | 1,826   |  
|                                                                                         |  |                   |         |   |                   |   |         |  
|CASH, end of period                                                                      |  | $                 | 2,327   |   |                   | $ | 495     |  
|                                                                                         |  |                   |         |   |                   |   |         |  
|SUPPLEMENTAL CASH FLOW DISCLOSURE:                                                       |  |                   |         |   |                   |   |         |  
|Cash paid for interest                                                                   |  | $                 | 802     |   |                   | $ | 1,162   |  
|Cash paid for income taxes                                                               |  |                   | 279     |   |                   |   | 182     |  
|Capital leases                                                                           |  |                   |        |   |                   |   | 304     |  
|Common stock issued to directors earned in previous period (Note 4)                      |  |                   | 50      |   |                   |   | 77      |  

See notes to consolidated financial statements.



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1  BASIS OF PRESENTATION

Cybex International, Inc. (the
Company or Cybex), a New York corporation, is a manufacturer of exercise equipment and develops, manufactures and markets strength and cardiovascular fitness equipment products for the commercial and, to a lesser extent,
consumer markets. Currently, most of the Companys products are sold under the brand name CYBEX. The Company operates in one business segment.

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position,
results of operations and cash flows in conformity with U.S. generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three and nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the entire year.

It is recommended that these consolidated financial statements be read in conjunction with the consolidated financial statements and other information included in the Companys reports filed with the Securities
and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2005, this Report on Form 10-Q, its Current Reports on Form 8-K, and its proxy statement dated April 4, 2006.

NOTE 2  CONSOLIDATION OF RISK AND GEOGRAPHIC SEGMENT DATA

Sales to one customer represented 13% and 15% of consolidated net sales for the three and nine months ended September 30, 2006 and 16% and 17% of consolidated net sales for the three and nine months ended September 24, 2005,
respectively. Accounts receivable from this customer was $1,650,000 and $1,732,000 at September 30, 2006 and December 31, 2005, respectively.

Sales outside of North America represented 29% of consolidated net sales for the three and nine months ended September 30, 2006 and 30% and 29% of consolidated net sales for the three and nine months ended September 24, 2005,
respectively. No single foreign country accounts for greater than 10% of consolidated net sales.

NOTE 3  ACCOUNTING FOR GUARANTEES

The Company arranges equipment leases and other financings for its customers. While most of these financings are without recourse, in certain cases the
Company may offer a guarantee or other recourse provisions. In such situations, the Company ensures that the transaction between the independent leasing company and the end user customer represents a sales-type lease. The Company monitors the
payment status of the lessee under these arrangements and provides a reserve under Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, in situations when collection of the lease payments is not
probable. At September 30, 2006, the maximum contingent liability under all recourse and guarantee provisions was $4,599,000. A reserve for estimated losses under recourse provisions of $359,000 and $289,000 has been recorded at
September 30, 2006 and December 31, 2005, respectively, based on historical and industry experience and is included in accrued expenses.

The
Company has recorded a net liability of $68,000 and $74,000 at September 30, 2006 and December 31, 2005, respectively, in accordance with Financial Accounting Standards Board (FASB)



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Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, for the estimated fair value of the Companys guarantees issued after January 1, 2003. The fair value of the guarantees was determined based on the estimated cost for a customer to obtain a letter of credit
from a bank or similar institution. This liability is reduced on a straight-line basis over the term of each respective guarantee. In most cases, if the Company is required to fulfill its obligations under the guarantee, then it has the right to
repossess the equipment from the customer. It is not practicable to estimate the approximate amount of proceeds that would be generated from the sale of these assets in such situations.

Additionally, FIN 45 requires disclosure about the Companys obligations under other guarantees that it has issued, including warranties. The Company provides a warranty on its products for up to three years for
labor and up to ten years for structural frames. Warranty periods for parts range from one to three years depending on the type of equipment. 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, and are subject to change. The following table sets forth the change in the liability for product warranties during the nine months ended September 30, 2006:



|                                       |  |   |            |  
|-------------------------------------- |  | - | ---------- | -
|Balance as of January 1, 2006          |  | $ | 2,875,000  |  
|Payments made under product warranties |  |   | (2,288,000 | )
|Accrual for product warranties issued  |  |   | 2,410,000  |  
|                                       |  |   |            |  
|Balance as of September 30, 2006       |  | $ | 2,997,000  |  
|                                       |  |   |            |  

NOTE 4  STOCK-BASED COMPENSATION

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R), which was issued in December 2004. SFAS No. 123R supersedes SFAS No. 123,
Accounting for Stock-Based Compensation, and Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretations. SFAS No. 123R requires recognition in the
financial statements of the cost of employee services received in exchange for an award of equity instruments, with such cost recognized over the period that the employee is required to perform services in exchange for the award. SFAS No. 123R
also requires measurement of the cost of employee services received in exchange for an award based on the grant date fair value of the award. The Company adopted SFAS No. 123R using the modified prospective method. Accordingly, prior period
amounts have not been restated. Under this method, the Company is required to record compensation expense for all awards granted or modified after the date of adoption and for the unvested portion of previously granted awards that remain outstanding
at the date of adoption. For the three months ended September 30, 2006, the Company recorded stock-based compensation expense of $30,000, consisting of expenses related to stock options issued to employees ($16,000) and restricted stock to be
issued to directors ($14,000). For the nine months ended September 30, 2006, the Company recorded stock-based compensation expense of $92,000, consisting of expenses related to stock options issued to employees ($51,000) and restricted stock to
be issued to directors ($41,000). These stock-based compensation charges decreased net income by $18,000 and $80,000 and have no effect on basic and diluted net income per share for the three and nine months ended September 30, 2006,
respectively. Cash received from the exercise of incentive stock options for the nine month period ended September 30, 2006 totaled $183,000.

Before
the adoption of SFAS No. 123R, the Company applied APB Opinion No. 25 to account for its stock-based awards. Under APB Opinion No. 25, the Company was not required to recognize compensation expense for the cost of stock options. Had
the Company adopted SFAS No. 123R during the three and nine months ended September 24, 2005, the impact would have been as follows:



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|                                                                                                                    |  |                                      |            |   |                                     |   |            |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---------- | - | ----------------------------------- | - | ---------- | -
|                                                                                                                    |  | Three Months EndedSeptember 24, 2005 |            |   | Nine Months EndedSeptember 24, 2005 |  
|Net loss                                                                                                            |  | $                                    | (3,535,000 | ) |                                     | $ | (2,378,000 | )
|Add: Stock-based compensation included in net loss                                                                  |  |                                      | 14,000     |   |                                     |   | 43,000     |  
|Deduct: Total stock-based employee compensation expense determined under the fair-value based method for all awards |  |                                      | (53,000    | ) |                                     |   | (157,000   | )
|                                                                                                                    |  |                                      |            |   |                                     |   |            |  
|Pro forma net loss                                                                                                  |  | $                                    | (3,574,000 | ) |                                     | $ | (2,492,000 | )
|                                                                                                                    |  |                                      |            |   |                                     |   |            |  
|Basic and diluted net loss per share: As reported                                                                   |  | $                                    | (.23       | ) |                                     | $ | (.16       | )
|                                                                                                                    |  |                                      |            |   |                                     |   |            |  
|Pro forma                                                                                                           |  | $                                    | (.24       | ) |                                     | $ | (.16       | )
|                                                                                                                    |  |                                      |            |   |                                     |   |            |  

The fair value of the Companys stock-based awards issued to employees prior to 2006 was estimated at the
date of grant using the Black-Scholes closed form option-pricing model (Black-Scholes), assuming no dividends and using an expected life of seven years, volatility of 20% to 50% and a risk-free rate of 3.4% to 3.9%.

