##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934



---



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2007.
|- | --------------------------------------------------------------------------------------------------------------------------------------

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from
 to .
|- | -----------------------------------------------------------------------------------------------------------------------------

Commission file number 0-4538



---

Cybex International, Inc.

(Exact
name of registrant as specified in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|New York                                                       |  | 11-1731581                          
|(State or other jurisdiction of 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 May 4, 2007, the Registrant had outstanding 17,315,152 shares
of Common Stock, par value $0.10 per share, which is the Registrants only class of Common Stock.



---



---

##### Table of Contents

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX



|           |  |                       |  |                                                                                             |  |     
|---------- |  | --------------------- |  | ------------------------------------------------------------------------------------------- |  | ----
|           |  |                       |  |                                                                                             |  | Page
|PART I.    |  | FINANCIAL INFORMATION |  |                                                                                            
|           |  |                       | 
|           |  | Item 1.               |  | Financial Statements (unaudited)                                                            |  |     
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of OperationsThree months ended March 31, 2007 and April 1, 2006. |  | 3   
|           |  |                       | 
|           |  |                       |  | Consolidated Balance SheetsMarch 31, 2007 and December 31, 2006                            |  | 4   
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Cash FlowsThree months ended March 31, 2007 and April 1, 2006   |  | 5   
|           |  |                       | 
|           |  |                       |  | Notes to Consolidated Financial Statements                                                  |  | 6   
|           |  |                       | 
|           |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations       |  | 17  
|           |  |                       | 
|           |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                  |  | 22  
|           |  |                       | 
|           |  | 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                                                                                    |  | 23  
|           | 
|Signatures |  | 25                   



2



---

##### Table of Contents

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                             |  |                    |        |              |   |       
|-------------------------------------------- |  | ------------------ | ------ | ------------ | - | ------
|                                             |  | Three Months Ended
|                                             |  | March 31, 2007     |        | April 1,2006
|Net sales                                    |  | $                  | 34,676 |              | $ | 28,912
|                                             |  |                   
|Cost of sales                                |  |                    | 21,782 |              |   | 18,361
|                                             |  |                    |        |              |   |       
|Gross profit                                 |  |                    | 12,894 |              |   | 10,551
|                                             |  |                   
|Selling, general and administrative expenses |  |                    | 10,796 |              |   | 9,262 
|                                             |  |                    |        |              |   |       
|Operating income                             |  |                    | 2,098  |              |   | 1,289 
|                                             |  |                   
|Interest expense, net                        |  |                    | 210    |              |   | 559   
|                                             |  |                    |        |              |   |       
|Income before income taxes                   |  |                    | 1,888  |              |   | 730   
|Income tax expense                           |  |                    | 784    |              |   | 63    
|                                             |  |                    |        |              |   |       
|Net income                                   |  | $                  | 1,104  |              | $ | 667   
|                                             |  |                    |        |              |   |       
|Basic and diluted net income per share       |  | $                  | 0.06   |              | $ | 0.04  
|                                             |  |                    |        |              |   |       

See notes to consolidated financial statements.



3



---

##### Table of Contents

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



|                                                                                        |  |                |         |   |                   |   |         |  
|--------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                        |  | March 31, 2007 |         |   | December 31, 2006 |  
|                                                                                        | 
|                                                                                        |  | (unaudited)    |         |   |                   |  
|ASSETS                                                                                  |  |                |         |   |                   |   |         |  
|Current Assets:                                                                         |  |                |         |   |                   |   |         |  
|Cash and cash equivalents                                                               |  | $              | 801     |   |                   | $ | 1,419   |  
|Accounts receivable, net of allowance of $824 and $797                                  |  |                | 17,919  |   |                   |   | 20,296  |  
|Inventories                                                                             |  |                | 12,241  |   |                   |   | 9,620   |  
|Prepaid expenses and other                                                              |  |                | 3,106   |   |                   |   | 4,176   |  
|Deferred tax asset                                                                      |  |                | 3,509   |   |                   |   | 3,509   |  
|                                                                                        |  |                |         |   |                   |   |         |  
|Total current assets                                                                    |  |                | 37,576  |   |                   |   | 39,020  |  
|Property, plant and equipment, net                                                      |  |                | 15,830  |   |                   |   | 13,055  |  
|Goodwill                                                                                |  |                | 11,247  |   |                   |   | 11,247  |  
|Deferred tax asset                                                                      |  |                | 8,158   |   |                   |   | 8,773   |  
|Other assets                                                                            |  |                | 1,225   |   |                   |   | 1,282   |  
|                                                                                        |  |                |         |   |                   |   |         |  
|                                                                                        |  | $              | 74,036  |   |                   | $ | 73,377  |  
|                                                                                        |  |                |         |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                    |  |                |         |   |                   |   |         |  
|Current Liabilities:                                                                    |  |                |         |   |                   |   |         |  
|Current maturities of debt                                                              |  | $              | 2,972   |   |                   | $ | 3,762   |  
|Current portion of capital leases                                                       |  |                | 183     |   |                   |   | 248     |  
|Accounts payable                                                                        |  |                | 6,208   |   |                   |   | 5,570   |  
|Accrued expenses                                                                        |  |                | 14,711  |   |                   |   | 15,379  |  
|                                                                                        |  |                |         |   |                   |   |         |  
|Total current liabilities                                                               |  |                | 24,074  |   |                   |   | 24,959  |  
|Capital leases, excluding current portion                                               |  |                | 68      |   |                   |   | 82      |  
|Other liabilities                                                                       |  |                | 3,114   |   |                   |   | 2,669   |  
|                                                                                        |  |                |         |   |                   |   |         |  
|Total liabilities                                                                       |  |                | 27,256  |   |                   |   | 27,710  |  
|                                                                                        |  |                |         |   |                   |   |         |  
|Commitments (Notes 3 and 9)                                                             |  |                |         |   |                   |   |         |  
|Stockholders Equity:                                                                   |  |                |         |   |                   |   |         |  
|Common stock, $.10 par value, 30,000 shares authorized, 17,454 and 17,411 shares issued |  |                | 1,745   |   |                   |   | 1,741   |  
|Additional paid-in capital                                                              |  |                | 67,685  |   |                   |   | 67,503  |  
|Treasury stock, at cost (209 shares)                                                    |  |                | (2,251  | ) |                   |   | (2,251  | )
|Accumulated deficit                                                                     |  |                | (19,372 | ) |                   |   | (20,476 | )
|Accumulated other comprehensive loss                                                    |  |                | (1,027  | ) |                   |   | (850    | )
|                                                                                        |  |                |         |   |                   |   |         |  
|Total stockholders equity                                                              |  |                | 46,780  |   |                   |   | 45,667  |  
|                                                                                        |  |                |         |   |                   |   |         |  
|                                                                                        |  | $              | 74,036  |   |                   | $ | 73,377  |  
|                                                                                        |  |                |         |   |                   |   |         |  

