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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 April 1, 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)



---

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 April 26, 2006, the Registrant had
outstanding 15,180,810 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)                                                                    |  |     
|                              |  |          | 
|                              |  |          |  | Condensed Consolidated Statements of OperationsThree months ended April 1, 2006 and March 26, 2005 |  | 3   
|                              |  |          | 
|                              |  |          |  | Condensed Consolidated Balance Sheets April 1, 2006 and December 31, 2005                          |  | 4   
|                              |  |          | 
|                              |  |          |  | Condensed Consolidated Statements of Cash FlowsThree months ended April 1, 2006 and March 26, 2005 |  | 5   
|                              |  |          | 
|                              |  |          |  | Notes to Condensed Consolidated Financial Statements                                                |  | 6   
|                              |  |          | 
|                              |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations               |  | 15  
|                              |  |          | 
|                              |  | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                          |  | 19  
|                              |  |          | 
|                              |  | Item 4.  |  | Controls and Procedures                                                                             |  | 19  
|                              | 
|PART II. OTHER INFORMATION    |  |         
|                              |  |          | 
|                              |  | Item 1.  |  | Legal Proceedings                                                                                   |  | 20  
|                              |  |          | 
|                              |  | Item 1A. |  | Risk Factors                                                                                        |  | 20  
|                              |  |          | 
|                              |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                         |  | 20  
|                              |  |          | 
|                              |  | Item 3.  |  | Defaults Upon Senior Securities                                                                     |  | 20  
|                              |  |          | 
|                              |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                 |  | 20  
|                              |  |          | 
|                              |  | Item 5.  |  | Other Information                                                                                   |  | 21  
|                              |  |          | 
|                              |  | Item 6.  |  | Exhibits                                                                                            |  | 21  
|                              |  |         
|Signatures                    |  |          |  | 22                                                                                                 



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                             |  |                    |        |                |   |       
|-------------------------------------------- |  | ------------------ | ------ | -------------- | - | ------
|                                             |  | Three Months Ended
|                                             |  | April 1, 2006      |        | March 26, 2005
|Net sales                                    |  | $                  | 28,912 |                | $ | 24,759
|Cost of sales                                |  |                    | 18,361 |                |   | 15,904
|                                             |  |                    |        |                |   |       
|Gross profit                                 |  |                    | 10,551 |                |   | 8,855 
|                                             |  |                   
|Selling, general and administrative expenses |  |                    | 9,187  |                |   | 8,026 
|Bad debt expense                             |  |                    | 75     |                |   | 57    
|                                             |  |                    |        |                |   |       
|Operating income                             |  |                    | 1,289  |                |   | 772   
|                                             |  |                   
|Interest expense, net                        |  |                    | 559    |                |   | 596   
|                                             |  |                    |        |                |   |       
|Income before income taxes                   |  |                    | 730    |                |   | 176   
|Income tax expense                           |  |                    | 63     |                |   | 57    
|                                             |  |                    |        |                |   |       
|Net income                                   |  | $                  | 667    |                | $ | 119   
|                                             |  |                    |        |                |   |       
|Basic net income per share                   |  | $                  | 0.04   |                | $ | 0.01  
|                                             |  |                    |        |                |   |       
|Diluted net income per share                 |  | $                  | 0.04   |                | $ | 0.01  
|                                             |  |                    |        |                |   |       

See notes to condensed consolidated financial statements.



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)