Cybexs 2005 Omnibus Incentive Plan (the Omnibus Plan) 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 1,000,000 shares of common stock for issuance pursuant to the Omnibus 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 qualified 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). The options generally vest over a three to five year period (with some subject to cliff vesting).

A summary of the status of the Companys stock option plans as of September 30, 2006 is presented below:



|                                                          |  |                  |   |  |                                |      |                                   |      |                |   |          
|--------------------------------------------------------- |  | ---------------- | - |  | ------------------------------ | ---- | --------------------------------- | ---- | -------------- | - | ---------
|                                                          |  | Number of Shares |   |  | Weighted AverageExercise Price |      | Remaining ContractualTerm (years) |      | IntrinsicValue
|Outstanding at January 1, 2006                            |  | 766,100          |   |  | $                              | 1.87 |                                   |      |                |   |          
|Exercised                                                 |  | (90,850          | ) |  |                                | 2.02 |                                   |      |                |   |          
|Forfeited                                                 |  | (5,250           | ) |  |                                | 1.38 |                                   |      |                |   |          
|                                                          |  |                  |   |  |                                |      |                                   |      |                |   |          
|Outstanding at September 30, 2006                         |  | 670,000          |   |  | $                              | 1.85 |                                   | 5.93 |                | $ | 3,216,000
|                                                          |  |                  |   |  |                                |      |                                   |      |                |   |          
|Options exercisable at September 30, 2006                 |  | 463,000          |   |  | $                              | 2.09 |                                   | 5.37 |                | $ | 2,109,000
|                                                          |  |                  |   |  |                                |      |                                   |      |                |   |          
|Options vested and expected to vest at September 30, 2006 |  | 663,000          |   |  | $                              | 1.86 |                                   | 5.91 |                | $ | 3,178,000
|                                                          |  |                  |   |  |                                |      |                                   |      |                |   |          



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The intrinsic value of options exercised for the three and nine months ended September 30, 2006 was $92,000 and
$342,000, respectively. The intrinsic value of options exercised for the three and nine months ended September 24, 2005 was $0 and $38,000, respectively. A registration statement has been filed for the Omnibus Plan and the Company anticipates
providing newly-issued shares of registered common stock upon the exercise of options.

As of September 30, 2006, there was $63,000 of total
unrecognized compensation cost related to nonvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.6 years.

The Companys 2002 Stock Retainer Plan for Nonemployee Directors (the 2002 Plan) provides that each nonemployee director will receive 50% of his annual retainer in shares of common stock of the
Company. Up to 150,000 shares of common stock may be issued under the 2002 Plan. The issuance of shares as partial payment of annual retainers results in expense based on the fair market value of such shares. At September 30, 2006, there are
42,937 shares available for future issuance pursuant to the 2002 Plan. The Company recorded stock-based compensation expense of $14,000 and $41,000 for the three months and nine months ended September 30, 2006, respectively, for common stock to
be issued to the directors in 2007 as payment for 2006 services. The accrued directors fees are included in accrued expenses at September 30, 2006. During the quarter ended April 1, 2006, the Company issued 14,344 shares of common stock to
the directors, which had a fair value of $52,000, related to directors fees earned in 2005, which were included in accrued expenses at December 31, 2005.

NOTE 5  INVENTORIES

Inventories consist of the following:



|                |  |                    |           |                   |   |          
|--------------- |  | ------------------ | --------- | ----------------- | - | ---------
|                |  | September 30, 2006 |           | December 31, 2005
|Raw materials   |  | $                  | 5,461,000 |                   | $ | 4,989,000
|Work in process |  |                    | 2,076,000 |                   |   | 2,110,000
|Finished goods  |  |                    | 2,254,000 |                   |   | 2,159,000
|                |  |                    |           |                   |   |          
|                |  | $                  | 9,791,000 |                   | $ | 9,258,000
|                |  |                    |           |                   |   |          

NOTE 6  LONG-TERM DEBT

Long-term debt consists of the following:



|                           |  |                    |   |                   |   |            |  
|-------------------------- |  | ------------------ | - | ----------------- | - | ---------- | -
|                           |  | September 30, 2006 |   | December 31, 2005 |  
|CIT working capital loans  |  | $                  |  |                   | $ | 1,339,000  |  
|CIT term loan              |  |                    |  |                   |   | 5,069,000  |  
|GMAC real estate term loan |  |                    |  |                   |   | 5,860,000  |  
|GMAC equipment credit line |  |                    |  |                   |   | 1,391,000  |  
|                           |  |                    |   |                   |   |            |  
|                           |  |                    |  |                   |   | 13,659,000 |  
|Less  current portion     |  |                    |  |                   |   | (3,929,000 | )
|                           |  |                    |   |                   |   |            |  
|                           |  | $                  |  |                   | $ | 9,730,000  |  
|                           |  |                    |   |                   |   |            |  



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In July 2004, the Company entered into a credit agreement with GMAC Commercial Finance, LLC (GMAC) (the
GMAC Credit Agreement) and entered into an amendment of a financing agreement with The CIT Group/Business Credit, Inc. (CIT) (as amended, the CIT Amended Financing Agreement). The GMAC Credit Agreement provided
for a $13,000,000 term loan, the proceeds of which were used to retire in full the $11,000,000 term loan under a prior financing agreement with Hilco Capital LP (the Hilco Financing Agreement), repay $1,600,000 term loan from CIT and pay
financing costs. The unamortized balance of the deferred financing costs under the Hilco Financing Agreement of approximately $340,000 was charged to expense in the third quarter of 2004 upon the repayment of the Hilco loan. The Company prepaid
$3,000,000 of the GMAC term loan in September 2004 with the proceeds from a common stock private placement. On February 1, 2005, the Company entered into an amendment and restatement of the GMAC Credit Agreement that provided for a new
equipment credit line pursuant to which the Company received aggregate advances of $1,654,000 to finance equipment and machinery purchases, which advances were represented by a term note. In August 2005, the Company utilized a portion of the
proceeds from the sale/leaseback transaction described below to prepay $3,067,000 of the GMAC term loan. The GMAC Credit Agreement was further amended and restated (as restated, the GMAC Amended Credit Agreement) in January 2006 to
include a $5,000,000 credit line that is available through December 15, 2006 to finance the purchase of machinery and equipment. On June 30, 2006, the outstanding loans under the GMAC Amended Credit Agreement were prepaid in full from the
proceeds of the Companys common stock public offering (see Note 7). The GMAC loans are secured by the Companys equipment.