See notes to consolidated financial statements.



4



---

##### Table of Contents

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                  |  |                    |         |   |               |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                                                                  |  | Three Months Ended |        
|                                                                                  |  | March 31, 2007     |         |   | April 1, 2006 |  
|                                                                                  | 
|OPERATING ACTIVITIES:                                                             |  |                    |         |   |               |   |         |  
|Net income                                                                        |  | $                  | 1,104   |   |               | $ | 667     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                    |         |   |               |   |         |  
|Depreciation and amortization                                                     |  |                    | 778     |   |               |   | 829     |  
|Amortization of deferred financing costs                                          |  |                    | 14      |   |               |   | 134     |  
|Deferred income taxes                                                             |  |                    | 615     |   |               |   |        |  
|Stock-based compensation                                                          |  |                    | 41      |   |               |   | 29      |  
|Provision for doubtful accounts                                                   |  |                    | 92      |   |               |   | 75      |  
|Change in fair value of interest rate swap                                        |  |                    | 47      |   |               |   |        |  
|Change in fair value of foreign currency contract                                 |  |                    | 28      |   |               |   | 53      |  
|Changes in operating assets and liabilities:                                      |  |                    |         |   |               |   |         |  
|Accounts receivable                                                               |  |                    | 2,292   |   |               |   | 3,722   |  
|Inventories                                                                       |  |                    | (2,617  | ) |               |   | (219    | )
|Prepaid expenses and other                                                        |  |                    | 1,004   |   |               |   | (953    | )
|Accounts payable, accrued liabilities and other liabilities                       |  |                    | 403     |   |               |   | (1,155  | )
|                                                                                  |  |                    |         |   |               |   |         |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |  |                    | 3,801   |   |               |   | 3,182   |  
|                                                                                  |  |                    |         |   |               |   |         |  
|INVESTING ACTIVITIES:                                                             |  |                    |         |   |               |   |         |  
|Purchases of property, plant and equipment                                        |  |                    | (3,580  | ) |               |   | (250    | )
|                                                                                  |  |                    |         |   |               |   |         |  
|NET CASH USED IN INVESTING ACTIVITIES                                             |  |                    | (3,580  | ) |               |   | (250    | )
|                                                                                  |  |                    |         |   |               |   |         |  
|FINANCING ACTIVITIES:                                                             |  |                    |         |   |               |   |         |  
|Repayments of term loans                                                          |  |                    |        |   |               |   | (577    | )
|Repayments of revolving loans                                                     |  |                    | (36,903 | ) |               |   | (31,271 | )
|Borrowings under revolving loans                                                  |  |                    | 36,113  |   |               |   | 29,932  |  
|Proceeds from exercise of stock options                                           |  |                    | 30      |   |               |   | 90      |  
|Principal payments on capital leases                                              |  |                    | (79     | ) |               |   | (128    | )
|                                                                                  |  |                    |         |   |               |   |         |  
|NET CASH USED IN FINANCING ACTIVITIES                                             |  |                    | (839    | ) |               |   | (1,954  | )
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |  |                    | (618    | ) |               |   | 978     |  
|CASH and cash equivalents, beginning of period                                    |  |                    | 1,419   |   |               |   | 807     |  
|                                                                                  |  |                    |         |   |               |   |         |  
|CASH and cash equivalents, end of period                                          |  | $                  | 801     |   |               | $ | 1,785   |  
|                                                                                  |  |                    |         |   |               |   |         |  
|SUPPLEMENTAL CASH FLOW DISCLOSURE                                                 |  |                    |         |   |               |   |         |  
|Cash paid for interest                                                            |  | $                  | 138     |   |               | $ | 322     |  
|Cash paid for income taxes                                                        |  |                    | 22      |   |               |   | 202     |  
|Common stock issued to directors earned in previous period (Note 4)               |  |                    | 47      |   |               |   | 52      |  

See notes to consolidated financial statements.