|                                                                                        |  |              |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                        |  | April 1,2006 |         |   | December 31,2005 |  
|ASSETS                                                                                  |  |              |         |   |                  |   |         |  
|Current Assets:                                                                         |  |              |         |   |                  |   |         |  
|Cash                                                                                    |  | $            | 1,785   |   |                  | $ | 807     |  
|Accounts receivable, net of allowance of $626 and $689                                  |  |              | 14,523  |   |                  |   | 18,320  |  
|Inventories                                                                             |  |              | 9,477   |   |                  |   | 9,258   |  
|Prepaid expenses and other                                                              |  |              | 3,504   |   |                  |   | 2,707   |  
|                                                                                        |  |              |         |   |                  |   |         |  
|Total current assets                                                                    |  |              | 29,289  |   |                  |   | 31,092  |  
|Property, plant and equipment, net                                                      |  |              | 11,544  |   |                  |   | 12,124  |  
|Goodwill                                                                                |  |              | 11,247  |   |                  |   | 11,247  |  
|Other assets                                                                            |  |              | 1,026   |   |                  |   | 1,209   |  
|                                                                                        |  |              |         |   |                  |   |         |  
|                                                                                        |  | $            | 53,106  |   |                  | $ | 55,672  |  
|                                                                                        |  |              |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                    |  |              |         |   |                  |   |         |  
|Current Liabilities:                                                                    |  |              |         |   |                  |   |         |  
|Current maturities of long-term debt                                                    |  | $            | 2,684   |   |                  | $ | 3,929   |  
|Current portion of capital leases                                                       |  |              | 433     |   |                  |   | 481     |  
|Accounts payable                                                                        |  |              | 5,500   |   |                  |   | 5,918   |  
|Accrued expenses                                                                        |  |              | 15,659  |   |                  |   | 16,286  |  
|                                                                                        |  |              |         |   |                  |   |         |  
|Total current liabilities                                                               |  |              | 24,276  |   |                  |   | 26,614  |  
|Long-term debt                                                                          |  |              | 9,059   |   |                  |   | 9,730   |  
|Capital leases                                                                          |  |              | 252     |   |                  |   | 332     |  
|Other liabilities                                                                       |  |              | 2,589   |   |                  |   | 2,808   |  
|                                                                                        |  |              |         |   |                  |   |         |  
|Total liabilities                                                                       |  |              | 36,176  |   |                  |   | 39,484  |  
|                                                                                        |  |              |         |   |                  |   |         |  
|Contingencies (Note 9)                                                                  |  |              |         |   |                  |   |         |  
|Stockholders Equity:                                                                   |  |              |         |   |                  |   |         |  
|Common stock, $.10 par value, 30,000 shares authorized, 15,389 and 15,340 shares issued |  |              | 1,539   |   |                  |   | 1,534   |  
|Additional paid-in capital                                                              |  |              | 57,718  |   |                  |   | 57,565  |  
|Treasury stock, at cost (209 shares)                                                    |  |              | (2,251  | ) |                  |   | (2,251  | )
|Accumulated deficit                                                                     |  |              | (39,863 | ) |                  |   | (40,530 | )
|Accumulated other comprehensive loss                                                    |  |              | (213    | ) |                  |   | (130    | )
|                                                                                        |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                              |  |              | 16,930  |   |                  |   | 16,188  |  
|                                                                                        |  |              |         |   |                  |   |         |  
|                                                                                        |  | $            | 53,106  |   |                  | $ | 55,672  |  
|                                                                                        |  |              |         |   |                  |   |         |  

See notes to condensed consolidated financial statements.