The CIT Amended
Financing Agreement provided for a term loan with an original balance of $4,000,000 and working capital revolving loans of up to the lesser of $14,000,000 or an amount determined by reference to a borrowing base. In May 2005, the Company entered
into an amendment to the CIT Amended Financing Agreement which increased the then outstanding term loan from $3,250,000 to $6,250,000. On May 22, 2006, the CIT term loan was prepaid in full from the public offering proceeds (see Note 7). On
June 30, 2006, the CIT Amended Financing Agreement was further amended to, among other things, extend the working capital revolving loan availability through June 30, 2009. In October 2006, the CIT Amended Financing Agreement was again
amended to, among other things, permit the capital expenditures and the mortgage financing to be incurred in connection with the Companys new facility in Owatonna, Minnesota. The CIT loans are secured by substantially all assets of the Company
other than real estate, fixtures and equipment.

At September 30, 2006, there were no term loans or working capital revolving loans outstanding.
Availability under the revolving loan fluctuates daily. At September 30, 2006, there was $6,103,000 in unused availability under the working capital revolving loan.

The CIT working capital revolving loan bears interest at rates ranging between LIBOR plus 1.75% to 2.50% or the prime rate less .25% to plus .50% based on a performance grid (8% at September 30, 2006) (prior to
June 30, 2006, LIBOR plus 2.50% to 3.25% or the prime rate less .25% to plus .50% based on a performance grid). The CIT term loan bore interest at the prime rate plus 3%, with a minimum of 7% (prior to July 13, 2004, a $3,000,000 CIT term
loan bore interest at the prime rate plus 5% with a minimum rate of 10%). The GMAC term loans bore interest, payable monthly, at LIBOR plus 4% or the prime rate plus 1% (prior to September 1, 2004, LIBOR plus 5% or the prime rate plus 2%) and
the advances under the equipment line bear interest at LIBOR plus 3.25% or the prime rate plus 1%. The prime rate was 8.25% and LIBOR was 5.30% at September 30, 2006. The Hilco loan bore interest at the prime rate plus 11.5%, with a minimum of
15.5%.

The average outstanding working capital revolving loan balance for the nine months ended September 30, 2006 and September 24, 2005 was
approximately $115,000 and $2,918,000, respectively, and the weighted average interest rate was 7.61% and 5.68%, respectively.

The GMAC Amended Credit
Agreement and the CIT Amended Financing Agreement require the Company to maintain certain financial covenants including maintaining a minimum fixed charge ratio, a leverage ratio and a limitation on annual capital expenditures. The Company was in
compliance with these covenants as of September 30, 2006. The CIT Amended Financing Agreement also restricts the ability of the Company to pay cash dividends. The CIT Amended Financing Agreement and the GMAC Amended Credit Agreement each
contains a cross default provision to the other.



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UM Holdings Ltd. (UM) provided the collateral to support a $2,945,722 letter of credit in the Companys
appeal of the judgment in the litigation, Kirila et al v. Cybex International, Inc., et al (see Note 9), which was replaced during the second quarter of 2005 by a letter of credit issued under the CIT Amended Financing Agreement. This letter
of credit was returned and canceled after the payment of the Kirila judgment in November 2006. A $2,888,025 letter of credit has also been issued under the CIT Amended Financing Agreement in connection with the Companys appeal of the judgment
in the litigation, Colassi v. Cybex International, Inc.(see Note 9). Letters of credit outstanding under the CIT Amended Financing Agreement reduce availability under the CIT working capital revolving loan facility.

On August 2, 2005, the Company sold its manufacturing, warehouse and office facility located in Owatonna, Minnesota for approximately $3,600,000, of which
$3,067,000 was used to prepay a portion of the GMAC term loan, $123,000 was used to pay a prepayment fee in connection therewith and $400,000 was used to prepay a portion of the CIT term loan. Simultaneously with the sale of the Owatonna facility,
the Company and the purchaser entered into a lease of the Owatonna facility with an initial term of five years at a rental rate of $40,000 per month, plus operating costs. The lease contains renewal options as well as options to terminate the lease
if the Company elects to relocate. Due to an option to repurchase the facility originally contained in the lease, the transaction was treated for financial accounting purposes as a financing transaction, and payments made of $200,000 through
December 2005 were recorded as interest expense. On December 23, 2005, the lease was amended to eliminate the Companys option to repurchase the building in exchange for certain services to be provided by the landlord. Accordingly, the
transaction has been accounted for as a sale/leaseback subsequent to December 23, 2005 resulting in a deferred gain of $811,000 at December 31, 2005, of which $177,000 was included in accrued expenses and $634,000 was included in other
long-term liabilities and is being amortized over 21 months. At September 30, 2006, $438,000 of the deferred gain was included in accrued expenses and $110,000 was included in other long-term liabilities.

In August 2006, Cybex entered into an Industrial Building Lease (Build to Suit/Triple Net) (the Lease). Pursuant to the Lease, the lessor has agreed to
construct to the Companys specifications an approximate 340,000 square foot manufacturing, office and warehouse facility in Owatonna, Minnesota (the Owatonna Premises). Simultaneously with entering into the Lease, Cybex exercised
its option under the Lease to acquire the Owatonna Premises for a purchase price of $14,275,000, subject to adjustment. The closing of the purchase and sale of the Owatonna Premises is subject to standard conditions and will occur upon substantial
completion of the improvements, scheduled for June 1, 2007, subject to extension. The lease of the existing Owatonna facility would terminate in conjunction with a relocation to this new facility.

In October 2006, Cybex entered into a loan agreement (the Citizens Loan Agreement) with Citizens Bank of Massachusetts (Citizens), pursuant to
which Citizens has agreed to advance to Cybex up to a $13,000,000 mortgage loan to finance the acquisition of the Owatonna Premises. This loan, which is subject to standard conditions, will be advanced simultaneously with the Companys
acquisition of the Owatonna Premises, currently scheduled for June 2007. The Citizens mortgage loan will be secured by a lien on the Owatonna Premises and, pending disbursement of the mortgage loan, Cybex has agreed not to incur or permit any
liens on its Medway, Massachusetts property. While the mortgage loan will bear interest at a floating rate equal to LIBOR plus 1.20% per annum, Cybex has entered into a related interest rate swap agreement with Citizens which locks in an
interest rate of 6.95% per annum to July 2014.

On September 8, 2004, Cybex entered into two interest rate caps with a financial intermediary to
lock in one-month LIBOR at a maximum of 3% for the two-year period ended September 8, 2006 related to the Companys GMAC term debt facility and CIT working capital revolving loan credit facility. The cost of the interest rate caps was
approximately $97,000. On May 31, 2006, the Company terminated its agreement with the financial intermediary and received proceeds of $79,000. The interest rate caps



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were accounted for as cash flow hedges and the cost of the interest rate caps was being amortized on a straight-line basis over two years, which approximated
the period during which the individual caplets related to each forecasted interest payment were to expire. Changes in the fair value of the interest rate caps were recorded within accumulated other comprehensive loss. For the three and nine months
ended September 30, 2006, the change in the fair value of the interest rate caps was a decrease of $0 and $103,000, respectively. For the three and nine months ended September 24, 2005, the change in the fair value of the interest rate
caps was an increase of $33,000 and $83,000, respectively.