5



---

##### Table of Contents

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 months ended March 31, 2007 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, 2006, its Current Reports on Form 8-K,
and its proxy statement dated April 10, 2007.

NOTE 2  CONSOLIDATION OF RISK AND GEOGRAPHIC SEGMENT DATA

Sales to one customer represented 16.7% and 16.9% of consolidated net sales for the three months ended March 31, 2007 and April 1, 2006, respectively. Accounts
receivable from this customer was $2,351,000 and $1,691,000 at March 31, 2007 and December 31, 2006, respectively.

Sales outside of North
America accounted for 26% and 30% of consolidated net sales for the three months ended March 31, 2007 and April 1, 2006, respectively. No single country besides the United States 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 March 31, 2007, the maximum contingent liability under all recourse and guarantee provisions was
approximately $4,663,000. A reserve for estimated losses under recourse provisions of $680,000 and $585,000 has been recorded based on historical and industry experience and is included in accrued expenses at March 31, 2007 and
December 31, 2006, respectively.

FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others," requires that the guarantor recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing such guarantees. The initial recognition
and measurement provisions of this interpretation was applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company has recorded a net liability of $66,000 and $70,000 at March 31, 2007 and
December 31, 2006, respectively, in accordance with FIN 45 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



6



---

##### Table of Contents

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 ten years depending on the part and 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 March 31, 2007.



|                                      |  |   |           |  
|------------------------------------- |  | - | --------- | -
|Balance as of January 1, 2007         |  | $ | 3,197,000 |  
|Payments made under warranty          |  |   | (946,000  | )
|Accrual for product warranties issued |  |   | 1,120,000 |  
|                                      |  |   |           |  
|Balance as of March 31, 2007          |  | $ | 3,371,000 |  
|                                      |  |   |           |  

NOTE 4  STOCK-BASED COMPENSATION

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R). 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. 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 March 31, 2007, the Company
recorded stock-based compensation expense of $41,000, consisting of expenses related to stock options ($21,000) and stock to be issued to directors ($20,000). 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 stock to be issued to directors ($13,000). These stock based compensation charges decreased net income by $24,000 and $17,000 and basic net income per
share by $.01 and $.01 for the three month periods ended March 31, 2007 and April 1, 2006, respectively; these stock based compensation charges had no effect on diluted net income per share for these periods. Cash received from the
exercise of incentive stock options for the three month periods ended March 31, 2007 and April 1, 2006 totaled $30,000 and $90,000, respectively.

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.



7



---

##### Table of Contents

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).

A summary of the status of the
Companys stock option plans as of March 31, 2007 is presented below:



|                                                      |  |                  |   |  |                               |      |                                  |      |                |   |          
|----------------------------------------------------- |  | ---------------- | - |  | ----------------------------- | ---- | -------------------------------- | ---- | -------------- | - | ---------
|                                                      |  | Number of Shares |   |  | WeightedAverageExercise Price |      | RemainingContractualTerm (years) |      | IntrinsicValue
|Outstanding at January 1, 2007                        |  | 695,000          |   |  | $                             | 2.09 |                                  |      |                |   |          
|Exercised                                             |  | (21,250          | ) |  |                               | 1.41 |                                  |      |                |   |          
|Forfeited                                             |  | (1,250           | ) |  |                               | 1.22 |                                  |      |                |   |          
|                                                      |  |                  |   |  |                               |      |                                  |      |                |   |          
|Outstanding at March 31, 2007                         |  | 672,500          |   |  |                               | 2.12 |                                  | 5.57 |                | $ | 2,161,000
|                                                      |  |                  |   |  |                               |      |                                  |      |                |   |          
|Options exercisable at March 31, 2007                 |  | 546,625          |   |  | $                             | 1.96 |                                  | 5.15 |                | $ | 1,841,000
|                                                      |  |                  |   |  |                               |      |                                  |      |                |   |          
|Options vested and expected to vest at March 31, 2007 |  | 667,255          |   |  | $                             | 2.09 |                                  | 5.55 |                | $ | 2,159,000
|                                                      |  |                  |   |  |                               |      |                                  |      |                |   |          

The intrinsic value of options exercised for the three months ended March 31, 2007 and April 1, 2006 was
$85,000 and $118,000, 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 March 31, 2007, there was $183,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements, which is expected to be
recognized over a weighted-average period of 3.2 years.

The options generally vest over a three to five year period (with some subject to cliff vesting).
At March 31, 2007, there are 970,000 shares available for future issuance pursuant to the 2005 Omnibus Incentive Plan.

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 March 31, 2007, there are 34,431 shares available for future issuance pursuant to the 2002 Plan. The
Company recorded stock-based compensation expense of $20,000 for the quarter ended March 31, 2007 for common stock to be issued to the directors for 2007 services, which is included in accrued expenses at March 31, 2007 and will be issued
in 2008. During the quarter ended March 31, 2007, the Company issued 7,511 shares of common stock to the directors, which had a fair value of $47,000, related to directors fees earned in 2006, which were included in accrued expenses at
December 31, 2006. The Company recorded stock-based compensation expense of $13,000 for the quarter ended April 1, 2006 for common stock issuable to the directors for 2006 services, which was included in accrued expenses at April 1,
2006 and was 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 directors fees earned in 2005, which were included in
accrued expenses at December 31, 2005.