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                  |  |                    |         |   |               |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                                                                  |  | Three Months Ended |        
|                                                                                  |  | April 1,2006       |         |   | March 26,2005 |  
|OPERATING ACTIVITIES:                                                             |  |                    |         |   |               |   |         |  
|Net income                                                                        |  | $                  | 667     |   |               | $ | 119     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                    |         |   |               |   |         |  
|Depreciation and amortization                                                     |  |                    | 829     |   |               |   | 892     |  
|Amortization of deferred financing costs                                          |  |                    | 134     |   |               |   | 134     |  
|Stock-based compensation                                                          |  |                    | 29      |   |               |   | 14      |  
|Provision for doubtful accounts                                                   |  |                    | 75      |   |               |   | 57      |  
|Change in fair value of foreign currency contract                                 |  |                    | 53      |   |               |   | (72     | )
|Changes in operating assets and liabilities:                                      |  |                    |         |   |               |   |         |  
|Accounts receivable                                                               |  |                    | 3,722   |   |               |   | 1,675   |  
|Inventories                                                                       |  |                    | (219    | ) |               |   | (673    | )
|Prepaid expenses and other                                                        |  |                    | (953    | ) |               |   | 221     |  
|Accounts payable, accrued liabilities and other liabilities                       |  |                    | (1,155  | ) |               |   | 694     |  
|                                                                                  |  |                    |         |   |               |   |         |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |  |                    | 3,182   |   |               |   | 3,061   |  
|                                                                                  |  |                    |         |   |               |   |         |  
|INVESTING ACTIVITIES:                                                             |  |                    |         |   |               |   |         |  
|Purchases of property, plant and equipment                                        |  |                    | (236    | ) |               |   | (881    | )
|Deposits related to equipment purchases                                           |  |                    | (14     | ) |               |   | (615    | )
|                                                                                  |  |                    |         |   |               |   |         |  
|NET CASH USED IN INVESTING ACTIVITIES                                             |  |                    | (250    | ) |               |   | (1,496  | )
|                                                                                  |  |                    |         |   |               |   |         |  
|FINANCING ACTIVITIES:                                                             |  |                    |         |   |               |   |         |  
|Repayments of term loans                                                          |  |                    | (577    | ) |               |   | (137    | )
|Borrowings under term loans                                                       |  |                    |        |   |               |   | 751     |  
|Repayments under revolving loan                                                   |  |                    | (31,271 | ) |               |   | (27,657 | )
|Borrowings under revolving loans                                                  |  |                    | 29,932  |   |               |   | 24,417  |  
|Proceeds from exercise of stock options                                           |  |                    | 90      |   |               |   | 7       |  
|Principal payments on capital leases                                              |  |                    | (128    | ) |               |   | (144    | )
|                                                                                  |  |                    |         |   |               |   |         |  
|NET CASH USED IN FINANCING ACTIVITIES                                             |  |                    | (1,954  | ) |               |   | (2,763  | )
|NET INCREASE (DECREASE) IN CASH                                                   |  |                    | 978     |   |               |   | (1,198  | )
|CASH, beginning of period                                                         |  |                    | 807     |   |               |   | 1,826   |  
|                                                                                  |  |                    |         |   |               |   |         |  
|CASH, end of period                                                               |  | $                  | 1,785   |   |               | $ | 628     |  
|                                                                                  |  |                    |         |   |               |   |         |  
|SUPPLEMENTAL CASH FLOW DISCLOSURE                                                 |  |                    |         |   |               |   |         |  
|Cash paid for interest                                                            |  | $                  | 322     |   |               | $ | 333     |  
|Cash paid for income taxes                                                        |  |                    | 202     |   |               |   | 98      |  
|Capital leases                                                                    |  |                    |        |   |               |   | 305     |  
|Common stock issued to directors earned in previous period (Note 4)               |  |                    | 52      |   |               |   | 77      |  

See notes to condensed consolidated financial statements.



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED 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 condensed 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 months ended April 1, 2006 are
not necessarily indicative of the results that may be expected for the entire year.

It is recommended that these condensed 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, its Current Reports on Form 8-K, and its proxy statement dated April 4, 2006.

NOTE 2  CONCENTRATION OF RISK AND
GEOGRAPHIC SEGMENT DATA

Sales to one customer represented 16.9% and 17.9% of consolidated net sales for the three months ended April 1, 2006 and March
26, 2005, respectively. Accounts receivable from this customer was $1,793,000 at April 1, 2006.

Sales outside of North America represented 30% and 26% of
consolidated net sales for the three months ended April 1, 2006 and March 26, 2005, respectively.

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 guaranty 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 April 1, 2006, the maximum contingent liability under all recourse and guarantee provisions was approximately $4,588,000. A reserve for estimated losses under recourse provisions of $210,000 and $289,000 has been recorded based on historical
and industry experience and is included in accrued expenses at April 1, 2006 and December 31, 2005, respectively.

The Company has recorded a net
liability of $98,000 and $74,000 at April 1, 2006 and December 31, 2005, respectively, in accordance with Financial Accounting Standards Board (FASB) 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.



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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 recorded at the time of product sale based on management estimates, which are developed from historical information, and certain assumptions about future events are subject to change.