Cybex entered into a series of 13 forward contracts on February 28, 2005, with the final
contract completed March 31, 2006, whereby Cybex paid a bank 140,212 British Sterling and the bank paid Cybex $265,000 each month. In February 2006, the Company entered into a series of 12 monthly forward contracts, that began on April 1,
2006, whereby Cybex pays a bank 150,000 British Sterling and the bank pays Cybex $265,000 each month. The purpose of these transactions is to hedge the foreign currency exposure on sales made in the UK in British Sterling. Cybex UKs sales are
in British Sterling while its purchases of inventory from the Company are paid in U.S. dollars. The above transaction is not considered eligible for hedge accounting based on guidance in SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended. The change in fair value of the hedge resulted in a loss of $26,000 and a gain of $8,000 for the three months ended September 30, 2006 and September 24, 2005, respectively, and a loss of $176,000
and a gain of $111,000 for the nine months ended September 30, 2006 and September 24, 2005, respectively.

NOTE 7  STOCKHOLDERS
EQUITY

Preferred Stock:

The Companys Board has the ability to issue, without approval by the common shareholders, up to 500,000 shares of $1 par value preferred stock having rights and preferences as the Board may determine in its sole discretion.

Common Stock:

On
May 22, 2006, the Company consummated a public offering of 3,500,000 shares of common stock at $5.50 per share. Of the total shares offered, 1,750,000 shares were issued by the Company and 1,750,000 shares were sold by the selling stockholders.
The Company also granted the underwriters of the offering an option to purchase up to an additional 525,000 shares of common stock on the same terms equally split between the Company and the selling stockholders. In June 2006, the underwriters
exercised a portion of their over-allotment option and purchased an additional 407,900 shares of common stock at the offering price of $5.50 per share. Of the over-allotment shares, 203,950 shares were issued and sold by the Company and 203,950 were
sold by a selling stockholder. The net proceeds to the Company in this offering, after commissions and offering expenses, were approximately $9,609,000. The Company did not receive any proceeds from the shares of common stock sold by the selling
shareholders.

On August 5, 2004, the Company consummated a private placement to accredited investors of 2,430,000 shares of common stock, at a price
of $3.30 per share. The net proceeds to the Company in this offering, after commissions and offering expenses, were $7,199,000. Additionally, in connection with the private placement, the Company issued to the placement agent and its affiliates
warrants to purchase 25,000 shares of the Companys common stock at an exercise price of $0.10 per share. The warrants have a term of five years.

At
September 30, 2006, there are 1,884,640 shares of common stock reserved for future issuance pursuant to the exercise or issuance of stock options and warrants.

Warrants:

At September 30, 2006,
warrants to purchase 189,640 and 25,000 shares of common stock at $.10 per share were outstanding and expire on July 16, 2008 and August 4, 2009, respectively.



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Comprehensive Income (Loss):

Comprehensive income (loss) is the change in equity of a business enterprise from transactions and other events and circumstances from non-owner sources. Excluding net
income (loss), the components of comprehensive income (loss) are from foreign currency translation adjustments and changes in the fair value of hedging instruments.

The following summarizes the components of comprehensive income (loss) (in thousands):



|                                         |  |                    |      |   |                   |   |        |                    |  |   |                   |   |  |   |        |  
|---------------------------------------- |  | ------------------ | ---- | - | ----------------- | - | ------ | ------------------ |  | - | ----------------- | - |  | - | ------ | -
|                                         |  | Three Months Ended |      |   | Nine Months Ended |  
|                                         |  | September 30,2006  |      |   | September 24,2005 |   |        | September 30, 2006 |  |   | September 24,2005 |  
|Net income (loss)                        |  | $                  | 817  |   |                   | $ | (3,535 | )                  |  | $ | 17,592            |   |  | $ | (2,378 | )
|Other comprehensive income (loss):       |  |                    |      |   |                   |   |        |                    |  |   |                   |   |  |   |        |  
|Foreign currency translation adjustment  |  |                    | (106 | ) |                   |   | 10     |                    |  |   | (385              | ) |  |   | 86     |  
|Change in fair value of hedge            |  |                    |     |   |                   |   | 33     |                    |  |   | (24               | ) |  |   | 83     |  
|Reclassification for settlement of hedge |  |                    |     |   |                   |   |       |                    |  |   | (79               | ) |  |   |       |  
|                                         |  |                    |      |   |                   |   |        |                    |  |   |                   |   |  |   |        |  
|Comprehensive income (loss)              |  | $                  | 711  |   |                   | $ | (3,492 | )                  |  | $ | 17,104            |   |  | $ | (2,209 | )
|                                         |  |                    |      |   |                   |   |        |                    |  |   |                   |   |  |   |        |  

NOTE 8  NET INCOME (LOSS) PER SHARE

The table below sets forth the reconciliation of the basic and diluted net income (loss) per share computations:



|                                                      |  |                    |  |                   |  |                    |  |                  
|----------------------------------------------------- |  | ------------------ |  | ----------------- |  | ------------------ |  | -----------------
|                                                      |  | Three Months Ended |  | Nine Months Ended
|                                                      |  | September 30, 2006 |  | September 24,2005 |  | September 30, 2006 |  | September 24,2005
|Shares used in computing basic net income per share   |  | 17,185,000         |  | 15,130,000        |  | 16,128,000         |  | 15,119,000       
|Dilutive effect of options and warrants               |  | 622,000            |  |                  |  | 666,000            |  |                 
|                                                      |  |                    |  |                   |  |                    |  |                  
|Shares used in computing diluted net income per share |  | 17,807,000         |  | 15,130,000        |  | 16,794,000         |  | 15,119,000       
|                                                      |  |                    |  |                   |  |                    |  |                  

For the three and nine months ended September 24, 2005, options to purchase 767,100 shares of common stock at
exercise prices ranging from $1.22 to $4.32 per share were outstanding but were not included in the calculation of diluted net income per share as the result would be anti-dilutive.

NOTE 9  CONTINGENCIES

The Company is involved in certain legal actions and claims arising in the ordinary
course of business. At September 30, 2006, a reserve of $6,229,000 is included in accrued expenses for estimated losses related to those matters for which it is probable that a loss has been incurred. The ultimate resolution of these matters
could be material to the Companys financial position, results of operations and cash flows; however, management believes that the recorded reserve is adequate.

Kirila et al v. Cybex International, Inc., et al

This action was commenced in the Court of Common Pleas of
Mercer County, Pennsylvania in May 1997 against the Company, the Companys wholly-owned subsidiary, Trotter, and certain officers,



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directors and affiliates of the Company. The plaintiffs include companies that sold to Trotter a strength equipment company in 1993, a principal of the
corporate plaintiffs who was employed by Trotter following the acquisition, and a company that leased to Trotter a plant located in Sharpsville, Pennsylvania. The complaint, among other things, alleged wrongful closure of the Sharpsville facility,
wrongful termination of the individual plaintiffs employment and nonpayment of compensation, breach of the lease agreement and the asset purchase agreement, tortious interference with business relationships, fraud, negligent misrepresentation,
unjust enrichment, breach of the covenant of good faith and fair dealing, conversion, unfair competition and violation of the Pennsylvania Wage Payment and Collection Law. The complaint also sought specific performance of the lease, the employment
agreement and the indemnification provisions of the asset purchase agreement, and an unspecified amount of compensatory and punitive damages and expenses. The Company filed an answer to the complaint denying the material allegations of the complaint
and denying liability and it further asserted counterclaims against the plaintiffs, including for repayment of over-allocations of expenses under the lease and certain excess incentive compensation payments that were made to the individual
plaintiff.