8



---

##### Table of Contents

NOTE 5  INVENTORIES

Inventories consist of the following:



|                |  |               |            |                  |   |          
|--------------- |  | ------------- | ---------- | ---------------- | - | ---------
|                |  | March 31,2007 |            | December 31,2006
|Raw materials   |  | $             | 6,415,000  |                  | $ | 5,232,000
|Work in process |  |               | 2,260,000  |                  |   | 2,208,000
|Finished goods  |  |               | 3,566,000  |                  |   | 2,180,000
|                |  |               |            |                  |   |          
|                |  | $             | 12,241,000 |                  | $ | 9,620,000
|                |  |               |            |                  |   |          

NOTE 6  LONG-TERM DEBT

Long-term debt consists of the following:



|                           |  |               |            |   |                   |   |            |  
|-------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                           |  | March 31,2007 |            |   | December 31, 2006 |  
|CIT working capital loan   |  | $             | 2,972,000  |   |                   | $ | 3,762,000  |  
|GMAC equipment credit line |  |               |           |   |                   |   |           |  
|                           |  |               |            |   |                   |   |            |  
|                           |  |               | 2,972,000  |   |                   |   | 3,762,000  |  
|Less  current portion     |  |               | (2,972,000 | ) |                   |   | (3,762,000 | )
|                           |  |               |            |   |                   |   |            |  
|                           |  | $             |           |   |                   | $ |           |  
|                           |  |               |            |   |                   |   |            |  

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
originally provided for a $13,000,000 term loan. On June 30, 2006, the outstanding loans under the GMAC Credit Agreement, as amended, were prepaid in full from the proceeds of the Companys common stock public offering (see Note 7). In
December 2006, the Company entered into an amendment and restatement of the GMAC Credit Agreement (as restated, GMAC Amended Credit Agreement), which provides for a $7,000,000 credit line available through August 31, 2007 to finance
the purchase of machinery and equipment. Such advances will mature on January 1, 2012 and will be secured by the Companys equipment. No advances had been made under this credit line through March 31, 2007.



9



---

##### Table of Contents

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. On May 22, 2006, the CIT term loan, which had been increased to $6,250,000 was prepaid in full from the proceeds from the
Companys common stock public offering (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
(described below). The CIT loans are secured by substantially all assets of the Company other than real estate, fixtures and equipment.

At March 31,
2007, there were $2,972,000 in working capital loans outstanding. Availability under the revolving loan fluctuates daily. At March 31, 2007, there was $8,540,000 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 March 31, 2007) (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 GMAC term loans bore interest, payable monthly, at LIBOR plus 4% or the prime rate
plus 1% and the advances under the equipment line will bear interest at LIBOR plus 3.25% or the prime rate plus 1%. The prime rate was 8.25% and LIBOR was 5.2% at March 31, 2007.

The average outstanding working capital loan balance for the three months ended March 31, 2007 and April 1, 2006 was approximately $3,005,000 and $164,000, respectively, and the weighted average interest
rate was 8% and 7.18%, respectively. Interest expense on the working capital loan was $77,000 and $23,000 for the three months ended March 31, 2007 and April 1, 2006, respectively. Interest expense on the CIT term loans was $0 and $135,000
for the three months ended March 31, 2007 and April 1, 2006, respectively. Interest expense on the GMAC term loans was $0 and $115,000, for the three months ended March 31, 2007 and April 1, 2006, 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 March 31, 2007. 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.

At
March 31, 2007 long-term debt maturities are as follows:



|                                       |  |   |            |  
|-------------------------------------- |  | - | ---------- | -
|2008                                   |  | $ | 2,972,000  |  
|2009                                   |  |   |           |  
|2010                                   |  |   |           |  
|2011                                   |  |   |           |  
|2012                                   |  |   |           |  
|                                       |  |   |            |  
|                                       |  |   |           |  
|Less current portion of long-term debt |  |   | (2,972,000 | )
|                                       |  |   |            |  
|                                       |  | $ |           |  
|                                       |  |   |            |  



10



---

##### Table of Contents

In August 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 the 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, which is being amortized over 21 months. At March 31,
2007 and April 1, 2006, $329,000 and $177,000, respectively, of the deferred gain was included in accrued expenses and $0 and $590,000, respectively, 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 feet 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 currently estimated at $15,700,000. 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, currently scheduled for July 1, 2007, subject to extension. The lease of the existing Owatonna facility will terminate in conjunction with relocation to this new facility.

In October 2006, the Company entered into a Loan Agreement (the Citizens Loan Agreement) with Citizens Bank of Massachusetts (Citizens), pursuant
to which Citizens has agreed to advance to the Company up to $13,000,000 under a 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. The mortgage loan to be issued under the Citizens Loan Agreement will be secured by a lien on the Owatonna Premises and, pending disbursement of the mortgage loan, the Company 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, the Company has entered into a related interest rate swap agreement with
Citizens which locks in an interest rate of 6.95% per annum through June 2014.

A $2,888,025 letter of credit was 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). This letter of credit was returned and cancelled after payment of the judgment in April
2007. Letters of credit outstanding under the CIT Amended Financing Agreement reduce availability under the revolving loan facility.