The following table sets forth the change in the liability for product warranties during the three months ended April 1, 2006.



|                                      |  |   |           |  
|------------------------------------- |  | - | --------- | -
|Balance as of January 1, 2006         |  | $ | 2,875,000 |  
|Payments made under warranty          |  |   | (808,000  | )
|Accrual for product warranties issued |  |   | 859,000   |  
|                                      |  |   |           |  
|Balance as of April 1, 2006           |  | $ | 2,926,000 |  
|                                      |  |   |           |  

NOTE 4  STOCK-BASED COMPENSATION

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Shared-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 of the
cost of employee services received in exchange for an award of equity instruments in the financial statements 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 application, the Company is required to record compensation expense for all awards granted 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 April 1, 2006, the Company recorded stock-based compensation expense of $29,000, consisting of expenses related to stock options ($16,000) and restricted stock to be issued to directors ($13,000).

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 quarter ended March 26, 2005, the impact would have been as follows.



|                                                                                                                    |  |                    |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | -
|                                                                                                                    |  | Three Months Ended |        
|                                                                                                                    |  | March 26, 2005     |        
|Net income                                                                                                          |  | $                  | 119,000 |  
|Add: Stock-based compensation included in net income                                                                |  |                    | 14,000  |  
|Deduct: Total stock-based employee compensation expense determined under the fair-value based method for all awards |  |                    | (51,000 | )
|                                                                                                                    |  |                    |         |  
|Pro forma net income                                                                                                |  | $                  | 82,000  |  
|                                                                                                                    |  |                    |         |  
|Basic net income per share:                                                                                         |  |                    |         |  
|As reported                                                                                                         |  | $                  | .01     |  
|                                                                                                                    |  |                    |         |  
|Pro forma                                                                                                           |  | $                  | .01     |  
|                                                                                                                    |  |                    |         |  
|Diluted net income per share:                                                                                       |  |                    |         |  
|As reported                                                                                                         |  | $                  | .01     |  
|                                                                                                                    |  |                    |         |  
|Pro forma                                                                                                           |  | $                  | .01     |  
|                                                                                                                    |  |                    |         |  



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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 (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 April 1, 2006 is presented below:



|                                     |  |                  |   |  |                               |      |                                  |      |                |   |          
|------------------------------------ |  | ---------------- | - |  | ----------------------------- | ---- | -------------------------------- | ---- | -------------- | - | ---------
|                                     |  | Number of Shares |   |  | WeightedAverage ExercisePrice |      | RemainingContractual Term(years) |      | IntrinsicValue
|Outstanding at January 1, 2006       |  | 766,100          |   |  | $                             | 1.87 |                                  |      |                |   |          
|Exercised                            |  | (35,350          | ) |  |                               | 2.56 |                                  |      |                |   |          
|Forfeited                            |  | (1,000           | ) |  |                               | 1.70 |                                  |      |                |   |          
|                                     |  |                  |   |  |                               |      |                                  |      |                |   |          
|Outstanding at April 1, 2006         |  | 729,750          |   |  | $                             | 1.83 |                                  | 6.44 |                | $ | 3,529,000
|                                     |  |                  |   |  |                               |      |                                  |      |                |   |          
|Options exercisable at April 1, 2006 |  | 502,500          |   |  | $                             | 2.06 |                                  | 5.92 |                | $ | 2,318,000
|                                     |  |                  |   |  |                               |      |                                  |      |                |   |          

The intrinsic value of options exercised in the quarter ended April 1, 2006 was $98,000. 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 April 1, 2006, there was $98,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.4 years.

The Companys 2002 Stock Retainer Plan for Nonemployee Directors (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 April 1, 2006, there are 42,937 shares available for future issuance pursuant to the 2002 Plan. The Company recorded stock-based compensation expense of $13,000 for the quarter ended April 1, 2006 for common stock to be issued
to the directors for 2006 services, which is included in accrued expenses at April 1, 2006 and will be issued in 2007. 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.