A jury verdict was rendered in this litigation in February 2002. While the jury found in favor of the Company with respect to the majority of
the plaintiffs claims, it also found that the Company owed certain incentive compensation payments and rent, plus interest. In December 2002, plaintiff Kirila Realty and the Company agreed to enter judgment in favor of Kirila Realty for
$48,750 on the claims related to lease issues. Such amount represented the approximate $38,000 jury verdict together with an agreed amount of interest due and was paid by the Company in 2002.

In March 2004,a $2,452,783 judgment was entered with respect to the incentive compensation portion of the jury verdict. This judgment was composed of the
original jury verdict amount of $872,000, prejudgment interest on the judgment of $369,000, a statutory penalty under the Pennsylvania Wage Payment and Collection Law of $218,000 and attorneys fees of $993,783. Cybex filed an appeal of this
judgment, which required that Cybex post a letter of credit for $2,945,722 (see Note 6). In January 2006, the Superior Court of Pennsylvania affirmed the judgment, and both Cybex and the plaintiffs filed a Petition for Allowance of Appeal with the
Pennsylvania Supreme Court.

On June 7, 2006, the Pennsylvania Supreme Court denied the respective Petitions for Allowance of Appeal of the Company
and the plaintiffs. The Company determined not to further pursue its appeals, and on November 2, 2006, it satisfied the judgment, which with interest and costs amounted to approximately $2,800,000. The plaintiffs, however, have asserted that
additional attorneys fees (approximately $716,000 as of September 30, 2006) are payable by the Company. The Company believes that such additional attorneys fees are not payable by the Company, and the Court has yet to rule on this
dispute.

Colassi v. Cybex International, Inc.

This action was filed in the United States District Court for the District of Massachusetts. The plaintiff alleged that certain of the Companys treadmill products infringed a patent allegedly owned by the plaintiff. The plaintiff
sought injunctive relief and monetary damages. The Company filed an answer to the complaint denying the material allegations of the complaint and asserting counterclaims. A jury verdict was rendered in this litigation in August 2005. The jury
determined that the deck system of certain of the Companys treadmill products infringes plaintiffs patent and awarded $2,700,000 in damages and interest. A six-month stay of a permanent injunction against sale of these treadmill products
was entered in September 2005, and the Company has implemented a redesign of its deck system. The Company has filed an appeal of the judgment entered by the trial court on the jury verdict, which required that Cybex post a letter of credit for
$2,888,025 (see Note 6).



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Free Motion Fitness v. Cybex International, Inc.

In December 2001, Free Motion Fitness (f.k.a. Ground Zero Design Corporation) filed in the United States District Court for the District of Utah an action for patent
infringement against the Company alleging that the Companys FT360 Functional Trainer infringed plaintiffs patent. The Company filed an answer denying the material allegations of the complaint and including claims which management
believes could invalidate the Free Motion Fitness patent; the Company also filed a counterclaim against Free Motion Fitness seeking damages. In September 2003, this case was combined with a separate matter also in the United States District Court,
District of Utah in which Free Motion Fitness had sued the Nautilus Group for infringement of the same patent at issue in the Cybex case. In May 2004, the Court ruled in favor of the Companys motion for summary judgment, dismissing all of the
claims of the plaintiff against the Company and Nautilus and also dismissing the Companys counterclaims against the plaintiff. The plaintiff appealed the grant of summary judgment and in September 2005, the Court of Appeals for the Federal
Circuit reversed the lower court ruling, with the result that this case has been returned to the trial court level.

Other Litigation and
Contingencies

The Company is involved in certain other legal actions, contingencies and claims arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Companys financial position, results of operations and cash flows. Legal fees related to those matters are charged to expense as
incurred.

NOTE 10  INCOME TAXES

In 2002, the
Company established a full valuation allowance against of its net deferred tax assets. As of July 1, 2006, management reevaluated the need for this valuation allowance in accordance with SFAS No. 109, Accounting for Income
Taxes, due to the existence of various factors. Based on this reevaluation, the Company reduced the valuation allowance by $14,421,000 effective July 1, 2006, resulting in a net tax benefit of $13,735,000 for the nine months ended
September 30, 2006. For the three months ended September 30, 2006, an income tax provision of approximately 41% of income before taxes was recorded, totaling $561,000.

As of December 31, 2005, U.S. federal operating loss carryforwards of approximately $27,786,000 were available to offset future taxable income and, as of such date, the Company had foreign net operating loss
carryforwards of $2,703,000, federal alternative minimum tax credit carryforwards of $461,000 and federal research and development tax credit carryforwards of $129,000. The U.S. federal operating loss carryforwards begin to expire in 2012.
Approximately $35,000,000 of income before income taxes is needed to fully realize the Companys recorded net deferred tax asset and $52,383,000 of future taxable income is needed to fully realize the Companys deferred tax assets. The
difference between these figures and the net operating loss carryforwards and credits is primarily book vs. tax differences of various expenses.

The net
deferred tax asset balance of $13,839,000 at September 30, 2006 represents the amount that management believes is more likely than not to be realized, and the remaining valuation allowance at September 30, 2006 is approximately $6,600,000.
Management will continue to assess the need for the remaining valuation allowance in future periods.



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 below. These include, but are not limited to,
competitive factors, technological and product developments, market demand, economic conditions, the resolution of litigation involving us and our ability to comply with the terms of our credit facilities. Further information on these and other
factors which could affect our financial results can be found in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K, including Part I thereof, our Current Reports on Form 8-K, this Form 10-Q and
the proxy statement dated April 4, 2006.

OVERVIEW

We are a New York corporation that develops, manufactures and markets high performance, professional quality exercise equipment products for the commercial market and, to a lesser extent, the premium segment of the consumer market.

RESULTS OF OPERATIONS

NET SALES

Our net sales increased $3,159,000, or 12%, to $29,849,000 for the third quarter of 2006 from $26,690,000 for the third quarter of 2005. For the nine months ended
September 30, 2006, net sales increased $10,066,000, or 13%, to $88,712,000 from $78,646,000 compared to the same period in 2005. For the third quarter of 2006, sales of cardiovascular products increased $1,053,000, or 8%, to $15,076,000 and
sales of strength products increased $2,111,000, or 21%, to $12,140,000 compared to the same period in 2005. For the nine months ended September 30, 2006, sales of cardiovascular products increased $4,238,000, or 10%, to $46,699,000 and sales
of strength products increased $5,265,000, or 19%, to $33,707,000 compared to the same period in 2005. The sales increase of cardiovascular products for the third quarter and for the nine-month period was predominantly driven by an increase in sales
of the 425T treadmill, first introduced in November 2005 for the light commercial and high-end consumer markets. The sales increase of strength products for the quarter and for the nine-month period was primarily due to sales of VR3, the new
strength line introduced at the end of 2005, along with an increase in sales of modular products. Freight, parts and other revenue decreased $5,000, to $2,633,000 in the third quarter of 2006 and increased $563,000, or 7%, to $8,306,000 for the nine
months ended September 30, 2006.