On September 8,
2004, the Company 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 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 months ended April 1, 2006, the change in the fair value of the interest rate caps was
a decrease of $13,000.



11



---

##### Table of Contents

On February 28, 2005, the Company entered into a series of 13 forward contracts with the final contract completed
March 31, 2006, whereby Cybex paid a bank 140,212 British Sterling and the bank paid the Company $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
the Company pays a bank 150,000 British Sterling and the bank pays the Company $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. The Companys UK sales
are in British Sterling while its purchases of inventory from the Company are paid in U.S. dollars. The above transactions are 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 $28,000 and $53,000 for the three months ended March 31, 2007 and April 1, 2006, respectively.

On
June 29, 2006, the Company entered into an interest rate swap agreement with Citizens that will be initiated on July 1, 2007 to hedge a LIBOR based loan. The notional amount of the swap amortizes based on the same amortization schedule as
the mortgage loan to be issued under the Citizens Loan Agreement and the hedged item (one-month LIBOR) is the same as the basis for the interest rate on the mortgage. The swap effectively converts the rate from a floating rate based on LIBOR to a
6.95% fixed rate throughout the duration of the loan. The swap and interest payments on the debt will settle monthly. The mortgage debt and the swap both expire on June 30, 2014. There was no initial cost of the interest rate swap. The change
in the fair value of the interest rate swap is included as a component of interest expense. During the third quarter of 2006, the Company recorded $506,000 of expense related to this interest rate swap. The change in fair value of the hedge resulted
in a loss of $47,000 for the three months ended March 31, 2007. The fair value of the interest rate swap is included in other liabilities at March 31, 2007.

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 stockholders.



12



---

##### Table of Contents

At March 31, 2007, there are 1,845,490 shares of common stock reserved for future issuance pursuant to the exercise
or issuance of stock options and warrants.

Warrants:

At
March 31, 2007, warrants to purchase 189,640 and 13,350 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, comprehensive income includes the effects of foreign currency translation adjustments and changes in the fair value of hedging
instruments.

The following summarizes the components of comprehensive income:



|                                        |  |                    |           |   |              |   |         |  
|--------------------------------------- |  | ------------------ | --------- | - | ------------ | - | ------- | -
|                                        |  | Three Months Ended |          
|                                        |  | March 31, 2007     |           |   | April 1,2006 |  
|Net income                              |  | $                  | 1,104,000 |   |              | $ | 667,000 |  
|Other comprehensive income:             |  |                    |           |   |              |   |         |  
|Foreign currency translation adjustment |  |                    | (177,000  | ) |              |   | (70,000 | )
|Change in fair value of hedge           |  |                    |          |   |              |   | (13,000 | )
|                                        |  |                    |           |   |              |   |         |  
|Comprehensive income                    |  | $                  | 927,000   |   |              | $ | 584,000 |  
|                                        |  |                    |           |   |              |   |         |  

The following summarizes the components of accumulated other comprehensive loss at March 31, 2007 and
December 31, 2006:



|                                  |  |                |            |   |                  |   |          |  
|--------------------------------- |  | -------------- | ---------- | - | ---------------- | - | -------- | -
|                                  |  | March 31, 2007 |            |   | December 31,2006 |  
|Cumulative translation adjustment |  | $              | (1,027,000 | ) |                  | $ | (850,000 | )
|Fair value of hedge               |  |                |           |   |                  |   |         |  
|                                  |  |                |            |   |                  |   |          |  
|Total                             |  | $              | (1,027,000 | ) |                  | $ | (850,000 | )
|                                  |  |                |            |   |                  |   |          |  

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
|                                                      |  | March 31, 2007     |  | April 1, 2006
|Shares used in computing basic net income per share   |  | 17,224,000         |  | 15,158,000   
|Dilutive effect of options and warrants               |  | 614,000            |  | 661,000      
|                                                      |  |                    |  |              
|Shares used in computing diluted net income per share |  | 17,838,000         |  | 15,819,000   
|                                                      |  |                    |  |              

For the three months ended March 31, 2007, options to purchase 30,000 shares of common stock at exercise
prices of $7.37 per share were outstanding but were not included in the computation of diluted net income per share as the result would be anti-dilutive.



13



---

##### Table of Contents

NOTE 9  COMMITMENTS AND CONTINGENCIES

The Company is involved in certain legal actions and claims arising in the ordinary course of business. At March 31, 2007, a reserve of $3,161,000 is included in accrued expenses for estimated losses related to
those matters for which it is probable that a loss has been incurred. After the end of the quarter, this reserve was reduced to reflect the payments made in connection with the Colassi matter discussed below.

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 made numerous allegations, including wrongful closure of the Sharpsville facility, wrongful termination of the individual plaintiffs employment and nonpayment of compensation, fraud and breach of the asset purchase agreement. 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. Cybex filed an appeal of this judgment. 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 in November 2006, it satisfied a portion of the judgment, which, with interest and costs, amounted to
approximately $2,800,000. The plaintiffs asserted that additional attorneys fees were payable by the Company and the Court, on December 29, 2006, ordered that $523,000 be added to the judgment representing additional fees and costs. The
amended judgment was paid in January 2007, and the matter is now concluded.