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NOTE 5  INVENTORIES

Inventories consist of the following:



|                |  |               |           |                   |   |          
|--------------- |  | ------------- | --------- | ----------------- | - | ---------
|                |  | April 1, 2006 |           | December 31, 2005
|Raw materials   |  | $             | 4,789,000 |                   | $ | 4,989,000
|Work in process |  |               | 2,099,000 |                   |   | 2,110,000
|Finished goods  |  |               | 2,589,000 |                   |   | 2,159,000
|                |  |               |           |                   |   |          
|                |  | $             | 9,477,000 |                   | $ | 9,258,000
|                |  |               |           |                   |   |          

NOTE 6  LONG-TERM DEBT

Long-term debt consists of the following:



|                           |  |               |            |   |                   |   |            |  
|-------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                           |  | April 1, 2006 |            |   | December 31, 2005 |  
|CIT working capital loan   |  | $             |           |   |                   | $ | 1,339,000  |  
|CIT term loan              |  |               | 4,678,000  |   |                   |   | 5,069,000  |  
|GMAC real estate term loan |  |               | 5,739,000  |   |                   |   | 5,860,000  |  
|GMAC equipment term loan   |  |               | 1,326,000  |   |                   |   | 1,391,000  |  
|                           |  |               |            |   |                   |   |            |  
|                           |  |               | 11,743,000 |   |                   |   | 13,659,000 |  
|Less  current portion     |  |               | (2,684,000 | ) |                   |   | (3,929,000 | )
|                           |  |               |            |   |                   |   |            |  
|                           |  | $             | 9,059,000  |   |                   | $ | 9,730,000  |  
|                           |  |               |            |   |                   |   |            |  

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 a $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 its 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 are 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 in January 2006 (as amended, the GMAC Amended Credit Agreement) to
include a $5,000,000 credit line that will be available through December 15, 2006 to finance the purchase of machinery and equipment. The GMAC loans are secured by the Companys real estate, fixtures and 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. The CIT
loans are secured by substantially all assets of the Company other than real estate, fixtures and equipment.



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At April 1, 2006, there were $11,743,000 of term loans and no working capital loans outstanding. Availability under
the revolving loan fluctuates daily. At April 1, 2006, there was $8,773,000 in unused availability under the working capital revolving loan.

The CIT
working capital loan bears interest at rates ranging between LIBOR plus 2.5% to 3.25% or the prime rate less .25% to plus .50% based on a performance grid (7.50% at April 1, 2006). The CIT term loan bears interest at the prime rate plus 3%,
with a minimum of 7% (10.75% at April 1, 2006) (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 $6,250,000 CIT term loan, as amended, is due in equal quarterly
principal installments of $390,625, with the balance of $1,553,125 due at maturity on June 30, 2008. Interest is payable monthly. The GMAC term loans bear 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 GMAC term loans are due in equal monthly principal payments of $93,000 with
the balance of $3,294,000 due at maturity on August 1, 2009. Each advance under the GMAC equipment credit line will be repaid with equal principal installments payable monthly through July 2009, with any remaining unpaid principal due at
maturity on August 1, 2009. The prime rate was 7.75% and LIBOR was 5.25% at April 1, 2006. The Hilco loan bore interest at the prime rate plus 11.5%, with a minimum of 15.5%.

The average outstanding working capital loan balance for the three months ended April 1, 2006 and March 26, 2005 was approximately $164,000 and $1,127,000, respectively, and the weighted average interest
rate was 7.18% and 5.19%, 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 April 1, 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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At April 1, 2006, long-term debt maturities are as follows:



|                                       |  |   |            |  
|-------------------------------------- |  | - | ---------- | -
|2007                                   |  | $ | 2,684,000  |  
|2008                                   |  |   | 2,684,000  |  
|2009                                   |  |   | 2,675,000  |  
|2010                                   |  |   | 3,700,000  |  
|                                       |  |   |            |  
|                                       |  |   | 11,743,000 |  
|Less current portion of long-term debt |  |   | (2,684,000 | )
|                                       |  |   |            |  
|                                       |  | $ | 9,059,000  |  
|                                       |  |   |            |  

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). This letter of credit was replaced during the second quarter of 2005 by a letter of credit issued under the CIT Amended
Financing Agreement. 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 whereby 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 ($590,000 at April 1, 2006) was included in other long-term liabilities and is being amortized over 55 months.