GROSS MARGIN

Gross margin decreased to 35.4% in the third quarter of 2006 from 35.8% in the third quarter of 2005 predominantly due to the net effect of decreased selling prices and product costs (.6%), increased warranty costs (.5%), higher steel costs
(.5%) and direct labor (.4%), partially offset by increased sales volume (.7%) and improved product mix (.9%).

Gross margin increased to 36.1% for the
nine months ended September 30, 2006 from 35.7% for the same period in 2005 predominately due to the net effect of decreased product costs and selling prices (.6%), increased sales volume (.4%), improved product mix (.2%), and increased
overhead absorbed (.6%), partially offset by increased warranty costs (.7%) and freight costs (.7%).



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Beginning in 2004, we experienced increases in the price of steel, a major component of our products. The cost of steel
has fluctuated since 2004. The negative impact on gross margins from changes in steel prices in the quarter and nine months ended September 30, 2006 was .4% and .1%, respectively, compared to the corresponding period of 2005. We are uncertain
of the likely impact of steel prices on margins for the balance of 2006.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $776,000, or 9%, to $9,052,000 in the third quarter of 2006 compared to $8,276,000 in the third quarter of 2005,
predominantly due to an increase in product development costs ($343,000) and an increase in domestic and international selling expenses ($250,000). The balance of the increase in these expenses is primarily comprised of higher general salary levels
and increased insurance costs. For the nine months ended September 30, 2006, selling, general and administrative expenses increased by $2,648,000, or 11%, predominantly due to an increase in domestic and international selling expenses
($933,000) and an increase in product development costs ($829,000). The balance of the increase in these expenses is primarily comprised of higher general salary levels and increased insurance costs.

LITIGATION CHARGES

Litigation charges for the quarter and nine
months ended September 24, 2005 related to a $4,101,000 increase in legal reserves recorded in the third quarter of 2005. This increase in reserves primarily related to the jury verdict and associated costs in the Colassi patent infringement
case, which we are appealing.

NET INTEREST EXPENSE

Net interest expense decreased by $529,000 in the third quarter of 2006 compared to the corresponding period of 2005. For the nine months ended September 30, 2006, net interest expense decreased by $731,000 compared to the
corresponding period of 2005. The decreases in 2006 were primarily due to lower outstanding debt balances, which we expect to continue for the remainder of 2006 as a result of the repayment of debt during the second quarter of 2006 with the proceeds
from our underwritten public offering.

INCOME TAXES

We recorded an income tax expense of $561,000 and an income tax benefit of $13,735,000, respectively, for the quarter and nine months ended September 30, 2006. In 2002, we established a valuation allowance against all of our net
deferred tax asset. As of July 1, 2006, we reevaluated the need for this valuation allowance in accordance with SFAS No. 109, Accounting for Income Taxes, due to the existence of various factors. Based on this reevaluation, we
reduced the valuation allowance by $14,421,000 effective July 1, 2006. During the period from the establishment of the valuation allowance in 2002, to the July 1, 2006 reduction of the valuation allowance, our income tax provision was
limited to state taxes and federal alternative minimum taxes. We recorded an income tax provision of approximately 41% of income before taxes for the third quarter of 2006 and we anticipate an income tax provision at a similar effective tax rate in
future periods. Actual cash outlays for taxes will, however, continue to be reduced by the available operating loss carryforwards, consistent with prior periods.

As of December 31, 2005, U.S. federal operating loss carryforwards of approximately $27,786,000 were available to us to offset future taxable income and, as of such date, we had foreign net operating loss carryforwards of $2,703,000,
federal alternative minimum tax credit carryforwards of $461,000 and federal research and development tax credit carryforwards of $129,000. The net deferred tax asset balance of $13,839,000 at September 30, 2006 represents the amount that we
believe is more likely than not to be realized, and the remaining valuation allowance at September 30, 2006 is approximately $6,600,000. We will continue to assess the need for the remaining valuation allowance in future periods.



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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2006, we had working capital of $10,851,000 compared to $4,478,000 of working capital at December 31, 2005. The change in working capital is primarily due to the reduction of the deferred
tax valuation allowance resulting in a current deferred tax asset of $4,140,000 at September 30, 2006, and the $9,609,000 proceeds from the public offering of common stock which was utilized to retire the indebtedness.

For the nine months ended September 30, 2006, we generated $8,213,000 of cash from operating activities compared to $5,813,000 for the nine months ended
September 24, 2005. The increase in cash provided by operating activities is primarily due to an increase in net income after the effect of the reduction in the deferred tax valuation allowance during the nine months ended September 30,
2006 and the effect of the increase to the litigation reserve during the nine months ended September 24, 2005.

Cash used in investing activities of
$2,456,000 during the nine months ended September 30, 2006 consisted of purchases of manufacturing tooling and equipment of $1,348,000, primarily efficiency enhancing manufacturing equipment and tooling for new products, and computer hardware
and infrastructure of $1,108,000 including costs associated with an upgrade to our ERP system. Cash used in investing activities of $3,070,000 during the nine months ended September 24, 2005 relates primarily to purchases and deposits on
equipment and tooling for the manufacture of new products and improvements to our computer network. We anticipate capital expenditures of approximately $1,500,000 in the fourth quarter 2006, predominantly related to improvements to our Medway,
Massachusetts facility, manufacturing equipment and tooling, and further costs associated with our ERP upgrade.

Cash used in financing activities was
$4,237,000 and $4,074,000 for the nine months ended September 30, 2006 and September 24, 2005, respectively, consisting primarily of debt repayments, partially offset by the proceeds of our public offering of common stock during the nine
months ended September 30, 2006 and the proceeds of the sale of real estate during the nine months ended September 24, 2005.

On May 22,
2006, we consummated an underwritten public offering of 3,500,000 shares of our common stock, of which 1,750,000 shares were sold by selling stockholders. In June 2006, the underwriters in this offering exercised a portion of their over-allotment
option and purchased an additional 407,900 shares of common stock, of which 203,950 shares were sold by a selling stockholder. We received net cash proceeds in this offering, after commissions and offering expenses, of approximately $9,609,000. Net
proceeds were used to repay our total indebtedness under our existing credit facilities. We did not receive any of the proceeds from the sale of shares of common stock by the selling stockholders.

We have credit facilities with GMAC Commercial Finance, LLC (GMAC) and with The CIT Group/Business Credit, Inc. (CIT). Our Amended and Restated
Credit Agreement with GMAC provided for term loans and was amended in January 2006 to include a $5,000,000 credit line that is available through December 15, 2006 to finance machinery and equipment purchases. Our CIT Amended Financing Agreement
provides for working capital revolving loans of up to the lesser of $14,000,000, or an amount determined by reference to a borrowing base. The GMAC loans are secured by our equipment, and mature on August 1, 2009. The CIT loans are secured by
substantially all of our assets except real estate, fixtures and equipment and mature on June 30, 2009.

At September 30, 2006, there were no
term loans or working capital revolving loans outstanding. Availability under the revolving loan fluctuates daily. At September 30, 2006, there was $6,103,000 in unused availability under the working capital revolving loan facility.