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 damages which with interest equaled approximately
$2,800,000 at March 31, 2007. 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 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 Court of Appeals in February 2007, denied the Companys appeal, and the Company moved for a rehearing.
In November 2006 the plaintiff filed with the trial court a motion to enter a substitute judgment in an attempt to substitute plaintiffs reissued patent for the patent that was at issue at trial. In December 2006 the trial court denied this
motion and in January 2007 the plaintiff appealed this decision. In April 2007, the Court of Appeals ruled that it would not accept a rehearing of the Companys appeal. The Company paid to the plaintiff in April 2007 approximately $3,000,000
(representing the judgment, accrued interest, and royalties for the period prior to the Companys deck redesign), the plaintiff voluntarily dismissed its appeal, and this matter is now concluded.



14



---

##### Table of Contents

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 the 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 was returned to the trial court level. In January 2007, the parties entered into a settlement agreement pursuant to which, among other things, Cybex received a license of
certain Free Motion patents and paid an upfront license fee and the litigation was dismissed with prejudice.

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 or 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 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 $15,361,000 in 2006 (including $14,421,000 effective July 1, 2006). For the three months ended March 31, 2007, an income tax
provision of approximately 41% of income before taxes was recorded, totaling $784,000.

At December 31, 2006, U.S. federal net operating loss
carryforwards of approximately $23,477,000 were available to offset future taxable income and, as of such date, the Company had foreign net operating loss carryforwards of $2,568,000, which have an unlimited life, federal alternative minimum tax
credit carryforwards of $540,000, which do not expire, and a federal research and development tax credit carryforward of $129,000, which expires in 2008. The U.S. federal operating loss carryforwards begin to expire in 2012.

Approximately $30,000,000 of income before income taxes is needed to fully realize the Companys recorded net deferred tax asset and $47,000,000 of future taxable
income is needed to fully realize the Companys deferred tax assets. The difference between this figure and the net operating loss carryforwards and credits is primarily book versus tax differences of various expenses.

The net deferred tax asset balance of $11,667,000 at March 31, 2007 represents the amount that management believes is more-likely-than-not to be realized, and the
remaining valuation allowance at March 31, 2007 is $6,599,000. Management will continue to assess the need for the remaining valuation allowance in future periods.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements and prescribes a threshold of more-likely than-not for recognition of tax benefits of uncertain tax
positions taken or expected to be taken in a tax return. FIN 48 also provides related guidance on measurement, derecognition, classification, interest and penalties, and disclosure. The Company adopted the provisions of FIN 48 on January 1,
2007.



15



---

##### Table of Contents

The Company files income tax returns in the U.S. federal jurisdiction, the United Kingdom and various state
jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, United Kingdom and state income tax examinations by tax authorities for years before 2002.

Upon the adoption of FIN 48, the Company commenced a review of all open tax years in all jurisdictions. The Company does not believe it has included any uncertain tax positions in its federal income tax
return, United Kingdom return or any of the state tax returns it is currently filing. The Company has made an evaluation of the potential impact of additional state taxes being assessed by jurisdictions in which the Company does not currently
consider itself liable. Based on this analysis the Company does not anticipate that such additional taxes, if any, would result in a material change to its financial position.

Consistent with its current policy, the Company will include any interest and penalties related to uncertain tax positions as a component of selling, general and administrative expense.



16



---

##### 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 the 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 10, 2007.

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.

An approximate 340,000 square feet manufacturing, office and warehouse facility is being
constructed to our specifications in Owatonna, Minnesota, which is intended to replace our existing Owatonna facility. The purchase of and relocation to this new facility is scheduled for the third quarter of 2007. While we do not expect the move to
have a negative impact upon net sales for the full year, manufacturing delays or interruptions in connection with the move could negatively impact net sales for the third quarter of 2007. We currently estimate that the acquisition costs for the new
facility will be $15,700,000, that an additional $10,000,000 will be spent on manufacturing equipment, tooling and infrastructure related to the new facility, and that we will incur moving expenses of less than $500,000. We expect to fund these
expenditures with a combination of cash generated from operating activities and borrowings under our credit facilities.

RESULTS OF OPERATIONS

NET SALES

Our net sales increased $5,764,000, or
20%, to $34,676,000 for the first quarter of 2007 from $28,912,000 for the first quarter of 2006. The first quarter increase in 2007 was attributable to an increase of sales of cardiovascular products of $2,664,000, or 18%, to $17,824,000, and
increased sales of strength training products of $3,039,000, or 29%, to $13,556,000, along with increased freight, parts and other sales of $61,000, or 2%, to $3,296,000. The sales increase of cardiovascular products in 2007 was predominantly driven
by sales of the 445T treadmill, Cordless Arc Trainer, Cordless Total Body Arc Trainer, 425A Arc Trainer and the Home Arc Trainer, each of which is a new product first introduced in the third or fourth quarter of 2006. The sales increase of strength
training products in 2007 was primarily due to sales of VR3, the new strength line introduced at the end of 2005.

GROSS MARGIN

Gross margin increased to 37.2% in the first quarter of 2007 from 36.5% in the prior year first quarter predominantly due to improved overhead utilization (.9%) offset by
increased warranty costs (.2%).

The price of steel, a major component of our products, has fluctuated since 2004. The negative impact from changes in
steel prices in the first quarters of 2007 and 2006 was minimal. We are uncertain of the likely impact of steel prices on margins for the balance of 2007.