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 ending September 8, 2006 related to the Companys GMAC term debt facility and CIT working capital loan credit facility. The cost of the interest rate caps was approximately $97,000. The interest rate caps are accounted for
as cash flow hedges and the cost of the interest rate caps is being amortized on a straight-line basis over two years, which approximates the period during which the individual caplets related to each forecasted interest payment expire. Changes in
the fair value of the interest rate caps are recorded within accumulated other comprehensive loss. The change in the fair value of the interest rate caps was a decrease of $13,000 and an increase of $81,000 for the three months ended April 1,
2006 and March 26, 2005, 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 begin 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, as amended. The change in fair value of the
hedge resulted in a loss of $53,000 and a gain of $72,000 for the three months ended April 1, 2006 and March 26, 2005, respectively.



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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 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 approximately
$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 April 1, 2006, there are 1,944,390 shares of common stock reserved for future issuance pursuant to the
exercise or issuance of stock options and warrants.

Warrants:

At April 1, 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.

Comprehensive Income:

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

The following summarizes
the components of comprehensive income:



|                                            |  |                    |     |   |                |   |    
|------------------------------------------- |  | ------------------ | --- | - | -------------- | - | ---
|                                            |  | Three Months Ended
|                                            |  | April 1, 2006      |     |   | March 26, 2005
|Net income                                  |  | $                  | 667 |   |                | $ | 119
|Other comprehensive income (loss):          |  |                    |     |   |                |   |    
|Foreign currency translation adjustment     |  |                    | (70 | ) |                |   | 82 
|Change in fair value of interest rate hedge |  |                    | (13 | ) |                |   | 81 
|                                            |  |                    |     |   |                |   |    
|Comprehensive income                        |  | $                  | 584 |   |                | $ | 282
|                                            |  |                    |     |   |                |   |    



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NOTE 8  NET INCOME PER SHARE

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



|                                                      |  |                    |  |               
|----------------------------------------------------- |  | ------------------ |  | --------------
|                                                      |  | Three Months Ended
|                                                      |  | April 1, 2006      |  | March 26, 2005
|Shares used in computing basic net income per share   |  | 15,158,000         |  | 15,105,000    
|Dilutive effect of options and warrants               |  | 690,000            |  | 619,000       
|                                                      |  |                    |  |               
|Shares used in computing diluted net income per share |  | 15,848,000         |  | 15,724,000    
|                                                      |  |                    |  |               

For the three months ended March 26, 2005, options to purchase 63,000 shares of common stock at exercise
prices ranging from $4.06 to $11.75 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 April 1, 2006, a reserve of $6,200,000 is included in accrued expenses for estimated losses related to those matters for which it is probable that a loss has been incurred.

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, 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.



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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 Cybex has filed a petition for Allowance
of Appeal with the Pennsylvania Supreme Court. The ultimate resolution of this matter could be material to the Companys financial position, results of operations and cash flows; however, management believes that the recorded reserve is
adequate.

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 instituted 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). The ultimate resolution of this matter could be material to the Companys financial position, results of operations and cash flows; however, management believes that the recorded reserve is adequate.

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 plaintiffs 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 or results of operations. Legal fees related to those matters are charged to expense as incurred.



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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 the Annual Report on Form 10-K, including Item 1A, Part I thereof, the 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 $4,153,000, or 17%, to $28,912,000 for the first quarter of 2006 from $24,759,000 for the first quarter of 2005. For the first
quarter of 2006, sales of cardiovascular products increased $1,964,000, or 15%, to $15,289,000 and sales of strength products increased $1,793,000, or 20%, to $10,594,000. Of the increase in sales of cardiovascular products, 55% was due to the 425T
treadmill, first introduced in November 2005, for the light commercial and high-end consumer markets. Sales of bikes also increased in 2006, and cardiovascular sales were further augmented by the Trazer product, introduced during the second half of
2005, and moderate sales increases of Arc Trainers. The increase in sales of strength products for the quarter was primarily due to sales of VR3, the new strength line introduced at the end of 2005, along with an increase in modular, plate loaded
and free weight products. Freight, parts and other revenue increased $396,000, or 15%, to $3,029,000 in the first quarter of 2006.