In August 2005, we sold our Owatonna, Minnesota manufacturing, warehouse and office facility for approximately $3,600,000, of which $3,067,000 was used to prepay a
portion of the GMAC term loan, $123,000 was used to pay a prepayment fee in connection therewith and $400,000 was used to prepay a portion of the CIT term loan. Simultaneously with this sale, we and the purchaser entered into a lease



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of the Owatonna facility. The lease contains renewal options as well as options to terminate the lease if we elect to relocate. Due to an option to
repurchase the facility originally contained in the lease, the transaction was treated for financial accounting purposes as a financing transaction whereby payments made of $200,000 through December 2005 were recorded as interest expense. On
December 23, 2005, the lease was amended to eliminate our option to repurchase the building in exchange for certain services to be provided by the landlord. Accordingly, the transaction has been accounted for as a sale/leaseback subsequent to
December 23, 2005, resulting in a deferred gain of $811,000 at December 31, 2005, of which $177,000 was included in accrued expenses and $634,000 was included in other long-term liabilities and is being amortized over 21 months. At
September 30, 2006, $438,000 of the deferred gain was included in accrued expenses and $110,000 was included in other long-term liabilities.

In
August 2006, we entered into an Industrial Building Lease (Build to Suit/Triple Net) (the Lease) pursuant to which an approximate 340,000 square foot manufacturing, office and warehouse facility in Owatonna, Minnesota (the Owatonna
Premises) is being constructed to our specifications. Simultaneously with entering into the Lease, we exercised our option under the Lease to acquire the Owatonna Premises for a purchase price of $14,275,000, subject to adjustment. The closing
of the purchase and sale of the Owatonna Premises is subject to standard conditions and will occur upon substantial completion of the improvements, scheduled for June 1, 2007, subject to extension. The lease of the existing Owatonna facility
would terminate in conjunction with a relocation to this new facility.

In October 2006, we entered into a loan agreement (the Citizens Loan
Agreement) with Citizens Bank of Massachusetts (Citizens), pursuant to which Citizens has agreed to advance to us up to a $13,000,000 mortgage loan to finance the acquisition of the Owatonna Premises. This loan, which is subject to
standard conditions, will be advanced simultaneously with our acquisition of the Owatonna Premises, currently scheduled for June 2007. The Citizens mortgage loan will be secured by a lien on the Owatonna Premises.

We posted a letter of credit of $2,945,722 in connection with our appeal of the judgment in Kirila et al v. Cybex International, Inc., et al. This judgment, which
with interest and costs equaled approximately $2,800,000, was paid in November 2006 and the letter of credit has been returned and canceled. The assertion of the plaintiffs in this action that additional attorneys fees (approximately $716,000
as of September 30, 2006) are payable continues pending before the Court. We have also posted a letter of credit of $2,888,025 in connection with our appeal of the judgment in Colassi v. Cybex International, Inc. No payments will be
required by us with respect to the Colassi judgment until the end of the appeal process. The ultimate resolution of these matters could be material to our financial position, results of operations and cash flows; however, we believe that the
recorded reserves are adequate and that we will have adequate liquidity to satisfy any obligations which may become payable in connection with these matters.

We rely upon cash flows from our operations and borrowings under our credit facilities to fund our working capital and capital expenditure requirements. A decline in sales or margins or a failure to remain in compliance with the terms of
our credit facilities could result in us having insufficient funds for such purposes. We believe that our cash flows and the availability under our credit facilities are sufficient to fund our general working capital and capital expenditure needs
for at least the next 12 months.



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CONTRACTUAL OBLIGATIONS

The following is an aggregated summary of the Companys obligations and commitments to make future payments under agreements as of September 30, 2006:



|                              |  |       |            |                   |   |                    |  |                    |           |                  |   |           |  |   |        
|----------------------------- |  | ----- | ---------- | ----------------- | - | ------------------ |  | ------------------ | --------- | ---------------- | - | --------- |  | - | -------
|Contractual obligations:      |  | TOTAL |            | Less ThanOne Year |   | One to Three Years |  | Four to Five Years |           | After Five Years
|Royalty agreement             |  | $     | 2,250,000  |                   | $ | 390,000            |  | $                  | 720,000   |                  | $ | 720,000   |  | $ | 420,000
|Capital lease obligations (a) |  |       | 477,000    |                   |   | 348,000            |  |                    | 129,000   |                  |   |          |  |   |       
|Operating lease commitments   |  |       | 2,979,000  |                   |   | 1,062,000          |  |                    | 1,473,000 |                  |   | 444,000   |  |   |       
|Building purchase obligation  |  |       | 14,250,000 |                   |   | 14,250,000         |  |                    |          |                  |   |          |  |   |       
|Purchase obligations          |  |       | 15,955,000 |                   |   | 11,887,000         |  |                    | 4,068,000 |                  |   |          |  |   |       
|                              |  |       |            |                   |   |                    |  |                    |           |                  |   |           |  |   |        
|TOTAL                         |  | $     | 35,911,000 |                   | $ | 27,937,000         |  | $                  | 6,390,000 |                  | $ | 1,164,000 |  | $ | 420,000
|                              |  |       |            |                   |   |                    |  |                    |           |                  |   |           |  |   |        

---

|(a) | Includes future interest obligation
|--- | -----------------------------------

OFF-BALANCE SHEET ARRANGEMENTS

We have a lease financing program whereby we arrange equipment leases and other financing for certain commercial customers for selected products. These
leases are accounted for as sales-type leases and are generally for terms of three to five years, at which time title transfers to the lessee. While most of these financings are without recourse, in certain cases we may offer a guarantee or other
recourse provisions. At September 30, 2006, the maximum contingent liability under all recourse provisions was approximately $4,599,000. A reserve for estimated losses under recourse provisions of $359,000 has been recorded based upon
historical and industry experience, and is included in accrued liabilities at September 30, 2006.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the 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. On an ongoing basis,
management evaluates its estimates and judgments, including those related to the allowance for doubtful accounts, realizability of inventory, reserves for warranty obligations, reserves for legal matters and product liability, recoverability of
goodwill and valuation of deferred tax assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, which could materially impact the
Companys results of operations and financial position. These critical accounting policies and estimates have been discussed with the Companys audit committee.

Allowance for doubtful accounts. Management performs ongoing credit evaluations of customers and adjusts credit limits based upon payment history and the customers current credit worthiness, as determined
by a review of their current credit information. Management continuously monitors collections and payments from customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection
issues that have been identified. If the financial condition of a specific customer or the Companys general customer base were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Realizability of inventory. The Company values inventory at the lower of cost or market. Management regularly reviews inventory quantities on-hand
and records a provision for excess and obsolete inventory based primarily on estimated forecasts of product demand and historical usage, after considering the impact of new products. If actual market conditions and product demand are less favorable
than projected, additional inventory write-downs may be required.



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Warranty reserve. All products are warranted for up to three years for labor and up to ten years for structural
frames. Warranty periods for parts range from one to three years depending on the part and the type of equipment. A warranty liability is recorded at the time of product sale based on estimates that are developed from historical information and
certain assumptions about future events. Future warranty obligations are affected by product failure rates, usage and service costs incurred in addressing warranty claims. These factors are impacted by the level of new product introductions and the
mix of equipment sold to the commercial and consumer markets. If actual warranty costs differ from managements estimates, adjustments to the warranty liability would be required.