17



---

##### Table of Contents

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses, increased by $1,534,000, or 17%, to $10,796,000 in the first quarter of 2007 compared to $9,262,000 in the first quarter of 2006, predominantly due to an increase in
domestic and international selling expenses ($708,000), an increase in product development costs ($656,000) and legal costs ($82,000). The balance of the increase in these expenses is comprised of smaller amounts including additional order
fulfillment staff and higher general salary levels. The increase in product development and legal costs includes $509,000 of expenses related to a product development agreement entered into during the quarter. Selling, general and administrative
expenses represented 31% of sales in 2007 compared to 32% of sales in 2006.

NET INTEREST EXPENSE

Net interest expense decreased by $349,000 or 62% in the first quarter of 2007 compared to the corresponding period of 2006. The decrease in 2007 was primarily due to
lower outstanding debt balances, partially offset by the interest expense related to the change in fair value of an interest rate swap. We expect that net interest expense will increase during the balance of 2007 compared to the corresponding 2006
period as we incur additional debt to finance the purchase of our new Owatonna manufacturing facility and related capital expenditures.

INCOME TAXES

We recorded income tax expense of $784,000 for the three months ended March 31, 2007. In 2002, we established a valuation allowance against all of
our deferred tax assets. 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 $15,361,000 in 2006 (including $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 and fourth quarters of 2006. For the three
months ended March 31, 2007, an income tax provision of approximately 41% of income before taxes was recorded totaling $784,000. 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, 2006, U.S. federal operating loss carryforwards of approximately $23,477,000 were available to us
to offset future taxable income and, as of such date, we had foreign net operating loss carryforwards of $2,568,000, federal alternative minimum tax credit carryforwards of $540,000 and federal research and development tax credit carryforwards of
$129,000. The net deferred tax asset balance of $11,667,000 at March 31, 2007 represents the amount that we believe is more-likely-than-not to be realized, and the remaining valuation allowance at March 31, 2007 is $6,599,000. We will
continue to assess the need for the remaining valuation allowance in future periods.

The Company adopted the provisions of FIN 48 on January 1, 2007.
The impact of FIN 48 on the Companys financial position is discussed in Note 10 to the consolidated financial statements.

FINANCIAL CONDITION,
LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2007, we had working capital of $13,502,000 compared to $14,061,000 at December 31, 2006. The
net decrease in working capital is primarily due to a $2,377,000 decrease in accounts receivable, reflecting lower sales volume in the first quarter of 2007 versus the fourth quarter of 2006, and a $1,070,000 decrease in prepaid expenses partially
offset by a $2,621,000 increase in inventory. The increase in inventory reflects the inclusion of $1,100,000 of inventory for the new Home Arc line which utilizes outsourced manufacturing and approximately $500,000 of audio visual screens which did
not begin to ship until the end of the first quarter of 2007.



18



---

##### Table of Contents

For the three months ended March 31, 2007, we generated $3,801,000 of cash from operating activities compared to
$3,182,000 for the three months ended April 1, 2006. The increase in cash provided by operating activities is primarily due to an increase in net income.

Cash used in investing activities of $3,580,000 during the three months ended March 31, 2007 consisted of purchases on manufacturing tooling and equipment of $1,442,000, primarily for the manufacture of new products, and computer
hardware and infrastructure of $2,138,000. 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. We expect to incur approximately $25,700,000 in capital expenditures during the balance of 2007 related to the new Owatonna facility, including acquisition costs
currently estimated at $15,700,000 and manufacturing equipment, tooling and infrastructure currently estimated at $10,000,000. We expect to fund these expenditures with a combination of cash generated from operating activities and borrowings under
our credit facilities.

Cash used in financing activities was $839,000 and $1,954,000 for the three months ended March 31, 2007 and April 1,
2006, 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 presently provides for a $7,000,000 credit line that will be available through August 31, 2007 to finance machinery and equipment purchases.
Our Amended Financing Agreement with CIT presently 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. The GMAC loans will be secured by our equipment,
and will mature on January 1, 2012. The CIT loans are secured by substantially all of our assets except real estate, fixtures, and equipment, and mature on June 30, 2009.

At March 31, 2007, $2,972,000 in working capital loans was outstanding and no term loans were outstanding at March 31, 2007. Availability under the revolving loan fluctuates daily. At March 31, 2007,
there was $8,540,000 in unused availability under the working capital revolving facility.

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 feet 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 currently estimated at $15,700,000. 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, currently scheduled for July 2007, subject to extension. The lease of our existing Owatonna facility will terminate in conjunction with the
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 July 2007. The
mortgage loan to be issued under the Citizens Loan Agreement will be secured by a lien on the Owatonna Premises.

In August 2005, we sold our Owatonna,
Minnesota manufacturing, warehouse and office facility and 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 was included in other long-term liabilities and is being amortized over 21 months. At March 31, 2007,
$329,000 of the deferred gain was included in accrued expenses.



19



---

##### Table of Contents

We posted a letter of credit of $2,888,025 in connection with our appeal of the judgment in Colassi v. Cybex
International, Inc. In April 2007, we paid to the plaintiff in this action approximately $3,000,000 (representing the judgment, accrued interest and royalties for the period prior to our deck design) and the letter of credit was returned and
canceled. This litigation is now concluded.