GROSS MARGIN

Gross margin increased to 36.5% in the first quarter of 2006 from 35.8% in the prior year first quarter predominantly due to lower costs (1.7%),
increased pricing (.8%) and overhead absorption due to higher volumes (.4%), partially offset by higher warranty costs (.5%) and product sales mix (1.7%).

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 positive impact on gross margins from the decrease in steel prices in the first quarter
of 2006 compared to the corresponding 2005 period was approximately .9%. We do not expect that steel prices will have a substantial impact on margins in 2006 compared to 2005.



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##### Table of Contents

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses, including bad debt expense increased by $1,179,000, or 15%, to $9,262,000 in the first quarter of 2006 compared to $8,083,000 in the first quarter of 2005, predominantly
due to an increase in domestic and international selling expenses ($503,000), and an increase in product development costs ($265,000). The balance of the increase in these expenses is comprised of smaller amounts including additional order
fulfillment staff, higher general salary levels and increased insurance and legal costs. Selling, general and administrative expenses represented 32.0% of sales in 2006 compared to 32.6% of sales in 2005.

NET INTEREST EXPENSE

Net interest expense decreased by $37,000 in
the first quarter of 2006 compared to the corresponding period of 2005. The decrease in 2006 was primarily due to lower outstanding debt balances.

INCOME TAXES

In a prior year, we established a valuation allowance for deferred taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. At December 31, 2005, deferred tax assets of approximately $21,960,000 were available to us to offset future taxable income. We will continue to re-evaluate the need for the deferred tax valuation
reserve in future periods based on our continuing to achieve profitable operating results. The amounts recorded for income tax expense for the three months ended April 1, 2006 and March 26, 2005 relate to state taxes and federal
alternative minimum tax.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

As of April 1, 2006, we had working capital of $5,013,000 compared to $4,478,000 of working capital at December 31, 2005. The net increase in working capital is primarily due to cash provided by operating
activities.

For the three months ended April 1, 2006, we generated $3,182,000 of cash from operating activities compared to $3,061,000 for the three
months ended March 26, 2005. The increase in cash provided by operating activities is primarily due to an increase in net income, partially offset by changes in operating assets and liabilities.

Cash used in investing activities of $250,000 during the three months ended April 1, 2006 consisted of purchases and deposits on manufacturing tooling and equipment
of $61,000, primarily for the manufacture of new products, and computer hardware and infrastructure of $189,000. Cash used in investing activities of $1,496,000 during the three months ended March 26, 2005 related primarily to purchases and
deposits on equipment and tooling for the manufacturing of new products and improvements to our computer hardware and infrastructure.

Cash used in
financing activities was $1,954,000 and $2,763,000 for the three months ended April 1, 2006 and March 26, 2005, respectively, consisting primarily of debt repayments.

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 provides for term
loans and was amended in January 2006 to include a $5,000,000 credit line that will be available through December 15, 2006 to finance machinery and equipment purchases. Our Amended Financing Agreement with CIT provides for working capital
revolving loans in amounts up to the lesser of $14,000,000, or an amount determined by reference to a borrowing base and a term loan. The GMAC loans are secured by our real estate, fixtures and equipment, and mature on August 1, 2009. The CIT
loans are secured by substantially all of our other assets and mature on June 30, 2008.

At April 1, 2006, there were $11,743,000 of term loans
and no working capital loans outstanding. Availability under the revolving loan fluctuates daily. At April 1, 2006, there was $8,773,000 in unused availability under the working capital revolving loan facility.



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##### Table of Contents

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 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 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 ($590,000 at April 1, 2006) was included in other long-term liabilities and is being amortized over 55 months.

We have posted
letters of credit of $2,945,722 and $2,888,025, respectively, in connection with our appeals of the judgments in Kirila et al v. Cybex International, Inc., et al, and Colassi v. Cybex International, Inc. No cash payments to the
plaintiffs will be required with respect to either item of litigation until the end of the respective appeal processes. 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 these judgments if our appeals are ultimately unsuccessful.

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 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.