Legal matters. The Company has recorded a reserve related to certain legal matters for which it is probable that a loss has been incurred and the range of such loss can be determined. With respect to other
matters, management has concluded that a loss is only possible or remote and, therefore, no loss is recorded. As additional information becomes available, the Company will continue to assess whether losses from legal matters are probable, possible
or remote, and the adequacy of accruals for probable loss contingencies.

Product liability reserve.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. Reserves for self-insured retention, including claims incurred but not yet reported, are
included in accrued liabilities in the accompanying consolidated balance sheets, based on managements review of outstanding claims and claims history and consultation with its third-party claims administrator. If actual results vary from
managements estimates, adjustments to the reserve would be required.

Recoverability of goodwill. In assessing the recoverability of goodwill,
management is required to make assumptions regarding estimated future cash flows and other factors to determine whether the fair value of the business supports the carrying value of goodwill. This analysis includes assumptions and estimates about
future sales, costs, working capital, capital expenditures and cost of capital. If these assumptions and estimates change in the future, the Company may be required to record an impairment charge related to goodwill.

Valuation of deferred tax assets. In 2002, we established a full valuation allowance against our net deferred tax asset. Effective July 1, 2006, we
reevaluated the need for this valuation allowance in accordance with SFAS No. 109, Accounting for Income Taxes, due to the existence of various factors. Based on this reevaluation, we reduced the valuation allowance by $14,421,000
effective July 1, 2006. The net deferred tax asset balance of $13,839,000 at September 30, 2006 represents the amount that we believe is more likely than not to be realized and the remaining valuation allowance at September 30, 2006
is approximately $6,600,000. We will continue to assess the need for the remaining valuation allowance in future periods.Approximately $35,000,000 of income before income taxes is needed to fully realize the Companys recorded net
deferred tax asset and $52,383,000 of future taxable income is needed to fully realize the Companys deferred tax assets. If the estimates and related assumptions relating to the likely utilization of the deferred tax asset change in the
future, the valuation allowance may change accordingly.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the quarter ended July 1, 2006, the Company
repaid all outstanding variable rate and fixed rate debt. Otherwise, there have been no material changes in market risks from the disclosure within the Companys Report on Form 10-K for the year ended December 31, 2005.



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ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of
its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Companys controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, as of the end of the
period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed
by the Company (including its consolidated subsidiaries) in its periodic filings with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms.
There has been no change in the Companys internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over
financial reporting.



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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Kirila et al v. Cybex International, Inc., et al

See Part I Item 3 of the Companys Report on Form 10-K for the year ended December 31, 2005 and Part II Item 1 of the Companys
Report on Form 10-Q for the quarter ended July 1, 2006 for a description of these proceedings. The judgment in this matter, which with interest and costs equaled approximately $2,800,000, was paid in November 2006. The assertion of the
plaintiff that additional attorneys fees (approximately $716,000 as of September 30, 2006) are payable continues pending before the Court.

Free Motion Fitness v. Cybex International, Inc.

See Part 1 Item 3 of the Companys
Report on Form 10-K for the year ended December 31, 2005 for a description of these proceedings.

Colassi v. Cybex
International, Inc.

See Part 1 Item 3 of the Companys Report on Form 10-K for the year ended December 31, 2005 for
a description of these proceedings.

ITEM 1A. RISK FACTORS

There are no material changes to the risk factors previously disclosed in Item 1A,
Part 1 of the Companys Report on Form 10-K for the year ended December 31, 2005.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

The Company has entered into a loan agreement dated as of October 17, 2006
(the Citizens Loan Agreement) with Citizens Bank of Massachusetts (Citizens). There are no material relationships between Cybex or its affiliates and Citizens other than with respect to the Citizens Loan Agreement and related
documentation.

Pursuant to the Citizens Loan Agreement, Citizens has agreed to advance to Cybex up to a $13,000,000 mortgage loan to
finance the acquisition of an approximate 340,000 square foot, manufacturing, office and warehouse facility located in Owatonna, Minnesota (the Owatonna Premises) being built to the Companys specifications. This loan, which is
subject to standard conditions, will be advanced simultaneously with the Companys acquisition of the Owatonna Premises, currently scheduled for June 2007. This mortgage loan will be secured by a lien on the Owatonna Premises. Pending
disbursement of the mortgage loan, Cybex has also agreed not to incur or to permit any liens on its Medway, Massachusetts property. Principal on the mortgage loan will be retired by consecutive equal monthly payments of principal and interest of
approximately $91,000 each, with the entire outstanding principal and accrued but unpaid interest to be due and payable on the seventh anniversary of the date the mortgage loan is advanced. The mortgage loan will bear interest at a floating rate
equal to LIBOR plus 1.2% per annum. Cybex has entered into a related interest rate swap agreement with Citizens which locks in an interest rate of 6.95% per annum to July 2014. The Citizens Loan Agreement requires the Company to maintain
certain financial covenants, including maintaining a minimum debt service coverage and a leverage ratio.



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The Company has entered into a Seventh Amendment to Financing Agreement with The CIT Group/Business
Credit, Inc. dated as of October 17, 2006. The Seventh Amendment to Financing Agreement amends the financing agreement entered into in July of 2004, as amended, by among other things permitting the capital expenditures and mortgage financing in
connection with the construction and purchase of the Companys new Owatonna facility.

ITEM 6. EXHIBITS

Exhibit 10.1 - Industrial Building Lease (Build-To-Suit/Triple Net) dated August 22,
2006 between the Company and First Industrial Development Services, Inc. (First Industrial).

Exhibit 10.2 - Agreement of
Purchase and Sale dated August 22, 2006 between the Company and First Industrial.

Exhibit 10.3 - Tri-Party Agreement dated
August 22, 2006 among the Company, First Industrial and the City of Owatonna, Minnesota (the City of Owatonna).

Exhibit
10.4 - Business Subsidy Agreement dated August 22, 2006 between the Company and the City of Owatonna.

Exhibit 10.5 - Loan Agreement
dated as of October 17, 2006, between the Company and Citizens Bank of Massachusetts.

Exhibit 10.6 - Seventh Amendment to Financing
Agreement dated as of October 17, 2006 between the Company and The CIT Group/Business Credit, Inc.

Exhibit 31.1  Certification
of Chief Executive Officer.

Exhibit 31.2  Certification of Chief Operating and Chief Financial Officer.

Exhibit 32.1  Statement of Chief Executive Officer.

Exhibit 32.2  Statement of Chief Operating and Chief Financial Officer.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.



|                  |  |                           |  |                                                                         
|----------------- |  | ------------------------- |  | ------------------------------------------------------------------------
|                  |  | Cybex International, Inc.
|                  |  |                          
|                  |  | By:                       |  | /s/ John Aglialoro                                                      
|November 13, 2006 |  |                           |  | John Aglialoro Chairman and Chief Executive
Officer                     
|                  |  |                          
|                  |  | By:                       |  | /s/ Arthur W. Hicks, Jr.                                                
|November 13, 2006 |  |                           |  | Arthur W. Hicks, Jr. Chief Operating Officer
and Chief Financial Officer



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