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 March 31, 2007:



|                              |  |       |            |                   |   |                    |  |                   |           |                  |   |         |  |   |        
|----------------------------- |  | ----- | ---------- | ----------------- | - | ------------------ |  | ----------------- | --------- | ---------------- | - | ------- |  | - | -------
|                              |  | TOTAL |            | Less ThanOne Year |   | One to Three Years |  | Four to FiveYears |           | After Five Years
|Contractual obligations:      |  |       |            |                   |   |                    |  |                   |           |                  |   |         |  |   |        
|Debt                          |  | $     | 2,972,000  |                   | $ | 2,972,000          |  | $                 |          |                  | $ |        |  | $ |       
|Royalty agreement             |  |       | 2,070,000  |                   |   | 390,000            |  |                   | 720,000   |                  |   | 720,000 |  |   | 240,000
|Capital lease obligations (a) |  |       | 268,000    |                   |   | 197,000            |  |                   | 71,000    |                  |   |        |  |   |       
|Operating lease commitments   |  |       | 1,106,000  |                   |   | 766,000            |  |                   | 337,000   |                  |   | 3,000   |  |   |       
|Building purchase obligation  |  |       | 14,275,000 |                   |   | 14,275,000         |  |                   |          |                  |   |        |  |   |       
|Purchase obligations          |  |       | 22,098,000 |                   |   | 20,516,000         |  |                   | 1,582,000 |                  |   |        |  |   |       
|                              |  |       |            |                   |   |                    |  |                   |           |                  |   |         |  |   |        
|TOTAL                         |  | $     | 42,789,000 |                   | $ | 39,116,000         |  | $                 | 2,710,000 |                  | $ | 723,000 |  | $ | 240,000
|                              |  |       |            |                   |   |                    |  |                   |           |                  |   |         |  |   |        

---

|(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 March 31, 2007, the maximum contingent liability under all recourse provisions was approximately $4,663,000. A reserve for estimated losses under recourse provisions of $680,000 has been recorded based upon historical
and industry experience, and is included in accrued liabilities at March 31, 2007.

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 customers current credit information. Management
continuously monitors collections and payments from customers and maintains 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 the Companys general customer base were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.



20



---

##### Table of Contents

Realizability of inventory. The Company values inventory at the lower of cost (first-in, first-out) 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.

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 ten 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 administrators. 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 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, 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 $15,361,000 in 2006 (including $14,421,000 effective July 1, 2006). The net deferred tax asset balance of $11,667,000
at March 31, 2007 represents the amount that we believe is more-likely-than-not to be realized and the remaining valuation allowance at March 31, 2007 is $6,599,000. We will continue to assess the need for the remaining valuation allowance
in future periods.Approximately $30,000,000 of income before income taxes is needed to fully realize the Companys recorded net deferred tax asset and $47,000,000 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.



21



---

##### Table of Contents

|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, 2006.



|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.



22



---

##### Table of Contents

PART II. OTHER INFORMATION



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   |  |                                                                                                                                                                                                                         
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM 1.  |  | LEGAL 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, 2006 for a description of these proceedings. In April 2007, the Court of Appeals ruled
that it would not accept a rehearing of the Companys appeal. The Company paid to the plaintiff in April 2007 approximately $3,000,000 (representing the judgment, accrued interest, and royalties for the period prior to the Companys deck
redesign), the plaintiff voluntarily dismissed its appeal, and this matter is now concluded.
|         | 
|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,
2006.                                                                                                                                                                                                                                                                                                                                                    
|         | 
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | 
|         |  | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         | 
|ITEM 6.  |  | EXHIBITS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|(a)      |  | Exhibit 10.1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |  | Form of Restricted Stock Award Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 22, 2007 (the February 22, 2007 Form
8-K).*                                      
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|         |  | Exhibit 10.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |  | Form of Notification of Participation in the 2007 Management Incentive Compensation Bonus Program (Executive Officers), incorporated by reference to Exhibit 10.2 to the February 22, 2007 Form
8-K.*                   
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|         |  | Exhibit 10.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |  | Form of Notification of Participation in the 2007 Management Incentive Compensation Bonus Program (Non-Executive Officers/Director Level), incorporated by reference to Exhibit 10.3 to the
February 22, 2007 Form 8-K.*



23



---

##### Table of Contents

| |  |              |  |   |  |                                                                                                                                                                                                                               
| |  | ------------ |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit 10.4 |  |  |  | Form of Notification of Participation in the 2007 Management Incentive Compensation Bonus Program (Non-Executive Officers/Vice President Level), incorporated by
reference to Exhibit 10.4 to the February 22, 2007 Form 8-K.*
| |  |              | 
| |  | Exhibit 10.5 |  |  |  | Fulfillment Agreement, dated as of March 20, 2007, between the Company and eNOVA Group Limited Liability Company, incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed March 20, 2007.           
| |  |              | 
| |  | 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.                                                                                                                                                             

---

|* | Executive compensation plans and arrangements
|- | ---------------------------------------------



24



---

##### Table of Contents

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                                                       |  | 
|May 4, 2007 |  |  |  |     |  | John Aglialoro Chairman and Chief Executive
Officer                      |  | 
|            |  |  |  |    
|            |  |  |  | By: |  | /s/ Arthur W. Hicks, Jr.                                                 |  | 
|May 4, 2007 |  |  |  |     |  | Arthur W. Hicks, Jr. Chief Operating Officer and
Chief Financial Officer |  | 



25