CONTRACTUAL OBLIGATIONS

The following is an aggregated summary of our obligations and commitments to make future payments under various agreements as of April 1, 2006:



|                              |  |       |            |                   |   |                    |  |                    |            |                  |   |           |  |   |        
|----------------------------- |  | ----- | ---------- | ----------------- | - | ------------------ |  | ------------------ | ---------- | ---------------- | - | --------- |  | - | -------
|Contractual obligations:      |  | TOTAL |            | Less ThanOne Year |   | One to Three Years |  | Four to Five Years |            | After Five Years
|Debt                          |  | $     | 11,743,000 |                   | $ | 2,684,000          |  | $                  | 5,359,000  |                  | $ | 3,700,000 |  | $ |       
|Royalty agreement             |  |       | 2,430,000  |                   |   | 390,000            |  |                    | 720,000    |                  |   | 720,000   |  |   | 600,000
|Capital lease obligations (a) |  |       | 749,000    |                   |   | 478,000            |  |                    | 199,000    |                  |   | 72,000    |  |   |       
|Operating lease commitments   |  |       | 3,960,000  |                   |   | 1,106,000          |  |                    | 2,174,000  |                  |   | 680,000   |  |   |       
|Purchase obligations          |  |       | 11,792,000 |                   |   | 9,378,000          |  |                    | 2,414,000  |                  |   |          |  |   |       
|                              |  |       |            |                   |   |                    |  |                    |            |                  |   |           |  |   |        
|TOTAL                         |  | $     | 30,674,000 |                   | $ | 14,036,000         |  | $                  | 10,866,000 |                  | $ | 5,172,000 |  | $ | 600,000
|                              |  |       |            |                   |   |                    |  |                    |            |                  |   |           |  |   |        

---

|(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 guaranty or other
recourse provisions. At April 1, 2006, the maximum contingent liability under all recourse provisions was approximately $4,588,000. A reserve for estimated losses under recourse provisions of $210,000 has been recorded based upon historical and
industry experience, and is included in accrued liabilities at April 1, 2006.



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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, we evaluate our 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. We base our 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 our results of operations and financial position. These critical accounting policies and estimates have been
discussed with our audit committee.

Allowance for doubtful accounts. We perform ongoing credit evaluations of customers and adjust credit limits
based upon payment history and the customers current credit worthiness, as determined by a review of their current credit information. We continuously monitor collections and payments from customers and maintain a reserve 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 our general customer base were to deteriorate, resulting in an impairment of their
ability to make payments, additional reserves would be required.

Realizability of inventory. We value inventory at the lower of cost or market. We
regularly review inventory quantities on-hand and record 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 would be required.

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. We have 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, we have concluded that a loss is only possible or remote and, therefore, no loss is recorded. As additional information becomes available, we 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 our products, we are involved in certain pending product liability claims and lawsuits. We maintain product liability insurance coverage subject to deductibles. Reserves for
self-insured retention, including claims incurred but not yet reported, are included in accrued expenses in the accompanying consolidated balance sheets, based on our review of outstanding claims and claims history and consultation with our
third-party claims administrators. If actual results vary from our estimates, adjustments to the reserve would be required.



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Recoverability of goodwill. In assessing the recoverability of goodwill, we are 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 and net operating assets. 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, we may be required to record an impairment charge related to goodwill.

Valuation of deferred tax assets. At December 31, 2005, there was a valuation allowance of $21,960,000 against the carrying value of our deferred tax assets.
Approximately $56,307,000 of future taxable income is needed to fully realize our 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

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.

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 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.

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 I 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



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ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS



| | (a) | Exhibit 31.1  Certification of Chief Executive Officer.
| | --- | --------------------------------------------------------

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

Exhibit 32.1  Statement of Chief
Executive Officer.

Exhibit 32.2  Statement of Chief Operating Officer 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                                 
|April 28, 2006 |  |                           |  | John Aglialoro Chairman and Chief Executive
Officer



|               |  |     |  |                                                                         
|-------------- |  | --- |  | ------------------------------------------------------------------------
|               |  | By: |  | /s/ Arthur W. Hicks, Jr.                                                
|April 28, 2006 |  |     |  | Arthur W. Hicks, Jr. Chief Operating Officer and
Chief Financial Officer



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